As song writer and musician Bob Dylan said in his hit song, “The Times They Are A-Changin'”:
Come gather’ round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
Then you better start swimmin’ or you’ll sink like a stone
For the times they are a-changin’
The federal tax laws are certainly about to change. With the need to raise revenue as a top priority for the Biden Administration, everyone is expecting dramatic changes to the Internal Revenue Code.
Prologue
Kyle N. Richard recently joined Foster Garvey. Kyle’s practice is primarily focused on assisting our municipal clients in bond and tax matters. With his tax experience, however, he assists our tax practice group clients on broader federal, state and local tax matters. We are excited to have Kyle join our tax team, adding to our already robust bench strength.
The article below was authored by Kyle. Expect to see more of Kyle’s contributions to Larry’s Tax Law in the future.
Larry
On September 30, 2021, the Washington State Supreme Court upheld the constitutionality of the additional 1.2 percent business and occupation (B&O) tax imposed by the 2019 Substitute House Bill 2167 (“SHB 2167”) on “specified financial institutions”—financial institutions with annual net income of more than $1 billion. SHB 2167 increases the tax rate for these institutions from 1.5 percent (the rate generally applicable to financial institutions) to 2.7 percent.
The tax was codified in Section 82.04.29004 Revised Code of Washington (“RCW”). Like other B&O taxes in Washington, the amount of tax due is measured by the amount of the specified financial institution’s gross revenues attributed to Washington State, which is generally based on an apportionment formula (contained in RCW 82.04.460-.462). The effect of this apportionment regime is that a certain percentage of a financial institution’s total gross income for the year is treated as earned in Washington and taxed under Washington law.
The Washington Bankers Association and American Bankers Association (taxpayers) commenced a lawsuit, arguing that the tax violated the U.S. Constitution’s Dormant Commerce Clause (“DCC”). At trial, the court concluded that the taxpayers had standing to challenge the tax under the Uniform Declaratory Judgments Act (“UDJA”) and held that the additional graduated tax rate discriminated against out-of-state businesses, in violation of the DCC. The trial court denied reconsideration of its decision. The Washington Department of Revenue then appealed directly to the Washington State Supreme Court.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
