HB 2089 — Supporting wildfire mitigation by modifying RCW 82.04.29005, concerning taxes on loan interest.

H-3503.1H-2423.1 SUBSTITUTE HOUSE BILL 2089 State of Washington 69th Legislature 2026 Regular Session By House Finance (originally sponsored by Representatives Scott, Springer, Parshley, Ryu, Simmons, Berry, Street, Thomas, Ormsby, Obras, Reeves, Macri, Fosse, Hill, Pollet, and Salahuddin)Salahuddin READPrefiled FIRST12/02/25. TIME 02/09/26.

Read first time 01/12/26.

Referred to Committee on Finance.

1 SHBHB 2089 (b) In RCW 76.04.505, the legislature found that "[fire] suppression costs are only a small portion of the impact [of wildfires] to the state budget." The legislature finds that funding wildfire preparedness activities under RCW 76.04.511(3) saves the state substantially in post facto costs stemming from infrastructure wreckage, reduced real estate valuation, insurance claims, and adverse health outcomes.

"Community banks" were defined in statute, RCW 82.04.29005, as "persons or an affiliate of such persons located in ten or fewer states." The legislature indicated that this tax preference was intended to stimulate lending activity in Washington's residential housing market throughvia definedlocal "communityfinancial banks,"institutions, and to do so without violating the federal interstate commerce clause.

These and other large financial institutions benefiting from the tax preference are more likely to conduct a greater share of their business transactions via data centers that consume immenselarge amounts of water on vast plots of deforested land, exacerbating climatic warming trends which increase the frequency of forest fires.

(e) The legislature finds that the current statutory definition of a "community bank" may in any case violate the interstate commerce clause:

An arbitrary definition of "ten or fewer states" would appear to discriminate against certain financial institutions on the basis of how much business they conduct in and across American states.

(f) To harmonize the impact of the first mortgage interest deduction tax preference with the legislature's intentintent, in creating this preference, the joint legislative audit and review committee's 2015 revisitation of this tax preference p.

2 SHBHB 2089 2015 revisitation of RCW 82.04.4292 and 82.04.29005 recommended narrowingtying the intended target of the tax preference therein, perhaps by adjusting the statute definition of a "community bank,"bank" orto bythe makingworking thefederal preferencedefinition a(a functionbank ofwith certain$10 kindsbillion ofor datafewer aboutin mortgages.assets).

The legislature finds that thuslynewly subjecting certain financial institutions to the Washington state business and occupation tax would create revenues,revenues someto both the state general fund and to the state workforce education investment account, and that workforce development investments for forest fire mitigation activities werewas core to the creation of the wildfire response,response forest restoration and community resilience account under RCW 76.04.511(7).

(g) This act aligns the state definition of a "community bank" with the federal definition, then directs general fund revenues resulting therefrom into the state's wildfire response account.

(1) Amounts received as interest on loans originated by a ((personperson located((located in more than ten states))states)), high volume mortgage lender, or an affiliate of such person, and primarily secured by first mortgages or trust deeds on nontransient residential properties are subject to tax under RCW 82.04.290(2)(a).

(2) For the purposes of this ((subsection [section])) section, a person is ((locatedlocated in a state))state a high volume mortgage lender if:

(a) ((TheThe person or an affiliate of the person maintains a branch, office, or one or more employees or representatives in the state;

and (b) Such in-state presence allows borrowers or potential borrowers to contact the branch, office, employee, or representative concerning the acquiring, negotiating, renegotiating, or restructuring of, or making payments on, mortgages issued or to be issued by the person or an affiliate of the person))person. The person is a specified financial institution as defined in RCW 82.04.29004;

or (b) The person has an annual closed mortgage origination volume of at least $10,000,000,000 reported under the federal home mortgage disclosure act in the previous calendar year.

and p.(b) "Interest" has the same meaning as in RCW 82.04.4292 and also includes servicing fees described in RCW 82.04.4292(4).

3 SHB 2089 (b) "Interest" has the same meaning as in RCW 82.04.4292 and also includes servicing fees described in RCW 82.04.4292(4).

(1)p. By October 15, 2027, and by each October 15th thereafter, the department must estimate any increase in state general fund revenue collections for the immediately preceding fiscal year resulting from the modification of RCW 82.04.29005 under section 3, chapter .

3 HB 2089 (1) By October 15, 2027, and by each October 15th thereafter, the department must estimate any increase in state general fund revenue collections for the immediately preceding fiscal year resulting from the modification of RCW 82.04.29005 under section 3, chapter .

4 SHBHB 2089