The Washington state legislature has recently passed House Bill 2487 (“HB 2487”), aiming to close unintended tax loopholes by modifying tax exemptions for insurers in Washington. The key highlights are as follows:
- Washington imposes a 2% tax on all premiums the insurer collects or receives, subject to certain exceptions.
- Washington provides an exemption from its business and occupation (B&O) tax for any person, in respect to insurance business, upon which a tax based on gross premiums is paid to the state, subject to various exceptions.
- The bill replaces and consolidates existing exemptions, mandates rulemaking for enforcement, and establishes retroactive application to align past and present tax treatments.
- The insurance premium exemption to the B&O tax is modified by limiting its scope to: (1) gross premiums received by an insurer upon which the same insurer paid insurance premium taxes pursuant to state law; and (2) gross premiums received by an insurer that is exempt from premium taxes pursuant to state law.
- The B&O tax does not apply to the following:
- Insurance business activity performed by an insurer that is directly subject to the payment of insurance premium taxes in Washington state pursuant to chapter 48.14, 48.15, or 48.201 RCW. Only the person who paid the insurance premium tax can claim this exemption.
- Gross premiums and prepayments received by a person that is exempt from premium taxes under RCW 48.14.0201(6).
- Consideration received by an insurer for annuities regulated under chapters 48.23 and 48.24 RCW.
- Gross premiums received by an assigned risk plan established by an act of the legislature, either directly or indirectly, where premium taxes were paid by a servicing carrier for such assigned risk plan.
- Non-insurance businesses may no longer exploit tax exemptions meant for insurers.
- The change to the insurance premium exemption to the B&O tax applies both prospectively and retroactively to October 2, 2019.
- Penalties and interest may be waived for taxes due from 2019 to 2026 if the taxes were not filed under an exemption that is no longer applicable.
Please note that this bill becomes effective on June 11, 2026.
For any questions related to the above referenced bill in Washington, please contact Westmont Associates!