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2025 Legislation of Note

Legislation of Note

TAX & FISCAL POLICY

Max Martin, AWB’s tax and fiscal policy director, has updates on the following bills:

  • B&O tax increases: House Bill 2081, which increases B&O tax rates for Washington businesses, passed 50-48 in the House and 26-22 in the Senate. The bill increases the B&O tax rate for manufacturing, retailing, and wholesaling to 0.5% starting January 2027, while making changes to other rate categories. It also imposes a temporary B&O tax surcharge on businesses with taxable income over $250 million, raises the B&O surcharge for financial institutions, and increases the advanced computing surcharge. AWB opposed this measure and sent a letter to legislative leaders last week with concerns.

  • Sales tax on services: Senate Bill 5814 expands the sales tax to a range of services, including advertising, IT services, custom website development, temporary staffing agencies and security. The bill passed the House 50-47 and the Senate 26-22. AWB also opposed this bill and believes it will burden small and medium-sized businesses, who rely on many of the service providers facing higher taxes under this bill.

  • Capital gains tax and estate tax: Senate Bill 5813 increases the state's capital gains tax and estate tax. The existing 7% capital gains tax applies to gains above $270,000 on the sale or exchange of long-term assets including stocks, bonds and business interests. The proposal would add another 2.9% for gains exceeding $1 million. The bill passed 53-45 in the House and 27-21 in the Senate.

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EMPLOYMENT LAW

Lindsey Hueer, AWB’s lead on employment law issues, has updates on these bills:

  • UI for striking workers: Senate Bill 5041, which allows striking workers to collect unemployment insurance benefits, gained final passage in both chambers by a largely partisan vote. The Senate and House reached a deal to allow striking workers to receive up to six weeks of unemployment benefits. AWB remains concerned that the bill will disrupt the balance at the bargaining table and lead to higher UI costs for all employers. We plan to send a veto request to the governor later this week.

  • Self-insured employers/workers’ comp: Senate Bill 5463 has passed and is heading to the governor’s desk. AWB opposed this bill, which requires employers with self-insured workers’ compensation programs to adhere to the good faith and fair dealing standard. State law already functionally requires them to do that with Department of Labor and Industries' broad existing oversight. The bill passed with an amendment that makes the 3-strikes provision slightly better, allowing for a corrective action plan instead of automatic revocation of ability to self-insure.

  • Pregnancy accommodations: Senate Bill 5217, which expands pregnancy-related accommodations for employees, passed both chambers and is on the governor’s desk. The bill requires all employers (current law is employers with 15+ employees) to provide accommodations to pregnant workers, including more frequent restroom breaks, ability to sit down, carry a water bottle, etc. The bill also requires additional accommodations for breastfeeding/lactating workers.

  • Driver license requirement in job postings: Senate Bill 5501 has passed and was signed by the governor. The bill prohibits employers from including in a job posting a requirement that a worker possess a valid drivers' license, unless the job requires the individual to drive as part of their job duties.

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ENVIRONMENT

Peter Godlewski, AWB government affairs director for energy and the environment, has an update on the following bill:

  • CCA fix bill: House Bill 1975, which makes important tweaks to the Climate Commitment Act, gained final passage with bipartisan support. The bill will help provide short-term price containment strategies for businesses under the Climate Commitment Act, as Washington works to link its carbon market with those in California and other areas. AWB thanks Reps. Joe Fitzgibbon, D-West Seattle, and Mary Dye, R-Pomeroy, for their work on this bill.

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EDUCATION, WORKFORCE and HEALTH CARE

Emily Wittman, AWB’s lead on workforce, education and health care, has an update on the following bills:

  • Higher education scholarships: Senate Bill 5785, which makes changes to student eligibility for the Washington College Grant, has received final passage. AWB opposed this bill, which dramatically reduces grant awards for students to attend independent colleges. The bill limits students’ access to college education, forcing them to make up the difference in other ways. Several Democrats joined Republicans in voting against this bill.

  • Cutting hospital funding: Senate Bill 5083, which caps the reimbursements that the state’s public employee insurance plans pay to hospitals for services, has passed and is heading to the governor’s desk. The bill was improved with amendments, but AWB still has concerns about the bill’s impact on hospitals and patient care.

  • Pay transparency updates: AWB is pleased to see Senate Bill 5408, which makes key updates to Washington’s pay transparency law, gain final passage with bipartisan support. The bill aims to address a flurry of lawsuits filed in response to Washington’s pay transparency law. Under the bill, employers would have 14 days to correct a job posting after they are notified it does not include a salary range. This is an important fix that will preserve both pay transparency and protect employers from frivolous lawsuits. AWB is thankful to Sen. Curtis King, R-Yakima, and Rep. Mary Fosse, D-Everett, for their work on this bill.

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HOUSING

Morgan Irwin, AWB’s lead for transportation, housing, land use and technology, has an update on the following bill:

  • Rent control: House Bill 1217, which enacts statewide rent control, is heading to the governor’s desk. A handful of Democrats joined Republicans in voting no. The compromise bill limits annual rent increases to 7% plus inflation, or 10%, whichever is lower in a given year. AWB is disappointed in the outcome and believes the policy will deter housing investment and push housing providers out of state. The bill also exempts new construction from rent control for 12 years — which is problematic because lenders in other markets have refused to underwrite loans for projects that aren’t free of rent control for at least 25 years.

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