Investment of businesses in related entities

From the 2024 DOR Tax Exemption Study

82.04.4281(1)(b,c) - Investment of businesses in related entities Description Businesses qualify for a B&O tax deduction for amounts derived as dividends or distributions from a capital account by a parent entity from its subsidiaries. Businesses also qualify for a B&O tax deduction on amounts derived from interest on loans between a subsidiary and a parent or subsidiaries of a common parent if the total investment and loan income is less than 5% of annual gross income. Purpose Encourages capital investment in Washington and provides equal treatment to similarly situated businesses. Taxpayer ($ in millions): savings FY 2024 FY 2025 FY 2026 FY 2027 State Taxes Indeterminate Indeterminate Indeterminate Indeterminate Local Taxes $0.000 $0.000 $0.000 $0.000 Repeal of Repealing this deduction would increase revenues; however, businesses may be exemption able to shift this income to out-of-state affiliates. Potential ($ in millions): revenue gains FY 2024 FY 2025 FY 2026 FY 2027 from full repeal State Taxes $0.000 Indeterminate Indeterminate Indeterminate Local Taxes $0.000 $0.000 $0.000 $0.000 Assumptions - The revenue impact from the repeal of this deduction is indeterminate. Informati