A new legislative proposal, Senate Bill 5815, aims to clarify tax regulations for businesses in Washington, particularly regarding investment income. Introduced on April 18, 2025, the bill seeks to amend existing tax codes to ensure that nondeductible investment income is subject to the business and occupation tax classification, aligning it with established apportionment rules.

The bill's primary focus is on defining what constitutes "incidental" investment income. Under the proposed changes, businesses can deduct investment income from their tax calculations only if it accounts for less than five percent of their total worldwide gross income. This provision is designed to prevent larger corporations from exploiting loopholes to avoid taxation on substantial investment earnings.

Notably, the bill specifies that certain types of income, such as loans and credit extensions, will not be deductible unless they fall under specific conditions. This move has sparked debates among lawmakers, with some arguing that it could disproportionately affect smaller businesses that rely on investment income for growth.

Supporters of SB 5815 argue that the bill promotes fairness in the tax system by ensuring that all businesses contribute their fair share, while critics warn it may stifle investment and economic growth. Experts suggest that the bill could have significant implications for Washington's business landscape, potentially reshaping how companies approach their investment strategies.

As the bill progresses through the legislative process, stakeholders are closely monitoring its developments, anticipating potential amendments and the final impact on Washington's economy. The outcome of SB 5815 could set a precedent for how investment income is taxed in the state, influencing future legislative efforts and business operations alike.