CERTIFICATION OF ENROLLMENT ENGROSSED SUBSTITUTE SENATE BILL 6346 69th Legislature 2026 Regular Session Passed by the Senate March 11, 2026 Yeas 27 Nays 21 President of the Senate Passed by the House March 9, 2026 Yeas 51 Nays 46 Speaker of the House of Representatives CERTIFICATE I, Sarah Bannister, Secretary of the Senate of the State of Washington, do hereby certify that the attached is ENGROSSED SUBSTITUTE SENATE BILL 6346 as passed by the Senate and the House of Representatives on the dates hereon set forth. Secretary Approved FILED Governor of the State of Washington Secretary of State State of Washington

AN ACT Relating to investing in Washington families and 1 businesses to fund K-12 education, health care, higher education, 2 other essential governmental services, and the working families' tax 3 credit, and to reduce certain sales and use taxes and certain 4 business and occupation taxes by establishing a tax on millionaires; 5 amending RCW 82.32.050, 82.32.060, 82.32.090, 2.10.180, 2.12.090, 6 2.14.100, 6.15.020, 41.24.240, 41.32.052, 41.34.080, 41.35.100, 7 41.37.090, 41.40.052, 41.44.240, 41.26.053, 41.28.200, 43.43.310, 8 82.08.0206, 82.04.4451, 82.32.045, 82.04.288, 82.04.050, 82.04.192, 9 82.04.050, 82.04.288, and 1.90.100; amending 2023 c 456 s 3 10 (uncodified); adding a new section to chapter 74.20A RCW; adding new 11 sections to chapter 82.08 RCW; adding new sections to chapter 82.12 12 RCW; adding a new Title to the Revised Code of Washington to be 13 codified as Title 82A RCW; creating new sections; prescribing 14 penalties; and providing effective dates. 15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON: 16 NEW SECTION. Sec. 1. INTENT. (1) The legislature finds that the 17 state, through the state's general fund, invests in K-12 education, 18 health care, higher education, other essential governmental services, 19 and the working families' tax credit, all of which help 20 Washingtonians succeed and thrive. 21 ENGROSSED SUBSTITUTE SENATE BILL 6346 AS AMENDED BY THE HOUSE Passed Legislature - 2026 Regular Session State of Washington 69th Legislature 2026 Regular Session By Senate Ways & Means (originally sponsored by Senators Pedersen, Chapman, Frame, Bateman, Orwall, Slatter, Alvarado, Hunt, Lovelett, Riccelli, Shewmake, Valdez, Wellman, Hasegawa, Robinson, Lovick, Conway, Trudeau, Cleveland, Kauffman, C. Wilson, Dhingra, Stanford, Nobles, Saldaña, Salomon, and Cortes) READ FIRST TIME 02/09/26. p. 1 ESSB 6346.PL

(2) These general fund dollars help the state meet its paramount 1 duty to make ample provision for the education of all children in the 2 state, including children who qualify for special education services, 3 creating the opportunity for each child to succeed in school and 4 achieve success in life. The legislature intends to further support 5 academic success and well-being of our children in K-12 education by 6 providing access to breakfast and lunch for all children served 7 without charge each school day. 8 (3) The general fund supports health care programs that deliver 9 critical, life-saving medical care, provide support for those with 10 developmental and other disabilities, offers long-term care for the 11 elderly, and protects the long-term health and well-being of the 12 public. 13 (4) Further, the general fund invests in higher education, 14 including two and four-year colleges, apprenticeships, and other 15 postsecondary education and training programs, ensuring Washington 16 students remain competitive in the workforce and broader economy. 17 (5) The general fund also invests in human services that provide 18 vital basic-needs assistance to the state's lowest-income households 19 and educate the youngest learners. The legislature intends to further 20 support these young learners through transferring a portion of the 21 revenues from this act to the fair start for kids account, for child 22 care and early learning purposes. 23 (6) Therefore, the intent of this act is to maintain and preserve 24 essential governmental services for Washingtonians, particularly 25 within K-12 education, health care, higher education, and human 26 services, and support working families by ensuring continued 27 investment in, and expansion of who qualifies for, the working 28 families' tax credit by depositing revenues from this act into the 29 general fund. 30 (7) The legislature further recognizes that reforming our tax 31 code to be common sense, balanced, and sustainable is essential to 32 the long-term economic success of Washington. The Washington tax 33 structure, developed during the Great Depression, relies heavily on 34 excise and consumption taxes, with consequences for equity, adequacy, 35 and long-term fiscal stability that persist today. The legislature 36 recognizes that more progress is needed for the state to have a fair 37 and balanced tax system that can provide sustainable, ample funding 38 for K-12 education, health care, higher education, human services, 39 and other essential governmental services. Washington's tax system 40 p. 2 ESSB 6346.PL

remains the second most regressive in the nation as it asks those 1 with the least to pay the most as a percentage of their income. Low- 2 income Washingtonians pay at least three times more in state and 3 local taxes as a percentage of their income than the state's highest 4 income households. 5 (8) Further, due to the action of the federal government through 6 the passage of HR 1, Washington's highest-income households are set 7 to receive an average federal tax break of $90,850 while Washington's 8 lowest-income households are set to receive a mere $200, according to 9 the institute on taxation and economic policy. These tax breaks were 10 largely funded through cuts to federal funding in health care and 11 food security programs, negatively impacting Washington's working 12 families. 13 (9) Thus, the legislature intends to limit the tax established by 14 this act to households with annual adjusted gross income of 15 $1,000,000 or more. Washingtonian households with an annual adjusted 16 gross income of less than $1,000,000 will not owe this tax. As a 17 result, the millionaires' tax is estimated to affect only the 18 wealthiest one-half of one percent of the households in this state, 19 taking a significant step toward reducing the disproportionate 20 reliance on working people to fund K-12 education, health care, 21 higher education, human services, the working families' tax credit, 22 and other essential governmental services to benefit Washingtonians. 23 The application of the tax to households matches the policy of the 24 state's capital gains excise tax and the policy of the property tax 25 exemption for senior citizens, veterans, and people with 26 disabilities. 27 (10) The legislature further intends to exempt certain sources of 28 income from the tax including, but not limited to, the sale of 29 qualified family owned small businesses in accordance with RCW 30 82.87.070 and the sale of residential and other real property in 31 accordance with RCW 82.87.050. 32 (11) It is also the intent of the legislature to rebalance the 33 tax system by reducing taxes on consumers, low and middle-income 34 families, and businesses through small business and other business 35 and occupation tax credits, by exempting from the retail sales tax 36 essential household items such as personal care products, certain 37 over the counter drugs, and diapers, and by providing the tax relief 38 in sections 1101 through 1104 of this act. The legislature further 39 intends that the tax imposed under this act operate together with 40 p. 3 ESSB 6346.PL

certain tax reductions and tax credits enacted by this act as an 1 integrated reform of the state tax code, and that repeal or 2 invalidation of section 201 of this act would reinstate certain sales 3 and use tax on items made exempt by this act and repeal working 4 families tax credits and small business tax credits enacted by this 5 act. 6 (12) The legislature finds that local government revenue sources 7 are limited and unable to keep up with rising costs. The legislature 8 further finds that many of the tax reductions that help 9 Washingtonians have an impact on local government revenues. To offset 10 some of those impacts, the legislature intends to create a city and 11 county fiscal health account for future transfers from the general 12 fund to mitigate a portion of the revenue loss to local government. 13 Such transfers will be unrestricted and available for general use. 14 (13) Thus, to help meet the state's paramount duty of amply 15 providing every child in the state with an education and supporting 16 the health and well-being of Washingtonians, it is the intent of the 17 legislature, by adopting this act, insofar as possible, to: 18 (a) Impose a tax on those households with the greatest ability to 19 pay, specifically those earning Washington adjusted gross income 20 during the taxable year of at least $1,000,000; 21 (b) Make the Washington millionaires' tax law reflect the 22 provisions of the internal revenue code relating to the measurement 23 of adjusted gross income, modified as necessary to achieve the goals 24 and purpose of this act; 25 (c) Achieve this result by the application of the various 26 provisions of the internal revenue code relating to the definition of 27 income, exemptions and exclusions therefrom, accounting methods, 28 basis, depreciation, and other pertinent provisions, subject to 29 additional exemptions and modifications as provided in this act, 30 resulting in a final amount called "Washington adjusted taxable 31 income"; 32 (d) Impose a tax on residents of this state measured by 33 Washington adjusted taxable income wherever derived and to impose a 34 tax on nonresidents measured by Washington adjusted taxable income 35 from sources within this state; and 36 (e) Increase state funding for K-12 education in order to improve 37 outcomes for Washington's students by strengthening high quality 38 instruction and expanding student supports. 39 p. 4 ESSB 6346.PL

PART I 1 DEFINITIONS 2 NEW SECTION. Sec. 101. DEFINITIONS. The definitions in this 3 section apply throughout this chapter unless the context clearly 4 requires otherwise. 5 (1) "Capital asset" has the same meaning as provided in chapter 6 82.87 RCW. 7 (2) "Department" means the department of revenue of the state of 8 Washington. 9 (3) "Federal adjusted gross income" means adjusted gross income 10 as determined under section 62 of the internal revenue code. 11 (4) "Individual" means a natural person. 12 (5) "Internal revenue code" means the United States internal 13 revenue code of 1986, as amended and in effect on January 1, 2026. 14 (6) "Long-term capital asset," "long-term capital gain," and 15 "long-term capital loss" have the same meanings as provided in 16 chapter 82.87 RCW. 17 (7) "Pass-through entity" means a partnership, limited liability 18 company, or S corporation, which reports out the distributive share 19 of taxable income to its partners, members, or shareholders for 20 federal income tax purposes. 21 (8)(a) "Resident" means an individual: 22 (i) Who is domiciled in this state during the taxable year, 23 unless the individual (A) maintained no permanent place of abode in 24 this state during the entire taxable year, (B) maintained a permanent 25 place of abode outside of this state during the entire taxable year, 26 and (C) spent in the aggregate not more than 30 days of the taxable 27 year in this state; or 28 (ii) Who is not domiciled in this state during the taxable year, 29 but maintained a place of abode and was physically present in this 30 state for more than 183 days during the taxable year. 31 (b) For purposes of this subsection, "day" means a calendar day 32 or any portion of a calendar day. 33 (c) An individual who is a resident under (a) of this subsection 34 is a resident for that portion of a taxable year in which the 35 individual was domiciled in this state or maintained a place of abode 36 in this state. 37 (9) "Taxable year" means the taxpayer's taxable year as defined 38 under section 7701(a)(23) of the internal revenue code. 39 p. 5 ESSB 6346.PL

(10) "Taxpayer" means an individual receiving income subject to 1 tax under this chapter. 2 (11) "Washington base income" means federal adjusted gross income 3 as modified under sections 302 through 308 and 401 through 407 of 4 this act. 5 (12) "Washington taxable income" means Washington base income as 6 further modified by sections 309 through 314 of this act. 7 NEW SECTION. Sec. 102. UNDEFINED TERMS—CONFORMITY WITH FEDERAL 8 INTERNAL REVENUE CODE. Any term used in this chapter has the same 9 meaning as when used in a comparable context in the internal revenue 10 code, unless a different meaning is clearly required or the term is 11 specifically defined in this chapter. 12 PART II 13 DETERMINATION OF TAX 14 NEW SECTION. Sec. 201. TAX IMPOSED—RATES. (1) Beginning January 15 1, 2028, a tax is imposed on the receipt of Washington taxable 16 income. Only individuals are subject to payment of the tax, which 17 equals 9.90 percent multiplied by an individual's Washington taxable 18 income. 19 (2) If an individual's Washington taxable income is less than 20 zero for a taxable year, no tax is due under this section. 21 NEW SECTION. Sec. 202. DISTRIBUTION OF TAX REVENUES. (1) Taxes 22 collected under this chapter must be deposited in the state general 23 fund to fund the sales and use tax relief in sections 903 through 908 24 of this act, the working families' tax credit program, including its 25 expansion in section 901 of this act, and the business and occupation 26 tax relief in sections 909 through 911 of this act, and to make 27 public investments in K-12 education, health care, human services, 28 and higher education. 29 (2) Beginning July 1, 2029, and each July 1st thereafter, the 30 state treasurer must deposit five percent of the revenues collected 31 pursuant to this chapter during the previous fiscal year into the 32 fair start for kids account created in RCW 43.216.772. 33 (3) All interest and penalties collected under this chapter must 34 be deposited in the state general fund. 35 p. 6 ESSB 6346.PL

NEW SECTION. Sec. 203. CREDIT FOR INCOME TAXES DUE TO ANOTHER 1 JURISDICTION. (1) A resident individual is allowed a credit against 2 the tax imposed under this chapter for the amount of any income tax 3 paid to another state, or political subdivision of the state, on 4 income taxed under this chapter, subject to the following conditions, 5 which must be imposed separately with respect to each taxing 6 jurisdiction: 7 (a) The credit is allowed only for taxes paid by the individual, 8 or a pass-through entity in which the individual is an owner, to the 9 other jurisdiction on net income from sources within that 10 jurisdiction that is included in the individual's Washington base 11 income; and 12 (b) The amount of the credit may not exceed the smaller of: 13 (i) The amount of tax paid to the other jurisdiction on net 14 income from sources within the other jurisdiction; or 15 (ii) The amount of tax due under this chapter before application 16 of credits allowable by this chapter, multiplied by a fraction. The 17 numerator of the fraction is the amount of the taxpayer's federal 18 adjusted gross income subject to tax in the other jurisdiction. The 19 denominator of the fraction is the taxpayer's total Washington base 20 income. The fraction may never be greater than one. 21 (2) If the laws of the other taxing jurisdiction contain a 22 provision exempting a resident of this state from liability for the 23 payment of income taxes on income earned for personal services 24 performed in such jurisdiction, then the department may enter into a 25 reciprocal agreement with such jurisdiction providing a similar tax 26 exemption on income earned for personal services performed in this 27 state. 28 (3) The credit claimed under this section for a taxable year may 29 not exceed the tax otherwise due under this chapter for that taxable 30 year. Unused credit may not be carried forward or backward to another 31 taxable year. No refunds may be granted for unused credit under this 32 section. 33 (4) For purposes of this section, "state" means a state of the 34 United States, the District of Columbia, the Commonwealth of Puerto 35 Rico, a federally recognized tribe, or any territory or possession of 36 the United States. 37 NEW SECTION. Sec. 204. CREDIT FOR BUSINESS AND OCCUPATION AND 38 PUBLIC UTILITY TAXES. (1) Beginning in tax year 2028 with taxes due 39 p. 7 ESSB 6346.PL

in 2029, to avoid taxing the same Washington taxable income under the 1 business and occupation tax or public utility tax and the tax imposed 2 under this chapter, a nonrefundable credit is allowed against taxes 3 due under this chapter on income that is also subject to the tax 4 imposed under chapter 82.04 or 82.16 RCW. The credit is equal to the 5 amount of tax paid under chapter 82.04 or 82.16 RCW for income 6 included in both the calculation of the tax paid under chapter 82.04 7 or 82.16 RCW and the tax imposed under this chapter. 8 (2) The credit under this section is earned in regard to income 9 reportable for federal income tax purposes and may be claimed against 10 taxes due under this chapter, for the taxable year in which the 11 income is reportable for federal income tax purposes. The credit 12 claimed for a taxable year may not exceed the tax otherwise due under 13 this chapter for that taxable year. Unused credit may not be carried 14 forward or backward to another tax reporting period. No refunds may 15 be granted for unused credit under this section. 16 NEW SECTION. Sec. 205. CREDIT FOR WASHINGTON CAPITAL GAINS 17 TAXES. (1) Beginning in tax year 2028 with taxes due in 2029, a 18 nonrefundable credit is allowed against taxes due under this chapter 19 for the amount of tax imposed on Washington capital gains for the 20 same tax year. "Washington capital gains" has the same meaning as 21 provided in RCW 82.87.020. 22 (2) The credit claimed under this section for a taxable year may 23 not exceed the tax otherwise due under this chapter for that taxable 24 year. Unused credit may not be carried forward or backward to another 25 taxable year. No refunds may be granted for unused credit under this 26 section. 27 NEW SECTION. Sec. 206. CREDIT FOR PASS-THROUGH ENTITY TAX 28 PAYMENTS. (1) Beginning in tax year 2028 for taxes due in 2029, a 29 nonrefundable credit is allowed against taxes due under this chapter 30 for the amount of the tax expense incurred by a pass-through entity 31 under section 502 of this act attributable to the owner as provided 32 in section 502(3) of this act. For a resident, the credit under this 33 section must be reduced by the amount of any credit claimed under 34 section 203 of this act based on the same Washington taxable income. 35 (2) The credit claimed under this section for a taxable year may 36 not exceed the tax otherwise due under this chapter for that taxable 37 year. Unused credit may not be carried forward or backward to another 38 p. 8 ESSB 6346.PL

taxable year. No refunds may be granted for unused credit under this 1 section. 2 PART III 3 ADJUSTED GROSS INCOME MODIFICATIONS 4 NEW SECTION. Sec. 301. INTRODUCTORY. In computing Washington 5 base income for a taxable year, modifications must be made to the 6 taxpayer's federal adjusted gross income as required under sections 7 302 through 308 and 401 through 407 of this act, unless the 8 modification has the effect of duplicating an item of income or 9 deduction. If an item of income is excluded from federal adjusted 10 gross income, it is excluded from the tax under this chapter unless 11 specifically included as provided in sections 302 through 309 of this 12 act. 13 NEW SECTION. Sec. 302. LONG-TERM CAPITAL GAINS AND LOSSES. (1) 14 In computing a taxpayer's Washington base income, the taxpayer must 15 deduct from the taxpayer's federal adjusted gross income any long- 16 term capital gains that have been included in computing federal 17 adjusted gross income. 18 (2) In computing a taxpayer's Washington base income, a taxpayer 19 must add to the taxpayer's federal adjusted gross income any long- 20 term capital losses that have been included in computing federal 21 adjusted gross income. 22 (3) After making the modifications required under subsections (1) 23 and (2) of this section, in computing a taxpayer's Washington base 24 income, a taxpayer must add to the taxpayer's federal adjusted gross 25 income the amount of Washington capital gains subject to tax under 26 chapter 82.87 RCW for the same taxable year, plus the amount deducted 27 under RCW 82.87.060(1). Under this subsection (3), a taxpayer must 28 not include long-term capital gains or long-term capital losses, from 29 the sales or exchanges exempt under RCW 82.87.050, in the computation 30 of their Washington base income. This subsection (3) applies only to 31 taxpayers owing tax under chapter 82.87 RCW for that taxable year. 32 "Washington capital gains" has the same meaning as provided in RCW 33 82.87.020. 34 NEW SECTION. Sec. 303. STATE AND LOCAL OBLIGATIONS. In 35 computing a taxpayer's Washington base income, the taxpayer must add 36 p. 9 ESSB 6346.PL

to the taxpayer's federal adjusted gross income any income that has 1 been excluded under section 103 of the internal revenue code in 2 computing federal adjusted gross income, except interest on 3 obligations of the state of Washington or political subdivisions of 4 the state of Washington. 5 NEW SECTION. Sec. 304. STATE AND LOCAL INCOME TAXES—BUSINESS 6 AND OCCUPATION AND PUBLIC UTILITY TAXES. In computing a taxpayer's 7 Washington base income, the taxpayer must add to the taxpayer's 8 federal adjusted gross income: 9 (1) Taxes on or measured by net income which have been deducted 10 under the internal revenue code in computing federal adjusted gross 11 income; 12 (2) The amount of taxes paid or accrued which have been deducted 13 for federal purposes, but for which either a business and occupation 14 tax credit or public utility tax credit, or both, is allowed. 15 NEW SECTION. Sec. 305. CARRYOVERS. In computing a taxpayer's 16 Washington base income, the taxpayer must: 17 (1) Add to the taxpayer's federal adjusted gross income, any 18 amounts that have been deducted in computing federal adjusted gross 19 income to the extent the amounts have been carried over from taxable 20 years ending before January 1, 2028; 21 (2)(a) Add to the taxpayer's federal adjusted gross income, any 22 amounts of net operating loss carryover that have been deducted in 23 computing federal adjusted gross income not described in subsection 24 (1) of this section; and 25 (b) Deduct 80 percent of the amount of net operating loss 26 carryover that has been deducted in computing federal adjusted gross 27 income, to the extent that the loss carryover meets all of the 28 following criteria: 29 (i) The loss carryover is from losses apportioned to Washington 30 under sections 401 through 407 of this act; 31 (ii) The loss carryover is not added to federal adjusted gross 32 income under subsection (1) of this section; and 33 (iii) The loss carryover is from a previous tax year so long as 34 that previous tax year is after January 1, 2028. 35 NEW SECTION. Sec. 306. FEDERAL OBLIGATIONS. In computing a 36 taxpayer's Washington base income, the taxpayer must deduct, to the 37 p. 10 ESSB 6346.PL

extent included, from the taxpayer's federal adjusted gross income, 1 any income derived from obligations of the United States that this 2 state is prohibited by federal law from subjecting to a net income 3 tax. However, the amount deducted under this section must be reduced 4 by any expense, including amortizable bond premiums, incurred in the 5 production of such income to the extent the expense has been deducted 6 in calculating federal adjusted gross income. 7 NEW SECTION. Sec. 307. INCOMPLETE NONGRANTOR TRUSTS FOR 8 WASHINGTON RESIDENTS. In computing a resident taxpayer's Washington 9 base income, the taxpayer must add to the taxpayer's federal adjusted 10 gross income, all income from a trust treated as a nongrantor trust 11 for federal income tax purposes but funded with an incomplete gift 12 for purposes of section 2511 of the internal revenue code and its 13 accompanying regulations, to the extent the trust income is not 14 otherwise included in the calculation of Washington base income. 15 NEW SECTION. Sec. 308. TRIBAL INCOME. (1) The following is 16 exempt from the tax imposed by this chapter: 17 (a) Income derived from the exercise of rights by any member of a 18 federally recognized tribe secured by treaty, executive order, or act 19 of congress; 20 (b) Income received by any member of a federally recognized 21 tribe, when the individual worked or received income within their own 22 tribe's Indian country; 23 (c) Income received by any member of a federally recognized tribe 24 that is derived directly from lands or funds held in trust by the 25 secretary of the United States department of interior allotted and 26 restricted Indian lands; 27 (d) Income derived from a federally recognized tribe, including 28 its subdivisions and entities, when such income is received by a 29 member of a federally recognized tribe or by a beneficiary of an 30 Indian health program pursuant to 42 C.F.R. Sec. 136.12 (2026); and 31 (e) Any income, payments, benefits, or services, the taxation of 32 which is otherwise exempted or preempted by federal or state law 33 including, but not limited to, sections 139D and 139E of the internal 34 revenue code. 35 (2) This chapter is not intended to apply to, or impose 36 obligations on, federally recognized tribes or their subdivisions or 37 p. 11 ESSB 6346.PL

entities with tribal government headquarters located in the state of 1 Washington. 2 NEW SECTION. Sec. 309. CHARITABLE CONTRIBUTIONS. (1) In 3 computing a taxpayer's Washington taxable income, the taxpayer may 4 deduct from their Washington base income the amount of charitable 5 contributions they claimed for the taxable year under section 170 of 6 the internal revenue code to a qualified organization, up to a 7 maximum deduction of $100,000 per individual, or in the case of 8 spouses or domestic partners, their combined charitable deduction is 9 limited to $100,000, regardless of whether they file joint or 10 separate returns. 11 (2) For the purposes of this section, "qualified organization" 12 has the same meaning as in RCW 82.87.080. 13 NEW SECTION. Sec. 310. PASS-THROUGH ENTITY TAX PAYMENTS. In 14 computing a taxpayer's Washington taxable income, the taxpayer must 15 add to the taxpayer's Washington base income the taxpayer's 16 distributive share of the tax expense incurred by a pass-through 17 entity under section 502 of this act to the extent the expense has 18 been deducted in calculating the taxpayer's federal adjusted gross 19 income. 20 NEW SECTION. Sec. 311. CAPITAL CONSTRUCTION FUND FOR VESSEL 21 IMPROVEMENTS OR ACQUISITION. In computing a taxpayer's Washington 22 taxable income, the taxpayer may deduct from the taxpayer's 23 Washington base income the amount deposited in a capital construction 24 fund under section 7518 of the internal revenue code if the amount 25 has reduced the taxpayer's federal taxable income for the taxable 26 year. 27 NEW SECTION. Sec. 312. WAGERING LOSSES. In computing a 28 taxpayer's Washington taxable income, the taxpayer must deduct an 29 amount equal to 90 percent of any Washington allocated wagering 30 losses for the tax year. The amount of the losses deducted cannot be 31 more than the Washington allocated wagering income included in the 32 taxpayer's Washington base income. Wagering losses may not be carried 33 forward or backward. The wagering loss deduction must be adjusted for 34 nonresidents as provided in section 401 of this act. 35 p. 12 ESSB 6346.PL

NEW SECTION. Sec. 313. COMMERCIAL CANNABIS ACTIVITIES. In 1 computing a taxpayer's Washington taxable income, the taxpayer may 2 deduct from the taxpayer's Washington base income the amount of 3 expenditures disallowed pursuant to section 280E of the internal 4 revenue code so long as the expenditures are related to the 5 commercial cannabis activities by a person licensed pursuant to RCW 6 69.50.325. 7 NEW SECTION. Sec. 314. ONE MILLION DOLLAR STANDARD DEDUCTION. 8 In computing a taxpayer's Washington taxable income, a taxpayer may 9 deduct from the taxpayer's Washington base income a standard 10 deduction of $1,000,000 per individual, or in the case of spouses or 11 state registered domestic partners, their combined standard deduction 12 is $1,000,000, regardless of whether they file joint or separate 13 returns. The amount of the standard deduction must be annually 14 adjusted pursuant to section 316 of this act. The standard deduction 15 must be adjusted for nonresidents as provided in section 315 of this 16 act. 17 NEW SECTION.

Sec. 315.

ADJUSTMENT OF DEDUCTIONS FOR 18 NONRESIDENTS. The deduction from Washington base income allowed under 19 section 314 of this act for individual taxpayers who are not 20 residents of this state for the entire taxable year must be reduced 21 by multiplying the amount of the deduction by a fraction. The 22 numerator of the fraction is the individual's Washington base income. 23 The denominator of the fraction is the individual's federal adjusted 24 gross income from all sources. The fraction may never be greater than 25 one. 26 NEW SECTION. Sec. 316. INDEX FOR INFLATION. (1) Beginning 27 October 2029 and each October of an odd-numbered year thereafter, the 28 department must adjust the standard deduction under section 314 of 29 this act by multiplying the current standard deduction amount by one 30 plus the percentage by which the most current consumer price index 31 available on October 1st of the current year exceeds the consumer 32 price index for the prior 12-month period, and rounding the result to 33 the nearest $1,000. If an adjustment under this subsection (1) would 34 reduce the standard deduction amount, the department must not adjust 35 the amounts for use in the following year. The department must 36 publish the adjusted standard deduction amount on its public website 37 p. 13 ESSB 6346.PL

by October 31st of each year. The adjusted standard deduction amount 1 calculated under this subsection (1) takes effect for taxes due in 2 the following calendar year. 3 (2) For purposes of this section, "consumer price index" means 4 the consumer price index for all urban wage earners and clerical 5 workers as calculated by the United States bureau of labor statistics 6 or its successor agency. 7 PART IV 8 DIVISION OF INCOME 9 NEW SECTION. Sec. 401. ALLOCATION AND APPORTIONMENT OF INCOME. 10 (1) For resident individuals, all income must be allocated to this 11 state. 12 (2) For nonresident individuals, income derived from sources 13 within this state must be allocated to this state. Income derived 14 from sources within this state means: 15 (a) Wages and other compensation from employment within this 16 state as provided in section 403 of this act; 17 (b) Compensation attributable to professional athletics as 18 provided in section 404 of this act; 19 (c) Income of a nonresident student athlete derived from the 20 commercial use of the student athlete's name, image, or likeness as 21 provided in section 407 of this act; 22 (d) Amounts attributable to any business, trade, profession, or 23 occupation carried on within this state, including an individual's 24 distributive share of income from a pass-through entity operating 25 within this state as provided in section 402 of this act, to the 26 extent determined under section 405 of this act; 27 (e) Rents, short-term gains, and other amounts attributable to 28 the ownership or disposition of any interest in real or tangible 29 personal property in this state; 30 (f) Income from intangible personal property, including 31 annuities, dividends, interest, and gains from the disposition of 32 intangible personal property, to the extent that the intangible 33 personal property was employed in a business, trade, profession, or 34 occupation carried on within this state; and 35 (g) Income received from wagering transactions. 36 (3) If the nonresident individual performs services in Washington 37 five or fewer days cumulatively in any calendar year, no income must 38 p. 14 ESSB 6346.PL

be allocated pursuant to this section. This subsection (3) does not 1 apply to nonresident professional athletes, nonresident student 2 athletes, and nonresident entertainers. 3 (4) Deductible expenses, capital losses, and net operating losses 4 of a nonresident are based solely on income, gains, losses, and 5 deductible expenses derived from or connected with sources in this 6 state but are otherwise determined in the same manner as the 7 corresponding federal deductions except as provided in this chapter. 8 (5) Compensation paid by the United States for service in the 9 armed forces of the United States performed in this state by a 10 nonresident does not constitute income derived from sources within 11 this state. 12 (6) Income earned by a nonresident participating as a keynote 13 speaker, panelist, presenter, moderator, or similar role at a 14 convention trade show or business event held in this state may be 15 excluded if the individual meets the requirements of RCW 82.32.531. 16 NEW SECTION. Sec. 402. PASS-THROUGH ENTITIES—DISTRIBUTIVE 17 SHARE. (1) Income derived from sources within this state include an 18 apportioned share of the individual's distributive share of income, 19 gains, losses, and deductions from pass-through entities that operate 20 in the state, as provided in subsection (2) of this section. 21 (2) The allowable modifications and credits under this chapter 22 for partners, members, or shareholders of a pass-through entity are 23 computed by including a pro rata share of the Washington base income 24 and the credits allowed under sections 203 through 205 of this act, 25 if the modification or credit relates to the income of the pass- 26 through entity. Each member's, partner's, or shareholder's pro rata 27 share of a modification or credit is the amount of modification or 28 credit based on the pro rata share of net income or loss on a 29 member's, partner's, or shareholder's federal schedule K-1 form. 30 (3) For purposes of this section, "pro rata share" means pro rata 31 share as reflected on the member's, partner's, or shareholder's 32 federal schedule K-1 form. 33 NEW SECTION. Sec. 403. GENERAL RULE FOR ALLOCATING NONRESIDENT 34 INCOME DERIVED FROM COMPENSATION TO WASHINGTON. (1) Unless provided 35 otherwise in this chapter, a nonresident individual is subject to tax 36 on the portion of federal adjusted gross income derived from 37 p. 15 ESSB 6346.PL

employment within the state of Washington, regardless of the location 1 of the commercial domicile of the employer. 2 (2) Compensation for services performed by a nonresident as part 3 of their employment must be allocated to this state to the extent 4 such services are rendered within the state. If services are 5 performed both within and outside the state, the compensation must be 6 apportioned based on the ratio of days worked in the state to total 7 days worked, or by another reasonable method approved by the 8 department. 9 (3) For the purpose of this section, the following definitions 10 apply: 11 (a) "Compensation" means wages, salaries, commissions, and any 12 other form of remuneration paid to employees for personal services. 13 (b) "Employment" means personal service, of whatever nature, as 14 known to the common law or any other legal relationship performed for 15 an employer by an individual for compensation or under any contract 16 calling for the performance of personal services, written or oral, 17 express or implied, where the employer is subject to tax under RCW 18 50.24.010 on any portion of compensation paid by the employer to the 19 individual for the performance of the personal services. 20 NEW SECTION. Sec. 404. APPORTIONING INCOME FOR NONRESIDENT 21 MEMBERS OF A PROFESSIONAL ATHLETIC TEAM. (1) For nonresident members 22 of a professional athletic team, the portion of compensation 23 attributable to athletic performances in the state must be 24 apportioned to Washington as provided under this section. 25 (2)(a) The portion of the compensation of a member of a 26 professional athletic team apportioned to Washington is that portion 27 of compensation received for the tax year that bears the same ratio 28 to total compensation received for the tax year as the number of duty 29 days within this state bears to the total number of duty days spent 30 both within and outside this state during the tax year. 31 (b) Notwithstanding the description of the portion of 32 compensation subject to apportionment to the state of Washington 33 under this subsection, the department may provide by rule alternative 34 methodologies for determining the portion of compensation subject to 35 apportionment to the state of Washington that the department 36 determines to be fair and equitable. 37 (3)(a) A person who transacts business in the state of Washington 38 and who pays wages, salary, bonuses, or other taxable income to a 39 p. 16 ESSB 6346.PL

member of a professional athletic team, must submit a report to the 1 department each year indicating any member of a professional athletic 2 team who may be reasonably assumed to owe tax under this chapter for 3 the calendar year. 4 (b) The report required under (a) of this subsection (3) must 5 include: 6 (i) The total amount of compensation paid during the year to the 7 members of the professional athletic team for which the report is 8 being made; 9 (ii) A roster of the members of the professional athletic team 10 for which the report is being made who were members at any time 11 during the year, that lists for each member: 12 (A) A taxpayer identification number; 13 (B) Compensation paid to the member; and 14 (C) The number of duty days in this state and the total number of 15 duty days for the year; and 16 (iii) Any other information the department may require by rule. 17 (c) The report must be filed with the department on or before 18 April 15th following the year for which the report is being made or 19 at another time as the department may require by rule. 20 (4) The definitions in this subsection apply throughout this 21 section unless the context clearly requires otherwise. 22 (a) "Compensation" means wages, salaries, bonuses, and any other 23 income included with federal adjusted gross income and paid to a 24 member of a professional athletic team. 25 (b) "Duty days" means the days during the tax year from the 26 beginning of the official preseason training period of a professional 27 athletic team through the last game in which the professional 28 athletic team competes or is scheduled to compete during the tax 29 year. 30 (c) "Member of a professional athletic team" means a nonresident 31 athlete or other individual rendering service to a professional 32 athletic team if the total compensation of the athlete or other 33 individual exceeds $1,000,000 in a tax year. 34 NEW SECTION. Sec. 405. GENERAL RULE FOR APPORTIONING AND 35 ALLOCATING NONRESIDENT INCOME FROM BUSINESS ACTIVITY CONDUCTED IN THE 36 STATE. (1) The portion of federal adjusted gross income of a 37 nonresident derived from or connected with a business, trade, or 38 profession carried on in this state, including a sole proprietorship 39 p. 17 ESSB 6346.PL

and any distributive share of a pass-through entity of a business, 1 trade, or profession carried on in this state, must be apportioned 2 and allocated as provided in this section. This section does not 3 apply to compensation received as an employee allocated under section 4 403 of this act. 5 (2) Income from a business, trade, or profession carried on in 6 this state, including any distributive share of a pass-through entity 7 of a business, trade, or profession carried on in this state, must be 8 classified as either apportionable income or nonapportionable income. 9 (3) All apportionable income must be apportioned to this state by 10 multiplying the income by the receipts factor. The receipts factor is 11 a fraction the numerator of which is the total receipts of the 12 taxpayer in this state during the tax period and the denominator of 13 which is the total receipts of the taxpayer everywhere during the tax 14 period. 15 (a) Receipts from the sale of tangible personal property are in 16 this state if: 17 (i) The property is delivered or shipped to a purchaser, other 18 than the United States government, within this state regardless of 19 the free on board point or other conditions of the sale; or 20 (ii) The property is shipped from an office, store, warehouse, 21 factory, or other place of storage in this state and (A) the 22 purchaser is the United States government or (B) the taxpayer is not 23 taxable in the state of the purchaser. 24 (b)(i) Receipts, other than receipts described in (a) of this 25 subsection (3), are in this state if the taxpayer's market for the 26 sales is in this state. The taxpayer's market for sales is in this 27 state: 28 (A) In the case of sale, rental, lease, or license of real 29 property, if and to the extent the property is located in this state; 30 (B) In the case of rental, lease, or license of tangible personal 31 property, if and to the extent the property is located in this state; 32 (C) In the case of sale of a service, if and to the extent the 33 service is delivered to a location in this state; and 34 (D) In the case of intangible property: 35 (I) That is rented, leased, or licensed, if and to the extent the 36 property is used in this state, provided that intangible property 37 used in marketing a good or service to a consumer is "used in this 38 state" if that good or service is purchased by a consumer who is in 39 this state; and 40 p. 18 ESSB 6346.PL

(II) That is sold, if and to the extent the property is used in 1 this state, if: 2 (1) A contract right, government license, or similar intangible 3 property that authorizes the holder to conduct a business activity in 4 a specific geographic area is "used in this state" if the geographic 5 area includes all or part of this state; 6 (2) Receipts from intangible property sales that are contingent 7 on the productivity, use, or disposition of the intangible property 8 must be treated as receipts from the rental, lease, or licensing of 9 such intangible property under subsection (4)(a)(i) of this section; 10 and 11 (3) All other receipts from a sale of intangible property must be 12 excluded from the numerator and denominator of the receipts factor. 13 (c) If the state or states of assignment under (b) of this 14 subsection (3) cannot be determined, the state or states of 15 assignment must be reasonably approximated. 16 (d) If the taxpayer is not taxable in a state to which a receipt 17 is assigned under this subsection (3), or if the state of assignment 18 cannot be determined under (b) of this subsection (3) or reasonably 19 approximated under (c) of this subsection (3), the receipt must be 20 excluded from the denominator of the receipts factor. 21 (4)(a) If the allocation and apportionment provisions in 22 subsection (3) of this section do not fairly represent the extent of 23 the taxpayer's business activity in this state, the taxpayer may 24 petition for or the department may require, in respect to all or any 25 part of the taxpayer's business activity, if reasonable: 26 (i) Separate accounting; 27 (ii) The exclusion of any one or more of the factors; 28 (iii) The inclusion of one or more additional factors that will 29 fairly represent the taxpayer's business activity in this state; or 30 (iv) The employment of any other method to effectuate an 31 equitable allocation and apportionment of the taxpayer's income. 32 (b) If the allocation and apportionment provisions of this 33 section do not fairly represent the extent of business activity in 34 this state for taxpayers engaged in a particular industry or in a 35 particular transaction or activity, the department may, in addition 36 to the authority provided in (a) of this subsection (4), adopt rules 37 for determining alternative allocation and apportionment methods for 38 such taxpayers. Rules adopted pursuant to this subsection (4)(b) must 39 be applied uniformly, except that with respect to any taxpayer to 40 p. 19 ESSB 6346.PL

whom such rule applies, the taxpayer may petition for, or the 1 department may require, adjustment under (a) of this subsection (4). 2 (c)(i) The party petitioning for, or the department requiring, 3 the use of any method to effectuate an equitable allocation and 4 apportionment of the taxpayer's income pursuant to (a) of this 5 subsection (4) must prove by clear and convincing evidence: 6 (A) That the allocation and apportionment provisions of this 7 section do not fairly represent the extent of the taxpayer's business 8 activity in this state; and 9 (B) That the alternative to such provisions is reasonable. 10 (ii) The same burden of proof applies whether the taxpayer is 11 petitioning for, or the department is requiring, the use of any 12 reasonable method to effectuate an equitable allocation and 13 apportionment of the taxpayer's income. However, if the department 14 can show that in any two of the prior five tax years, the taxpayer 15 had used an allocation or apportionment method at variance with its 16 allocation or apportionment method or methods used for such other tax 17 years, then the department does not bear the burden of proof in 18 imposing a different method pursuant to (a) of this subsection (4). 19 (iii) If the department requires any method to effectuate an 20 equitable allocation and apportionment of the taxpayer's income, the 21 department may not impose any civil or criminal penalty with 22 reference to the tax due that is attributable to the taxpayer's 23 reasonable reliance solely on the allocation and apportionment 24 provisions of this section. 25 (iv) A taxpayer that has received written permission from the 26 department to use a reasonable method to effectuate an equitable 27 allocation and apportionment of the taxpayer's income may not have 28 that permission revoked with respect to transactions and activities 29 that have already occurred unless there has been a material change 30 in, or a material misrepresentation of, the facts provided by the 31 taxpayer upon which the department reasonably relied. 32 (5) Rents and royalties from real or tangible personal property, 33 capital gains, interest, dividends, or patent or copyright royalties, 34 to the extent that they constitute nonapportionable income, must be 35 allocated as provided in subsections (6) through (9) of this section. 36 (6)(a) Net rents and royalties from real property located in this 37 state are allocable to this state. 38 (b) Net rents and royalties from tangible personal property are 39 allocable to this state: (i) If and to the extent that the property 40 p. 20 ESSB 6346.PL

is utilized in this state; or (ii) in their entirety if the 1 taxpayer's commercial domicile is in this state and the taxpayer is 2 not organized under the laws of or taxable in the state in which the 3 property is utilized. 4 (c) The extent of utilization of tangible personal property in a 5 state is determined by multiplying the rents and royalties by a 6 fraction the numerator of which is the number of days of physical 7 location of the property in the state during the rental or royalty 8 period in the taxable year and the denominator of which is the number 9 of days of physical location of the property everywhere during all 10 rental or royalty periods in the taxable year. If the physical 11 location of the property during the rental or royalty period is 12 unknown or unascertainable by the taxpayer, tangible personal 13 property is utilized in the state in which the property was located 14 at the time the rental or royalty payer obtained possession. 15 (7)(a) Short-term capital gains and losses from sales of real 16 property located in this state are allocable to this state. 17 (b) Short-term capital gains and losses from sales of tangible 18 personal property are allocable to this state if: (i) The property 19 had a situs in this state at the time of the sale; or (ii) the 20 taxpayer's commercial domicile is in this state and the taxpayer is 21 not taxable in the state in which the property had a situs. 22 (c) Short-term capital gains and losses from sales of intangible 23 personal property are allocable to this state if the taxpayer's 24 commercial domicile is in this state. 25 (8) Interest and dividends are allocable to this state if the 26 taxpayer's commercial domicile is in this state. 27 (9)(a) Patent and copyright royalties are allocable to this 28 state: (i) If and to the extent that the patent or copyright is 29 utilized by the payer in this state; or (ii) if and to the extent 30 that the patent or copyright is utilized by the payer in a state in 31 which the taxpayer is not taxable and the taxpayer's commercial 32 domicile is in this state. 33 (b) A patent is utilized in a state to the extent that it is 34 employed in production, fabrication, manufacturing, or other 35 processing in the state or to the extent that a patented product is 36 produced in the state. If the basis of receipts from patent royalties 37 does not permit allocation to states or if the accounting procedures 38 do not reflect states of utilization, the patent is utilized in the 39 state in which the taxpayer's commercial domicile is located. 40 p. 21 ESSB 6346.PL

(c) A copyright is utilized in a state to the extent that 1 printing or other publication originates in the state. If the basis 2 of receipts from copyright royalties does not permit allocation to 3 states or if the accounting procedures do not reflect states of 4 utilization, the copyright is utilized in the state in which the 5 taxpayer's commercial domicile is located. 6 (10) The definitions in this subsection apply throughout this 7 section unless the context clearly requires otherwise. 8 (a) "Apportionable income" means: 9 (i) All income that is apportionable under the Constitution of 10 the United States and is not allocated under the laws of this state, 11 including: 12 (A) Income arising from transactions and activity in the regular 13 course of the taxpayer's trade or business; and 14 (B) Income arising from tangible and intangible property if the 15 acquisition, management, employment, development, or disposition of 16 the property is or was related to the operation of the taxpayer's 17 trade or business; and 18 (ii) Any income that would be allocable to this state under the 19 Constitution of the United States, but that is apportioned rather 20 than allocated pursuant to the laws of this state. 21 (b) "Commercial domicile" means the principal place from which 22 the trade or business of the taxpayer is directed or managed. 23 (c) "Nonapportionable income" means all income other than 24 apportionable income. 25 (d) "Receipts" means all gross receipts of the taxpayer that are 26 not allocated under this section, and that are received from 27 transactions and activity in the regular course of the taxpayer's 28 trade or business, except that receipts of a taxpayer from hedging 29 transactions and from the maturity, redemption, sale, exchange, loan, 30 or other disposition of cash or securities, shall be excluded. 31 (e) "State" means any state of the United States, the District of 32 Columbia, the Commonwealth of Puerto Rico, any territory or 33 possession of the United States, and any foreign country or political 34 subdivision thereof. 35 (f) "Taxpayer" means a pass-through entity or individual 36 conducting business activity in the state of Washington. 37 p. 22 ESSB 6346.PL

NEW SECTION. Sec. 406. PRORATION OF PART-YEAR INCOME. (1) 1 Except as provided in subsection (2) of this section, the adjusted 2 gross income of a part-year resident is the sum of the following: 3 (a) For the portion of the year in which the taxpayer was a 4 resident of Washington, the taxpayer's entire adjusted gross income; 5 and 6 (b) For the portion of the year in which the taxpayer was a 7 nonresident, the taxpayer's adjusted gross income derived from 8 sources within this state, as provided in sections 403 through 405 9 and 407 of this act. 10 (2) The adjusted gross income of a part-year resident with 11 federal adjusted gross income that includes an item of income, gain, 12 loss, deduction, or credit from a pass-through entity must include 13 the sum of the following: 14 (a) The total amount of the item that is taken into account in 15 federal adjusted gross income, multiplied by the ratio of the number 16 of days the taxpayer was a resident of Washington during the tax year 17 of the entity over the total number of days in the tax year of the 18 entity; and 19 (b) The total amount of the item that is taken into account in 20 federal adjusted gross income and that is derived from or connected 21 with sources within this state, as determined under sections 403 22 through 405 and 407 of this act, multiplied by the ratio of the 23 number of days the taxpayer was a nonresident of Washington during 24 the tax year of the entity over the total number of days in the tax 25 year of the entity. 26 NEW SECTION. Sec. 407. ALLOCATION AND APPORTIONMENT OF 27 NONRESIDENT STUDENT ATHLETE INCOME. (1) The portion of adjusted gross 28 income of a nonresident student athlete derived from the commercial 29 use of the student athlete's name, image, or likeness is allocated to 30 this state if the publicity services provided by the student athlete 31 related to such commercial use of the student athlete's name, image, 32 or likeness primarily occur in Washington. 33 (2) The portion of adjusted gross income of a nonresident student 34 athlete derived from payments by an institution of higher education 35 representing a percentage of institutional athletic revenues shall be 36 apportioned to Washington in a form and manner consistent with a 37 duty-day methodology. By January 1, 2028, the department shall submit 38 p. 23 ESSB 6346.PL

proposed legislation to the legislature that would implement an 1 apportionment methodology as specified under this subsection (2). 2 (3) The definitions in this subsection apply throughout this 3 section unless the context clearly requires otherwise. 4 (a) "Commercial use" means the use of an individual's name, 5 image, or likeness for advertising, selling, or soliciting purchases 6 of products, goods, or services. 7 (b) "Name, image, or likeness" means an individual's readily 8 identifiable name, voice, signature, photograph, or likeness. 9 (c) "Publicity services" includes, but is not limited to, the 10 following activities: Appearing in photoshoots; filming commercials; 11 recording audio endorsements; posting sponsored content on social 12 media platforms; attending promotional events; either wearing or 13 using, or both, branded products; and granting rights by the student 14 athlete to use the student athlete's name, image, or likeness in 15 either advertisements or online campaigns, or both. 16 (d) "Student athlete" means an individual who is enrolled at an 17 institution of higher education and eligible to engage in any varsity 18 intercollegiate athletics program at the institution. 19 PART V 20 ESTIMATED TAX PAYMENTS AND PASS-THROUGH ENTITY TAX ELECTION 21 NEW SECTION. Sec. 501. ESTIMATED TAX IMPOSED—DUE DATE OF 22 ESTIMATED TAXES—AMOUNT OF ESTIMATED TAX—UNDERPAYMENT PENALTY. (1) 23 Each individual with an estimated tax under this chapter in excess of 24 $5,000 that is required by the internal revenue code to make payment 25 of estimated taxes must pay to the department on forms prescribed by 26 the department the estimated taxes due under this chapter. 27 (2) The provisions of the internal revenue code relating to the 28 determination of reporting periods and due dates of payments of 29 estimated tax applies to the estimated tax payments due under this 30 section. 31 (3) Estimated tax payments are not required under this section if 32 the annualized estimated tax is less than $5,000. RCW 82.32.090 33 applies to underpayments of estimated tax. 34 (4) For purposes of this section, the annualized estimated tax is 35 the taxpayer's projected tax liability for the tax year as computed 36 pursuant to section 6654 of the internal revenue code and the 37 regulations thereunder. 38 p. 24 ESSB 6346.PL

(5) The department shall adopt rules for making estimated tax 1 payments under this section on wages, salaries, and other 2 compensation subject to federal income tax withholding. 3 (6) Estimated payments are not required under this section before 4 July 1, 2029. 5 NEW SECTION. Sec. 502. PASS-THROUGH ENTITY TAX ELECTION. (1)(a) 6 Beginning January 1, 2028, a tax is imposed at a rate of 9.90 percent 7 of the taxable income of an electing entity for each taxable year in 8 which an election under this section is in effect. 9 (b) The tax is paid by the electing entity. 10 (2)(a) A pass-through entity may elect to be subject to the tax 11 imposed under this section by filing an election with the department 12 on or before the due date prescribed by the department for making 13 such election, but no later than June 15th of the taxable year. 14 (b) The election is made annually and is irrevocable for the 15 taxable year once filed. 16 (c) The election must be made by: (i) In the case of a 17 partnership or limited liability company, any person authorized to 18 sign the entity's return; and (ii) in the case of an S corporation, 19 an officer authorized to sign the return. 20 (d) An election may exclude owners who choose not to participate. 21 At the time of election, the pass-through entity must identify the 22 participating and nonparticipating owners. 23 (3)(a) The taxable income of an electing entity consists of: 24 (i) The entire distributive share of income, gain, loss, and 25 deduction attributable to participating resident owners, regardless 26 of source; and 27 (ii) The state source distributive share of income, gain, loss, 28 and deduction attributable to participating nonresident owners. 29 (b) Taxable income is determined by applying all state specific 30 additions, subtractions, and modifications that would apply to the 31 owners individually. 32 (c) Guaranteed payments, separately stated items, and investment 33 income is included in taxable income to the same extent these items 34 would be included in a participating owner's individual Washington 35 base income under this chapter. 36 (4)(a) An electing entity shall make estimated tax payments in 37 the same manner and at the same times as required for individual 38 estimated tax payments under section 501 of this act. 39 p. 25 ESSB 6346.PL

(b) Estimated tax payments are based on the electing entity's 1 reasonable estimate of taxable income for the taxable year. 2 (c) Estimated tax payments paid by the electing entity under this 3 section are in lieu of the estimated tax payments imposed on owners 4 under section 501 of this act with respect to the income included in 5 the electing entity's taxable income. 6 (d) Estimated tax payments are not required under this subsection 7 before July 1, 2029. 8 (5)(a) Each participating owner of an electing entity is allowed 9 a credit against the tax imposed under this section equal to the 10 owner's proportionate share of the tax paid by the electing entity 11 under this chapter as provided in section 206 of this act. 12 (b) Participating resident owners shall include in their 13 Washington base income their full distributive share of the electing 14 entity's income, gains, losses, and deductions and shall claim the 15 credit allowed under section 206 of this act. 16 (c) Participating nonresident owners shall include in their 17 Washington base income their distributive share of the electing 18 entity's income, gains, losses, and deductions as allocated and 19 apportioned under section 405 of this act and shall claim the credit 20 allowed under section 206 of this act. 21 (d) Participating part-year resident owners shall include in 22 their Washington base income their distributive share of the electing 23 entity's income, gains, losses, and deductions, and claim the credit 24 allowed under section 206 of this act, in the manner required under 25 (a) and (b) of this subsection for the portion of the year in which 26 the participating owner was a resident and nonresident, respectively. 27 (6)(a) The electing entity shall file an annual return reporting 28 taxable income, tax due, estimated payments, and any other 29 information required by the department in a form and manner required 30 by the department. 31 (b) The department may adopt rules necessary to administer this 32 section, which to the extent possible, must be consistent with the 33 requirements under this chapter for individuals. The department may 34 adopt rules to streamline and simplify the process and procedures for 35 making an election under this section. 36 (7) The definitions in this subsection apply throughout this 37 section unless the context clearly requires otherwise. 38 p. 26 ESSB 6346.PL

(a) "Distributive share" means the owner's share of income, gain, 1 loss, or deduction as determined under the entity's governing 2 documents and federal income tax law. 3 (b) "Electing entity" means a pass-through entity that has made a 4 valid election under subsection (2)(c) of this section. 5 (c) "Nonresident owner" means an owner who is not a resident of 6 this state for individual income tax purposes. 7 (d) "Owner" means a partner, member, or shareholder of a pass- 8 through entity. 9 (e) "Resident owner" means an owner who is a resident of this 10 state for individual income tax purposes. 11 (f) "State source income" means income, gain, or loss derived 12 from sources within this state, determined under the allocation and 13 apportionment provisions of section 405 of this act. 14 PART VI 15 CRIMES 16 NEW SECTION. Sec. 601. CRIMES. (1) Any person who knowingly 17 attempts to evade the tax imposed under this chapter or payment 18 thereof is guilty of a class C felony as provided in chapter 9A.20 19 RCW. 20 (2) Any person who knowingly fails to pay tax, make returns, or 21 supply information, as required under this chapter, is guilty of a 22 gross misdemeanor as provided in chapter 9A.20 RCW. 23 PART VII 24 ADMINISTRATIVE PROVISIONS 25 NEW SECTION. Sec. 701. METHOD OF ACCOUNTING. (1) A taxpayer's 26 method of accounting for purposes of the tax imposed under this 27 chapter is the same as the taxpayer's method of accounting for 28 federal income tax purposes. If no method of accounting has been 29 regularly used by a taxpayer for federal income tax purposes or if 30 the method used does not clearly reflect income, tax due under this 31 chapter is computed by the cash method of accounting. 32 (2) If a person's method of accounting is changed for federal 33 income tax purposes, it must be similarly changed for purposes of 34 this chapter. 35 p. 27 ESSB 6346.PL

NEW SECTION. Sec. 702. FILING TAX RETURNS. (1)(a) Except as 1 otherwise provided in this section or RCW 82.32.080, taxpayers owing 2 tax under this chapter must file, on forms prescribed by the 3 department, a return with the department on or before the date the 4 taxpayer's federal income tax return for the taxable year is required 5 to be filed. Individuals not owing tax under this chapter are not 6 required to file a return under this section. 7 (b)(i) Except as provided in (b)(ii) of this subsection (1), 8 returns and all supporting documents must be filed electronically 9 using the department's online tax filing service or other method of 10 electronic reporting as the department may authorize. 11 (ii) The department may waive the electronic filing requirement 12 in this subsection for good cause as provided in RCW 82.32.080. 13 (2)(a) Every taxpayer owing tax under this chapter must include 14 with the Washington return described in subsection (1) of this 15 section a copy of the taxpayer's federal income tax return filed with 16 the internal revenue service of the United States, including: 17 (i) All federal income tax forms, schedules, and other 18 attachments that directly relate to the taxpayer's federal adjusted 19 gross income; and 20 (ii) Any information returns and federal tax documents received 21 by the taxpayer that directly relate to the taxpayer's federal 22 adjusted gross income including, but not limited to, form W-2, form 23 1099-INT, form 1099-DIV, form 1099-NEC, form 1099-MISC, form 1099-B, 24 schedule K-1 (form 1065), and schedule K-1 (form 1120-S). 25 (b) A taxpayer must provide to the department, upon request, 26 other federal tax return information needed to verify the tax owed 27 under this chapter. 28 (c) The department may prescribe by rule additional reporting or 29 verification requirements under this subsection (2) to substantiate 30 an individual's federal adjusted gross income. 31 (d) The department may prescribe by rule additional Washington- 32 specific reporting or verification requirements under this subsection 33 (2), such as a Washington schedule K-1 form, to substantiate an 34 individual's Washington base income. 35 (3) Each taxpayer required to file a return under this section 36 must, without assessment, notice, or demand, pay any tax due thereon 37 to the department on or before the date fixed for the filing of the 38 return, regardless of any filing extension. The tax must be paid by 39 electronic funds transfer as defined in RCW 82.32.085 or by other 40 p. 28 ESSB 6346.PL

forms of electronic payment as may be authorized by the department. 1 The department may waive the electronic payment requirement for good 2 cause as provided in RCW 82.32.080. If any tax due under this chapter 3 is not paid by the due date, interest and penalties as provided in 4 chapter 82.32 RCW apply to the deficiency. 5 (4) If a taxpayer has obtained an extension of time for filing 6 the federal income tax return for the taxable year, the taxpayer is 7 entitled to the same extension of time for filing the return required 8 under this section. An extension under this subsection for the filing 9 of a return under this chapter is not an extension of time to pay the 10 tax due under this chapter. 11 (5)(a) If any return due under subsection (1) of this section, 12 along with a copy of the federal income tax return, is not filed with 13 the department by the due date or any extension granted by the 14 department, the department must assess a penalty in the amount of 15 five percent of the unpaid tax due, as of the due date for the 16 return, for the taxable year covered by the return for each full 17 month that the return remains unfiled. The total penalty assessed 18 under this subsection may not exceed 25 percent of the unpaid tax 19 due, as of the due date for the return, for the taxable year covered 20 by the delinquent return. The penalty under this subsection is in 21 addition to any penalties assessed for the late payment of any tax 22 due on the return. 23 (b) The department must waive or cancel the penalty imposed under 24 this subsection if: 25 (i) The department is persuaded that the taxpayer's failure to 26 file the return by the due date was due to circumstances beyond the 27 taxpayer's control; or 28 (ii) The taxpayer has not been delinquent in filing any return 29 due under this section during the preceding five calendar years and 30 the taxpayer has not been contacted by the department for enforcement 31 purposes regarding the reporting period covered by the waiver 32 request. 33 (6) The department must waive or cancel the penalty imposed under 34 RCW 82.32.090(1) on a payment required under this section when the 35 circumstances under which the delinquency occurred do not qualify for 36 waiver or cancellation under RCW 82.32.105(1) if all of the following 37 apply: 38 (a) A taxpayer requests a waiver of penalty for a payment 39 required under this section; 40 p. 29 ESSB 6346.PL

(b) The taxpayer has not been contacted by the department for 1 enforcement purposes regarding the reporting period covered by the 2 waiver request; and 3 (c) The taxpayer has timely remitted payment on all tax returns 4 due under this section during the preceding five calendar years. 5 (7)(a) In the event a taxpayer's federal income tax return is 6 changed in a manner that is final after their return required under 7 subsection (1) of this section is filed with the department and the 8 taxpayer's federal income tax return is changed in a manner that 9 impacts either the calculation of their Washington adjusted gross 10 income or their tax liability under this chapter, or both, the 11 taxpayer must amend the taxpayer's return due under subsection (1) of 12 this section for the same tax year in which their federal income tax 13 return is changed. For the purposes of this subsection (7), a federal 14 income tax return is changed in a manner that is final when such 15 change is not subject to either administrative review by the United 16 States internal revenue service or judicial review in a court of 17 competent jurisdiction, or both. A change is also final in the case 18 of an audit finding in the following circumstances: 19 (i) The taxpayer has received audit findings from the internal 20 revenue service for the tax period and the taxpayer does not timely 21 file an administrative appeal with the internal revenue service. 22 (ii) The taxpayer consented to any of the audit findings for the 23 tax period through a form or other written agreement with the United 24 States internal revenue service. 25 (b) If the return is not amended, as required under this 26 subsection (7), with the department within 90 days of the federal 27 income tax return change becoming final, the department must assess 28 on the 91st day a penalty in the amount of five percent of any 29 additional tax due for the taxable year covered by the return for 30 each month or portion of a month that the return is not timely 31 amended as required by this subsection. The total penalty assessed 32 under this subsection (7)(b) may not exceed 25 percent of the 33 additional tax due for the taxable year covered by the delinquent 34 return amendment. The penalty under this subsection (7)(b) is in 35 addition to any penalties assessed under this section. 36 (8)(a) No assessment or correction of an assessment for 37 additional taxes, penalties, or interest due may be made by the 38 department more than four years after the year in which a return is 39 filed under subsection (1) of this section except: 40 p. 30 ESSB 6346.PL

(i) When the taxpayer's federal income tax return is changed in a 1 manner that requires an amended return under subsection (7) of this 2 section; or 3 (ii) As provided in RCW 82.32.050(4). 4 (b) In the event the statute of limitations is extended under 5 (a)(i) of this subsection, no assessment or correction of an 6 assessment for additional taxes, penalties, or interest due may be 7 made by the department more than four years after the year in which 8 an amended return is filed with the department as required under 9 subsection (7) of this section. Any assessment or correction of an 10 assessment for additional taxes, penalties, or interest due under 11 this subsection (8)(b) but made by the department more than four 12 years after the year in which a return is filed under subsection (1) 13 of this section must be directly related to the federal income tax 14 return change described in subsection (7) of this section. 15 (9) If the federal government extends the due date for filing a 16 tax return, paying tax, or both, by reason of natural disaster or 17 other occurrence, the corresponding deadlines under this section 18 shall be adjusted in the same manner. 19 NEW SECTION. Sec. 703. REQUIREMENT FOR SEPARATE OR JOINT 20 RETURNS. (1) If the federal income tax liabilities of both spouses 21 are determined on a joint federal return for the taxable year, they 22 must file a joint return under this chapter. 23 (2) Except as otherwise provided in this subsection (2), if the 24 federal income tax liability of any individual, including either 25 spouse of a marital community, is determined on a separate federal 26 return for the taxable year, they must file separate returns under 27 this chapter. State registered domestic partners may file a joint 28 return under this chapter even if they filed separate federal returns 29 for the taxable year. 30 (3) The liability for tax due under this chapter of each spouse 31 or state registered domestic partner is joint and several, unless: 32 (a) The spouse or state registered domestic partner is relieved 33 of liability for federal tax purposes as provided under sections 66 34 or 6015 of the internal revenue code; or 35 (b) Regardless of whether the spouse or state registered domestic 36 partner qualifies for relief as provided under (a) of this subsection 37 (3), the department determines that the spouse or state registered 38 domestic partner qualifies for relief as provided by rule of the 39 p. 31 ESSB 6346.PL

department in a manner consistent with sections 66 or 6015 of the 1 internal revenue code. 2 (4)(a) Unless the context clearly indicates otherwise, 3 individuals who are spouses or state registered domestic partners are 4 not considered separate taxpayers for the purposes of this chapter 5 regardless of whether they file a joint or separate return for the 6 tax imposed under this chapter. The activities and assets of each 7 spouse or state registered domestic partner are combined as if they 8 were one individual for the purposes of determining the applicability 9 of any threshold amounts, caps, deductions, credits, or any other 10 amounts related to the activities or assets of an individual 11 throughout this chapter. 12 (b) When an individual does not file a joint return for the tax 13 imposed under this chapter, both spouses or state registered domestic 14 partners must allocate between themselves their respective share of 15 the marital community's or domestic partnership's income, gains, 16 losses, deductions, and credits in a manner consistent with the 17 community property laws of this state and the applicable provisions 18 of the internal revenue code, and its accompanying regulations, 19 addressing taxpayers domiciled in community property jurisdictions. 20 NEW SECTION. Sec. 704. ADMINISTRATION OF CHAPTER CONSISTENT 21 WITH CHAPTER 82.32 RCW. Except as otherwise provided by law and to 22 the extent not inconsistent with the provisions of this chapter, 23 chapter 82.32 RCW applies to the administration of taxes imposed 24 under this chapter. 25 Sec. 705. RCW 82.32.050 and 2025 c 409 s 12 are each amended to 26 read as follows: 27 (1) If upon examination of any returns or from other information 28 obtained by the department it appears that a tax or penalty has been 29 paid less than that properly due, the department shall assess against 30 the taxpayer such additional amount found to be due and shall add 31 thereto interest on the tax only. The department shall notify the 32 taxpayer by mail, or electronically as provided in RCW 82.32.135, of 33 the additional amount and the additional amount shall become due and 34 shall be paid within 30 days from the date of the notice, or within 35 such further time as the department may provide. 36 (a) For tax liabilities arising before January 1, 1992, interest 37 shall be computed at the rate of nine percent per annum from the last 38 p. 32 ESSB 6346.PL

day of the year in which the deficiency is incurred until the earlier 1 of December 31, 1998, or the date of payment. After December 31, 2 1998, the rate of interest shall be variable and computed as provided 3 in subsection (2) of this section. The rate so computed shall be 4 adjusted on the first day of January of each year for use in 5 computing interest for that calendar year. 6 (b) For tax liabilities arising after December 31, 1991, the rate 7 of interest shall be variable and computed as provided in subsection 8 (2) of this section from the last day of the year in which the 9 deficiency is incurred until the date of payment. The rate so 10 computed shall be adjusted on the first day of January of each year 11 for use in computing interest for that calendar year. 12 (c)(i) Except as otherwise provided in this subsection (1)(c), 13 interest imposed after December 31, 1998, shall be computed from the 14 last day of the month following each calendar year included in a 15 notice, and the last day of the month following the final month 16 included in a notice if not the end of a calendar year, until the due 17 date of the notice. 18 (ii) For interest associated with annual tax reporting periods 19 having a due date as prescribed in RCW 82.32.045(3) ((and)), 20 82.87.110, and section 702 of this act, interest must be computed 21 from the last day of April immediately following each such annual 22 reporting period included in the notice, until the due date of the 23 notice. 24 (iii) For purposes of computing interest under (c)(i) and (ii) of 25 this subsection (1): 26 (A) The same computation of interest applies regardless of 27 whether the department grants additional time for filing any return 28 under RCW 82.32.080(4)(a)(i). 29 (B) If the department extends a due date under subsection (3) of 30 this section or RCW 82.32.080(4)(b), and payment is not made in full 31 by the extended due date, interest is computed from the last day of 32 the month in which the extended due date occurs until the date of 33 payment. 34 (iv) If payment in full is not made by the due date of the 35 notice, additional interest shall be computed under this subsection 36 (1)(c) until the date of payment. The rate of interest shall be 37 variable and computed as provided in subsection (2) of this section. 38 The rate so computed shall be adjusted on the first day of January of 39 each year for use in computing interest for that calendar year. 40 p. 33 ESSB 6346.PL

(2) For the purposes of this section, the rate of interest to be 1 charged to the taxpayer shall be an average of the federal short-term 2 rate as defined in 26 U.S.C. Sec. 1274(d) plus two percentage points. 3 The rate set for each new year shall be computed by taking an 4 arithmetical average to the nearest percentage point of the federal 5 short-term rate, compounded annually. That average shall be 6 calculated using the rates from four months: January, April, and July 7 of the calendar year immediately preceding the new year, and October 8 of the previous preceding year. 9 (3) During a state of emergency declared under RCW 43.06.010(12), 10 the department, on its own motion or at the request of any taxpayer 11 affected by the emergency, may extend the due date of any assessment 12 or correction of an assessment for additional taxes, penalties, or 13 interest as the department deems proper. 14 (4) No assessment or correction of an assessment for additional 15 taxes, penalties, or interest due may be made by the department more 16 than four years after the close of the tax year, except (a) against a 17 taxpayer who has not registered as required by this chapter, (b) upon 18 a showing of fraud or of misrepresentation of a material fact by the 19 taxpayer, or (c) where a taxpayer has executed a written waiver of 20 such limitation. The execution of a written waiver shall also extend 21 the period for making a refund or credit as provided in RCW 22 82.32.060(2). 23 (5) For the purposes of this section, the following definitions 24 apply: 25 (a) "Due date of the notice" means the date indicated in the 26 notice by which the amount due in the notice must be paid, or such 27 later date as provided by RCW 1.12.070(3). 28 (b) "Return" means any document a person is required by the state 29 of Washington to file to satisfy or establish a tax or fee obligation 30 that is administered or collected by the department and that has a 31 statutorily defined due date. "Return" also means an application for 32 refund under RCW 82.08.0206. 33 Sec. 706. RCW 82.32.060 and 2025 c 409 s 13 are each amended to 34 read as follows: 35 (1) If, upon receipt of an application by a taxpayer for a refund 36 or for an audit of the taxpayer's records, or upon an examination of 37 the returns or records of any taxpayer, it is determined by the 38 department that within the statutory period for assessment of taxes, 39 p. 34 ESSB 6346.PL

penalties, or interest prescribed by RCW 82.32.050 any amount of tax, 1 penalty, or interest has been paid in excess of that properly due, 2 the excess amount paid within, or attributable to, such period must 3 be credited to the taxpayer's account or must be refunded to the 4 taxpayer, at the taxpayer's option. Except as provided in subsection 5 (2) of this section, no refund or credit may be made for taxes, 6 penalties, or interest paid more than four years prior to the 7 beginning of the calendar year in which the refund application is 8 made or examination of records is completed. 9 (2)(a) The execution of a written waiver under RCW 82.32.050 or 10 82.32.100 will extend the time for making a refund or credit of any 11 taxes paid during, or attributable to, the years covered by the 12 waiver if, prior to the expiration of the waiver period, an 13 application for refund of such taxes is made by the taxpayer or the 14 department discovers a refund or credit is due. 15 (b) A refund or credit must be allowed for an excess payment 16 resulting from the failure to claim a bad debt deduction, credit, or 17 refund under RCW 82.04.4284, 82.08.037, 82.12.037, 82.14B.150, or 18 82.16.050(5) for debts that became bad debts under 26 U.S.C. Sec. 19 166, as amended or renumbered as of January 1, 2003, less than four 20 years prior to the beginning of the calendar year in which the refund 21 application is made or examination of records is completed. 22 (3) Any such refunds must be made by means of vouchers approved 23 by the department and by the issuance of state warrants drawn upon 24 and payable from such funds as the legislature may provide. However, 25 taxpayers who are required to pay taxes by electronic funds transfer 26 under RCW 82.32.080 must have any refunds paid by electronic funds 27 transfer if the department has the necessary account information to 28 facilitate a refund by electronic funds transfer. 29 (4) Any judgment for which a recovery is granted by any court of 30 competent jurisdiction, not appealed from, for tax, penalties, and 31 interest which were paid by the taxpayer, and costs, in a suit by any 32 taxpayer must be paid in the same manner, as provided in subsection 33 (3) of this section, upon the filing with the department of a 34 certified copy of the order or judgment of the court. 35 (a) Interest at the rate of three percent per annum must be 36 allowed by the department and by any court on the amount of any 37 refund, credit, or other recovery allowed to a taxpayer for taxes, 38 penalties, or interest paid by the taxpayer before January 1, 1992. 39 This rate of interest applies for all interest allowed through 40 p. 35 ESSB 6346.PL

December 31, 1998. Interest allowed after December 31, 1998, must be 1 computed at the rate as computed under RCW 82.32.050(2). The rate so 2 computed must be adjusted on the first day of January of each year 3 for use in computing interest for that calendar year. 4 (b) For refunds or credits of amounts paid or other recovery 5 allowed to a taxpayer after December 31, 1991, the rate of interest 6 must be the rate as computed for assessments under RCW 82.32.050(2) 7 less one percent. This rate of interest applies for all interest 8 allowed through December 31, 1998. Interest allowed after December 9 31, 1998, must be computed at the rate as computed under RCW 10 82.32.050(2). The rate so computed must be adjusted on the first day 11 of January of each year for use in computing interest for that 12 calendar year. 13 (5) Interest allowed on a credit notice or refund issued after 14 December 31, 2003, must be computed as follows: 15 (a) If all overpayments for each calendar year and all reporting 16 periods ending with the final month included in a notice or refund 17 were made on or before the due date of the final return for each 18 calendar year or the final reporting period included in the notice or 19 refund: 20 (i) Interest must be computed from January 31st following each 21 calendar year included in a notice or refund; 22 (ii) Interest must be computed from the last day of the month 23 following the final month included in a notice or refund; or 24 (iii) For interest associated with annual tax reporting periods 25 having a due date as prescribed in RCW 82.32.045(3) ((and)), 26 82.87.110, and section 702 of this act, interest must be computed 27 from the last day of April following each such annual reporting 28 period included in a notice or refund. 29 (b) If the taxpayer has not made all overpayments for each 30 calendar year and all reporting periods ending with the final month 31 included in a notice or refund on or before the dates specified by 32 RCW 82.32.045 for the final return for each calendar year or the 33 final month included in the notice or refund, interest must be 34 computed from the last day of the month following the date on which 35 payment in full of the liabilities was made for each calendar year 36 included in a notice or refund, and the last day of the month 37 following the date on which payment in full of the liabilities was 38 made if the final month included in a notice or refund is not the end 39 of a calendar year. 40 p. 36 ESSB 6346.PL

(c) Interest included in a credit notice must accrue up to the 1 date the taxpayer could reasonably be expected to use the credit 2 notice, as defined by the department's rules. If a credit notice is 3 converted to a refund, interest must be recomputed to the date the 4 refund is issued, but not to exceed the amount of interest that would 5 have been allowed with the credit notice. 6 Sec. 707. RCW 82.32.090 and 2025 c 409 s 14 are each amended to 7 read as follows: 8 (1) If payment of any tax due on a return to be filed by a 9 taxpayer is not received by the department of revenue by the due 10 date, there is assessed a penalty of nine percent of the amount of 11 the tax; and if the tax is not received on or before the last day of 12 the month following the due date, there is assessed a total penalty 13 of 19 percent of the amount of the tax under this subsection; and if 14 the tax is not received on or before the last day of the second month 15 following the due date, there is assessed a total penalty of 29 16 percent of the amount of the tax under this subsection. No penalty so 17 added may be less than $5. 18 (2) If the department of revenue determines that any tax has been 19 substantially underpaid, there is assessed a penalty of five percent 20 of the amount of the tax determined by the department to be due. If 21 payment of any tax determined by the department to be due is not 22 received by the department by the due date specified in the notice, 23 or any extension thereof, there is assessed a total penalty of 15 24 percent of the amount of the tax under this subsection; and if 25 payment of any tax determined by the department to be due is not 26 received on or before the 30th day following the due date specified 27 in the notice of tax due, or any extension thereof, there is assessed 28 a total penalty of 25 percent of the amount of the tax under this 29 subsection. No penalty so added may be less than $5. As used in this 30 ((section)) subsection, "substantially underpaid" means that the 31 taxpayer has paid less than 80 percent of the amount of tax 32 determined by the department to be due for all of the types of taxes 33 included in, and for the entire period of time covered by, the 34 department's examination, and the amount of underpayment is at least 35 $1,000. 36 (3) If a warrant is issued by the department of revenue for the 37 collection of taxes, increases, and penalties, there is added thereto 38 p. 37 ESSB 6346.PL

a penalty of 10 percent of the amount of the tax, but not less than 1 $10. 2 (4) If the department finds that a person has engaged in any 3 business or performed any act upon which a tax is imposed under this 4 title and that person has not obtained from the department a 5 registration certificate as required by RCW 82.32.030, the department 6 must impose a penalty of five percent of the amount of tax due from 7 that person for the period that the person was not registered as 8 required by RCW 82.32.030. The department may not impose the penalty 9 under this subsection (4) if a person who has engaged in business 10 taxable under this title without first having registered as required 11 by RCW 82.32.030, prior to any notification by the department of the 12 need to register, obtains a registration certificate from the 13 department. 14 (5) If the department finds that a taxpayer has disregarded 15 specific written instructions as to reporting or tax liabilities, or 16 willfully disregarded the requirement to file returns or remit 17 payment electronically, as provided by RCW 82.32.080, the department 18 must add a penalty of 10 percent of the amount of the tax that should 19 have been reported and/or paid electronically or the additional tax 20 found due if there is a deficiency because of the failure to follow 21 the instructions. A taxpayer disregards specific written instructions 22 when the department has informed the taxpayer in writing of the 23 taxpayer's tax obligations and the taxpayer fails to act in 24 accordance with those instructions unless, in the case of a 25 deficiency, the department has not issued final instructions because 26 the matter is under appeal pursuant to this chapter or departmental 27 regulations. The department may not assess the penalty under this 28 section upon any taxpayer who has made a good faith effort to comply 29 with the specific written instructions provided by the department to 30 that taxpayer. A taxpayer will be considered to have made a good 31 faith effort to comply with specific written instructions to file 32 returns and/or remit taxes electronically only if the taxpayer can 33 show good cause, as defined in RCW 82.32.080, for the failure to 34 comply with such instructions. A taxpayer will be considered to have 35 willfully disregarded the requirement to file returns or remit 36 payment electronically if the department has mailed or otherwise 37 delivered the specific written instructions to the taxpayer on at 38 least two occasions. Specific written instructions may be given as a 39 part of a tax assessment, audit, determination, closing agreement, or 40 p. 38 ESSB 6346.PL

other written communication, provided that such specific written 1 instructions apply only to the taxpayer addressed or referenced on 2 such communication. Any specific written instructions by the 3 department must be clearly identified as such and must inform the 4 taxpayer that failure to follow the instructions may subject the 5 taxpayer to the penalties imposed by this subsection. If the 6 department determines that it is necessary to provide specific 7 written instructions to a taxpayer that does not comply with the 8 requirement to file returns or remit payment electronically as 9 provided in RCW 82.32.080, the specific written instructions must 10 provide the taxpayer with a minimum of 45 days to come into 11 compliance with its electronic filing and/or payment obligations 12 before the department may impose the penalty authorized in this 13 subsection. 14 (6) If the department finds that all or any part of a deficiency 15 resulted from engaging in a disregarded transaction, as described in 16 RCW 82.32.655(3), the department must assess a penalty of 35 percent 17 of the additional tax found to be due as a result of engaging in a 18 transaction disregarded by the department under RCW 82.32.655(2). The 19 penalty provided in this subsection may be assessed together with any 20 other applicable penalties provided in this section on the same tax 21 found to be due, except for the evasion penalty provided in 22 subsection (7) of this section. The department may not assess the 23 penalty under this subsection if, before the department discovers the 24 taxpayer's use of a transaction described under RCW 82.32.655(3), the 25 taxpayer discloses its participation in the transaction to the 26 department. 27 (7) If the department finds that all or any part of the 28 deficiency resulted from an intent to evade the tax payable 29 hereunder, a further penalty of 50 percent of the additional tax 30 found to be due must be added. 31 (8) The penalties imposed under subsections (1) through (4) of 32 this section can each be imposed on the same tax found to be due. 33 This subsection does not prohibit or restrict the application of 34 other penalties authorized by law. 35 (9) The department may not impose the evasion penalty in 36 combination with the penalty for disregarding specific written 37 instructions or the penalty provided in subsection (6) of this 38 section on the same tax found to be due. 39 p. 39 ESSB 6346.PL

(10) If a taxpayer substantially underpays an estimated payment 1 of tax imposed under RCW 82.87.040 pursuant to RCW 82.87.110(3), 2 there is assessed a penalty of five percent of the amount of the 3 actual tax due for tax imposed under RCW 82.87.040. As used in this 4 ((section)) subsection, "substantially underpaid" means that an 5 individual's estimated payment for taxes imposed under RCW 82.87.040 6 was less than 80 percent of the actual tax due, and at least $1,000. 7 (11) If the total estimated tax payments under section 501 of 8 this act for the tax year are substantially underpaid, there is 9 assessed a penalty of five percent of the amount of the underpaid 10 tax. If a pass-through entity makes an election under section 502 of 11 this act, this subsection (11) applies to the estimated tax payments 12 of the pass-through entity in lieu of the individual. As used in this 13 subsection, "substantially underpaid" means that an individual's 14 total annual estimated tax payments under section 501 of this act are 15 less than the tax shown on the return required under section 702(1) 16 of this act unless the estimated tax remitted to the department is 17 either: (a) 90 percent of the tax shown on the return required under 18 section 702(1) of this act; or (b) 100 percent of the tax shown on 19 the most recently filed tax return under section 702(1) of this act. 20 (12) For the purposes of this section, "return" means any 21 document a person is required by the state of Washington to file to 22 satisfy or establish a tax or fee obligation that is administered or 23 collected by the department, and that has a statutorily defined due 24 date. "Return" also includes the submission of any estimated payment 25 of tax as provided in RCW 82.87.110(3) and the confirmation of an 26 extension of the filing due date required under RCW 82.87.110(5). 27 NEW SECTION. Sec. 708. ESTIMATION AGREEMENTS. The department 28 may reasonably estimate the items of business or nonbusiness income 29 of a taxpayer having an office within the state and one or more other 30 states or foreign countries which may be apportioned or allocated to 31 the state and may enter into estimation agreements with such 32 taxpayers for the determination of their liability for the tax 33 imposed by this chapter. 34 NEW SECTION. Sec. 709. PROVISIONS OF INTERNAL REVENUE CODE 35 CONTROL. (1) To the extent possible without being inconsistent with 36 this chapter, all of the provisions of subtitle F (procedure and 37 p. 40 ESSB 6346.PL

administration) of the internal revenue code relating to the 1 following subjects apply to the taxes imposed under this chapter: 2 (a) Timing and amount of tax prepayments under section 501 of 3 this act; 4 (b) Liability of transferees; and 5 (c) Time and manner of making returns, extensions of time for 6 filing returns, verification of returns, and the time when a return 7 is deemed to be filed by the department. 8 (2) The department by rule may provide modifications and 9 exceptions to the provisions listed in subsection (1) of this 10 section, if reasonably necessary to facilitate the prompt, efficient, 11 and equitable collection of tax under this chapter. 12 NEW SECTION. Sec. 710. RULES. (1) The department may adopt 13 rules under chapter 34.05 RCW for the administration and enforcement 14 of this chapter. The rules, to the extent possible without being 15 inconsistent with this chapter, must follow the internal revenue code 16 and the regulations and rulings of the United States treasury 17 department with respect to the federal income tax. The department may 18 adopt as a part of these rules any portions of the internal revenue 19 code and United States treasury department regulations and rulings, 20 in whole or in part. 21 (2) The department may adopt any rules under chapter 34.05 RCW it 22 considers necessary for the administration of section 711 of this 23 act. 24 NEW SECTION. Sec. 711. A new section is added to chapter 74.20A 25 RCW to read as follows: 26 (1) Income tax refunds held by the department of revenue pursuant 27 to chapter 82A.--- RCW (the new chapter created in section 1203 of 28 this act) are subject to collection action by the department under 29 this chapter and all other applicable state statutes. 30 (2) The department shall enter into a data-sharing agreement with 31 the department of revenue to facilitate the exchange of information 32 necessary to implement and administer this section. 33 (3) The department and the department of revenue shall adopt 34 rules as necessary to administer this section pursuant to their 35 relevant rule-making authority. 36 (4) When the department commences collection action under this 37 chapter to collect past due child support from income tax refunds due 38 p. 41 ESSB 6346.PL

to a taxpayer pursuant to chapter 82A.--- RCW (the new chapter 1 created in section 1203 of this act), the department of revenue may 2 not allow the taxpayer to apply an income tax refund to future taxes. 3 NEW SECTION. Sec. 712. ADVISORY GROUP. (1) For the purposes of 4 implementing sections 101 through 814 of this act, the department of 5 revenue is required to regularly consult with the advisory group 6 created in this section. 7 (2) The advisory group members must include: 8 (a) The director of the department of revenue, or their 9 appointees; 10 (b) The director of the office of financial management, or their 11 appointees; 12 (c) The director of the office of minority and women's business 13 enterprises, or their appointees; 14 (d) Two members of the senate, one from each of the major 15 caucuses and appointed by the president of the senate; 16 (e) Two members of the house of representatives, one from each of 17 the major caucuses and appointed by the speaker of the house of 18 representatives; and 19 (f) Ten members appointed by the governor from a list of 20 recommendations made by the president of the senate and the speaker 21 of the house, to include members representing the following groups: 22 (i) Two certified public accountants; 23 (ii) Two members of the tax section of the Washington state bar 24 association; 25 (iii) One member from the office of the attorney general; 26 (iv) One member from a small business association that has 27 membership throughout the state; 28 (v) One member from a large business association; and 29 (vi) One member of a federally recognized Indian tribe 30 recommended by the governor's office of Indian affairs. 31 (3) Staff support for the advisory group will be provided by the 32 department of revenue. 33 (4) Staff support for the legislative members during the advisory 34 group meetings shall include nonpartisan staff from senate committee 35 services and the house of representatives office of program research 36 as well as partisan staff for the majority and minority caucuses in 37 the senate and the house of representatives. 38 p. 42 ESSB 6346.PL

(5) After July 1, 2026, the advisory group must meet regularly to 1 be consulted on the implementation of this act and to make 2 recommendations regarding the implementation and administration of 3 this act, including: 4 (a) The implementation and administration of the pass-through 5 entity election, including the requirements and timing of the 6 election; 7 (b) The development of a state schedule K-1; 8 (c) Filing requirements, including documents required to be 9 included; 10 (d) The administration and implementation of the opt-in safe 11 harbor provision; 12 (e) The implementation and administration of extending sales tax 13 to services; and 14 (f) Other essential administrative and implementation matters to 15 be determined by the advisory group. 16 (6) The department of revenue is required to provide: 17 (a) An initial report by December 15, 2026, to the fiscal 18 committees of the house of representatives and the senate that are 19 responsible for the state's tax policy. This report must include any 20 recommended changes identified during the first phase of 21 implementation that may require legislation during the 2027 session; 22 and 23 (b) A final report of recommendations related to the 24 administration of the tax by December 15, 2027, to the fiscal 25 committees of the house of representatives and the senate that are 26 responsible for the state's tax policy. 27 PART VIII 28 APPLICATION OF TAX TO PUBLIC PENSIONS 29 Sec. 801. RCW 2.10.180 and 2012 c 159 s 17 are each amended to 30 read as follows: 31 (1) Except as provided in subsections (2), (3), ((and)) (4), and 32 (5) of this section, the right of a person to a retirement allowance, 33 disability allowance, or death benefit, the retirement, disability or 34 death allowance itself, any optional benefit, any other right accrued 35 or accruing to any person under the provisions of this chapter, and 36 the moneys in the fund created under this chapter, are hereby exempt 37 from any state, county, municipal, or other local tax and shall not 38 p. 43 ESSB 6346.PL

be subject to execution, garnishment, or any other process of law 1 whatsoever whether the same be in actual possession of the person or 2 be deposited or loaned. 3 (2) Subsection (1) of this section shall not be deemed to 4 prohibit a beneficiary of a retirement allowance from authorizing 5 deductions therefrom for payment of premiums due on any group 6 insurance policy or plan issued for the benefit of a group comprised 7 of public employees of the state of Washington. 8 (3) Deductions made in the past from retirement benefits are 9 hereby expressly recognized, ratified, and affirmed. Future 10 deductions may only be made in accordance with this section. 11 (4) Subsection (1) of this section shall not prohibit the 12 department of retirement systems from complying with (a) a wage 13 assignment order for child support issued pursuant to chapter 26.18 14 RCW, (b) a notice of payroll deduction issued under chapter 26.23 15 RCW, (c) an order to withhold and deliver issued pursuant to chapter 16 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant 17 to chapter 41.50 RCW, (e) a court order directing the department of 18 retirement systems to pay benefits directly to an obligee under a 19 dissolution order as defined in RCW 41.50.500(3) which fully complies 20 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 21 order expressly authorized by federal law. 22 (5) Subsection (1) of this section does not exempt any pension or 23 other benefit received under this chapter from tax under Title 82A 24 RCW (the new title created in section 1203 of this act). 25 Sec. 802. RCW 2.12.090 and 2012 c 159 s 18 are each amended to 26 read as follows: 27 (1) Except as provided in subsections (2), (3), ((and)) (4), and 28 (5) of this section, the right of any person to a retirement 29 allowance or optional retirement allowance under the provisions of 30 this chapter and all moneys and investments and income thereof are 31 exempt from any state, county, municipal, or other local tax and 32 shall not be subject to execution, garnishment, attachment, the 33 operation of bankruptcy or the insolvency laws, or other processes of 34 law whatsoever whether the same be in actual possession of the person 35 or be deposited or loaned and shall be unassignable except as herein 36 specifically provided. 37 (2) Subsection (1) of this section shall not prohibit the 38 department of retirement systems from complying with (a) a wage 39 p. 44 ESSB 6346.PL

assignment order for child support issued pursuant to chapter 26.18 1 RCW, (b) a notice of payroll deduction issued under chapter 26.23 2 RCW, (c) an order to withhold and deliver issued pursuant to chapter 3 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant 4 to chapter 41.50 RCW, (e) a court order directing the department of 5 retirement systems to pay benefits directly to an obligee under a 6 dissolution order as defined in RCW 41.50.500(3) which fully complies 7 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 8 order expressly authorized by federal law. 9 (3) Subsection (1) of this section shall not be deemed to 10 prohibit a beneficiary of a retirement allowance from authorizing 11 deductions therefrom for payment of premiums due on any group 12 insurance policy or plan issued for the benefit of a group comprised 13 of public employees of the state of Washington. 14 (4) Deductions made in the past from retirement benefits are 15 hereby expressly recognized, ratified, and affirmed. Future 16 deductions may only be made in accordance with this section. 17 (5) Subsection (1) of this section does not exempt any pension or 18 other benefit received under this chapter from tax under Title 82A 19 RCW (the new title created in section 1203 of this act). 20 Sec. 803. RCW 2.14.100 and 2007 c 108 s 1 are each amended to 21 read as follows: 22 (1) A member who separates from judicial service for any reason 23 is entitled to receive a lump sum distribution of the member's 24 accumulated contributions. The administrator for the courts may adopt 25 rules establishing other payment options, in addition to lump sum 26 distributions, if the other payment options conform to the 27 requirements of the federal internal revenue code. 28 (2) The right of a person to receive a payment under this chapter 29 and the moneys in the accounts created under this chapter are exempt 30 from any state, county, municipal, or other local tax and are not 31 subject to execution, garnishment, attachment, the operation of 32 bankruptcy or insolvency law, or any other process of law whatsoever 33 and is not assignable, except as is otherwise specifically provided 34 in this section. 35 (3) If a judgment, decree or other order, including a 36 court-approved property settlement agreement, that relates to the 37 provision of child support, spousal maintenance, or the marital 38 property rights of a spouse or former spouse, child, or other 39 p. 45 ESSB 6346.PL

dependent of a member is made pursuant to the domestic relations law 1 of the state of Washington or such order issued by a court of 2 competent jurisdiction in another state or country, that has been 3 registered or otherwise made enforceable in this state, then the 4 amount of the member's accumulated contributions shall be paid in the 5 manner and to the person or persons so directed in the domestic 6 relations order. However, this subsection does not permit or require 7 a benefit to be paid or to be provided that is not otherwise 8 available under the terms of this chapter or any rules adopted under 9 this chapter. The administrator for the courts shall establish 10 reasonable procedures for determining the status or any such decree 11 or order and for effectuating distribution pursuant to the domestic 12 relations order. 13 (4) The administrator for the courts may pay from a member's 14 accumulated contributions the amount that the administrator finds is 15 lawfully demanded under a levy issued by the internal revenue service 16 with respect to that member or is sought to be collected by the 17 United States government under a judgment resulting from an unpaid 18 tax assessment against the member. 19 (5) Subsection (2) of this section does not exempt any payment or 20 other benefit received under this chapter from tax under Title 82A 21 RCW (the new title created in section 1203 of this act). 22 Sec. 804. RCW 6.15.020 and 2011 c 162 s 3 are each amended to 23 read as follows: 24 (1) It is the policy of the state of Washington to ensure the 25 well-being of its citizens by protecting retirement income to which 26 they are or may become entitled. For that purpose generally and 27 pursuant to the authority granted to the state of Washington under 11 28 U.S.C. Sec. 522(b)(2), the exemptions in this section relating to 29 retirement benefits are provided. 30 (2) Unless otherwise provided by federal law, any money received 31 by any citizen of the state of Washington as a pension from the 32 government of the United States, whether the same be in the actual 33 possession of such person or be deposited or loaned, shall be exempt 34 from execution, attachment, garnishment, or seizure by or under any 35 legal process whatever, and when a debtor dies, or absconds, and 36 leaves his or her family any money exempted by this subsection, the 37 same shall be exempt to the family as provided in this subsection. 38 This subsection shall not apply to child support collection actions 39 p. 46 ESSB 6346.PL

issued under chapter 26.18, 26.23, or 74.20A RCW, if otherwise 1 permitted by federal law, or to collection actions for taxes imposed 2 under Title 82A RCW (the new title created in section 1203 of this 3 act). 4 (3) The right of a person to a pension, annuity, or retirement 5 allowance or disability allowance, or death benefits, or any optional 6 benefit, or any other right accrued or accruing to any citizen of the 7 state of Washington under any employee benefit plan, and any fund 8 created by such a plan or arrangement, shall be exempt from 9 execution, attachment, garnishment, or seizure by or under any legal 10 process whatever. This subsection shall not apply to child support 11 collection actions issued under chapter 26.18, 26.23, or 74.20A RCW 12 if otherwise permitted by federal law, or to collection actions for 13 taxes imposed under Title 82A RCW (the new title created in section 14 1203 of this act). This subsection shall permit benefits under any 15 such plan or arrangement to be payable to a spouse, former spouse, 16 child, or other dependent of a participant in such plan to the extent 17 expressly provided for in a qualified domestic relations order that 18 meets the requirements for such orders under the plan, or, in the 19 case of benefits payable under a plan described in 26 U.S.C. Sec. 20 403(b) or 408 of the internal revenue code of 1986, as amended, or 21 section 409 of such code as in effect before January 1, 1984, to the 22 extent provided in any order issued by a court of competent 23 jurisdiction that provides for maintenance or support. This 24 subsection does not prohibit actions against an employee benefit 25 plan, or fund for valid obligations incurred by the plan or fund for 26 the benefit of the plan or fund. 27 (4) For the purposes of this section, the term "employee benefit 28 plan" means any plan or arrangement that is described in RCW 29 49.64.020, including any Keogh plan, whether funded by a trust or by 30 an annuity contract, and in 26 U.S.C. Sec. 401(a) or 403(a) of the 31 internal revenue code of 1986, as amended; or that is a tax-sheltered 32 annuity or a custodial account described in section 403(b) of such 33 code or an individual retirement account or an individual retirement 34 annuity described in section 408 of such code; or a Roth individual 35 retirement account described in section 408A of such code; or a 36 medical savings account or a health savings account described in 37 sections 220 and 223, respectively, of such code; or a retirement 38 bond described in section 409 of such code as in effect before 39 January 1, 1984. The term "employee benefit plan" shall not include 40 p. 47 ESSB 6346.PL

any employee benefit plan that is established or maintained for its 1 employees by the government of the United States, by the state of 2 Washington under chapter 2.10, 2.12, 41.26, 41.32, 41.34, 41.35, 3 41.37, 41.40, or 43.43 RCW or RCW 41.50.770, or by any agency or 4 instrumentality of the government of the United States. 5 (5) An employee benefit plan shall be deemed to be a spendthrift 6 trust, regardless of the source of funds, the relationship between 7 the trustee or custodian of the plan and the beneficiary, or the 8 ability of the debtor to withdraw or borrow or otherwise become 9 entitled to benefits from the plan before retirement. This subsection 10 shall not apply to child support collection actions issued under 11 chapter 26.18, 26.23, or 74.20A RCW, if otherwise permitted by 12 federal law, or to collection actions for taxes imposed under Title 13 82A RCW (the new title created in section 1203 of this act). This 14 subsection shall permit benefits under any such plan or arrangement 15 to be payable to a spouse, former spouse, child, or other dependent 16 of a participant in such plan to the extent expressly provided for in 17 a qualified domestic relations order that meets the requirements for 18 such orders under the plan, or, in the case of benefits payable under 19 a plan described in 26 U.S.C. Sec. 403(b) or 408 of the internal 20 revenue code of 1986, as amended, or section 409 of such code as in 21 effect before January 1, 1984, to the extent provided in any order 22 issued by a court of competent jurisdiction that provides for 23 maintenance or support. 24 (6) Unless prohibited by federal law, nothing contained in 25 subsection (3), (4), or (5) of this section shall be construed as a 26 termination or limitation of a spouse's community property interest 27 in an employee benefit plan held in the name of or on account of the 28 other spouse, who is the participant or the account holder spouse. 29 Unless prohibited by applicable federal law, at the death of the 30 nonparticipant, nonaccount holder spouse, the nonparticipant, 31 nonaccount holder spouse may transfer or distribute the community 32 property interest of the nonparticipant, nonaccount holder spouse in 33 the participant or account holder spouse's employee benefit plan to 34 the nonparticipant, nonaccount holder spouse's estate, testamentary 35 trust, inter vivos trust, or other successor or successors pursuant 36 to the last will of the nonparticipant, nonaccount holder spouse or 37 the law of intestate succession, and that distributee may, but shall 38 not be required to, obtain an order of a court of competent 39 jurisdiction, including a nonjudicial binding agreement or order 40 p. 48 ESSB 6346.PL

entered under chapter 11.96A RCW, to confirm the distribution. For 1 purposes of subsection (3) of this section, the distributee of the 2 nonparticipant, nonaccount holder spouse's community property 3 interest in an employee benefit plan shall be considered a person 4 entitled to the full protection of subsection (3) of this section. 5 The nonparticipant, nonaccount holder spouse's consent to a 6 beneficiary designation by the participant or account holder spouse 7 with respect to an employee benefit plan shall not, absent clear and 8 convincing evidence to the contrary, be deemed a release, gift, 9 relinquishment, termination, limitation, or transfer of the 10 nonparticipant, nonaccount holder spouse's community property 11 interest in an employee benefit plan. For purposes of this 12 subsection, the term "nonparticipant, nonaccount holder spouse" means 13 the spouse of the person who is a participant in an employee benefit 14 plan or in whose name an individual retirement account is maintained. 15 As used in this subsection, an order of a court of competent 16 jurisdiction entered under chapter 11.96A RCW includes an agreement, 17 as that term is used under RCW 11.96A.220. 18 Sec. 805. RCW 41.24.240 and 1995 c 11 s 13 are each amended to 19 read as follows: 20 (1) The right of any person to any future payment under the 21 provisions of this chapter shall not be transferable or assignable at 22 law or in equity, and none of the moneys paid or payable or the 23 rights existing under this chapter, shall be subject to execution, 24 levy, attachment, garnishment, or other legal process, or to the 25 operation of any bankruptcy or insolvency law. This section shall not 26 be applicable to any child support collection action taken under 27 chapter 26.18, 26.23, or 74.20A RCW. Benefits under this chapter 28 shall be payable to a spouse or ex-spouse to the extent expressly 29 provided for in any court decree of dissolution or legal separation 30 or in any court order or court-approved property settlement agreement 31 incident to any court decree of dissolution or legal separation. 32 (2) Nothing in this chapter shall be construed to deprive any 33 participant, eligible to receive a pension hereunder, from receiving 34 a pension under any other act to which that participant may become 35 eligible by reason of services other than or in addition to his or 36 her services under this chapter. 37 p. 49 ESSB 6346.PL

(3) Subsection (1) of this section does not exempt any pension or 1 other benefit received under this chapter from tax under Title 82A 2 RCW (the new title created in section 1203 of this act). 3 Sec. 806. RCW 41.32.052 and 2012 c 159 s 20 are each amended to 4 read as follows: 5 (1) Subject to subsections (2) ((and)), (3), and (4) of this 6 section, the right of a person to a pension, an annuity, a retirement 7 allowance, or disability allowance, to the return of contributions, 8 any optional benefit or death benefit, any other right accrued or 9 accruing to any person under the provisions of this chapter and the 10 moneys in the various funds created by this chapter shall be 11 unassignable, and are hereby exempt from any state, county, municipal 12 or other local tax, and shall not be subject to execution, 13 garnishment, attachment, the operation of bankruptcy or insolvency 14 laws, or other process of law whatsoever whether the same be in 15 actual possession of the person or be deposited or loaned. 16 (2) This section shall not be deemed to prohibit a beneficiary of 17 a retirement allowance who is eligible: 18 (a) Under RCW 41.05.080 from authorizing monthly deductions 19 therefrom for payment of premiums due on any group insurance policy 20 or plan issued for the benefit of a group comprised of public 21 employees of the state of Washington or its political subdivisions; 22 (b) Under a group health care benefit plan approved pursuant to 23 RCW 28A.400.350 or 41.05.065 from authorizing monthly deductions 24 therefrom, of the amount or amounts of subscription payments, 25 premiums, or contributions to any person, firm, or corporation 26 furnishing or providing medical, surgical, and hospital care or other 27 health care insurance; or 28 (c) Under this system from authorizing monthly deductions 29 therefrom for payment of dues and other membership fees to any 30 retirement association composed of retired teachers and/or public 31 employees pursuant to a written agreement between the director and 32 the retirement association. 33 Deductions under (a) and (b) of this subsection shall be made in 34 accordance with rules that may be adopted by the director. 35 (3) Subsection (1) of this section shall not prohibit the 36 department from complying with (a) a wage assignment order for child 37 support issued pursuant to chapter 26.18 RCW, (b) an order to 38 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) ((a 39 p. 50 ESSB 6346.PL

notice of payroll deduction)) an income withholding order issued 1 pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order 2 issued by the department, (e) a court order directing the department 3 of retirement systems to pay benefits directly to an obligee under a 4 dissolution order as defined in RCW 41.50.500(3) which fully complies 5 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 6 order expressly authorized by federal law. 7 (4) Subsection (1) of this section does not exempt any pension or 8 other benefit received under this chapter from tax under Title 82A 9 RCW (the new title created in section 1203 of this act). 10 Sec. 807. RCW 41.34.080 and 2012 c 159 s 23 are each amended to 11 read as follows: 12 (1) Subject to subsections (2) ((and)), (3), and (4) of this 13 section, the right of a person to a pension, an annuity, a retirement 14 allowance, any optional benefit, any other right accrued or accruing 15 to any person under the provisions of this chapter, and the various 16 funds created by chapter 239, Laws of 1995; chapter 341, Laws of 17 1998; and chapter 247, Laws of 2000 and all moneys and investments 18 and income thereof, is hereby exempt from any state, county, 19 municipal, or other local tax, and shall not be subject to execution, 20 garnishment, attachment, the operation of bankruptcy or insolvency 21 laws, or other process of law whatsoever, whether the same be in 22 actual possession of the person or be deposited or loaned and shall 23 be unassignable. 24 (2) This section shall not be deemed to prohibit a beneficiary of 25 a retirement allowance from authorizing deductions therefrom for 26 payment of premiums due on any group insurance policy or plan issued 27 for the benefit of a group comprised of public employees of the state 28 of Washington or its political subdivisions and that has been 29 approved for deduction in accordance with rules that may be adopted 30 by the state health care authority and/or the department. This 31 section shall not be deemed to prohibit a beneficiary of a retirement 32 allowance from authorizing deductions therefrom for payment of dues 33 and other membership fees to any retirement association or 34 organization the membership of which is composed of retired public 35 employees, if a total of three hundred or more of such retired 36 employees have authorized such deduction for payment to the same 37 retirement association or organization. 38 p. 51 ESSB 6346.PL

(3) Subsection (1) of this section shall not prohibit the 1 department from complying with (a) a wage assignment order for child 2 support issued pursuant to chapter 26.18 RCW, (b) an order to 3 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a 4 ((notice of payroll deduction)) income withholding order issued 5 pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order 6 issued by the department, (e) a court order directing the department 7 to pay benefits directly to an obligee under a dissolution order as 8 defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 9 and 41.50.700, or (f) any administrative or court order expressly 10 authorized by federal law. 11 (4) Subsection (1) of this section does not exempt any pension or 12 other benefit received under this chapter from tax under Title 82A 13 RCW (the new title created in section 1203 of this act). 14 Sec. 808. RCW 41.35.100 and 2012 c 159 s 24 are each amended to 15 read as follows: 16 (1) Subject to subsections (2) ((and)), (3), and (4) of this 17 section, the right of a person to a pension, an annuity, or 18 retirement allowance, any optional benefit, any other right accrued 19 or accruing to any person under the provisions of this chapter, the 20 various funds created by this chapter, and all moneys and investments 21 and income thereof, are hereby exempt from any state, county, 22 municipal, or other local tax, and shall not be subject to execution, 23 garnishment, attachment, the operation of bankruptcy or insolvency 24 laws, or other process of law whatsoever, whether the same be in 25 actual possession of the person or be deposited or loaned and shall 26 be unassignable. 27 (2) This section does not prohibit a beneficiary of a retirement 28 allowance from authorizing deductions therefrom for payment of 29 premiums due on any group insurance policy or plan issued for the 30 benefit of a group comprised of public employees of the state of 31 Washington or its political subdivisions and which has been approved 32 for deduction in accordance with rules that may be adopted by the 33 state health care authority and/or the department. This section also 34 does not prohibit a beneficiary of a retirement allowance from 35 authorizing deductions therefrom for payment of dues and other 36 membership fees to any retirement association or organization the 37 membership of which is composed of retired public employees, if a 38 total of three hundred or more of such retired employees have 39 p. 52 ESSB 6346.PL

authorized such deduction for payment to the same retirement 1 association or organization. 2 (3) Subsection (1) of this section does not prohibit the 3 department from complying with (a) a wage assignment order for child 4 support issued pursuant to chapter 26.18 RCW, (b) an order to 5 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) ((a 6 notice of payroll deduction)) an income withholding order issued 7 pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order 8 issued by the department, (e) a court order directing the department 9 of retirement systems to pay benefits directly to an obligee under a 10 dissolution order as defined in RCW 41.50.500(3) which fully complies 11 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 12 order expressly authorized by federal law. 13 (4) Subsection (1) of this section does not exempt any pension or 14 other benefit received under this chapter from tax under Title 82A 15 RCW (the new title created in section 1203 of this act). 16 Sec. 809. RCW 41.37.090 and 2012 c 159 s 25 are each amended to 17 read as follows: 18 (1) Subject to subsections (2) ((and (3))) through (4) of this 19 section, the right of a person to a pension, an annuity, or 20 retirement allowance, any optional benefit, any other right accrued 21 or accruing to any person under this chapter, the various funds 22 created by this chapter, and all moneys and investments and income 23 thereof, are hereby exempt from any state, county, municipal, or 24 other local tax, and shall not be subject to execution, garnishment, 25 attachment, the operation of bankruptcy or insolvency laws, or other 26 process of law whatsoever, whether the same be in actual possession 27 of the person or be deposited or loaned and shall be unassignable. 28 (2) This section does not prohibit a beneficiary of a retirement 29 allowance from authorizing deductions therefrom for payment of 30 premiums due on any group insurance policy or plan issued for the 31 benefit of a group comprised of public employees of the state of 32 Washington or its political subdivisions and which has been approved 33 for deduction in accordance with rules that may be adopted by the 34 state health care authority and/or the department. This section also 35 does not prohibit a beneficiary of a retirement allowance from 36 authorizing deductions therefrom for payment of dues and other 37 membership fees to any retirement association or organization the 38 membership of which is composed of retired public employees, if a 39 p. 53 ESSB 6346.PL

total of three hundred or more retired employees have authorized the 1 deduction for payment to the same retirement association or 2 organization. 3 (3) Subsection (1) of this section does not prohibit the 4 department from complying with (a) a wage assignment order for child 5 support issued pursuant to chapter 26.18 RCW, (b) an order to 6 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a 7 notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a 8 mandatory benefits assignment order issued by the department, (e) a 9 court order directing the department to pay benefits directly to an 10 obligee under a dissolution order as defined in RCW 41.50.500(3) 11 which fully complies with RCW 41.50.670 and 41.50.700, or (f) any 12 administrative or court order expressly authorized by federal law. 13 (4) Subsection (1) of this section does not exempt any pension or 14 other benefit received under this chapter from tax under Title 82A 15 RCW (the new title created in section 1203 of this act). 16 Sec. 810. RCW 41.40.052 and 2012 c 159 s 26 are each amended to 17 read as follows: 18 (1) Subject to subsections (2) ((and)), (3), and (4) of this 19 section, the right of a person to a pension, an annuity, or 20 retirement allowance, any optional benefit, any other right accrued 21 or accruing to any person under the provisions of this chapter, the 22 various funds created by this chapter, and all moneys and investments 23 and income thereof, are hereby exempt from any state, county, 24 municipal, or other local tax, and shall not be subject to execution, 25 garnishment, attachment, the operation of bankruptcy or insolvency 26 laws, or other process of law whatsoever, whether the same be in 27 actual possession of the person or be deposited or loaned and shall 28 be unassignable. 29 (2)(a) This section shall not be deemed to prohibit a beneficiary 30 of a retirement allowance from authorizing deductions therefrom for 31 payment of premiums due on any group insurance policy or plan issued 32 for the benefit of a group comprised of public employees of the state 33 of Washington or its political subdivisions and which has been 34 approved for deduction in accordance with rules that may be adopted 35 by the state health care authority and/or the department, and this 36 section shall not be deemed to prohibit a beneficiary of a retirement 37 allowance from authorizing deductions therefrom for payment of dues 38 and other membership fees to any retirement association or 39 p. 54 ESSB 6346.PL

organization the membership of which is composed of retired public 1 employees, if a total of three hundred or more of such retired 2 employees have authorized such deduction for payment to the same 3 retirement association or organization. 4 (b) This section does not prohibit a beneficiary of a retirement 5 allowance from authorizing deductions from that allowance for 6 charitable purposes on the same terms as employees and public 7 officers under RCW 41.04.035 and 41.04.036. 8 (3) Subsection (1) of this section shall not prohibit the 9 department from complying with (a) a wage assignment order for child 10 support issued pursuant to chapter 26.18 RCW, (b) an order to 11 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) ((a 12 notice of payroll deduction)) an income withholding order issued 13 pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order 14 issued by the department, (e) a court order directing the department 15 of retirement systems to pay benefits directly to an obligee under a 16 dissolution order as defined in RCW 41.50.500(3) which fully complies 17 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 18 order expressly authorized by federal law. 19 (4) Subsection (1) of this section does not exempt any pension or 20 other benefit received under this chapter from tax under Title 82A 21 RCW (the new title created in section 1203 of this act). 22 Sec. 811. RCW 41.44.240 and 2012 c 159 s 27 are each amended to 23 read as follows: 24 (1) The right of a person to a pension, annuity or a retirement 25 allowance, to the return of contribution, the pension, annuity or 26 retirement allowance itself, any optional benefit, any other right 27 accrued or accruing to any person under the provisions of this 28 chapter, and the moneys in the fund created under this chapter shall 29 not be subject to execution, garnishment, or any other process 30 whatsoever whether the same be in actual possession of the person or 31 be deposited or loaned. 32 (2) This section shall not apply to child support collection 33 actions taken under chapter 26.18, 26.23, or 74.20A RCW against 34 benefits payable under any such plan or arrangement. Benefits under 35 this chapter shall be payable to a spouse or ex-spouse to the extent 36 expressly provided for in any court decree of dissolution or legal 37 separation or in any court order or court-approved property 38 p. 55 ESSB 6346.PL

settlement agreement incident to any court decree of dissolution or 1 legal separation. 2 (3) Subsection (1) of this section does not exempt any pension or 3 other benefit received under this chapter from tax under Title 82A 4 RCW (the new title created in section 1203 of this act). 5 Sec. 812. RCW 41.26.053 and 2012 c 159 s 21 are each amended to 6 read as follows: 7 (1) Subject to subsections (2) ((and)), (3), and (4) of this 8 section, the right of a person to a retirement allowance, disability 9 allowance, or death benefit, to the return of accumulated 10 contributions, the retirement, disability or death allowance itself, 11 any optional benefit, any other right accrued or accruing to any 12 person under the provisions of this chapter, and the moneys in the 13 fund created under this chapter, are hereby exempt from any state, 14 county, municipal, or other local tax and shall not be subject to 15 execution, garnishment, attachment, the operation of bankruptcy or 16 insolvency laws, or any other process of law whatsoever, whether the 17 same be in actual possession of the person or be deposited or loaned 18 and shall be unassignable. 19 (2) On the written request of any person eligible to receive 20 benefits under this section, the department may deduct from such 21 payments the premiums for life, health, or other insurance. The 22 request on behalf of any child or children shall be made by the legal 23 guardian of such child or children. The department may provide for 24 such persons one or more plans of group insurance, through contracts 25 with regularly constituted insurance carriers or health care service 26 contractors. 27 (3) Subsection (1) of this section shall not prohibit the 28 department from complying with (a) a wage assignment order for child 29 support issued pursuant to chapter 26.18 RCW, (b) an order to 30 withhold and deliver issued pursuant to chapter 74.20A RCW, (c) ((a 31 notice of payroll deduction)) an income withholding order issued 32 pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order 33 issued by the department, (e) a court order directing the department 34 of retirement systems to pay benefits directly to an obligee under a 35 dissolution order as defined in RCW 41.50.500(3) which fully complies 36 with RCW 41.50.670 and 41.50.700, or (f) any administrative or court 37 order expressly authorized by federal law. 38 p. 56 ESSB 6346.PL

(4) Subsection (1) of this section does not exempt any pension or 1 other benefit received under this chapter from tax under Title 82A 2 RCW (the new title created in section 1203 of this act). 3 Sec. 813. RCW 41.28.200 and 2012 c 159 s 22 are each amended to 4 read as follows: 5 (1) The right of a person to a pension, an annuity or a 6 retirement allowance, to the return of contributions, the pension, 7 annuity or retirement allowance itself, any optional benefit, any 8 other right accrued or accruing to any person under the provisions of 9 this chapter, and the moneys in the fund created under this chapter 10 shall not be subject to execution, garnishment, attachment, or any 11 other process whatsoever, whether the same be in actual possession of 12 the person or be deposited or loaned and shall be unassignable except 13 as in this chapter specifically provided. 14 (2) Subsection (1) of this section does not exempt any pension or 15 other benefit received under this chapter from tax under Title 82A 16 RCW (the new title created in section 1203 of this act). 17 Sec. 814. RCW 43.43.310 and 2012 c 159 s 28 are each amended to 18 read as follows: 19 (1) Except as provided in subsections (2) ((and)), (3), and (4) 20 of this section, the right of any person to a retirement allowance or 21 optional retirement allowance under the provisions hereof and all 22 moneys and investments and income thereof are exempt from any state, 23 county, municipal, or other local tax and shall not be subject to 24 execution, garnishment, attachment, the operation of bankruptcy or 25 the insolvency laws, or other processes of law whatsoever, whether 26 the same be in actual possession of the person or be deposited or 27 loaned and shall be unassignable except as herein specifically 28 provided. 29 (2) Subsection (1) of this section shall not prohibit the 30 department of retirement systems from complying with (a) a wage 31 assignment order for child support issued pursuant to chapter 26.18 32 RCW, (b) an order to withhold and deliver issued pursuant to chapter 33 74.20A RCW, (c) ((a notice of payroll deduction)) an income 34 withholding order issued pursuant to RCW 26.23.060, (d) a mandatory 35 benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a 36 court order directing the department of retirement systems to pay 37 benefits directly to an obligee under a dissolution order as defined 38 p. 57 ESSB 6346.PL

in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 1 41.50.700, or (f) any administrative or court order expressly 2 authorized by federal law. 3 (3) Subsection (1) of this section shall not be deemed to 4 prohibit a beneficiary of a retirement allowance from authorizing 5 deductions therefrom for payment of premiums due on any group 6 insurance policy or plan issued for the benefit of a group comprised 7 of members of the Washington state patrol or other public employees 8 of the state of Washington, or for contributions to the Washington 9 state patrol memorial foundation. 10 (4) Subsection (1) of this section does not exempt any pension or 11 other benefit received under this chapter from tax under Title 82A 12 RCW (the new title created in section 1203 of this act). 13 PART IX 14 TAX RELIEF 15 Sec. 901. RCW 82.08.0206 and 2024 c 3 s 1 are each amended to 16 read as follows: 17 (1) A working families' tax credit, funded by sales and use tax 18 imposed, is provided to eligible low-income persons for calendar 19 years beginning on or after January 1, 2022. The credit is refundable 20 and is calculated as provided in this section. 21 (2) For purposes of the credit in this section, the following 22 definitions apply: 23 (a)(i) "Eligible low-income person" means an individual who: 24 (A) Is eligible for the credit provided in Title 26 U.S.C. Sec. 25 32 of the internal revenue code; 26 (B) Properly files a federal income tax return for the prior 27 federal tax year, and was a Washington resident during the year for 28 which the credit is claimed; and 29 (C) Has paid either retail sales tax under this chapter or use 30 tax under chapter 82.12 RCW, or both. There is a rebuttable 31 presumption that a person paid either retail sales tax under this 32 chapter or use tax under chapter 82.12 RCW, or both, if they were a 33 Washington resident during the year for which the credit is claimed. 34 (ii) "Eligible low-income person" also means an individual who 35 meets the requirements provided in (a)(i)(B) of this subsection and 36 would otherwise qualify for the credit provided in Title 26 U.S.C. 37 p. 58 ESSB 6346.PL

Sec. 32 of the internal revenue code except that one or any 1 combination of the following conditions apply: 2 (A) The individual filed a federal income tax return for the 3 prior federal tax year using a valid individual taxpayer 4 identification number in lieu of a social security number, and the 5 individual's spouse, if any, and all qualifying children, if any, 6 have a valid individual taxpayer identification number or a social 7 security number; ((or)) 8 (B) The individual filed their federal income tax return for the 9 prior federal tax year under the married filing separately status. 10 For purposes of the refund provided in this section, the special rule 11 for separated spouse under Title 26 U.S.C. Sec. 32(d)(2)(B) of the 12 internal revenue code does not apply; 13 (C) The individual does not meet the income requirement under 14 Title 26 U.S.C. Sec. 32(c)(1)(A)(ii)(II) of the internal revenue 15 code, but whose income was equal to or less than the maximum 16 qualifying income as defined in this section; or 17 (D) The individual does not meet the age requirement under Title 18 26 U.S.C. Sec. 32(c)(1)(A)(ii)(II) of the internal revenue code, but 19 is at least age 18 by the end of the prior federal tax year. 20 (b) "Income" means earned income as defined by Title 26 U.S.C. 21 Sec. 32 of the internal revenue code. 22 (c) "Individual" means an individual or an individual and that 23 individual's spouse if they file a federal joint income tax return. 24 (d) "Internal revenue code" means the United States internal 25 revenue code of 1986, as amended, as of June 9, 2022, or such 26 subsequent date as the department may provide by rule consistent with 27 the purpose of this section. 28 (e) "Maximum qualifying income" means the greater of: 29 (i) The maximum federally adjusted gross income under Title 26 30 U.S.C. Sec. 32 of the internal revenue code for the prior federal tax 31 year; or 32 (ii) The individual's monthly need and payment standards for cash 33 assistance, under WAC 388-478-0015, multiplied by 12. For the 34 purposes of this subsection (2)(e)(ii), an individual's assistance 35 unit size is determined by their household size for federal income 36 tax purposes for the prior federal tax year, not to exceed five. 37 (f) "Qualifying child" means a qualifying child as defined by 38 Title 26 U.S.C. Sec. 32 of the internal revenue code, except the 39 p. 59 ESSB 6346.PL

child may have a valid individual taxpayer identification number in 1 lieu of a social security number. 2 (g) "Washington resident" means an individual who is physically 3 present and residing in this state for at least 183 days. "Washington 4 resident" also includes an individual who is not physically present 5 and residing in this state for at least 183 days but is the spouse of 6 a Washington resident. For purposes of this subsection, "day" means a 7 calendar day or any portion of a calendar day. 8 (3)(a) Except as provided in (b) and (c) of this subsection, for 9 calendar year 2023 and thereafter, the working families' tax credit 10 refund amount for the prior calendar year is: 11 (i) $300 for eligible persons with no qualifying children; 12 (ii) $600 for eligible persons with one qualifying child; 13 (iii) $900 for eligible persons with two qualifying children; or 14 (iv) $1,200 for eligible persons with three or more qualifying 15 children. 16 (b) Except as provided in (f) of this subsection, the refund 17 amounts provided in (a) of this subsection will be reduced, rounded 18 to the nearest dollar, as follows: 19 (i) For eligible persons with no qualifying children, beginning 20 at $2,500 of income below the ((federal phase-out)) maximum 21 qualifying income for the prior federal tax year, by 18 percent per 22 additional dollar of income until the minimum credit amount as 23 specified in (c) of this subsection is reached. 24 (ii) For eligible persons with one qualifying child, beginning at 25 $5,000 of income below the ((federal phase-out)) maximum qualifying 26 income for the prior federal tax year, by 12 percent per additional 27 dollar of income until the minimum credit amount as specified in (c) 28 of this subsection is reached. 29 (iii) For eligible persons with two qualifying children, 30 beginning at $5,000 of income below the ((federal phase-out)) maximum 31 qualifying income for the prior federal tax year, by 15 percent per 32 additional dollar of income until the minimum credit amount as 33 specified in (c) of this subsection is reached. 34 (iv) For eligible persons with three or more qualifying children, 35 beginning at $5,000 of income below the ((federal phase-out)) maximum 36 qualifying income for the prior federal tax year, by 18 percent per 37 additional dollar of income until the minimum credit amount as 38 specified in (c) of this subsection is reached. 39 p. 60 ESSB 6346.PL

(c) If the refund for an eligible person as calculated in this 1 section is greater than zero cents, but less than $50, the refund 2 amount is $50. 3 (d) The refund amounts in this section shall be adjusted for 4 inflation every year beginning January 1, 2024, based upon changes in 5 the consumer price index that are published by November 15th of the 6 previous year for the most recent 12-month period. The adjusted 7 refund amounts must be rounded to the nearest $5. 8 (e) For purposes of this section, "consumer price index" means, 9 for any 12-month period, the average consumer price index for that 10 12-month period for the Seattle, Washington area for urban wage 11 earners and clerical workers, all items, compiled by the bureau of 12 labor statistics, United States department of labor. 13 (f) The percentage rate of remittance reductions in (b) of this 14 subsection must be adjusted every year beginning January 1, 2023, 15 based on calculations by the department that result in the minimum 16 credit being received at the maximum qualifying income level. 17 (4) The working families' tax credit shall be administered as 18 provided in this subsection. 19 (a) The refund paid under this section will be paid to eligible 20 filers who apply pursuant to this subsection. 21 (i) Application must be made to the department in a form and 22 manner determined by the department. If the application process is 23 initially done electronically, the department must provide a paper 24 application upon request. The application must include any 25 information and documentation as required by the department. The 26 department may use the information provided by the individual to 27 calculate the refund amount. Income reported on the application may 28 be rounded to the nearest dollar. 29 (ii) An individual applying for the credit under this section 30 must keep records necessary for the department to verify eligibility 31 under this section. Any information provided by the individual is 32 subject to audit verification by the department. 33 (iii) In addition to information provided on the application, the 34 department may verify that an individual qualifies as a Washington 35 resident through the use of automated verification tools or other 36 reasonable means. 37 (iv)(A) Except as provided in (a)(iv)(B) of this subsection (4), 38 application for a refund under this section must be made in the year 39 following the year for which the federal tax return was filed, but in 40 p. 61 ESSB 6346.PL

no case may any refund be provided for any period before January 1, 1 2022. 2 (B)(I) A person may apply for any refund for which they were 3 eligible but did not claim under (a)(iv)(A) of this subsection (4) 4 for up to three additional years. A person must complete an 5 application to claim this refund within the three calendar years 6 after the end of the calendar year in which the federal income tax 7 return for that tax year was legally due for federal income tax 8 purposes, without regard to any federal extension. 9 (II) If a person seeks to increase the amount of a refund that 10 has been made under this subsection (4), the person must apply for 11 the amended refund within the nonclaims period established under RCW 12 82.32.060(1). 13 (v) A person may not claim a credit on behalf of a deceased 14 individual. No individual may claim a credit under this section for 15 any year in a disallowance period under Title 26 U.S.C. Sec. 32(k)(1) 16 of the internal revenue code or for any year for which the individual 17 is ineligible to claim the credit in Title 26 U.S.C. Sec. 32 of the 18 internal revenue code by reason of Title 26 U.S.C. Sec. 32(k)(2) of 19 the internal revenue code. 20 (b) The department shall protect the privacy and confidentiality 21 of personal data of refund recipients in accordance with chapter 22 82.32 RCW. 23 (c) The department shall, in conjunction with other agencies or 24 organizations, design and implement a public information campaign to 25 inform potentially eligible persons of the existence of, and 26 requirements for, the credit provided in this section. 27 (d) The department must work with the internal revenue service of 28 the United States to administer the credit on an automatic basis as 29 soon as practicable. 30 (5) Receipt of a refund under this section may not be used in 31 eligibility determinations for any state income support programs or 32 in making public charge determinations. 33 (6) The department may adopt rules necessary to implement this 34 section. This includes establishing a date by which applications will 35 be accepted, with the aim of accepting applications as soon as 36 possible. 37 (7) The department must review the application and determine 38 eligibility for the working families' tax credit based on information 39 provided by the applicant and through audit and other administrative 40 p. 62 ESSB 6346.PL

records, including, when it deems it necessary, verification through 1 information from the internal revenue service of the United States, 2 other federal agencies, Washington state agencies, third-party 3 entities, or other persons. The department may accept a signed 4 attestation in a form and manner determined by the department from an 5 individual to presumptively validate that an individual meets all the 6 eligibility requirements as provided in this section. The signed 7 attestation is subject to audit verification by the department to 8 validate an individual's eligibility for the working families' tax 9 credit. 10 (8) If, upon review of internal revenue service data or other 11 information obtained by the department, it appears that an individual 12 received a refund that the individual was not entitled to, or 13 received a larger refund than the individual was entitled to, the 14 department may assess against the individual the overpaid amount. The 15 department may also assess such overpaid amount against the 16 individual's spouse if the refund in question was based on both 17 spouses filing a joint federal income tax return for the year for 18 which the refund was claimed. 19 (a) Interest as provided under RCW 82.32.050 applies to 20 assessments authorized under this subsection (8) starting six months 21 after the date the department issued the assessment until the amount 22 due under this subsection (8) is paid in full to the department. 23 Except as otherwise provided in this subsection, penalties may not be 24 assessed on amounts due under this subsection. 25 (b) If an amount due under this subsection is not paid in full by 26 the date due, or the department issues a warrant for the collection 27 of amounts due under this subsection, the department may assess the 28 applicable penalties under RCW 82.32.090. Penalties under this 29 subsection (8)(b) may not be made due until six months after the 30 department's issuance of the assessment. 31 (c) If the department finds by clear, cogent, and convincing 32 evidence that an individual knowingly submitted, caused to be 33 submitted, or consented to the submission of, a fraudulent claim for 34 refund under this section, the department must assess a penalty of 50 35 percent of the overpaid amount. This penalty is in addition to any 36 other applicable penalties assessed in accordance with (b) of this 37 subsection (8). 38 (9) If, within the period allowed for refunds under RCW 39 82.32.060, the department finds that an individual received a lesser 40 p. 63 ESSB 6346.PL

refund than the individual was entitled to, the department must remit 1 the additional amount due under this section to the individual. 2 (10) Interest does not apply to refunds provided under this 3 section. 4 (11) Chapter 82.32 RCW applies to the administration of this 5 section. 6 Sec. 902. 2023 c 456 s 3 (uncodified) is amended to read as 7 follows: 8 (1) This section is the tax preference performance statement for 9 the tax preference contained in section 2, chapter 195, Laws of 2021 10 ((and)), section 1, chapter 456, Laws of 2023, and section 901, 11 chapter . . ., Laws of 2026 (section 901 of this act). This 12 performance statement is only intended to be used for subsequent 13 evaluation of the tax preference. It is not intended to create a 14 private right of action by any party or be used to determine 15 eligibility for the preferential tax treatment. 16 (2) The legislature categorizes this tax preference as one 17 intended to provide tax relief for certain individuals as indicated 18 in RCW 82.32.808(2)(e). 19 (3) It is the legislature's specific public policy objective to 20 allow low-income and middle-income workers to recover some or all of 21 the sales tax they pay to support state and local government as a way 22 to increase their economic security and to decrease the regressivity 23 of our state tax code. It is the legislature's intent to provide a 24 sales and use tax credit, in the form of a remittance, to low-income 25 and middle-income working families. 26 (4) The joint legislative audit and review committee shall review 27 this preference in 2028 and every 10 years thereafter. If a review 28 finds that the working families' tax credit does not provide 29 meaningful financial relief to low-income and middle-income 30 households, RCW 82.08.0206 expires at the end of the calendar year 31 two years after the adoption of the final report containing that 32 finding. The joint legislative audit and review committee shall 33 provide written notice of the expiration date of RCW 82.08.0206 to 34 the department of revenue, the chief clerk of the house of 35 representatives, the secretary of the senate, the office of the code 36 reviser, and others as deemed appropriate by the joint legislative 37 audit and review committee. In its review of the program, the joint 38 legislative audit and review committee should use at least the 39 p. 64 ESSB 6346.PL

following metrics: Size of the benefit per household, number of 1 household beneficiaries statewide, and demographic information of 2 beneficiaries to include family size, income level, race and 3 ethnicity, and geographic location.(5) In order to obtain the data 4 necessary to perform the review in subsection (4) of this section, 5 the joint legislative audit and review committee may refer to the 6 remittance data prepared by the department of revenue. 7 NEW SECTION. Sec. 903. A new section is added to chapter 82.08 8 RCW to read as follows: 9 (1) Beginning January 1, 2029, the tax levied by RCW 82.08.020 10 does not apply to the sales of grooming and hygiene products. 11 (2) For the purpose of this section, "grooming and hygiene 12 products" means soaps and cleaning solutions, shampoo, toothpaste, 13 mouthwash, antiperspirants, and sun tan lotions and screens, 14 regardless of whether the item meets the definition of "over-the- 15 counter drug," as defined in RCW 82.08.0281. 16 NEW SECTION. Sec. 904. A new section is added to chapter 82.12 17 RCW to read as follows: 18 (1) Beginning January 1, 2029, the tax levied by RCW 82.12.020 19 does not apply to the use of grooming and hygiene products. 20 (2) For purposes of this section, "grooming and hygiene products" 21 has the same meaning as provided in section 903 of this act. 22 NEW SECTION. Sec. 905. A new section is added to chapter 82.08 23 RCW to read as follows: 24 (1) Beginning January 1, 2029, the tax levied by RCW 82.08.020 25 does not apply to the sale of diapers. 26 (2) For the purposes of this section, "diapers" means an 27 absorbent garment worn by humans who are incapable of, or have 28 difficulty, controlling their bladder or bowel movements. 29 NEW SECTION. Sec. 906. A new section is added to chapter 82.12 30 RCW to read as follows: 31 (1) Beginning January 1, 2029, the tax levied by this chapter 32 does not apply to the use of diapers. 33 (2) For the purposes of this section, "diapers" has the same 34 meaning as in section 905 of this act. 35 p. 65 ESSB 6346.PL

NEW SECTION. Sec. 907. A new section is added to chapter 82.08 1 RCW to read as follows: 2 (1) Beginning January 1, 2029, the tax levied by RCW 82.08.020 3 does not apply to the sale of over the counter drugs. 4 (2) For purposes of this section, "over the counter drugs" means 5 a drug that contains a label that identifies the product as a drug as 6 required by 21 C.F.R. Sec. 201.66 (2026) as it existed on the 7 effective date of this section. The over the counter drug label must 8 include a drug facts panel or a statement of the active ingredient or 9 ingredients with those ingredients contained in the compound, 10 substance, or preparation. 11 NEW SECTION. Sec. 908. A new section is added to chapter 82.12 12 RCW to read as follows: 13 (1) Beginning January 1, 2029, the tax levied by RCW 82.12.020 14 does not apply to the use of over the counter drugs. 15 (2) For purposes of this section, "over the counter drugs" has 16 the same meaning as in section 907 of this act. 17 Sec. 909. RCW 82.04.4451 and 2022 c 295 s 1 are each amended to 18 read as follows: 19 (1) In computing the tax imposed under this chapter, a credit is 20 allowed against the amount of tax otherwise due under this chapter, 21 as provided in this section. Except for taxpayers that report at 22 least 50 percent of their taxable amount under RCW 82.04.255, 23 82.04.290(2)(a), and 82.04.285, the maximum credit for a taxpayer for 24 a reporting period is (($55)) $125 multiplied by the number of months 25 in the reporting period, as determined under RCW 82.32.045. For a 26 taxpayer that reports at least 50 percent of its taxable amount under 27 RCW 82.04.255, 82.04.290(2)(a), and 82.04.285, the maximum credit for 28 a reporting period is (($160)) $375 multiplied by the number of 29 months in the reporting period, as determined under RCW 82.32.045. 30 (2) When the amount of tax otherwise due under this chapter is 31 equal to or less than the maximum credit, a credit is allowed equal 32 to the amount of tax otherwise due under this chapter. 33 (3) When the amount of tax otherwise due under this chapter 34 exceeds the maximum credit, a reduced credit is allowed equal to 35 twice the maximum credit, minus the tax otherwise due under this 36 chapter, but not less than zero. 37 p. 66 ESSB 6346.PL

(4) The department may prepare a tax credit table consisting of 1 tax ranges using increments of no more than five dollars and a 2 corresponding tax credit to be applied to those tax ranges. The table 3 shall be prepared in such a manner that no taxpayer will owe a 4 greater amount of tax by using the table than would be owed by 5 performing the calculation under subsections (1) through (3) of this 6 section. A table prepared by the department under this subsection 7 must be used by all taxpayers in taking the credit provided in this 8 section. 9 Sec. 910. RCW 82.32.045 and 2023 c 374 s 12 are each amended to 10 read as follows: 11 (1) Except as otherwise provided in this chapter and subsection 12 (6) of this section, payments of the taxes imposed under chapters 13 82.04, 82.08, 82.12, 82.14, 82.16, and 82.27 RCW, along with reports 14 and returns on forms prescribed by the department, are due monthly 15 within 25 days after the end of the month in which the taxable 16 activities occur. 17 (2) The department of revenue may relieve any taxpayer or class 18 of taxpayers from the obligation of remitting monthly and may require 19 the return to cover other longer reporting periods, but in no event 20 may returns be filed for a period greater than one year. Except as 21 provided in subsection (3) of this section, for these taxpayers, tax 22 payments are due on or before the last day of the month next 23 succeeding the end of the period covered by the return. 24 (3) For annual filers, tax payments, along with reports and 25 returns on forms prescribed by the department, are due on or before 26 April 15th of the year immediately following the end of the period 27 covered by the return. 28 (4) The department of revenue may also require verified annual 29 returns from any taxpayer, setting forth such additional information 30 as it may deem necessary to correctly determine tax liability. 31 (5) Notwithstanding subsections (1) and (2) of this section, the 32 department may relieve any person of the requirement to file returns 33 if the following conditions are met: 34 (a) The person's value of products, gross proceeds of sales, or 35 gross income of the business, from all business activities taxable 36 under chapter 82.04 RCW, is less than (($125,000)) $250,000 per year; 37 (b) The person's gross income of the business from all activities 38 taxable under chapter 82.16 RCW is less than $24,000 per year; and 39 p. 67 ESSB 6346.PL

(c) The person is not required to collect or pay to the 1 department of revenue any other tax or fee which the department is 2 authorized to collect. 3 (6)(a) Taxes imposed under chapter 82.08 or 82.12 RCW on taxable 4 events that occur beginning January 1, 2019, through June 30, 2019, 5 and payable by a consumer directly to the department are due, on 6 returns prescribed by the department, by July 25, 2019. 7 (b) This subsection (6) does not apply to the reporting and 8 payment of taxes imposed under chapters 82.08 and 82.12 RCW: 9 (i) On the retail sale or use of motor vehicles, vessels, or 10 aircraft; or 11 (ii) By consumers who are engaged in business, unless the 12 department has relieved the consumer of the requirement to file 13 returns pursuant to subsection (5) of this section. 14 Sec. 911. RCW 82.04.288 and 2025 c 420 s 201 are each amended to 15 read as follows: 16 (1) Beginning January 1, 2026, in addition to all other taxes 17 imposed under this chapter, persons must pay a surcharge on 18 Washington taxable income over $250,000,000 in a calendar year. 19 (2) The rate of the tax is 0.5 percent of the amount of 20 Washington taxable income over $250,000,000. 21 (3)(a) Any Washington taxable income subject to the tax in RCW 22 82.04.29004 is exempt from the surcharge imposed in this section. 23 (b)(i) Any Washington taxable income subject to the manufacturing 24 tax rates in RCW 82.04.240, 82.04.2404, 82.04.241, 82.04.260, 25 82.04.2602, 82.04.287, 82.04.2909, or 82.04.294(1) is exempt from the 26 surcharge imposed in this section. 27 (ii) Any Washington taxable income attributable to the wholesale 28 or retail sale of products so manufactured by a person subject to the 29 manufacturing tax rates specified in (b)(i) of this subsection (3) is 30 exempt from the surcharge imposed in this section. 31 (iii) Any Washington taxable income attributable to retail sales 32 that are exempt from the imposition of sales tax in RCW 82.08.0293, 33 82.08.0297, and 82.08.0281 is exempt from the surcharge imposed in 34 this section. 35 (iv) Any Washington taxable income subject to the tax rates in 36 RCW 82.04.260(12) is exempt from the surcharge imposed in this 37 section. 38 p. 68 ESSB 6346.PL

(v) Any Washington taxable income attributable to the wholesale 1 or retail sale of petroleum products by a person who is both located 2 in a state other than Washington and the owner of such materials 3 processed for it in Washington by an affiliated processor for hire 4 subject to the rate in RCW 82.04.280(1)(c), is exempt from the 5 surcharge imposed in this section. For the purposes of this 6 subsection (3)(b)(v), the following definitions apply: 7 (A) "Affiliated" means a person that directly or indirectly, 8 through one or more intermediaries, controls, is controlled by, or is 9 under common control with another person; 10 (B) "Control" means the possession, directly or indirectly, of 11 more than 50 percent of the power to direct or cause the direction of 12 the management and policies of a person, whether through the 13 ownership of voting shares, by contract, or otherwise; and 14 (C) "Petroleum product" has the same meaning as in RCW 82.21.020. 15 (vi) Any Washington taxable income received by a hospital as 16 defined in RCW 70.41.020 is exempt from the surcharge imposed by this 17 section. 18 (vii) Any Washington taxable income attributable to the 19 warehousing and reselling of drugs for human use pursuant to a 20 prescription is exempt from the surcharge imposed by this section. 21 For the purposes of this subsection (3)(b)(vii), the following 22 definitions apply: 23 (A) "Prescription" has the same meaning as in RCW 82.08.0281. 24 (B) "Warehousing and reselling drugs for human use pursuant to a 25 prescription" means the buying of drugs for human use pursuant to a 26 prescription from a manufacturer or another wholesaler and reselling 27 of the drugs to persons selling at retail or to hospitals, clinics, 28 health care providers, or other providers of health care services by 29 a wholesaler or retailer who is registered with the federal drug 30 enforcement administration and licensed by the pharmacy quality 31 assurance commission. 32 (viii) Any Washington taxable income attributable to the 33 provision of health care services by a health care provider licensed 34 under Title 18 RCW is exempt from the surcharge imposed by this 35 section. 36 (4)(a) The surcharge imposed under this section does not apply to 37 taxable income for which a credit is allowed under RCW 82.04.440. 38 p. 69 ESSB 6346.PL

(b) The surcharge imposed under this section does not apply to a 1 person engaged in business primarily as a farmer or eligible apiarist 2 as defined in RCW 82.04.213. 3 (c) The surcharge imposed under this section does not apply to a 4 person subject to the tax imposed pursuant to RCW 82.04.299. 5 (d) The surcharge imposed under this section does not apply to 6 taxable income for wholesale and retail transactions of fuel as 7 defined in RCW 82.38.020. 8 (5) Any income that is exempt from the surcharge imposed under 9 this section is not included in the calculation of Washington taxable 10 income in subsection (1) of this section. 11 (6) This section expires December 31, 2029. 12 NEW SECTION. Sec. 912. Sections 909 through 911 of this act 13 take effect January 1, 2029. 14 PART X 15 CHAPTER 422, LAWS OF 2025 16 Sec. 1001. RCW 82.04.050 and 2025 c 422 s 101 are each amended 17 to read as follows: 18 (1)(a) "Sale at retail" or "retail sale" means every sale of 19 tangible personal property (including articles produced, fabricated, 20 or imprinted) to all persons irrespective of the nature of their 21 business and including, among others, without limiting the scope 22 hereof, persons who install, repair, clean, alter, improve, 23 construct, or decorate real or personal property of or for consumers 24 other than a sale to a person who: 25 (i) Purchases for the purpose of resale as tangible personal 26 property in the regular course of business without intervening use by 27 such person, but a purchase for the purpose of resale by a regional 28 transit authority under RCW 81.112.300 is not a sale for resale; or 29 (ii) Installs, repairs, cleans, alters, imprints, improves, 30 constructs, or decorates real or personal property of or for 31 consumers, if such tangible personal property becomes an ingredient 32 or component of such real or personal property without intervening 33 use by such person; or 34 (iii) Purchases for the purpose of consuming the property 35 purchased in producing for sale as a new article of tangible personal 36 property or substance, of which such property becomes an ingredient 37 p. 70 ESSB 6346.PL

or component or is a chemical used in processing, when the primary 1 purpose of such chemical is to create a chemical reaction directly 2 through contact with an ingredient of a new article being produced 3 for sale; or 4 (iv) Purchases for the purpose of consuming the property 5 purchased in producing ferrosilicon which is subsequently used in 6 producing magnesium for sale, if the primary purpose of such property 7 is to create a chemical reaction directly through contact with an 8 ingredient of ferrosilicon; or 9 (v) Purchases for the purpose of providing the property to 10 consumers as part of competitive telephone service, as defined in RCW 11 82.04.065; or 12 (vi) Purchases for the purpose of satisfying the person's 13 obligations under an extended warranty as defined in subsection (7) 14 of this section, if such tangible personal property replaces or 15 becomes an ingredient or component of property covered by the 16 extended warranty without intervening use by such person. 17 (b) The term includes every sale of tangible personal property 18 that is used or consumed or to be used or consumed in the performance 19 of any activity defined as a "sale at retail" or "retail sale" even 20 though such property is resold or used as provided in (a)(i) through 21 (vi) of this subsection following such use. 22 (c) The term also means every sale of tangible personal property 23 to persons engaged in any business that is taxable under RCW 24 82.04.280(1) (a), (b), and (((g))) (f), 82.04.290, and 82.04.2908. 25 (2) The term "sale at retail" or "retail sale" includes the sale 26 of or charge made for tangible personal property consumed and/or for 27 labor and services rendered in respect to the following: 28 (a) The installing, repairing, cleaning, altering, imprinting, or 29 improving of tangible personal property of or for consumers, 30 including charges made for the mere use of facilities in respect 31 thereto, but excluding charges made for the use of self-service 32 laundry facilities, and also excluding sales of laundry service to 33 nonprofit health care facilities, and excluding services rendered in 34 respect to live animals, birds and insects; 35 (b) The constructing, repairing, decorating, or improving of new 36 or existing buildings or other structures under, upon, or above real 37 property of or for consumers, including the installing or attaching 38 of any article of tangible personal property therein or thereto, 39 whether or not such personal property becomes a part of the realty by 40 p. 71 ESSB 6346.PL

virtue of installation, and also includes the sale of services or 1 charges made for the clearing of land and the moving of earth 2 excepting the mere leveling of land used in commercial farming or 3 agriculture; 4 (c) The constructing, repairing, or improving of any structure 5 upon, above, or under any real property owned by an owner who conveys 6 the property by title, possession, or any other means to the person 7 performing such construction, repair, or improvement for the purpose 8 of performing such construction, repair, or improvement and the 9 property is then reconveyed by title, possession, or any other means 10 to the original owner; 11 (d) The cleaning, fumigating, razing, or moving of existing 12 buildings or structures, but does not include the charge made for 13 janitorial services; and for purposes of this section the term 14 "janitorial services" means those cleaning and caretaking services 15 ordinarily performed by commercial janitor service businesses 16 including, but not limited to, wall and window washing, floor 17 cleaning and waxing, and the cleaning in place of rugs, drapes and 18 upholstery. The term "janitorial services" does not include painting, 19 papering, repairing, furnace or septic tank cleaning, snow removal or 20 sandblasting; 21 (e) Automobile towing and similar automotive transportation 22 services, but not in respect to those required to report and pay 23 taxes under chapter 82.16 RCW; 24 (f) The furnishing of lodging and all other services by a hotel, 25 rooming house, tourist court, motel, trailer camp, and the granting 26 of any similar license to use real property, as distinguished from 27 the renting or leasing of real property, and it is presumed that the 28 occupancy of real property for a continuous period of one month or 29 more constitutes a rental or lease of real property and not a mere 30 license to use or enjoy the same. For the purposes of this 31 subsection, it is presumed that the sale of and charge made for the 32 furnishing of lodging for a continuous period of one month or more to 33 a person is a rental or lease of real property and not a mere license 34 to enjoy the same. For the purposes of this section, it is presumed 35 that the sale of and charge made for the furnishing of lodging 36 offered regularly for public occupancy for periods of less than a 37 month constitutes a license to use or enjoy the property subject to 38 sales and use tax and not a rental or lease of property; 39 p. 72 ESSB 6346.PL

(g) The installing, repairing, altering, or improving of digital 1 goods for consumers; 2 (h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) 3 of this subsection when such sales or charges are for property, labor 4 and services which are used or consumed in whole or in part by such 5 persons in the performance of any activity defined as a "sale at 6 retail" or "retail sale" even though such property, labor and 7 services may be resold after such use or consumption. Nothing 8 contained in this subsection may be construed to modify subsection 9 (1) of this section and nothing contained in subsection (1) of this 10 section may be construed to modify this subsection. 11 (3) The term "sale at retail" or "retail sale" includes the sale 12 of or charge made for personal, business, or professional services 13 including amounts designated as interest, rents, fees, admission, and 14 other service emoluments however designated, received by persons 15 engaging in the following business activities: 16 (a) Abstract, title insurance, and escrow services; 17 (b) Credit bureau services; 18 (c) Automobile parking and storage garage services; 19 (d) Landscape maintenance and horticultural services but 20 excluding (i) horticultural services provided to farmers and (ii) 21 pruning, trimming, repairing, removing, and clearing of trees and 22 brush near electric transmission or distribution lines or equipment, 23 if performed by or at the direction of an electric utility; 24 (e) Service charges associated with tickets to professional 25 sporting events; 26 (f) The following personal services: Tanning salon services, 27 tattoo parlor services, steam bath services, turkish bath services, 28 escort services, and dating services; 29 (g) ((Information technology training services, technical 30 support, and other services including, but not limited to, assisting 31 with network operations and support, help desk services, in-person 32 training related to hardware or software, network system support 33 services, data entry services, and data processing services; 34 (h) Custom website development services. For the purposes of this 35 subsection (3), "website development services" means the design, 36 development, and support of a website provided by a website developer 37 to a customer; 38 (i) Investigation, security services, security monitoring 39 services, and armored car services including, but not limited to, 40 p. 73 ESSB 6346.PL

background checks, security guard and patrol services, personal and 1 event security, armored car transportation of cash and valuables, and 2 security system services and monitoring. This does not include 3 locksmith services; 4 (j) Temporary staffing services. For the purposes of this 5 subsection (3), "temporary staffing services" means providing workers 6 to other businesses, except for hospitals licensed under chapter 7 70.41 or 71.12 RCW, for limited periods of time to supplement their 8 workforce and fill employment vacancies on a contract or for fee 9 basis; 10 (k))) Advertising services. (i) For the purposes of this 11 subsection (3), "advertising services" means all digital and 12 nondigital services related to the creation, preparation, production, 13 or dissemination of advertisements including, but not limited to: 14 (A) Layout, art direction, graphic design, mechanical 15 preparation, production supervision, placement, referrals, 16 acquisition of advertising space, and rendering advice concerning the 17 best methods of advertising products or services; and 18 (B) Online referrals, search engine marketing((,)) and lead 19 generation optimization, web campaign planning, the acquisition of 20 advertising space in the internet media, and the monitoring and 21 evaluation of website traffic for purposes of determining the 22 effectiveness of an advertising campaign. 23 (ii) "Advertising services" do not include: 24 (A) Web hosting services and domain name registration; 25 (B) Services rendered in respect to the following: 26 (I) "Newspapers" as defined in RCW 82.04.214; 27 (II) Printing or publishing under RCW 82.04.280; and 28 (III) "Radio and television broadcasting" within this state as 29 defined in RCW 82.04.281; and 30 (C) Services rendered in respect to out-of-home advertising, 31 including: Billboard advertising; street furniture advertising; 32 transit advertising; place-based advertising, such as in-store 33 display advertising or point-of-sale advertising; dynamic or static 34 signage at live events; naming rights; and fixed signage advertising. 35 Out-of-home advertising does not include direct mail((; 36 (l) Live presentations including, but not limited to, lectures, 37 seminars, workshops, or courses where participants attend either in- 38 person or via the internet or telecommunications equipment that 39 p. 74 ESSB 6346.PL

allows audience members and the presenter or instructor to give, 1 receive, and discuss information with each other in real time)); and 2 (((m))) (h)(i) Operating an athletic or fitness facility, 3 including all charges for the use of such a facility or for any 4 associated services and amenities, except as provided in (((m))) (h) 5 (ii) of this subsection. 6 (ii) Notwithstanding anything to the contrary in (((m))) (h)(i) 7 of this subsection (3), the term "sale at retail" and "retail sale" 8 under this subsection does not include: 9 (A) Separately stated charges for the use of an athletic or 10 fitness facility where such use is primarily for a purpose other than 11 engaging in or receiving instruction in a physical fitness activity; 12 (B) Separately stated charges for the use of a discrete portion 13 of an athletic or fitness facility, other than a pool, where such 14 discrete portion of the facility does not by itself meet the 15 definition of "athletic or fitness facility" in this subsection; 16 (C) Separately stated charges for services, such as massage, 17 nutritional consulting, and body composition testing, that do not 18 require the customer to engage in physical fitness activities to 19 receive the service. The exclusion in this subsection (3)(((m))) (h) 20 (ii)(C) does not apply to personal training services and instruction 21 in a physical fitness activity; 22 (D) Separately stated charges for physical therapy provided by a 23 physical therapist, as those terms are defined in RCW 18.74.010, or 24 occupational therapy provided by an occupational therapy 25 practitioner, as those terms are defined in RCW 18.59.020, when 26 performed pursuant to a referral from an authorized health care 27 practitioner or in consultation with an authorized health care 28 practitioner. For the purposes of this subsection (3)(((m))) (h) 29 (ii)(D), an authorized health care practitioner means a health care 30 practitioner licensed under chapter 18.83, 18.25, 18.36A, 18.57, 31 18.71, or 18.71A RCW, or, until July 1, 2022, chapter 18.57A RCW; 32 (E) Rent or association fees charged by a landlord or residential 33 association to a tenant or residential owner with access to an 34 athletic or fitness facility maintained by the landlord or 35 residential association, unless the rent or fee varies depending on 36 whether the tenant or owner has access to the facility; 37 (F) Services provided in the regular course of employment by an 38 employee with access to an athletic or fitness facility maintained by 39 p. 75 ESSB 6346.PL

the employer for use without charge by its employees or their family 1 members; 2 (G) The provision of access to an athletic or fitness facility by 3 an educational institution to its students and staff. However, 4 charges made by an educational institution to its alumni or other 5 members of the public for the use of any of the educational 6 institution's athletic or fitness facilities are a retail sale under 7 this subsection (3)(((m))) (h). For purposes of this subsection (3) 8 (((m))) (h)(ii)(G), "educational institution" has the same meaning as 9 in RCW 82.04.170; 10 (H) Yoga, chi gong, or martial arts classes, training, or events 11 held at a community center, park, school gymnasium, college or 12 university, hospital or other medical facility, private residence, or 13 any other facility that is not operated within and as part of an 14 athletic or fitness facility. 15 (iii) Nothing in (((m))) (h)(ii) of this subsection (3) may be 16 construed to affect the taxation of sales made by the operator of an 17 athletic or fitness facility, where such sales are defined as a 18 retail sale under any provision of this section other than this 19 subsection (3). 20 (iv) For the purposes of this subsection (3)(((m))) (h), the 21 following definitions apply: 22 (A) "Athletic or fitness facility" means an indoor or outdoor 23 facility or portion of a facility that is primarily used for: 24 Exercise classes; strength and conditioning programs; personal 25 training services; tennis, racquetball, handball, squash, or 26 pickleball; or other activities requiring the use of exercise or 27 strength training equipment, such as treadmills, elliptical machines, 28 stair climbers, stationary cycles, rowing machines, pilates 29 equipment, balls, climbing ropes, jump ropes, and weightlifting 30 equipment. 31 (B) "Martial arts" means any of the various systems of training 32 for physical combat or self-defense. "Martial arts" includes, but is 33 not limited to, karate, kung fu, tae kwon do, Krav Maga, boxing, 34 kickboxing, jujitsu, shootfighting, wrestling, aikido, judo, hapkido, 35 Kendo, tai chi, and mixed martial arts. 36 (C) "Physical fitness activities" means activities that involve 37 physical exertion for the purpose of improving or maintaining the 38 general fitness, strength, flexibility, conditioning, or health of 39 p. 76 ESSB 6346.PL

the participant. "Physical fitness activities" includes participating 1 in yoga, chi gong, or martial arts. 2 For the purposes of (g) ((through (i) and (k))) of this 3 subsection (3), the terms "sale at retail" and "retail sale" do not 4 include a sale between members of an affiliated group as defined in 5 RCW 82.04.299(1)(f). 6 (4)(a) The term also includes the renting or leasing of tangible 7 personal property to consumers. 8 (b) The term does not include the renting or leasing of tangible 9 personal property where the lease or rental is for the purpose of 10 sublease or subrent. 11 (5) The term also includes the providing of "competitive 12 telephone service," "telecommunications service," or "ancillary 13 services," as those terms are defined in RCW 82.04.065, to consumers. 14 (6)(a) The term also includes the sale of prewritten computer 15 software((, custom software, and customization of prewritten computer 16 software)) to a consumer, regardless of the method of delivery to the 17 end user. For purposes of this subsection (6)(a), the sale of 18 prewritten computer software includes the sale of or charge made for 19 a key or an enabling or activation code, where the key or code is 20 required to activate prewritten computer software and put the 21 software into use. There is no separate sale of the key or code from 22 the prewritten computer software, regardless of how the sale may be 23 characterized by the vendor or by the purchaser. 24 (b) The term "retail sale" does not include the sale of or charge 25 made for: 26 (i) Custom software; or 27 (ii) The customization of prewritten computer software. 28 (c)(i) The term also includes the charge made to consumers for 29 the right to access and use prewritten computer software((, custom 30 software, and customization of prewritten computer software)), where 31 possession of the software is maintained by the seller or a third 32 party, regardless of whether the charge for the service is on a per 33 use, per user, per license, subscription, or some other basis. 34 (ii)(A) The service described in (((b))) (c)(i) of this 35 subsection (6) includes the right to access and use prewritten 36 computer software((, custom software, and customization of prewritten 37 computer software)) to perform data processing. 38 (B) For purposes of this subsection (6)(((b))) (c)(ii), "data 39 processing" means the systematic performance of operations on data to 40 p. 77 ESSB 6346.PL

extract the required information in an appropriate form or to convert 1 the data to usable information. Data processing includes check 2 processing, image processing, form processing, survey processing, 3 payroll processing, claim processing, and similar activities. 4 (7) The term also includes the sale of or charge made for an 5 extended warranty to a consumer. For purposes of this subsection, 6 "extended warranty" means an agreement for a specified duration to 7 perform the replacement or repair of tangible personal property at no 8 additional charge or a reduced charge for tangible personal property, 9 labor, or both, or to provide indemnification for the replacement or 10 repair of tangible personal property, based on the occurrence of 11 specified events. The term "extended warranty" does not include an 12 agreement, otherwise meeting the definition of extended warranty in 13 this subsection, if no separate charge is made for the agreement and 14 the value of the agreement is included in the sales price of the 15 tangible personal property covered by the agreement. For purposes of 16 this subsection, "sales price" has the same meaning as in RCW 17 82.08.010. 18 (8)(a) The term also includes the following sales to consumers of 19 digital goods, digital codes, and digital automated services: 20 (i) Sales in which the seller has granted the purchaser the right 21 of permanent use; 22 (ii) Sales in which the seller has granted the purchaser a right 23 of use that is less than permanent; 24 (iii) Sales in which the purchaser is not obligated to make 25 continued payment as a condition of the sale; and 26 (iv) Sales in which the purchaser is obligated to make continued 27 payment as a condition of the sale. 28 (b) A retail sale of digital goods, digital codes, or digital 29 automated services under this subsection (8) includes any services 30 provided by the seller exclusively in connection with the digital 31 goods, digital codes, or digital automated services, whether or not a 32 separate charge is made for such services. 33 (c) A retail sale of digital goods, digital codes, or digital 34 automated services does not include ((the following services if the 35 sale occurs between members of an affiliated group as defined in RCW 36 82.04.299(1)(f): 37 (i) Any service that primarily involves the application of human 38 effort by the seller, and the human effort originated after the 39 customer requested the service; 40 p. 78 ESSB 6346.PL

(ii) Live presentations, such as lectures, seminars, workshops, 1 or courses, where participants are connected to other participants 2 via the internet or telecommunications equipment, which allows 3 audience members and the presenter or instructor to give, receive, 4 and discuss information with each other in real time; 5 (iii) Advertising)) advertising services if the sale occurs 6 between members of an affiliated group as defined in RCW 7 82.04.299(1)(f). For purposes of this subsection (8)(c), "advertising 8 services" means all services directly related to the creation, 9 preparation, production, or dissemination of advertisements. 10 Advertising services include layout, art direction, graphic design, 11 mechanical preparation, production supervision, placement, and 12 rendering advice to a client concerning the best methods of 13 advertising that client's products or services. Advertising services 14 also include online referrals, search engine marketing and lead 15 generation optimization, web campaign planning, the acquisition of 16 advertising space in the internet media, and the monitoring and 17 evaluation of website traffic for purposes of determining the 18 effectiveness of an advertising campaign. Advertising services do not 19 include web hosting services and domain name registration((; and 20 (iv) Data processing services. For purposes of this subsection 21 (8)(c), "data processing service" means a primarily automated service 22 provided to a business or other organization where the primary object 23 of the service is the systematic performance of operations by the 24 service provider on data supplied in whole or in part by the customer 25 to extract the required information in an appropriate form or to 26 convert the data to usable information. Data processing services 27 include check processing, image processing, form processing, survey 28 processing, payroll processing, claim processing, and similar 29 activities. Data processing does not include the service described in 30 subsection (6)(b) of this section)). 31 (d) For purposes of this subsection, "permanent" means perpetual 32 or for an indefinite or unspecified length of time. A right of 33 permanent use is presumed to have been granted unless the agreement 34 between the seller and the purchaser specifies or the circumstances 35 surrounding the transaction suggest or indicate that the right to use 36 terminates on the occurrence of a condition subsequent. 37 (9) The term also includes the charge made for providing tangible 38 personal property along with an operator for a fixed or indeterminate 39 period of time. A consideration of this is that the operator is 40 p. 79 ESSB 6346.PL

necessary for the tangible personal property to perform as designed. 1 For the purpose of this subsection (9), an operator must do more than 2 maintain, inspect, or set up the tangible personal property. 3 (10) The term does not include the sale of or charge made for 4 labor and services rendered in respect to the building, repairing, or 5 improving of any street, place, road, highway, easement, right-of- 6 way, mass public transportation terminal or parking facility, bridge, 7 tunnel, or trestle which is owned by a municipal corporation or 8 political subdivision of the state or by the United States and which 9 is used or to be used primarily for foot or vehicular traffic 10 including mass transportation vehicles of any kind. 11 (11) The term also does not include sales of chemical sprays or 12 washes to persons for the purpose of postharvest treatment of fruit 13 for the prevention of scald, fungus, mold, or decay, nor does it 14 include sales of feed, seed, seedlings, fertilizer, agents for 15 enhanced pollination including insects such as bees, and spray 16 materials to: (a) Persons who participate in the federal conservation 17 reserve program, the environmental quality incentives program, the 18 wetlands reserve program, and the wildlife habitat incentives 19 program, or their successors administered by the United States 20 department of agriculture; (b) farmers for the purpose of producing 21 for sale any agricultural product; (c) farmers for the purpose of 22 providing bee pollination services; and (d) farmers acting under 23 cooperative habitat development or access contracts with an 24 organization exempt from federal income tax under 26 U.S.C. Sec. 25 501(c)(3) of the federal internal revenue code or the Washington 26 state department of fish and wildlife to produce or improve wildlife 27 habitat on land that the farmer owns or leases. 28 (12) The term does not include the sale of or charge made for 29 labor and services rendered in respect to the constructing, 30 repairing, decorating, or improving of new or existing buildings or 31 other structures under, upon, or above real property of or for the 32 United States, any instrumentality thereof, or a county or city 33 housing authority created pursuant to chapter 35.82 RCW, including 34 the installing, or attaching of any article of tangible personal 35 property therein or thereto, whether or not such personal property 36 becomes a part of the realty by virtue of installation. Nor does the 37 term include the sale of services or charges made for the clearing of 38 land and the moving of earth of or for the United States, any 39 instrumentality thereof, or a county or city housing authority. Nor 40 p. 80 ESSB 6346.PL

does the term include the sale of services or charges made for 1 cleaning up for the United States, or its instrumentalities, 2 radioactive waste and other by-products of weapons production and 3 nuclear research and development. 4 (13) The term does not include the sale of or charge made for 5 labor, services, or tangible personal property pursuant to agreements 6 providing maintenance services for bus, rail, or rail fixed guideway 7 equipment when a regional transit authority is the recipient of the 8 labor, services, or tangible personal property, and a transit agency, 9 as defined in RCW 81.104.015, performs the labor or services. 10 (14) The term does not include the sale for resale of any service 11 described in this section if the sale would otherwise constitute a 12 "sale at retail" and "retail sale" under this section. 13 (15)(a) The term "sale at retail" or "retail sale" includes 14 amounts charged, however labeled, to consumers to engage in any of 15 the activities listed in this subsection (15)(a), including the 16 furnishing of any associated equipment or, except as otherwise 17 provided in this subsection, providing instruction in such 18 activities, where such charges are not otherwise defined as a "sale 19 at retail" or "retail sale" in this section: 20 (i)(A) Golf, including any variant in which either golf balls or 21 golf clubs are used, such as miniature golf, hitting golf balls at a 22 driving range, and golf simulators, and including fees charged by a 23 golf course to a player for using his or her own cart. However, 24 charges for golf instruction are not a retail sale, provided that if 25 the instruction involves the use of a golfing facility that would 26 otherwise require the payment of a fee, such as green fees or driving 27 range fees, such fees, including the applicable retail sales tax, 28 must be separately identified and charged by the golfing facility 29 operator to the instructor or the person receiving the instruction. 30 (B) Notwithstanding (a)(i)(A) of this subsection (15) and except 31 as otherwise provided in this subsection (15)(a)(i)(B), the term 32 "sale at retail" or "retail sale" does not include amounts charged to 33 participate in, or conduct, a golf tournament or other competitive 34 event. However, amounts paid by event participants to the golf 35 facility operator are retail sales under this subsection (15)(a)(i). 36 Likewise, amounts paid by the event organizer to the golf facility 37 are retail sales under this subsection (15)(a)(i), if such amounts 38 vary based on the number of event participants; 39 p. 81 ESSB 6346.PL

(ii) Ballooning, hang gliding, indoor or outdoor sky diving, 1 paragliding, parasailing, and similar activities; 2 (iii) Air hockey, billiards, pool, foosball, darts, shuffleboard, 3 ping pong, and similar games; 4 (iv) Access to amusement park, theme park, and water park 5 facilities, including but not limited to charges for admission and 6 locker or cabana rentals. Discrete charges for rides or other 7 attractions or entertainment that are in addition to the charge for 8 admission are not a retail sale under this subsection (15)(a)(iv). 9 For the purposes of this subsection, an amusement park or theme park 10 is a location that provides permanently affixed amusement rides, 11 games, and other entertainment, but does not include parks or zoos 12 for which the primary purpose is the exhibition of wildlife, or 13 fairs, carnivals, and festivals as defined in (b)(i) of this 14 subsection; 15 (v) Batting cage activities; 16 (vi) Bowling, but not including competitive events, except that 17 amounts paid by the event participants to the bowling alley operator 18 are retail sales under this subsection (15)(a)(vi). Likewise, amounts 19 paid by the event organizer to the operator of the bowling alley are 20 retail sales under this subsection (15)(a)(vi), if such amounts vary 21 based on the number of event participants; 22 (vii) Climbing on artificial climbing structures, whether indoors 23 or outdoors; 24 (viii) Day trips for sightseeing purposes; 25 (ix) Bungee jumping, zip lining, and riding inside a ball, 26 whether inflatable or otherwise; 27 (x) Horseback riding offered to the public, where the seller 28 furnishes the horse to the buyer and providing instruction is not the 29 primary focus of the activity, including guided rides, but not 30 including therapeutic horseback riding provided by an instructor 31 certified by a nonprofit organization that offers national or 32 international certification for therapeutic riding instructors; 33 (xi) Fishing, including providing access to private fishing areas 34 and charter or guided fishing, except that fishing contests and 35 license fees imposed by a government entity are not a retail sale 36 under this subsection; 37 (xii) Guided hunting and hunting at game farms and shooting 38 preserves, except that hunting contests and license fees imposed by a 39 government entity are not a retail sale under this subsection; 40 p. 82 ESSB 6346.PL

(xiii) Swimming, but only in respect to (A) recreational or 1 fitness swimming that is open to the public, such as open swim, lap 2 swimming, and special events like kids night out and pool parties 3 during open swim time, and (B) pool parties for private events, such 4 as birthdays, family gatherings, and employee outings. Fees for 5 swimming lessons, to participate in swim meets and other 6 competitions, or to join a swim team, club, or aquatic facility are 7 not retail sales under this subsection (15)(a)(xiii); 8 (xiv) Go-karting, bumper cars, and other motorized activities 9 where the seller provides the vehicle and the premises where the 10 buyer will operate the vehicle; 11 (xv) Indoor or outdoor playground activities, such as inflatable 12 bounce structures and other inflatables; mazes; trampolines; slides; 13 ball pits; games of tag, including laser tag and soft-dart tag; and 14 human gyroscope rides, regardless of whether such activities occur at 15 the seller's place of business, but not including playground 16 activities provided for children by a licensed child day care center 17 or licensed family day care provider as those terms are defined in 18 RCW 43.216.010; 19 (xvi) Shooting sports and activities, such as target shooting, 20 skeet, trap, sporting clays, "5" stand, and archery, but only in 21 respect to discrete charges to members of the public to engage in 22 these activities, but not including fees to enter a competitive 23 event, instruction that is entirely or predominately classroom based, 24 or to join or renew a membership at a club, range, or other facility; 25 (xvii) Paintball and airsoft activities; 26 (xviii) Skating, including ice skating, roller skating, and 27 inline skating, but only in respect to discrete charges to members of 28 the public to engage in skating activities, but not including skating 29 lessons, competitive events, team activities, or fees to join or 30 renew a membership at a skating facility, club, or other 31 organization; 32 (xix) Nonmotorized snow sports and activities, such as downhill 33 and cross-country skiing, snowboarding, ski jumping, sledding, snow 34 tubing, snowshoeing, and similar snow sports and activities, whether 35 engaged in outdoors or in an indoor facility with or without snow, 36 but only in respect to discrete charges to the public for the use of 37 land or facilities to engage in nonmotorized snow sports and 38 activities, such as fees, however labeled, for the use of ski lifts 39 and tows and daily or season passes for access to trails or other 40 p. 83 ESSB 6346.PL

areas where nonmotorized snow sports and activities are conducted. 1 However, fees for the following are not retail sales under this 2 subsection (15)(a)(xix): (A) Instructional lessons; (B) permits 3 issued by a governmental entity to park a vehicle on or access public 4 lands; and (C) permits or leases granted by an owner of private 5 timberland for recreational access to areas used primarily for 6 growing and harvesting timber; and 7 (xx) Scuba diving; snorkeling; river rafting; surfing; 8 kiteboarding; flyboarding; water slides; inflatables, such as water 9 pillows, water trampolines, and water rollers; and similar water 10 sports and activities. 11 (b) Notwithstanding anything to the contrary in this subsection 12 (15), the term "sale at retail" or "retail sale" does not include 13 charges: 14 (i) Made for admission to, and rides or attractions at, fairs, 15 carnivals, and festivals. For the purposes of this subsection, fairs, 16 carnivals, and festivals are events that do not exceed 21 days and a 17 majority of the amusement rides, if any, are not affixed to real 18 property; 19 (ii) Made by an educational institution to its students and staff 20 for activities defined as retail sales by (a)(i) through (xx) of this 21 subsection. However, charges made by an educational institution to 22 its alumni or other members of the general public for these 23 activities are a retail sale under this subsection (15). For purposes 24 of this subsection (15)(b)(ii), "educational institution" has the 25 same meaning as in RCW 82.04.170; 26 (iii) Made by a vocational school for commercial diver training 27 that is licensed by the workforce training and education coordinating 28 board under chapter 28C.10 RCW; or 29 (iv) Made for day camps offered by a nonprofit organization or 30 state or local governmental entity that provide youth not older than 31 age 18, or that are focused on providing individuals with 32 disabilities or mental illness, the opportunity to participate in a 33 variety of supervised activities. 34 (16)(a) The term "sale at retail" or "retail sale" includes the 35 purchase or acquisition of tangible personal property and specified 36 services by a person who receives either a qualifying grant exempt 37 from tax under RCW 82.04.767 or 82.16.320 or a grant deductible under 38 RCW 82.04.4339, except for transactions excluded from the definition 39 of "sale at retail" or "retail sale" by any other provision of this 40 p. 84 ESSB 6346.PL

section. Nothing in this subsection (16) may be construed to limit 1 the application of any other provision of this section to purchases 2 by a recipient of either a qualifying grant exempt from tax under RCW 3 82.04.767 or a grant deductible under RCW 82.04.4339, or by any other 4 person. 5 (b) For purposes of this subsection (16), "specified services" 6 means: 7 (i) The constructing, repairing, decorating, or improving of new 8 or existing buildings or other structures under, upon, or above real 9 property, including the installing or attaching of any article of 10 tangible personal property therein or thereto, whether or not such 11 personal property becomes a part of the realty by virtue of 12 installation; 13 (ii) The clearing of land or the moving of earth, whether or not 14 associated with activities described in (b)(i) of this subsection 15 (16); 16 (iii) The razing or moving of existing buildings or structures; 17 and 18 (iv) Landscape maintenance and horticultural services. 19 Sec. 1002. RCW 82.04.192 and 2025 c 422 s 201 are each amended 20 to read as follows: 21 (1) "Digital audio works" means works that result from the 22 fixation of a series of musical, spoken, or other sounds, including 23 ringtones. 24 (2) "Digital audiovisual works" means a series of related images 25 which, when shown in succession, impart an impression of motion, 26 together with accompanying sounds, if any. 27 (3)(a) "Digital automated service," except as provided in (b) of 28 this subsection (3), means any service transferred electronically 29 that uses one or more software applications. 30 (b) "Digital automated service" does not include: 31 (i) Any service that primarily involves the application of human 32 effort by the seller, and the human effort originated after the 33 customer requested the service; 34 (ii) The loaning or transferring of money or the purchase, sale, 35 or transfer of financial instruments. For purposes of this subsection 36 (3)(b)(((i))) (ii), "financial instruments" include cash, accounts 37 receivable and payable, loans and notes receivable and payable, debt 38 p. 85 ESSB 6346.PL

securities, equity securities, as well as derivative contracts such 1 as forward contracts, swap contracts, and options; 2 (((ii))) (iii) Dispensing cash or other physical items from a 3 machine; 4 (((iii))) (iv) Payment processing services; 5 (((iv))) (v) Parimutuel wagering and handicapping contests as 6 authorized by chapter 67.16 RCW; 7 (((v))) (vi) Telecommunications services and ancillary services 8 as those terms are defined in RCW 82.04.065; 9 (((vi))) (vii) The internet and internet access as those terms 10 are defined in RCW 82.04.297; 11 (((vii))) (viii) The service described in RCW 82.04.050(6)(((b))) 12 (c); 13 (((viii))) (ix) Online educational programs provided by a: 14 (A) Public or private elementary or secondary school; or 15 (B) An institution of higher education as defined in sections 16 1001 or 1002 of the federal higher education act of 1965 (Title 20 17 U.S.C. Secs. 1001 and 1002), as existing on July 1, 2009. For 18 purposes of this subsection (3)(b)(((viii))) (ix)(B), an online 19 educational program must be encompassed within the institution's 20 accreditation; 21 (((ix))) (x) Live presentations, such as lectures, seminars, 22 workshops, or courses, where participants are connected to other 23 participants via the internet or telecommunications equipment, which 24 allows audience members and the presenter or instructor to give, 25 receive, and discuss information with each other in real time; 26 (xi) Travel agent services, including online travel services, and 27 automated systems used by travel agents to book reservations; 28 (((x))) (xii)(A) A service that allows the person receiving the 29 service to make online sales of products or services, digital or 30 otherwise, using either: (I) The service provider's website; or (II) 31 the service recipient's website, but only when the service provider's 32 technology is used in creating or hosting the service recipient's 33 website or is used in processing orders from customers using the 34 service recipient's website. 35 (B) The service described in this subsection (3)(b)(((x))) (xii) 36 does not include the underlying sale of the products or services, 37 digital or otherwise, by the person receiving the service; 38 (((xi))) (xiii) Telehealth as defined in RCW 18.134.010 or 39 telemedicine as defined in RCW 48.43.735; 40 p. 86 ESSB 6346.PL

(((xii))) (xiv) The mere storage of digital products, digital 1 codes, computer software, or master copies of software. This 2 exclusion from the definition of digital automated services includes 3 providing space on a server for web hosting or the backing up of data 4 or other information; ((and 5 (xiii))) (xv) Data processing services. For purposes of this 6 subsection (3)(b)(xv), "data processing service" means a primarily 7 automated service provided to a business or other organization where 8 the primary object of the service is the systematic performance of 9 operations by the service provider on data supplied in whole or in 10 part by the customer to extract the required information in an 11 appropriate form or to convert the data to usable information. "Data 12 processing services" include check processing, image processing, form 13 processing, survey processing, payroll processing, claim processing, 14 and similar activities. "Data processing service" does not include 15 the service described in RCW 82.04.050(6)(c); and 16 (xvi) Digital goods. 17 (4) "Digital books" means works that are generally recognized in 18 the ordinary and usual sense as books. 19 (5) "Digital code" means a code that provides a purchaser with 20 the right to obtain one or more digital products, if all of the 21 digital products to be obtained through the use of the code have the 22 same sales and use tax treatment. "Digital code" does not include a 23 code that represents a stored monetary value that is deducted from a 24 total as it is used by the purchaser. "Digital code" also does not 25 include a code that represents a redeemable card, gift card, or gift 26 certificate that entitles the holder to select digital products of an 27 indicated cash value. A digital code may be obtained by any means, 28 including email or by tangible means regardless of its designation as 29 song code, video code, book code, or some other term. 30 (6)(a) "Digital goods," except as provided in (b) of this 31 subsection (6), means sounds, images, data, facts, or information, or 32 any combination thereof, transferred electronically, including, but 33 not limited to, specified digital products and other products 34 transferred electronically not included within the definition of 35 specified digital products. 36 (b) The term "digital goods" does not include: 37 (i) Telecommunications services and ancillary services as those 38 terms are defined in RCW 82.04.065; 39 (ii) Computer software as defined in RCW 82.04.215; 40 p. 87 ESSB 6346.PL

(iii) The internet and internet access as those terms are defined 1 in RCW 82.04.297; 2 (iv)(A) Except as provided in (b)(iv)(B) of this subsection (6), 3 the representation of a personal or professional service in 4 electronic form, such as an electronic copy of an engineering report 5 prepared by an engineer, where the service primarily involves the 6 application of human effort by the service provider, and the human 7 effort originated after the customer requested the service. 8 (B) The exclusion in (b)(iv)(A) of this subsection (6) does not 9 apply to photographers in respect to amounts received for the taking 10 of photographs that are transferred electronically to the customer, 11 but only if the customer is an end user, as defined in RCW 12 82.04.190(11), of the photographs. Such amounts are considered to be 13 for the sale of digital goods; and 14 (v) Services and activities excluded from the definition of 15 digital automated services in subsection (3)(b)(i) through (((xii))) 16 (xv) of this section and not otherwise described in (b)(i) through 17 (iv) of this subsection (6). 18 (7) "Digital products" means digital goods and digital automated 19 services. 20 (8) "Electronically transferred" or "transferred electronically" 21 means obtained by the purchaser by means other than tangible storage 22 media. It is not necessary that a copy of the product be physically 23 transferred to the purchaser. So long as the purchaser may access the 24 product, it will be considered to have been electronically 25 transferred to the purchaser. 26 (9) "Specified digital products" means electronically transferred 27 digital audiovisual works, digital audio works, and digital books. 28 (10) "Subscription radio services" means the sale of audio 29 programming by a radio broadcaster as defined in RCW 82.08.0208, 30 except as otherwise provided in this subsection. "Subscription radio 31 services" does not include audio programming that is sold on a pay- 32 per-program basis or that allows the buyer to access a library of 33 programs at any time for a specific charge for that service. 34 (11) "Subscription television services" means the sale of video 35 programming by a television broadcaster as defined in RCW 82.08.0208, 36 except as otherwise provided in this subsection. "Subscription 37 television services" does not include video programming that is sold 38 on a pay-per-program basis or that allows the buyer to access a 39 library of programs at any time for a specific charge for that 40 p. 88 ESSB 6346.PL

service, but only if the seller is not subject to a franchise fee in 1 this state under the authority of Title 47 U.S.C. Sec. 542(a) on the 2 gross revenue derived from the sale. 3 NEW SECTION. Sec. 1003. Sections 1001 and 1002 of this act take 4 effect January 1, 2029. 5 PART XI 6 CLARIFYING APPLICABILITY OF RECENT CHANGES TO SALES AND USE TAXES AND 7 BUSINESS AND OCCUPATION TAXES 8 Sec. 1101. RCW 82.04.050 and 2025 c 422 s 101 are each amended 9 to read as follows: 10 (1)(a) "Sale at retail" or "retail sale" means every sale of 11 tangible personal property (including articles produced, fabricated, 12 or imprinted) to all persons irrespective of the nature of their 13 business and including, among others, without limiting the scope 14 hereof, persons who install, repair, clean, alter, improve, 15 construct, or decorate real or personal property of or for consumers 16 other than a sale to a person who: 17 (i) Purchases for the purpose of resale as tangible personal 18 property in the regular course of business without intervening use by 19 such person, but a purchase for the purpose of resale by a regional 20 transit authority under RCW 81.112.300 is not a sale for resale; or 21 (ii) Installs, repairs, cleans, alters, imprints, improves, 22 constructs, or decorates real or personal property of or for 23 consumers, if such tangible personal property becomes an ingredient 24 or component of such real or personal property without intervening 25 use by such person; or 26 (iii) Purchases for the purpose of consuming the property 27 purchased in producing for sale as a new article of tangible personal 28 property or substance, of which such property becomes an ingredient 29 or component or is a chemical used in processing, when the primary 30 purpose of such chemical is to create a chemical reaction directly 31 through contact with an ingredient of a new article being produced 32 for sale; or 33 (iv) Purchases for the purpose of consuming the property 34 purchased in producing ferrosilicon which is subsequently used in 35 producing magnesium for sale, if the primary purpose of such property 36 p. 89 ESSB 6346.PL

is to create a chemical reaction directly through contact with an 1 ingredient of ferrosilicon; or 2 (v) Purchases for the purpose of providing the property to 3 consumers as part of competitive telephone service, as defined in RCW 4 82.04.065; or 5 (vi) Purchases for the purpose of satisfying the person's 6 obligations under an extended warranty as defined in subsection (7) 7 of this section, if such tangible personal property replaces or 8 becomes an ingredient or component of property covered by the 9 extended warranty without intervening use by such person. 10 (b) The term includes every sale of tangible personal property 11 that is used or consumed or to be used or consumed in the performance 12 of any activity defined as a "sale at retail" or "retail sale" even 13 though such property is resold or used as provided in (a)(i) through 14 (vi) of this subsection following such use. 15 (c) The term also means every sale of tangible personal property 16 to persons engaged in any business that is taxable under RCW 17 82.04.280(1) (a), (b), and (((g))) (f), 82.04.290, and 82.04.2908. 18 (2) The term "sale at retail" or "retail sale" includes the sale 19 of or charge made for tangible personal property consumed and/or for 20 labor and services rendered in respect to the following: 21 (a) The installing, repairing, cleaning, altering, imprinting, or 22 improving of tangible personal property of or for consumers, 23 including charges made for the mere use of facilities in respect 24 thereto, but excluding charges made for the use of self-service 25 laundry facilities, and also excluding sales of laundry service to 26 nonprofit health care facilities, and excluding services rendered in 27 respect to live animals, birds and insects; 28 (b) The constructing, repairing, decorating, or improving of new 29 or existing buildings or other structures under, upon, or above real 30 property of or for consumers, including the installing or attaching 31 of any article of tangible personal property therein or thereto, 32 whether or not such personal property becomes a part of the realty by 33 virtue of installation, and also includes the sale of services or 34 charges made for the clearing of land and the moving of earth 35 excepting the mere leveling of land used in commercial farming or 36 agriculture; 37 (c) The constructing, repairing, or improving of any structure 38 upon, above, or under any real property owned by an owner who conveys 39 the property by title, possession, or any other means to the person 40 p. 90 ESSB 6346.PL

performing such construction, repair, or improvement for the purpose 1 of performing such construction, repair, or improvement and the 2 property is then reconveyed by title, possession, or any other means 3 to the original owner; 4 (d) The cleaning, fumigating, razing, or moving of existing 5 buildings or structures, but does not include the charge made for 6 janitorial services; and for purposes of this section the term 7 "janitorial services" means those cleaning and caretaking services 8 ordinarily performed by commercial janitor service businesses 9 including, but not limited to, wall and window washing, floor 10 cleaning and waxing, and the cleaning in place of rugs, drapes and 11 upholstery. The term "janitorial services" does not include painting, 12 papering, repairing, furnace or septic tank cleaning, snow removal or 13 sandblasting; 14 (e) Automobile towing and similar automotive transportation 15 services, but not in respect to those required to report and pay 16 taxes under chapter 82.16 RCW; 17 (f) The furnishing of lodging and all other services by a hotel, 18 rooming house, tourist court, motel, trailer camp, and the granting 19 of any similar license to use real property, as distinguished from 20 the renting or leasing of real property, and it is presumed that the 21 occupancy of real property for a continuous period of one month or 22 more constitutes a rental or lease of real property and not a mere 23 license to use or enjoy the same. For the purposes of this 24 subsection, it is presumed that the sale of and charge made for the 25 furnishing of lodging for a continuous period of one month or more to 26 a person is a rental or lease of real property and not a mere license 27 to enjoy the same. For the purposes of this section, it is presumed 28 that the sale of and charge made for the furnishing of lodging 29 offered regularly for public occupancy for periods of less than a 30 month constitutes a license to use or enjoy the property subject to 31 sales and use tax and not a rental or lease of property; 32 (g) The installing, repairing, altering, or improving of digital 33 goods for consumers; 34 (h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) 35 of this subsection when such sales or charges are for property, labor 36 and services which are used or consumed in whole or in part by such 37 persons in the performance of any activity defined as a "sale at 38 retail" or "retail sale" even though such property, labor and 39 services may be resold after such use or consumption. Nothing 40 p. 91 ESSB 6346.PL

contained in this subsection may be construed to modify subsection 1 (1) of this section and nothing contained in subsection (1) of this 2 section may be construed to modify this subsection. 3 (3) The term "sale at retail" or "retail sale" includes the sale 4 of or charge made for personal, business, or professional services 5 including amounts designated as interest, rents, fees, admission, and 6 other service emoluments however designated, received by persons 7 engaging in the following business activities: 8 (a) Abstract, title insurance, and escrow services; 9 (b) Credit bureau services; 10 (c) Automobile parking and storage garage services; 11 (d) Landscape maintenance and horticultural services but 12 excluding (i) horticultural services provided to farmers and (ii) 13 pruning, trimming, repairing, removing, and clearing of trees and 14 brush near electric transmission or distribution lines or equipment, 15 if performed by or at the direction of an electric utility; 16 (e) Service charges associated with tickets to professional 17 sporting events; 18 (f) The following personal services: Tanning salon services, 19 tattoo parlor services, steam bath services, turkish bath services, 20 escort services, and dating services; 21 (g) Information technology training services, technical support, 22 and other services including, but not limited to, assisting with 23 network operations and support, help desk services, in-person 24 training related to hardware or software, network system support 25 services, data entry services, and data processing services; 26 (h) Custom website development services. For the purposes of this 27 subsection (3), "website development services" means the design, 28 development, and support of a website provided by a website developer 29 to a customer; 30 (i) Investigation, security services, security monitoring 31 services, and armored car services including, but not limited to, 32 background checks, security guard and patrol services, personal and 33 event security, armored car transportation of cash and valuables, and 34 security system services and monitoring. This does not include 35 locksmith services; 36 (j) Temporary staffing services. For the purposes of this 37 subsection (3), "temporary staffing services" means providing workers 38 to other businesses, except for hospitals licensed under chapter 39 70.41 or 71.12 RCW, for limited periods of time to supplement their 40 p. 92 ESSB 6346.PL

workforce and fill employment vacancies on a contract or for fee 1 basis. "Temporary staffing services" do not include staffing services 2 utilized by hospital-based clinical providers to supplement their 3 fulfillment of hospital contracts for professional services and that 4 are utilized for limited periods of time to supplement hospital 5 staffing; 6 (k) Advertising services. (i) For the purposes of this subsection 7 (3), "advertising services" means all digital and nondigital services 8 related to the creation, preparation, production, or dissemination of 9 advertisements including, but not limited to: 10 (A) Layout, art direction, graphic design, mechanical 11 preparation, production supervision, placement, referrals, 12 acquisition of advertising space, and rendering advice concerning the 13 best methods of advertising products or services; and 14 (B) Online referrals, search engine marketing((,)) and lead 15 generation optimization, web campaign planning, the acquisition of 16 advertising space in the internet media, and the monitoring and 17 evaluation of website traffic for purposes of determining the 18 effectiveness of an advertising campaign. 19 (ii) "Advertising services" do not include: 20 (A) Web hosting services and domain name registration; 21 (B) Services rendered in respect to the following: 22 (I) "Newspapers" as defined in RCW 82.04.214; 23 (II) Printing or publishing under RCW 82.04.280; and 24 (III) "Radio and television broadcasting" within this state as 25 defined in RCW 82.04.281; and 26 (C) Services rendered in respect to out-of-home advertising, 27 including: Billboard advertising; street furniture advertising; 28 transit advertising; place-based advertising, such as in-store 29 display advertising or point-of-sale advertising; dynamic or static 30 signage at live events; naming rights; and fixed signage advertising. 31 Out-of-home advertising does not include direct mail; 32 (l)(i) Live presentations including, but not limited to, 33 lectures, seminars, workshops, or courses where participants attend 34 either in-person or via the internet or telecommunications equipment 35 that allows audience members and the presenter or instructor to give, 36 receive, and discuss information with each other in real time; 37 (ii) "Live presentations" do not include: 38 (A) Before and after school care provided in-person and on-site 39 by elementary schools; 40 p. 93 ESSB 6346.PL

(B) Presentations given by a nonprofit organization exempt from 1 federal income tax under Title 26 U.S.C. Sec. 501(c) of the federal 2 internal revenue code; 3 (C) Musical, dramatic, comedic, or similar performances, 4 including any incidental instruction; 5 (D) One-on-one instructional activities including tutoring and 6 consulting; and 7 (E) Music lessons regardless of the number of participants; and 8 (m)(i) Operating an athletic or fitness facility, including all 9 charges for the use of such a facility or for any associated services 10 and amenities, except as provided in (m)(ii) of this subsection. 11 (ii) Notwithstanding anything to the contrary in (m)(i) of this 12 subsection (3), the term "sale at retail" and "retail sale" under 13 this subsection does not include: 14 (A) Separately stated charges for the use of an athletic or 15 fitness facility where such use is primarily for a purpose other than 16 engaging in or receiving instruction in a physical fitness activity; 17 (B) Separately stated charges for the use of a discrete portion 18 of an athletic or fitness facility, other than a pool, where such 19 discrete portion of the facility does not by itself meet the 20 definition of "athletic or fitness facility" in this subsection; 21 (C) Separately stated charges for services, such as massage, 22 nutritional consulting, and body composition testing, that do not 23 require the customer to engage in physical fitness activities to 24 receive the service. The exclusion in this subsection (3)(m)(ii)(C) 25 does not apply to personal training services and instruction in a 26 physical fitness activity; 27 (D) Separately stated charges for physical therapy provided by a 28 physical therapist, as those terms are defined in RCW 18.74.010, or 29 occupational therapy provided by an occupational therapy 30 practitioner, as those terms are defined in RCW 18.59.020, when 31 performed pursuant to a referral from an authorized health care 32 practitioner or in consultation with an authorized health care 33 practitioner. For the purposes of this subsection (3)(m)(ii)(D), an 34 authorized health care practitioner means a health care practitioner 35 licensed under chapter 18.83, 18.25, 18.36A, 18.57, 18.71, or 18.71A 36 RCW, or, until July 1, 2022, chapter 18.57A RCW; 37 (E) Rent or association fees charged by a landlord or residential 38 association to a tenant or residential owner with access to an 39 athletic or fitness facility maintained by the landlord or 40 p. 94 ESSB 6346.PL

residential association, unless the rent or fee varies depending on 1 whether the tenant or owner has access to the facility; 2 (F) Services provided in the regular course of employment by an 3 employee with access to an athletic or fitness facility maintained by 4 the employer for use without charge by its employees or their family 5 members; 6 (G) The provision of access to an athletic or fitness facility by 7 an educational institution to its students and staff. However, 8 charges made by an educational institution to its alumni or other 9 members of the public for the use of any of the educational 10 institution's athletic or fitness facilities are a retail sale under 11 this subsection (3)(m). For purposes of this subsection 12 (3)(m)(ii)(G), "educational institution" has the same meaning as in 13 RCW 82.04.170; 14 (H) Yoga, chi gong, or martial arts classes, training, or events 15 held at a community center, park, school gymnasium, college or 16 university, hospital or other medical facility, private residence, or 17 any other facility that is not operated within and as part of an 18 athletic or fitness facility. 19 (iii) Nothing in (m)(ii) of this subsection (3) may be construed 20 to affect the taxation of sales made by the operator of an athletic 21 or fitness facility, where such sales are defined as a retail sale 22 under any provision of this section other than this subsection (3). 23 (iv) For the purposes of this subsection (3)(m), the following 24 definitions apply: 25 (A) "Athletic or fitness facility" means an indoor or outdoor 26 facility or portion of a facility that is primarily used for: 27 Exercise classes; strength and conditioning programs; personal 28 training services; tennis, racquetball, handball, squash, or 29 pickleball; or other activities requiring the use of exercise or 30 strength training equipment, such as treadmills, elliptical machines, 31 stair climbers, stationary cycles, rowing machines, pilates 32 equipment, balls, climbing ropes, jump ropes, and weightlifting 33 equipment. 34 (B) "Martial arts" means any of the various systems of training 35 for physical combat or self-defense. "Martial arts" includes, but is 36 not limited to, karate, kung fu, tae kwon do, Krav Maga, boxing, 37 kickboxing, jujitsu, shootfighting, wrestling, aikido, judo, hapkido, 38 Kendo, tai chi, and mixed martial arts. 39 p. 95 ESSB 6346.PL

(C) "Physical fitness activities" means activities that involve 1 physical exertion for the purpose of improving or maintaining the 2 general fitness, strength, flexibility, conditioning, or health of 3 the participant. "Physical fitness activities" includes participating 4 in yoga, chi gong, or martial arts. 5 For the purposes of (g) through (i) and (k) of this subsection 6 (3), the terms "sale at retail" and "retail sale" do not include a 7 sale between members of an affiliated group as defined in RCW 8 82.04.299(1)(f). 9 (4)(a) The term also includes the renting or leasing of tangible 10 personal property to consumers. 11 (b) The term does not include the renting or leasing of tangible 12 personal property where the lease or rental is for the purpose of 13 sublease or subrent. 14 (5) The term also includes the providing of "competitive 15 telephone service," "telecommunications service," or "ancillary 16 services," as those terms are defined in RCW 82.04.065, to consumers. 17 (6)(a) The term also includes the sale of prewritten computer 18 software, custom software, and customization of prewritten computer 19 software to a consumer, regardless of the method of delivery to the 20 end user. For purposes of this subsection (6)(a), the sale of 21 prewritten computer software includes the sale of or charge made for 22 a key or an enabling or activation code, where the key or code is 23 required to activate prewritten computer software and put the 24 software into use. There is no separate sale of the key or code from 25 the prewritten computer software, regardless of how the sale may be 26 characterized by the vendor or by the purchaser. 27 (b)(i) The term also includes the charge made to consumers for 28 the right to access and use prewritten computer software, custom 29 software, and customization of prewritten computer software, where 30 possession of the software is maintained by the seller or a third 31 party, regardless of whether the charge for the service is on a per 32 use, per user, per license, subscription, or some other basis. 33 (ii)(A) The service described in (b)(i) of this subsection (6) 34 includes the right to access and use prewritten computer software, 35 custom software, and customization of prewritten computer software to 36 perform data processing. 37 (B) For purposes of this subsection (6)(b)(ii), "data processing" 38 means the systematic performance of operations on data to extract the 39 required information in an appropriate form or to convert the data to 40 p. 96 ESSB 6346.PL

usable information. Data processing includes check processing, image 1 processing, form processing, survey processing, payroll processing, 2 claim processing, and similar activities. 3 (7) The term also includes the sale of or charge made for an 4 extended warranty to a consumer. For purposes of this subsection, 5 "extended warranty" means an agreement for a specified duration to 6 perform the replacement or repair of tangible personal property at no 7 additional charge or a reduced charge for tangible personal property, 8 labor, or both, or to provide indemnification for the replacement or 9 repair of tangible personal property, based on the occurrence of 10 specified events. The term "extended warranty" does not include an 11 agreement, otherwise meeting the definition of extended warranty in 12 this subsection, if no separate charge is made for the agreement and 13 the value of the agreement is included in the sales price of the 14 tangible personal property covered by the agreement. For purposes of 15 this subsection, "sales price" has the same meaning as in RCW 16 82.08.010. 17 (8)(a) The term also includes the following sales to consumers of 18 digital goods, digital codes, and digital automated services: 19 (i) Sales in which the seller has granted the purchaser the right 20 of permanent use; 21 (ii) Sales in which the seller has granted the purchaser a right 22 of use that is less than permanent; 23 (iii) Sales in which the purchaser is not obligated to make 24 continued payment as a condition of the sale; and 25 (iv) Sales in which the purchaser is obligated to make continued 26 payment as a condition of the sale. 27 (b) A retail sale of digital goods, digital codes, or digital 28 automated services under this subsection (8) includes any services 29 provided by the seller exclusively in connection with the digital 30 goods, digital codes, or digital automated services, whether or not a 31 separate charge is made for such services. 32 (c) A retail sale of digital goods, digital codes, or digital 33 automated services does not include the following services if the 34 sale occurs between members of an affiliated group as defined in RCW 35 82.04.299(1)(f): 36 (i) Any service that primarily involves the application of human 37 effort by the seller, and the human effort originated after the 38 customer requested the service; 39 p. 97 ESSB 6346.PL

(ii) Live presentations, such as lectures, seminars, workshops, 1 or courses, where participants are connected to other participants 2 via the internet or telecommunications equipment, which allows 3 audience members and the presenter or instructor to give, receive, 4 and discuss information with each other in real time; 5 (iii) Advertising services. For purposes of this subsection 6 (8)(c), "advertising services" means all services directly related to 7 the creation, preparation, production, or dissemination of 8 advertisements. Advertising services include layout, art direction, 9 graphic design, mechanical preparation, production supervision, 10 placement, and rendering advice to a client concerning the best 11 methods of advertising that client's products or services. 12 Advertising services also include online referrals, search engine 13 marketing and lead generation optimization, web campaign planning, 14 the acquisition of advertising space in the internet media, and the 15 monitoring and evaluation of website traffic for purposes of 16 determining the effectiveness of an advertising campaign. Advertising 17 services do not include web hosting services and domain name 18 registration; and 19 (iv) Data processing services. For purposes of this subsection 20 (8)(c), "data processing service" means a primarily automated service 21 provided to a business or other organization where the primary object 22 of the service is the systematic performance of operations by the 23 service provider on data supplied in whole or in part by the customer 24 to extract the required information in an appropriate form or to 25 convert the data to usable information. Data processing services 26 include check processing, image processing, form processing, survey 27 processing, payroll processing, claim processing, and similar 28 activities. Data processing does not include the service described in 29 subsection (6)(b) of this section. 30 (d) For purposes of this subsection, "permanent" means perpetual 31 or for an indefinite or unspecified length of time. A right of 32 permanent use is presumed to have been granted unless the agreement 33 between the seller and the purchaser specifies or the circumstances 34 surrounding the transaction suggest or indicate that the right to use 35 terminates on the occurrence of a condition subsequent. 36 (9) The term also includes the charge made for providing tangible 37 personal property along with an operator for a fixed or indeterminate 38 period of time. A consideration of this is that the operator is 39 necessary for the tangible personal property to perform as designed. 40 p. 98 ESSB 6346.PL

For the purpose of this subsection (9), an operator must do more than 1 maintain, inspect, or set up the tangible personal property. 2 (10) The term does not include the sale of or charge made for 3 labor and services rendered in respect to the building, repairing, or 4 improving of any street, place, road, highway, easement, right-of- 5 way, mass public transportation terminal or parking facility, bridge, 6 tunnel, or trestle which is owned by a municipal corporation or 7 political subdivision of the state or by the United States and which 8 is used or to be used primarily for foot or vehicular traffic 9 including mass transportation vehicles of any kind. 10 (11) The term also does not include sales of chemical sprays or 11 washes to persons for the purpose of postharvest treatment of fruit 12 for the prevention of scald, fungus, mold, or decay, nor does it 13 include sales of feed, seed, seedlings, fertilizer, agents for 14 enhanced pollination including insects such as bees, and spray 15 materials to: (a) Persons who participate in the federal conservation 16 reserve program, the environmental quality incentives program, the 17 wetlands reserve program, and the wildlife habitat incentives 18 program, or their successors administered by the United States 19 department of agriculture; (b) farmers for the purpose of producing 20 for sale any agricultural product; (c) farmers for the purpose of 21 providing bee pollination services; and (d) farmers acting under 22 cooperative habitat development or access contracts with an 23 organization exempt from federal income tax under 26 U.S.C. Sec. 24 501(c)(3) of the federal internal revenue code or the Washington 25 state department of fish and wildlife to produce or improve wildlife 26 habitat on land that the farmer owns or leases. 27 (12) The term does not include the sale of or charge made for 28 labor and services rendered in respect to the constructing, 29 repairing, decorating, or improving of new or existing buildings or 30 other structures under, upon, or above real property of or for the 31 United States, any instrumentality thereof, or a county or city 32 housing authority created pursuant to chapter 35.82 RCW, including 33 the installing, or attaching of any article of tangible personal 34 property therein or thereto, whether or not such personal property 35 becomes a part of the realty by virtue of installation. Nor does the 36 term include the sale of services or charges made for the clearing of 37 land and the moving of earth of or for the United States, any 38 instrumentality thereof, or a county or city housing authority. Nor 39 does the term include the sale of services or charges made for 40 p. 99 ESSB 6346.PL

cleaning up for the United States, or its instrumentalities, 1 radioactive waste and other by-products of weapons production and 2 nuclear research and development. 3 (13) The term does not include the sale of or charge made for 4 labor, services, or tangible personal property pursuant to agreements 5 providing maintenance services for bus, rail, or rail fixed guideway 6 equipment when a regional transit authority is the recipient of the 7 labor, services, or tangible personal property, and a transit agency, 8 as defined in RCW 81.104.015, performs the labor or services. 9 (14) The term does not include the sale for resale of any service 10 described in this section if the sale would otherwise constitute a 11 "sale at retail" and "retail sale" under this section. 12 (15)(a) The term "sale at retail" or "retail sale" includes 13 amounts charged, however labeled, to consumers to engage in any of 14 the activities listed in this subsection (15)(a), including the 15 furnishing of any associated equipment or, except as otherwise 16 provided in this subsection, providing instruction in such 17 activities, where such charges are not otherwise defined as a "sale 18 at retail" or "retail sale" in this section: 19 (i)(A) Golf, including any variant in which either golf balls or 20 golf clubs are used, such as miniature golf, hitting golf balls at a 21 driving range, and golf simulators, and including fees charged by a 22 golf course to a player for using his or her own cart. However, 23 charges for golf instruction are not a retail sale, provided that if 24 the instruction involves the use of a golfing facility that would 25 otherwise require the payment of a fee, such as green fees or driving 26 range fees, such fees, including the applicable retail sales tax, 27 must be separately identified and charged by the golfing facility 28 operator to the instructor or the person receiving the instruction. 29 (B) Notwithstanding (a)(i)(A) of this subsection (15) and except 30 as otherwise provided in this subsection (15)(a)(i)(B), the term 31 "sale at retail" or "retail sale" does not include amounts charged to 32 participate in, or conduct, a golf tournament or other competitive 33 event. However, amounts paid by event participants to the golf 34 facility operator are retail sales under this subsection (15)(a)(i). 35 Likewise, amounts paid by the event organizer to the golf facility 36 are retail sales under this subsection (15)(a)(i), if such amounts 37 vary based on the number of event participants; 38 (ii) Ballooning, hang gliding, indoor or outdoor sky diving, 39 paragliding, parasailing, and similar activities; 40 p. 100 ESSB 6346.PL

(iii) Air hockey, billiards, pool, foosball, darts, shuffleboard, 1 ping pong, and similar games; 2 (iv) Access to amusement park, theme park, and water park 3 facilities, including but not limited to charges for admission and 4 locker or cabana rentals. Discrete charges for rides or other 5 attractions or entertainment that are in addition to the charge for 6 admission are not a retail sale under this subsection (15)(a)(iv). 7 For the purposes of this subsection, an amusement park or theme park 8 is a location that provides permanently affixed amusement rides, 9 games, and other entertainment, but does not include parks or zoos 10 for which the primary purpose is the exhibition of wildlife, or 11 fairs, carnivals, and festivals as defined in (b)(i) of this 12 subsection; 13 (v) Batting cage activities; 14 (vi) Bowling, but not including competitive events, except that 15 amounts paid by the event participants to the bowling alley operator 16 are retail sales under this subsection (15)(a)(vi). Likewise, amounts 17 paid by the event organizer to the operator of the bowling alley are 18 retail sales under this subsection (15)(a)(vi), if such amounts vary 19 based on the number of event participants; 20 (vii) Climbing on artificial climbing structures, whether indoors 21 or outdoors; 22 (viii) Day trips for sightseeing purposes; 23 (ix) Bungee jumping, zip lining, and riding inside a ball, 24 whether inflatable or otherwise; 25 (x) Horseback riding offered to the public, where the seller 26 furnishes the horse to the buyer and providing instruction is not the 27 primary focus of the activity, including guided rides, but not 28 including therapeutic horseback riding provided by an instructor 29 certified by a nonprofit organization that offers national or 30 international certification for therapeutic riding instructors; 31 (xi) Fishing, including providing access to private fishing areas 32 and charter or guided fishing, except that fishing contests and 33 license fees imposed by a government entity are not a retail sale 34 under this subsection; 35 (xii) Guided hunting and hunting at game farms and shooting 36 preserves, except that hunting contests and license fees imposed by a 37 government entity are not a retail sale under this subsection; 38 (xiii) Swimming, but only in respect to (A) recreational or 39 fitness swimming that is open to the public, such as open swim, lap 40 p. 101 ESSB 6346.PL

swimming, and special events like kids night out and pool parties 1 during open swim time, and (B) pool parties for private events, such 2 as birthdays, family gatherings, and employee outings. Fees for 3 swimming lessons, to participate in swim meets and other 4 competitions, or to join a swim team, club, or aquatic facility are 5 not retail sales under this subsection (15)(a)(xiii); 6 (xiv) Go-karting, bumper cars, and other motorized activities 7 where the seller provides the vehicle and the premises where the 8 buyer will operate the vehicle; 9 (xv) Indoor or outdoor playground activities, such as inflatable 10 bounce structures and other inflatables; mazes; trampolines; slides; 11 ball pits; games of tag, including laser tag and soft-dart tag; and 12 human gyroscope rides, regardless of whether such activities occur at 13 the seller's place of business, but not including playground 14 activities provided for children by a licensed child day care center 15 or licensed family day care provider as those terms are defined in 16 RCW 43.216.010; 17 (xvi) Shooting sports and activities, such as target shooting, 18 skeet, trap, sporting clays, "5" stand, and archery, but only in 19 respect to discrete charges to members of the public to engage in 20 these activities, but not including fees to enter a competitive 21 event, instruction that is entirely or predominately classroom based, 22 or to join or renew a membership at a club, range, or other facility; 23 (xvii) Paintball and airsoft activities; 24 (xviii) Skating, including ice skating, roller skating, and 25 inline skating, but only in respect to discrete charges to members of 26 the public to engage in skating activities, but not including skating 27 lessons, competitive events, team activities, or fees to join or 28 renew a membership at a skating facility, club, or other 29 organization; 30 (xix) Nonmotorized snow sports and activities, such as downhill 31 and cross-country skiing, snowboarding, ski jumping, sledding, snow 32 tubing, snowshoeing, and similar snow sports and activities, whether 33 engaged in outdoors or in an indoor facility with or without snow, 34 but only in respect to discrete charges to the public for the use of 35 land or facilities to engage in nonmotorized snow sports and 36 activities, such as fees, however labeled, for the use of ski lifts 37 and tows and daily or season passes for access to trails or other 38 areas where nonmotorized snow sports and activities are conducted. 39 However, fees for the following are not retail sales under this 40 p. 102 ESSB 6346.PL

subsection (15)(a)(xix): (A) Instructional lessons; (B) permits 1 issued by a governmental entity to park a vehicle on or access public 2 lands; and (C) permits or leases granted by an owner of private 3 timberland for recreational access to areas used primarily for 4 growing and harvesting timber; and 5 (xx) Scuba diving; snorkeling; river rafting; surfing; 6 kiteboarding; flyboarding; water slides; inflatables, such as water 7 pillows, water trampolines, and water rollers; and similar water 8 sports and activities. 9 (b) Notwithstanding anything to the contrary in this subsection 10 (15), the term "sale at retail" or "retail sale" does not include 11 charges: 12 (i) Made for admission to, and rides or attractions at, fairs, 13 carnivals, and festivals. For the purposes of this subsection, fairs, 14 carnivals, and festivals are events that do not exceed 21 days and a 15 majority of the amusement rides, if any, are not affixed to real 16 property; 17 (ii) Made by an educational institution to its students and staff 18 for activities defined as retail sales by (a)(i) through (xx) of this 19 subsection. However, charges made by an educational institution to 20 its alumni or other members of the general public for these 21 activities are a retail sale under this subsection (15). For purposes 22 of this subsection (15)(b)(ii), "educational institution" has the 23 same meaning as in RCW 82.04.170; 24 (iii) Made by a vocational school for commercial diver training 25 that is licensed by the workforce training and education coordinating 26 board under chapter 28C.10 RCW; or 27 (iv) Made for day camps offered by a nonprofit organization or 28 state or local governmental entity that provide youth not older than 29 age 18, or that are focused on providing individuals with 30 disabilities or mental illness, the opportunity to participate in a 31 variety of supervised activities. 32 (16)(a) The term "sale at retail" or "retail sale" includes the 33 purchase or acquisition of tangible personal property and specified 34 services by a person who receives either a qualifying grant exempt 35 from tax under RCW 82.04.767 or 82.16.320 or a grant deductible under 36 RCW 82.04.4339, except for transactions excluded from the definition 37 of "sale at retail" or "retail sale" by any other provision of this 38 section. Nothing in this subsection (16) may be construed to limit 39 the application of any other provision of this section to purchases 40 p. 103 ESSB 6346.PL

by a recipient of either a qualifying grant exempt from tax under RCW 1 82.04.767 or a grant deductible under RCW 82.04.4339, or by any other 2 person. 3 (b) For purposes of this subsection (16), "specified services" 4 means: 5 (i) The constructing, repairing, decorating, or improving of new 6 or existing buildings or other structures under, upon, or above real 7 property, including the installing or attaching of any article of 8 tangible personal property therein or thereto, whether or not such 9 personal property becomes a part of the realty by virtue of 10 installation; 11 (ii) The clearing of land or the moving of earth, whether or not 12 associated with activities described in (b)(i) of this subsection 13 (16); 14 (iii) The razing or moving of existing buildings or structures; 15 and 16 (iv) Landscape maintenance and horticultural services. 17 NEW SECTION. Sec. 1102. A new section is added to chapter 82.08 18 RCW to read as follows: 19 (1) The tax levied by RCW 82.08.020 does not apply to sales of 20 the following services subject to the tax imposed in RCW 82.04.050 to 21 public libraries, library districts, library service centers, K-12 22 schools, school districts, and educational service districts: 23 (a) Information technology services; 24 (b) Custom website development; 25 (c) Live presentations; 26 (d) Investigation, security, and armored car services; 27 (e) Temporary staffing; and 28 (f) Custom software and customization of prewritten software. 29 (2) Sellers making tax-exempt sales under this section must 30 obtain an exemption certificate from the purchaser in a form and 31 manner prescribed by the department. The seller must retain a copy of 32 the exemption certificate for the seller's files. 33 NEW SECTION. Sec. 1103. A new section is added to chapter 82.12 34 RCW to read as follows: 35 (1) This chapter does not apply in respect to the use of the 36 following services subject to the tax imposed in RCW 82.12.020 by 37 p. 104 ESSB 6346.PL

public libraries, library districts, library service centers, K-12 1 schools, school districts, and educational service districts: 2 (a) Information technology services; 3 (b) Custom website development; 4 (c) Investigation, security, and armored car services; 5 (d) Temporary staffing; and 6 (e) Custom software and customization of prewritten software. 7 (2) Sellers making tax-exempt sales under this section must 8 obtain an exemption certificate from the purchaser in a form and 9 manner prescribed by the department. The seller must retain a copy of 10 the exemption certificate for the seller's files. 11 Sec. 1104. RCW 82.04.288 and 2025 c 420 s 201 are each amended 12 to read as follows: 13 (1) Beginning January 1, 2026, in addition to all other taxes 14 imposed under this chapter, persons must pay a surcharge on 15 Washington taxable income over $250,000,000 in a calendar year. 16 (2) The rate of the tax is 0.5 percent of the amount of 17 Washington taxable income over $250,000,000. 18 (3)(a) Any Washington taxable income subject to the tax in RCW 19 82.04.29004 is exempt from the surcharge imposed in this section. 20 (b)(i) Any Washington taxable income subject to the manufacturing 21 tax rates in RCW 82.04.240, 82.04.2404, 82.04.241, 82.04.260, 22 82.04.2602, 82.04.287, 82.04.2909, or 82.04.294(1) is exempt from the 23 surcharge imposed in this section. 24 (ii) Any Washington taxable income attributable to the wholesale 25 or retail sale of products so manufactured by a person subject to the 26 manufacturing tax rates specified in (b)(i) of this subsection (3) is 27 exempt from the surcharge imposed in this section. 28 (iii) Any Washington taxable income attributable to retail sales 29 that are exempt from the imposition of sales tax in RCW 82.08.0293, 30 82.08.0297, and 82.08.0281 is exempt from the surcharge imposed in 31 this section. 32 (iv) Any Washington taxable income subject to the tax rates in 33 RCW 82.04.260(12) is exempt from the surcharge imposed in this 34 section. 35 (v) Any Washington taxable income attributable to wholesale sales 36 of food and food ingredients, as defined in RCW 82.08.0293, is exempt 37 from the surcharge imposed in this section provided that it is sold 38 by a wholesaler that is not affiliated with either the retailer or 39 p. 105 ESSB 6346.PL

manufacturer, or both, of such food and food ingredients. The 1 exemption in this subsection (3)(b)(v) does not apply to Washington 2 taxable income attributable to the wholesale sale of soft drinks, 3 bottled water, or dietary supplements, as they are defined in RCW 4 82.08.0293. 5 (vi) Any Washington taxable income attributable to the wholesale 6 or retail sale of petroleum products by a person who is both located 7 in a state other than Washington and the owner of such materials 8 processed for it in Washington by an affiliated processor for hire 9 subject to the rate in RCW 82.04.280(1)(c), is exempt from the 10 surcharge imposed in this section. For the purposes of this 11 subsection (3)(b)(((v))) (vi), ((the following definitions apply: 12 (A) "Affiliated" means a person that directly or indirectly, 13 through one or more intermediaries, controls, is controlled by, or is 14 under common control with another person; 15 (B) "Control" means the possession, directly or indirectly, of 16 more than 50 percent of the power to direct or cause the direction of 17 the management and policies of a person, whether through the 18 ownership of voting shares, by contract, or otherwise; and 19 (C) "Petroleum)) "petroleum product" has the same meaning as in 20 RCW 82.21.020. 21 (4)(a) The surcharge imposed under this section does not apply to 22 taxable income for which a credit is allowed under RCW 82.04.440. 23 (b) The surcharge imposed under this section does not apply to a 24 person engaged in business primarily as a farmer or eligible apiarist 25 as defined in RCW 82.04.213. 26 (c) The surcharge imposed under this section does not apply to a 27 person subject to the tax imposed pursuant to RCW 82.04.299. 28 (d) The surcharge imposed under this section does not apply to 29 taxable income for wholesale and retail transactions of fuel as 30 defined in RCW 82.38.020. 31 (5) Any income that is exempt from the surcharge imposed under 32 this section is not included in the calculation of Washington taxable 33 income in subsection (1) of this section. 34 (6) For the purposes of this section, the following definitions 35 apply: 36 (a) "Affiliated" means a person that directly or indirectly, 37 through one or more intermediaries, controls, is controlled by, or is 38 under common control with another person; 39 p. 106 ESSB 6346.PL

(b) "Control" means the possession, directly or indirectly, of 1 more than 50 percent of the power to direct or cause the direction of 2 the management and policies of a person, whether through the 3 ownership of voting shares, by contract, or otherwise. 4 (7) This section expires December 31, 2029. 5 NEW SECTION. Sec. 1105. RCW 82.32.805 and 82.32.808 do not 6 apply to sections 1101 through 1104 of this act. 7 NEW SECTION. Sec. 1106. Sections 1101 through 1104 of this act 8 take effect July 1, 2026. 9 NEW SECTION. Sec. 1107. If any provisions of sections 1 through 10 911 of this act or their application to any person or circumstances 11 is held invalid, sections 1101 through 1106 of this act or the 12 application of their provisions to other persons or circumstances is 13 not affected. 14 PART XII 15 MISCELLANEOUS 16 Sec. 1201. RCW 1.90.100 and 2024 c 5 s 1 (Initiative Measure No. 17 2111) are each amended to read as follows: 18 (1) Neither the state nor any county, city, or other local 19 jurisdiction in the state of Washington may tax any individual person 20 on any form of personal income. For the purposes of this chapter, 21 "income" has the same meaning as "gross income" in 26 U.S.C. Sec. 61. 22 (2) Subsection (1) of this section does not apply to the tax 23 authorized in chapter 82A.--- RCW (the new chapter created in section 24 1203 of this act) so long as the standard deduction is at least 25 $1,000,000 for a household. 26 NEW SECTION. Sec. 1202. NULL AND VOID. If a court of final 27 jurisdiction invalidates section 201 of this act, sections 1 through 28 1003 and 1201 through 1209 of this act are null and void in its 29 entirety. 30 NEW SECTION. Sec. 1203. CODIFICATION. Sections 101 through 704 31 and 708 through 710 and 712 of this act constitute a new chapter in a 32 p. 107 ESSB 6346.PL

new title in the Revised Code of Washington, to be codified as Title 1 82A RCW. 2 NEW SECTION. Sec. 1204. CONFORMING AMENDMENTS. If any 3 amendments in this act, or any sections enacted or affected by 4 chapter . . ., Laws of 2026 (this act), are enacted in a 2026 5 legislative session that do not take cognizance of chapter . . ., 6 Laws of 2026 (this act), the code reviser must prepare a bill for 7 introduction in the 2027 or 2028 legislative session that 8 incorporates any such amendments into the reorganization adopted by 9 chapter . . ., Laws of 2026 (this act) and corrects any incorrect 10 cross-references. 11 NEW SECTION. Sec. 1205. (1) Section 901 of this act takes 12 effect January 1, 2029. 13 (2) Refunds may not be provided under section 901 of this act for 14 any period before January 1, 2028. 15 NEW SECTION. Sec. 1206. Except as provided in section 902 of 16 this act, RCW 82.32.805 and 82.32.808 do not apply to this act. 17 NEW SECTION. Sec. 1207. RCW 82.32.805 does not apply to section 18 901 of this act. 19 NEW SECTION. Sec. 1208. The tax imposed in this act is 20 necessary for the support of the state government and its existing 21 public institutions. 22 NEW SECTION. Sec. 1209. It is the intent of the legislature for 23 the department of revenue to spend appropriated amounts to implement 24 this act regardless of litigation. 25 NEW SECTION. Sec. 1210. Beginning on January 1, 2028, the 26 department of revenue must report to the legislature annually on the 27 total cost of administration of this act, the number of full time 28 employees required to administer this act, and the ratio of cost of 29 implementation compared to revenue raised from the tax imposed in 30 this act. 31 --- END --- p. 108 ESSB 6346.PL