Washington 2021-2022 Regular Session Status: Passed House 20 D cosponsors

HB 1406 — Improving the equity of Washington state's tax code by creating the Washington state wealth tax and taxing extraordinary financial intangible assets.

Last action — By resolution, reintroduced and retained in present status.

  1. ✓
    Introduced
  2. ✓
    In Committee
  3. 3
    Passed House
  4. 4
    Passed Senate
  5. 5
    To Executive
  6. 6
    Enacted

This bill died with 2021-2022 Regular Session. It reached “Passed House” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.

This bill is no longer active — its legislative session has ended, so there are no live odds of enactment. It would have to be reintroduced in the current session to move again.

Bill Text

What changed in the latest version

328 added · 568 removed

Plain-language change summary

The recent changes to House Bill 1406 involve removing some specific references to state code sections and redefining the purpose of the revenues from the Washington state wealth tax. The new version emphasizes using these revenues to promote equity and support essential services like education, healthcare, and housing. This shift is significant because it highlights the legislature's commitment to ensuring that all residents have equal opportunities to thrive, reinforcing the importance of investing in community services.

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H-1416.2 SUBSTITUTE HOUSE BILL 1406 State of Washington 67th Legislature 2021 Regular Session By House Finance (originally sponsored by Representatives Frame, Sullivan, Ormsby, Ortiz-Self, Kirby, Davis, Bateman, Valdez, Kloba, Pollet, Walen, Dolan, Simmons, Cody, Ramel, Lekanoff, Duerr, Ryu, Berry, Peterson, Hackney, Chopp, Macri, Bergquist, Riccelli, and Harris-Talley) READ FIRST TIME 04/02/21.
H-0544.1 HOUSE BILL 1406 State of Washington 67th Legislature 2021 Regular Session By Representatives Frame, Sullivan, Ormsby, Ortiz-Self, Kirby, Davis, Bateman, Valdez, Kloba, Pollet, Walen, Dolan, Simmons, Cody, Ramel, Lekanoff, Duerr, Ryu, Berry, Peterson, Hackney, Chopp, Macri, Bergquist, Riccelli, and Harris-Talley Read first time 01/27/21.
Referred to Committee on Finance.
amending RCW 82.32.160, 43.135.034, and 82.32.655;
amending RCW 43.135.034 and 82.32.655;
adding a new section to chapter 84.36 RCW;
1 SHB 1406 households pay three percent or less.
1 HB 1406 households pay three percent or less.
2 SHB 1406 (7) Finally, the legislature further intends to achieve equity by using revenues generated by the Washington state wealth tax to offer credits against taxes paid disproportionately by low-income and middle-income families and small start-up and low-margin businesses.
2 HB 1406 (7) The legislature further intends to achieve equity by using revenues generated by the Washington state wealth tax to offer credits against taxes paid disproportionately by low-income and middle-income families and small start-up and low-margin businesses.
The legislature finds that if Washington state wants to continue its role as a global leader and attract, retain, and grow the most innovative, creative, and talented residents in the world, it must fund community investments equitably and ensure that our state is a place where every resident has a fair and equitable chance to not only survive, but thrive.
(8) Finally, the legislature intends to invest the revenues generated by the Washington state wealth tax to fund other critical services, such as education, child care, public health, housing, and public safety.
The legislature finds that if Washington state wants to continue its role as a global leader and attract, retain, and grow the most innovative, creative, and talented residents in the world, it must fund community investments and ensure that our state is a place where every resident has a fair and equitable chance to not only survive, but thrive.
(6) "Fair market value" means the amount of money that a willing buyer would pay to a willing seller for property in an arms-length transaction if both parties were fully informed about all advantages and disadvantages of the property and neither party is acting under a compulsion to enter into the transaction.
(6) "Fair market value" means the amount of money that a willing buyer would pay to a willing seller for property in an arms-length transaction if both parties were fully informed about all advantages p.
3 HB 1406 and disadvantages of the property and neither party is acting under a compulsion to enter into the transaction.
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(a) Cash and cash equivalents;
3 SHB 1406 (a) Cash and cash equivalents;
(i) Who is domiciled in this state at any time during the tax year, unless that person (A) maintained no permanent place of abode in this state during the entire tax year, (B) maintained a permanent p.
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4 SHB 1406 place of abode outside of this state during the entire tax year, and (C) spent in the aggregate not more than 30 days of the tax year in this state;
4 HB 1406 (i) Who is domiciled in this state at any time during the tax year, unless that person (A) maintained no permanent place of abode in this state during the entire tax year, (B) maintained a permanent place of abode outside of this state during the entire tax year, and (C) spent in the aggregate not more than 30 days of the tax year in this state;
(2) Except as provided in subsection (3) of this section, the tax imposed under this section applies to a resident's taxable worldwide wealth as of December 31st of the tax year.
(2) The tax imposed under this section applies to a resident's taxable worldwide wealth as of December 31st of the tax year.
(3) In the case of any individual who dies during a tax year and who is not married or in a state registered domestic partnership on the date of such individual's death:
(a) The tax imposed under this section applies to the individual's taxable worldwide wealth as of the date of the individual's death;
and (b) The amount of the tax otherwise due under this section must be reduced by an amount determined by:
(i) Dividing the amount of tax otherwise due for the entire tax year by the total number of days in the tax year;
and (ii) Multiplying the amount determined in (b)(i) of this subsection (3) by the number of days remaining in the tax year after the date of the individual's death.
(4) The tax imposed in this section does not apply to a resident based on that person's status as a trustee of a trust, unless that p.
5 SHB 1406 person is also a beneficiary of the trust or holds a general power of appointment over the assets of the trust.
(5)(a) If an individual is treated as the owner of any portion of a trust that qualifies as a grantor trust for federal income tax purposes, that individual must be treated as the owner of that property for purposes of the tax imposed in this section to the extent such property includes intangible assets.
(b) A grantor of a trust that does not qualify as a grantor trust for federal income tax purposes must nevertheless be treated as the owner of the intangible assets of the trust for purposes of the tax imposed in this section if the grantor's transfer of assets to the trust is treated as an incomplete gift under Title 26 U.S.C.
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2511 of the internal revenue code and its accompanying regulations.
(6) Intangible assets transferred after the effective date of this section by a resident to an individual who is a member of the family of the resident and has not attained the age of 18 must be treated as property of the resident for any calendar year before the year in which such individual attains the age of 18.
For purposes of this subsection, "member of the family" has the same meaning as in RCW 83.100.046.
(7) All moneys collected from the wealth tax must be deposited into the Washington tax justice and equity fund.
(1)(a) Except as otherwise provided in this section or RCW 82.32.080, each resident owing tax under this chapter must file, on forms prescribed by the department, a return with the department on or before April 15th each year reporting that person's taxable worldwide wealth for the immediate preceding calendar year, and such other information the department determines necessary to administer the tax imposed under this chapter.
(1)(a) Except as otherwise provided in this section or RCW 82.32.080, each resident owing tax under this chapter must file, on forms prescribed by the department, a return with the department on or before October 15th each year reporting that person's taxable worldwide wealth for the immediate preceding calendar year, and such other information the department determines necessary to administer the tax imposed under this chapter.
(ii) The department may waive the electronic filing requirement in this subsection for good cause as provided in RCW 82.32.080.
(2)(a) Except as otherwise provided in this subsection (2), spouses and state registered domestic partners must jointly file returns required under this section.
6 SHB 1406 (b)(i) A spouse or state registered domestic partner may petition the department, on a form and in a format as required by the department, for permission to file a separate return.
5 HB 1406 (ii) The department may waive the electronic filing requirement in this subsection for good cause as provided in RCW 82.32.080.
The department must grant the petition only if it finds that good cause exists for allowing the petitioner to file a separate return.
(2) Spouses and domestic partners must jointly file returns required under this section.
(ii) For purposes of this subsection (2)(b), "good cause" means:
(A) The petitioner reasonably believes that the nonpetitioning spouse or state registered domestic partner will not cooperate in the filing of a complete and accurate joint return;
or (B) Any other circumstance that, in the department's judgment, renders the filing of a joint return manifestly unreasonable.
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6 HB 1406 NEW SECTION.
(1) Up to $1,000,000,000 of a taxpayer's financial intangible assets.
(1) Up to $1,000,000,000 of a resident's financial intangible assets.
For purposes of this exemption, both spouses or state registered domestic partners are considered to be one taxpayer.
Only one such exemption may be claimed on a jointly filed return required under section 4 of this act;
If the department authorizes the filing of separate returns for a tax year, each spouse or state registered domestic partner is entitled to claim one-half of the exemption provided under this subsection (1) for that tax year;
However, the exemption provided in this subsection (3) does not affect the computation of a natural person's worldwide wealth;
However, the exemption provided in this subsection (3) does not apply to any financial intangible assets included in a natural person's worldwide wealth;
(5) Any obligations or evidences of debt of the state of Washington and its agencies, instrumentalities, political subdivisions, and municipal corporations, which include municipal bonds;
(5) Any obligations or evidences of debt of the state of Washington and its political subdivisions and agencies, and instrumentalities of the state of Washington and its political subdivisions, which include municipal bonds;
(1) Except as provided in subsection (2) of this section, a person subject to tax under this chapter is allowed a credit against the tax otherwise due under this chapter equal to the p.
(1) Except as provided in subsection (2) of this section, a person subject to tax under this chapter is allowed a credit against the tax otherwise due under this chapter equal to the amount of any similar wealth tax legally imposed on, and paid by, the person to another state for the same tax year on financial intangible assets subject to tax under this chapter.
8 SHB 1406 amount of any similar wealth tax legally imposed on, and paid by, the person to another state for the same tax year on financial intangible assets subject to tax under this chapter.
or (b) The taxpayer was domiciled in this state for a greater amount of time than in the other state during the tax year.
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7 HB 1406 (b) The taxpayer was domiciled in this state for a greater amount of time than in the other state during the tax year.
A tax on the value of property may be considered to be a similar wealth tax even though taxpayers are allowed a deduction for their liabilities in computing the tax.
INNOCENT SPOUSE RELIEF.
TAX REVENUES TO BE DEPOSITED INTO THE GENERAL FUND.
(1) An individual who is required to jointly file a return under this chapter may petition the department for relief from joint and several liability for an assessment of taxes due under this chapter, including penalties and interest.
All revenues collected under this chapter must be deposited into the state general fund.
Relief under this section is available only to the extent that the individual establishes by clear, cogent, and convincing evidence that he or she is entitled to relief under this section.
The petition must be made on a form and in a format prescribed by the department.
(2) An individual is entitled to relief from joint and several liability under this section only if he or she establishes that all of the following criteria have been met:
(a) The individual jointly filed a return under this chapter for a taxable year;
(b) There is an understatement of tax due on the jointly filed return that is attributable to erroneous reporting of assets by the nonpetitioning current or former spouse or state registered domestic partner;
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9 SHB 1406 (c) The individual seeking relief establishes that he or she did not know, and had no reason to know, that there was such an understatement;
and (d) Taking into account all the facts and circumstances, it is manifestly inequitable to hold the individual seeking relief liable for the deficiency in tax for such taxable year attributable to such understatement.
(3) Any determination under this section must be made without regard to community property laws.
(4) If an individual seeking relief under this section establishes that he or she did not know, and had no reason to know, the extent of such understatement, then such individual must be relieved of liability for tax not properly paid, including penalties and interest, for such taxable year to the extent that such liability is attributable to the portion of such understatement of which such individual did not know and had no reason to know.
(5) An individual seeking relief under this section has the burden of proof with respect to establishing the portion of any deficiency allocable to such individual and the portion solely allocable to the individual's current or former spouse or state registered domestic partner.
(6)(a) Notwithstanding any other provision of this section, an individual seeking relief under this section may not seek relief for taxes on wealth derived from disqualified assets.
For the purposes of this subsection, "disqualified asset" means any asset or right to an asset transferred between spouses or state registered domestic partners required to jointly file a return under this chapter if the principal purpose of the transfer was the avoidance of tax.
(b) Except as provided in (c) of this subsection (6), any transfer of assets between two spouses or state registered domestic partners, required to jointly file a return under this chapter, that is made within 12 months prior to December 31st of the tax year for which an individual is seeking relief under this section is presumed to be made with the principle purpose of avoidance of tax.
(c) The presumption under (b) of this subsection (6) does not apply to any transfer pursuant to a decree of divorce, dissolution of a domestic partnership, separate maintenance action, or a written instrument incident to such action, or to any transfer that an individual establishes did not have tax avoidance as its principal purpose.
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10 SHB 1406 (7) If relief is granted under this section, any asset giving rise to a deficiency on a jointly filed return shall be allocated to the individuals filing the return in the same manner as it would have been allocated if the individuals had filed separate returns for the taxable year.
No relief granted under this section may reduce the combined tax liability of individuals required to jointly file a return under this chapter in any given tax year.
(8) Any relief granted under this section may not result in an increase in the exemption amount under section 6(1) of this act.
Nothing in this section shall be construed to permit individuals required to jointly file a return under this chapter to claim a combined exemption under section 6(1) of this act exceeding the limit established in section 6(1) of this act.
(9) An individual seeking relief under this section must file a petition with the department no later than two years after the date of the department's notification of the deficiency that is the subject of the petition.
(10) The department may by rule provide a method or methods for allocating assets between individuals required to jointly file returns under this chapter in cases where one of the individuals is granted relief under this section.
The department may also by rule provide substantiation requirements for an individual to establish his or her eligibility for relief under this section.
(11) An individual seeking relief under this section may petition the department for a review of a denial of such relief pursuant to RCW 82.32.160.
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RCW 82.32.160 and 2007 c 111 s 110 are each amended to read as follows:
(1) Any person having been issued a notice of additional taxes, delinquent taxes, interest, or penalties assessed by the department, may within thirty days after the issuance of the original notice of the amount thereof or within the period covered by any extension of the due date thereof granted by the department petition the department in writing for a correction of the amount of the assessment, and a conference for examination and review of the assessment.
The petition shall set forth the reasons why the correction should be granted and the amount of the tax, interest, or penalties, which the petitioner believes to be due.
The department shall promptly consider the petition and may grant or deny it.
If p.
11 SHB 1406 denied, the petitioner shall be notified by mail, or electronically as provided in RCW 82.32.135, thereof forthwith.
If a conference is granted, the department shall fix the time and place therefor and notify the petitioner thereof by mail or electronically as provided in RCW 82.32.135.
After the conference the department may make such determination as may appear to it to be just and lawful and shall mail a copy of its determination to the petitioner, or provide a copy of its determination electronically as provided in RCW 82.32.135.
If no such petition is filed within the thirty-day period the assessment covered by the notice shall become final.
(2) The procedures provided for herein shall apply also to a notice denying, in whole or in part, an application for a pollution control tax exemption and credit certificate, with such modifications to such procedures established by departmental rules and regulations as may be necessary to accommodate a claim for exemption or credit.
(3) The procedures provided in subsection (1) of this section, as modified in this subsection (3), also apply to a notice denying, in whole or in part, a petition for relief from joint and several liability under section 8 of this act.
A petition under this subsection (3) is due within 30 days after the date the department issued its denial of relief under section 8 of this act.
The petition must set forth the reasons why the department should grant the petitioner's request for relief from joint and several liability.
The petition must also set forth the portion of any deficiency allocable to the petitioner and the portion solely allocable to the petitioner's current or former spouse or state registered domestic partner.
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SUBSTANTIAL WEALTH TAX VALUATION UNDERSTATEMENT PENALTY IMPOSED.
(1) Except as otherwise provided in this section, if any portion of an underpayment of tax due under this chapter is due to a substantial wealth tax valuation understatement, there must be added to the tax an amount equal to:
(a) In the case of any substantial wealth tax valuation understatement that is a gross wealth tax valuation misstatement, 50 percent of the portion of the underpayment due to the valuation understatement;
or (b) In all other cases, 30 percent of the portion of the underpayment due to the valuation understatement.
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12 SHB 1406 (2) The penalty imposed under subsection (1) of this section does not apply unless the portion of the underpayment attributable to substantial wealth tax valuation understatements for the calendar year exceeds $5,000.
(3) The penalty imposed in this section is in addition to any other applicable penalties imposed under this chapter or chapter 82.32 RCW on the same tax due, except for the penalty imposed in RCW 82.32.090(7).
(4) For purposes of this section, the following definitions apply:
(a) "Gross wealth tax valuation misstatement" means the fair market value of any financial intangible assets reported on a return required by this chapter is 40 percent or less of the amount determined to be the correct amount of such fair market value.
(b) "Substantial wealth tax valuation understatement" means the fair market value of any financial intangible assets reported on a return required by this chapter is 65 percent or less of the amount determined to be the correct amount of such fair market value.
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ENFORCEMENT.
Beginning in calendar year 2024, to the extent that sufficient funds are specifically appropriated for this purpose, the department must initiate audits of at least 10 percent of individuals who are registered with the department to pay the tax imposed in this chapter, increasing to 15 percent in calendar year 2025, and 20 percent in calendar year 2026 and thereafter.
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TAX REVENUES TO BE DEPOSITED INTO THE WASHINGTON TAX JUSTICE AND EQUITY FUND.
All taxes collected under this chapter, including associated penalties and interest, must be deposited into the Washington tax justice and equity fund.
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13 SHB 1406 NEW SECTION.
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Pursuant to the referendum power set forth in Article II, section 1 (b) of the state Constitution, tax increases may be referred to the voters for their approval or rejection at an election.
Pursuant to the referendum power set forth in Article II, section 1(b) of the state Constitution, tax increases may be referred to the voters for their approval or rejection at an election.
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(c) Whether an arrangement or transaction is a reasonable means of accomplishing a substantial nontax purpose;
14 SHB 1406 (c) Whether an arrangement or transaction is a reasonable means of accomplishing a substantial nontax purpose;
((and)) (c) Arrangements through which a taxpayer attempts to avoid tax under chapter 82.08 or 82.12 RCW by engaging in a transaction to disguise its purchase or use of tangible personal property by vesting legal title or other ownership interest in another entity over which the taxpayer exercises control in such a manner as to effectively retain control of the tangible personal property;
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and (d) Arrangements through which a taxpayer attempts to avoid tax under chapter 84A.--- RCW (the new chapter created in section 20 of this act) through intentional deception, such as by concealing assets or evidence of the location of the taxpayer's domicile in this state, by transferring assets prior to December 31st when the taxpayer effectively retained control of the assets, or by effectively converting taxable assets into nontaxable assets prior to December 31st when the taxpayer engages in a substantially offsetting transaction.
9 HB 1406 (c) Arrangements through which a taxpayer attempts to avoid tax under chapter 82.08 or 82.12 RCW by engaging in a transaction to disguise its purchase or use of tangible personal property by vesting legal title or other ownership interest in another entity over which the taxpayer exercises control in such a manner as to effectively retain control of the tangible personal property;
This subsection (3)(d) does not apply to substantial wealth tax valuation understatements subject to the penalty in section 10 of this act.
and (d) Arrangements through which a taxpayer attempts to avoid tax under chapter 84A.--- RCW (the new chapter created in section 15 of this act) through intentional deception, such as by concealing assets or evidence of the location of the taxpayer's domicile in this state, by transferring assets prior to December 31st when the taxpayer effectively retained control of the assets, or by effectively converting taxable assets into nontaxable assets prior to December 31st when the taxpayer engages in a substantially offsetting transaction.
(4) In determining whether a transaction or arrangement comes within the scope of subsection (3) of this section, the department is p.
(4) In determining whether a transaction or arrangement comes within the scope of subsection (3) of this section, the department is not required to prove a taxpayer's subjective intent in engaging in the transaction or arrangement.
15 SHB 1406 not required to prove a taxpayer's subjective intent in engaging in the transaction or arrangement.
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A new section is added to chapter 84.36 RCW to read as follows:
WASHINGTON TAX JUSTICE AND EQUITY FUND CREATED.
The Washington tax justice and equity fund is created in the state treasury.
Moneys in the account may only be used as specified in this section.
(1) First, moneys in the Washington tax justice and equity fund must be used to offset reductions in revenue and administrative costs resulting from the antidisplacement property tax exemption program in chapter .
..
(H-1414/21), Laws of 2021.
This use is the highest priority of moneys in the fund.
(2) After the requirements of subsection (1) of this section are satisfied, expenditures from the Washington tax justice and equity fund may be used for offsetting reductions in revenue due to implementation of other policies such as the working families' tax exemption, expansion of the small business tax credit, a replacement to the business and occupation tax, and other tax fairness policies such as those that may be suggested by the tax structure work group.
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If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
If any provision of this act or its application to any person or circumstance is held p.
10 HB 1406 invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
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Sections 1 through 8 and 10 through 14 of this act constitute a new chapter in a new title to be codified as Title 84A RCW.
Sections 1 through 10 of this act constitute a new chapter in a new title to be codified as Title 84A RCW.
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11 HB 1406
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Action History

  1. By resolution, reintroduced and retained in present status.

  2. Referred to Appropriations.

  3. Scheduled for public hearing in the House Committee on Finance at 08:00 AM

  4. Minority; without recommendation.

  5. Minority; do not pass.

  6. FIN - Majority; 1st substitute bill be substituted, do pass.

  7. Executive action taken in the House Committee on Finance at 8:00 AM.

  8. Scheduled for public hearing in the House Committee on Finance at 01:30 PM

  9. Public hearing in the House Committee on Finance at 1:30 PM.

  10. First reading, referred to Finance.

Sponsors

Sponsorship breakdown

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1 sponsors · 25 co-sponsors · 125 not signed on

Sponsors (1)

Co-sponsors (25)

Not signed on (125)

125 members have not signed on to this bill.

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"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

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Frequently asked questions

Who sponsors HB 1406?
HB 1406 is sponsored by Harris-Talley, Marcus Riccelli (Democrat), Steve Bergquist (Democrat), Nicole Macri (Democrat), Chopp, David Hackney (Democrat), Strom Peterson (Democrat), Liz Berry (Democrat), Cindy Ryu (Democrat), Davina Duerr (Democrat), Debra Lekanoff (Democrat), Alex Ramel (Democrat), Cody, Tarra Simmons (Democrat), Dolan, Amy Walen (Democrat), Gerry Pollet (Democrat), Shelley Kloba (Democrat), Javier Valdez (Democrat), Jessica Bateman (Democrat), Lauren Davis (Democrat), Kirby, Lillian Ortiz-Self (Democrat), Timm Ormsby (Democrat), Sullivan, and Noel Frame (Democrat).
What is the current status of HB 1406?
This bill died with 2021-2022 Regular Session. It reached “Passed House” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
Where can I track HB 1406?
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