2022 Tax Legislation

The following is a brief summary of the tax-related bills passed by the Legislature and signed into law by Governor Inslee during the 2022 legislative session.

911 emergency communications system 

Advanced computing surcharge exclusion for provider clinics

Affordable housing REET exemption  

Community solar expansion program

Custom farming and hauling exemptions

Electric vehicle infrastructure exemptions

Equitable Access to Credit Program B&O tax credit

Greenhouse gas emissions in buildings

Interstate toll bridges owned by local governments

LET exemption for historic facilities

Marijuana term change

Motion picture competitiveness program contributors B&O credit 

Rural and nonrural data centers

Sales and use tax deferral for affordable housing

Sales and use tax deferral program for clean energy investment projects

Sales and use tax deferral for economic development tax in targeted counties

Sales and use tax deferral program for solar canopies

Sales and use tax deferral for SR 167 and Interstate 405 corridor

Sales and use tax deferral for SR 520 corridor

Small business B&O tax credit and filing threshold

Solar energy systems

Washington health benefit exchange

Working families' tax credit reduction rates

Also, see the department's complete Summary of 2022 Tax & Licensing Legislation.

 

911 emergency communications system 

This bill makes several updates to reflect the ongoing modernization of the statewide 911 emergency communications system, including:

  • Removing the term "enhanced" where it describes 911 systems and related terms throughout the Emergency Management Act (EMA) and Enhanced 911 (E911) excise tax provisions. 
  • Adding new definitions to the EMA and E911 excise tax provisions.
  • Specifying certain allowable uses for the E911 Account funds.

Effective June 9, 2022 (SHB 1703, Chapter 203, Laws of 2022).

 

Advanced computing surcharge exclusion for provider clinics

This bill exempts the following entities from the workforce education investment surcharge that is imposed on select advanced computing businesses.

  • Provider clinics offering primary care, multi-specialty care, and surgical services, including behavioral health services. 
  • Affiliates of the provider clinic if the affiliate is an organization that offers health care services or provides administrative support for a provider clinic or is an independent practice association or accountable care organization.

Effective July 1, 2022 (SSB 5799, Chapter 170, Laws of 2022).

 

Affordable housing REET exemption

This bill exempts from the real estate excise tax (REET) the sale or transfer of real property to a qualifying grantee that uses the property as low-income housing. Qualifying grantees include:

  • Cooperative associations.
  • County corporations. 
  • Housing authorities.
  • Municipal corporations. 
  • Nonprofit entities.
  • Public corporations. 

Exemption effective January 1, 2023 (ESHB 1643, Chapter 199, Laws of 2022).

Special notice coming soon.

 

Community solar expansion program

This bill creates a public utility tax credit for light and power businesses participating in the Community Solar Expansion Program to be administered by the Washington State University Extension Energy Program. The credit is equal to incentive payments paid to qualifying participants. The maximum credit each light and power business may claim per fiscal year is $250,000 or 1.5% of their 2014 calendar year taxable power sales, whichever is greater. No credits may be earned after June 30, 2036, and credits may not be claimed after June 30, 2037. 

Credit effective July 1, 2022 (2SHB 1814, Chapter 212, Laws of 2022).

Special notice coming soon.

Custom farming and hauling exemptions

This bill restores the B&O tax exemption for custom farming services for a farmer and the public utility tax exemption for hauling farm products for related persons which expired December 30, 2020.  

Effective July 1, 2022 (HB 1641, Chapter 119, Laws of 2022).

Special notice coming soon.

 

Electric vehicle infrastructure exemptions

This bill expands the definition of “electric vehicle infrastructure” to include  “green electrolytic hydrogen production facilities” for the purposes of the retail sales and use tax exemptions in RCW 82.08.816 and RCW 82.12.816, and the leasehold excise tax exemption in RCW 82.29A.125

Effective June 9, 2022 (SSB 5910, Chapter 292, Laws of 2022).

Special notice coming soon.

 

Equitable Access to Credit Program B&O tax credit

This bill creates a B&O tax credit for contributions made to the Department of Commerce’s Equitable Access to Credit Program. Credits may be claimed beginning January 1, 2023. The credit provisions of the bill expire July 1, 2027.  

Effective June 9, 2022 (E2SHB 1015, Chapter 189, Laws of 2022).

Special notice coming soon.

 

Greenhouse gas emissions in buildings

This bill expands the definition of buildings eligible to receive incentive payments under the early adopter incentive program in RCW 19.27A.220, to include “Tier 2 covered buildings.” These are buildings where the sum of multifamily residential, nonresidential, hotel, motel, and dormitory floor areas exceed 20,000 gross square feet, but does not exceed 50,000 gross square feet, excluding the parking garage area.

Effective June 9, 2022 (SSB 5722, Chapter 177, Laws of 2022).

 

Interstate toll bridges owned by local governments

This bill:

  • Allows local governments along a bordering state to form a bistate commission to finance, construct, and operate a replacement interstate bridge. 
  • Establishes that the commission is deemed a municipal corporation for the purposes of RCW 82.04.050(10) and the construction activities qualify as public road construction.
  • Allows the commission or any person engaged in the construction of a bridge under this act to apply for deferral of state and local sales and use taxes.
  • Repayment of the deferred taxes begins on December 31 of the fifth calendar year after the date the project is certified as operationally complete and continues for nine years. 

Effective June 9, 2022 (SSB 5558, Chapter 89, Laws of 2022).

 

LET exemption for historic facilities

This bill provides a leasehold excise tax exemption for facilities owned by the Washington State Parks and Recreation Commission, which are listed on the National Register of Historic Places or the Washington Heritage Register.

Effective January 1, 2023 (HB 2058, Chapter 147, Laws of 2022).

 

Marijuana term change

This bill changes the terms "marijuana" and "marihuana" to "cannabis" throughout the Revised Code of Washington.

Effective June 9, 2022 (2SHB 1210, Chapter 16, Laws of 2022).

 

Motion picture competitiveness program contributors B&O credit 

This bill modifies the B&O tax credit for contributions to the Motion Picture Competitiveness Program in RCW 82.04.4489, by: 

  • Increasing the total statewide B&O tax credit limit for program contributions to $15 million per calendar year.
  • Increasing the individual taxpayer B&O tax credit limit to $1 million per calendar year.
  • Exempting people that are eligible for the B&O tax credit and not otherwise receiving funding under chapter 43.365 RCW from filing the annual tax performance report.
  • Providing that no credit may be earned for contributions made on or after July 1, 2030.

Effective June 9, 2022 (ESHB 1914, Chapter 270, Laws of 2022).

Motion Picture Competitiveness Program B&O tax credit modified.
 

Rural and nonrural data centers

This bill:

  • Expands and extends the rural data center exemption in RCW 82.08.986 and RCW 82.12.986, including:
    • Eliminating the limit on the number of exemption certificates that can be issued beginning on the effective date of this legislation for newly constructed data centers.
    • Allowing previously ineligible data centers to apply for a new certificate if they refurbish their data center.
    • Allowing data centers that were issued exemption certificates prior to July 1, 2015, to re-apply for a new certificate if they refurbish their data center.
    • Allowing data centers that were issued a certificate after July 1, 2015, to extend their existing exemptions if they refurbish their data center.
    • Extending the expiration date to July 1, 2048, and providing that no new certificates may be issued after July 1, 2036.
  • Creates a nearly identical sales and use tax exemption for urban data centers, but with some key differences which include:
    • Requiring urban data centers be located in a county with a population above 800,000.
    • Expiring these exemptions on July 1, 2038, and providing that no new certificates may be issued beginning July 1, 2028.

Effective June 9, 2022 (ESHB 1846, Chapter 267, Laws of 2022).

Sales and use tax exemption for rural data centers expanded

Sales and use tax exemption for nonrural data centers

 

Sales and use tax deferral for affordable housing

This bill provides a sales and use tax deferral for the construction of affordable housing on vacant lands in urban areas. 

  • The legislative authority of a qualifying city may authorize a sales and use tax deferral for an investment project on underdeveloped land within its boundaries.
  • Eligible cities are those with a population of at least 135,000 but not more than 250,000. 
  • The owner of a qualifying investment project must first apply to the city for conditional project approval and then apply to the Department of Revenue for a deferral certificate before initiating construction. 
  • The deferral is for state and local sales and use taxes on a qualified investment project, including labor and services rendered in the planning, installation, and construction of the project.
  • The investment project must be used primarily for multifamily housing units. At least 50% of the units must be rented or sold as affordable rental or affordable ownership housing to very-low, low, or moderate-income households.
  • If the project meets the housing affordability criteria for at least 10 consecutive years, the deferred taxes do not need to be repaid.
  • The recipient of a deferral must file an annual tax performance report for the year the city issues a certificate of occupancy and each year thereafter for 10 years.

Effective June 9, 2022 (E2SSB 5755, Chapter 241, Laws of 2022).

Special notice coming soon.

 

Sales and use tax deferral program for clean energy investment projects

This bill creates a sales and use tax deferral program for investment projects in clean technology manufacturing, clean alternative fuels production, and energy storage. All local taxes deferred must be repaid. However, the bill reduces the amount of state sales and use tax that must be repaid on eligible projects if the recipient complies with specified labor standards. 

  • Eligible projects must invest at least $2 million in certain new, renovated, or expanded manufacturing facilities used to manufacture property exclusively incorporated as an ingredient or component used in the manufacturing or generation of:
    • Zero-emission vehicles.
    • Charging and fueling infrastructure for zero-emission vehicles.
    • Renewable and green electrolytic hydrogen.
    • Renewable hydrogen carriers.
    • Clean fuels as established in the Clean Fuels Program.
    • Electricity from renewable resources.
    • Facilities or equipment used for electricity storage.
  • Deferred local taxes must begin to be repaid two years after project completion.
  • Repayments continue for the following nine years.
  • Deferral recipients may receive a 50/75/100% reduction in the amount of state sales tax to be repaid if the Department of Labor and Industries certifies the project’s adherence to one of three tiers of labor standards.
  • Deferral recipients must file annual tax performance reports beginning in the first calendar year after the project is operationally complete and continue filing until the deferred taxes have been repaid.
  • The Department of Revenue may not accept deferral applications after June 30, 2032, and cannot issue further exemption certificates after January 1, 2033.

Effective July 1, 2022 (2SHB 1988, Chapter 185, Laws of 2022).

Sales and use tax deferral for manufacturing and research and development in qualifying counties

 

Sales and use tax deferral for economic development tax in targeted counties

This bill provides a sales and use tax deferral for the construction of manufacturing and research and development facilities, and/or the acquisition of eligible machinery and equipment, in counties with a population of less than 650,000. 

  • A person constructing a qualifying facility or purchasing qualified machinery and equipment may defer up to $400,000 in state and local sales and use taxes.
  • If the project or equipment is used for qualifying purposes for at least eight years, the deferred taxes do not need to be repaid.
  • The recipient of a deferral must file an annual tax performance report for the duration of the deferral.
  • The Department of Revenue may not accept tax deferral applications after June 30, 2032.

Effective July 1, 2022 (ESB 5901, Chapter 257, Laws of 2022).

 

Sales and use tax deferral program for solar canopies

This bill creates a sales and use tax deferral for the construction of solar canopies, which are defined as “elevated structures, or multiple structures, containing a solar energy system with a nameplate capacity of at least one megawatt of alternating current.” 

  • The owner of a qualifying commercial center must apply to the department for a deferral certificate before initiating construction. 
  • The deferral is for state and local sales and use taxes on a qualified solar canopy, including labor and services rendered in the planning, installation, and construction of the project.
  • The owner of a qualifying solar canopy may qualify for a 50%, 75%, or 100% reduction in state and local sales and use taxes to be repaid depending on the specified labor standards contained in the construction contract.
  • To qualify for the deferral, the solar canopy must:
    • Be a new solar canopy of at least 50,000 sq. ft.
    • Be constructed within two years of the issuance of a tax deferral certificate.
    • Remain connected to the electrical grid for eight years.
  • The recipient of a deferral must file an annual tax performance for the year the solar canopy is certified as operationally complete and for the subsequent seven years. 

Effective July 1, 2022 (ESSB 5714, Chapter 161, Laws of 2022).

Special notice coming soon.

 

Sales and use tax deferral for SR 167 and Interstate 405 corridor

This bill creates a sales and use tax deferral for qualified construction projects to improve the Interstate 405/state route 167 corridor. The bill:

  • Defers state and local sales and use taxes due on materials and labor charges related to qualified projects including: 
    • Site preparation.
    • Construction.
    • Machinery and equipment that becomes a component of the final project.
    • Rental equipment.
  • Requires a person to apply to the Department of Revenue for a deferral certificate that exempts the qualified applicant from paying state and local sales and use taxes on qualified purchases. 
  • Requires applicants to begin repaying the deferred tax in the 10th year after the Washington State Department of Transportation notifies the department that all projects qualifying for a deferral are operationally complete. 
  • The first payment is due by December 31 of that year, and every December 31 for the following nine years. 
  • Each payment is equal to 10% of the deferred taxes. 
  • Excludes this legislation from the provisions of RCW 82.32.805 and RCW 82.32.808. Therefore, this deferral will not automatically expire in 10 years and the qualified applicants do not have to file an annual tax performance report.

Effective July 1, 2022 (EHB 1990, Chapter 274, Laws of 2022).

 

Sales and use tax deferral for SR 520 corridor

This bill extends the 10-year deferral period for sales and use taxes associated with the State Route 520 Bridge Replacement and High-Occupancy Vehicle project from five years after project completion to 24 years after project completion.

Effective July 1, 2022 (HB 2024, Chapter 144, Laws of 2022).

 

Small business B&O tax credit and filing threshold

Beginning with tax periods starting on or after January 1, 2023, this bill increases the small business B&O tax credit as follows: 

  • For taxpayers that report at least 50% of their taxable amount as subject to business and occupation tax under the Service and Other Activities classification including those subject to tax on contests of chance and/or tax on real estate brokers the maximum credit for a reporting period is $160 multiplied by the number of months in the reporting period, as determined under RCW 82.32.045
  • For all others, the maximum credit for a reporting period is $55 multiplied by the number of months in the reporting period.

The bill also increases the threshold for filing returns to $125,000 per year for all taxpayers that do not have other taxes to report to the department.

Credit and threshold effective January 1, 2023 (ESSB 5980, Chapter 295 Laws of 2022).

Special notice coming soon.

 

Washington%20health%20benefit%20exchangesSolar energy systems

This bill extends the expiration date for the preferential B&O tax rate under RCW 82.04.294 for taxpayers engaged in manufacturing and selling at wholesale solar energy systems, silicon solar wafers, silicon solar cells, thin film solar devices or compound semiconductor wafers to July 1, 2032.

Effective July 1, 2022 (ESB 5849, Chapter 172, Laws of 2022).

 

Washington health benefit exchange

This bill makes the B&O tax exemption for the Washington Health Benefit Exchange permanent by removing the expiration date from RCW 82.04.323.

Effective June 9, 2022 (HB 1765, Chapter 73, Laws of 2022).

 

Working families' tax credit reduction rates

This bill modifies the Working Families’ Tax Credit (WFTC) under RCW 82.08.0206 by requiring the Department of Revenue to annually adjust the WFTC percentage reduction rate in order to align the WFTC maximum qualifying income with the maximum federal adjusted gross income limit for the federal Earned Income Tax Credit.

Effective June 9, 2022 (HB 1888, Chapter 33, Laws of 2022).