Bill Summary – FastDemocracy

CERTIFICATION OF ENROLLMENT
                 ENGROSSED SUBSTITUTE HOUSE BILL 1297
                       Chapter 195, Laws of 2021
                               67th Legislature
                             2021 Regular Session
                    WORKING FAMILIES TAX EXEMPTION
                     EFFECTIVE DATE: July 25, 2021
Passed by the House April 15, 2021                  CERTIFICATE
  Yeas 93 Nays 3
                                       I, Bernard Dean, Chief Clerk of the
                                       House of Representatives of the
            LAURIE JINKINS             State of Washington, do hereby
Speaker of the House of                certify   that   the   attached   is
Representatives                        ENGROSSED   SUBSTITUTE  HOUSE   BILL
                                       1297 as passed by the House of
                                       Representatives and the Senate on
                                       the dates hereon set forth.
Passed by the Senate April 11, 2021
  Yeas 47 Nays 2
                                                    BERNARD DEAN
              DENNY HECK                                           Chief Clerk
President of the Senate
Approved May 4, 2021 2:56 PM                           FILED
                                                    May 5, 2021
                                               Secretary of State
              JAY INSLEE                       State of Washington
Governor of the State of Washington
                     ENGROSSED SUBSTITUTE HOUSE BILL 1297
                           AS AMENDED BY THE SENATE
                   Passed Legislature - 2021 Regular Session
     State of Washington         67th Legislature     2021 Regular Session
     By House Appropriations (originally sponsored by Representatives
     Thai,   Stokesbary,   Ramel,   Ryu,  Robertson,   Leavitt,   Bateman,
     Fitzgibbon, Shewmake, Chapman, J. Johnson, Senn, Frame, Riccelli,
     Chopp, Wylie, Wicks, Simmons, Boehnke, Berry, Davis, Tharinger,
     Walsh, Eslick, Goodman, Peterson, Santos, Valdez, Cody, Chambers,
     Kloba, Ramos, Kirby, Bronoske, Gregerson, Macri, Callan, Paul, Sells,
     Bergquist, Ormsby, Pollet, Slatter, Stonier, Taylor, and Harris-
     Talley)
     READ FIRST TIME 02/22/21.
     AN ACT Relating to the working families tax exemption; amending
 RCW 82.08.0206; creating new sections; prescribing penalties; and
 providing a contingent expiration date.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
     NEW SECTION. Sec. 1. (1) Many Washington families do not earn
 enough annually to keep pace with increasing health care, child care,
 housing, and other essential expenses.
     (2) Amidst rising cost of living across the state, the regressive
 nature of Washington's tax code puts an additional strain on
 households already struggling to meet their basic needs. Washington's
 tax system is the most upside down and regressive in the nation,
 allowing those who earn the most to pay the least percentage of their
 income in taxes. As a percentage of household income, low-income
 Washingtonians, who are disproportionately Black, American Indian and
 Alaska Native, Latinx, Native Hawaiian and Pacific Islander, and
 multiracial Washingtonians, pay six times more in taxes than our
 wealthiest residents.
     (3) Eligibility for the working families tax exemption is based
 on eligibility for the federal earned income tax credit, a refundable
 tax credit for working individuals and families whose earnings are
 below an income threshold. Since its establishment in 1975, the
                                       p. 1                    ESHB 1297.SL
 earned income tax credit has increased family income, reduced child
 poverty, and improved health, educational, and career outcomes for
 children in low-income families. Taxpayers filing with an individual
 tax identification number and their families, however, are excluded
 from receiving the federal credit and its corollary benefits to
 health and well-being, despite paying local, state, and federal
 taxes.
     (4) Since its establishment in 1975, the earned income tax credit
 has also had a positive impact on local businesses because it puts
 more money in the hands of low-income working people who spend the
 money on immediate needs, such as groceries, transportation, rent,
 and health care. The credit has been shown to have a multiplier
 effect to support local businesses, generating an estimated $1.50 to
 $2.00 in local economic activity for every dollar received by
 beneficiaries.
     (5) Therefore, it is the public policy objective of the
 legislature to stimulate local economic activity, advance racial
 equity, and promote economic stability and well-being for lower-
 income working people, including individual tax identification number
 filers, by updating and simplifying the structure of the working
 families tax exemption.
     Sec. 2.   RCW 82.08.0206 and 2008 c 325 s 2 are each amended to
 read as follows:
     (1) A working families' tax exemption, in the form of a
 remittance of tax due under this chapter and chapter 82.12 RCW, is
 provided to eligible low-income persons for sales taxes paid under
 this chapter after January 1, ((2008)) 2022.
     (2) For purposes of the exemption in this section, ((an eligible
 low-income person is)) the following definitions apply:
     (a) ((An)) (i) Except as provided in (a)(ii) of this subsection,
 "eligible low-income person" means an individual((, or an individual
 and that individual's spouse if they file a federal joint income tax
 return;
     (b) [An individual who] Who is)) who:
     (A) Is eligible for((, and is granted,)) the credit provided in
 Title 26 U.S.C. Sec. 32; and
     (((c) [An individual who] Who properly)) (B) Properly files a
 federal income tax return as a Washington resident, and has been a
                                     p. 2                     ESHB 1297.SL
 resident of the state of Washington more than one hundred eighty days
 of the year for which the exemption is claimed.
     (ii) "Eligible low-income person" also means an individual who:
     (A) Meets the requirements provided in (a)(i)(B) of this
 subsection; and
     (B) Would otherwise qualify for the credit provided in Title 26
 U.S.C. Sec. 32 except for the fact that the individual filed a
 federal tax return in the prior year using a valid individual
 taxpayer identification number in lieu of a social security number,
 or the individual has a spouse or dependent without a social security
 number.
     (b) "Income" means earned income as defined by Title 26 U.S.C.
 Sec. 32.
     (c) "Individual" means an individual and that individual's spouse
 if they file a federal joint income tax return.
     (d) "Qualifying child" means a qualifying child as defined by
 Title 26 U.S.C. Sec. 32, except the child may have a valid individual
 taxpayer identification number in lieu of a social security number.
     (3) ((For remittances made in 2009 and 2010, the working
 families' tax exemption for the prior year is a retail sales tax
 exemption equal to the greater of five percent of the credit granted
 as a result of Title 26 U.S.C. Sec. 32 in the most recent year for
 which data is available or twenty-five dollars. For 2011)) (a) Except
 as provided in (b) and (c) of this subsection, for 2023 and
 thereafter, the working families' tax ((exemption)) remittance amount
 for the prior year is ((equal to the greater of ten percent of the
 credit granted as a result of Title 26 U.S.C. Sec. 32 in the most
 recent year for which data is available or fifty dollars)):
     (i) $300 for eligible persons with no qualifying children;
     (ii) $600 for eligible persons with one qualifying child;
     (iii) $900 for eligible persons with two qualifying children; or
     (iv) $1,200 for eligible persons with three or more qualifying
 children.
     (b) The remittance amounts provided in (a) of this subsection
 will be reduced, rounded to the nearest dollar, as follows:
     (i) For eligible persons with no qualifying children, beginning
 at $2,500 of income below the federal phase-out income for the prior
 federal tax year, by 18 percent per additional dollar of income until
 the minimum credit amount as specified in (c) of this subsection is
 reached.
                                     p. 3                     ESHB 1297.SL
     (ii) For eligible persons with one qualifying child, beginning at
 $5,000 of income below the federal phase-out income for the prior
 federal tax year, by 12 percent per additional dollar of income until
 the minimum credit amount as specified in (c) of this subsection is
 reached.
     (iii) For eligible persons with two qualifying children,
 beginning at $5,000 of income below the federal phase-out income for
 the prior federal tax year, by 15 percent per additional dollar of
 income until the minimum credit amount as specified in (c) of this
 subsection is reached.
     (iv) For eligible persons with three or more qualifying children,
 beginning at $5,000 of income below the federal phase-out income for
 the prior federal tax year, by 18 percent per additional dollar of
 income until the minimum credit amount as specified in (c) of this
 subsection is reached.
     (c) If the remittance for an eligible person as calculated in
 this section is greater than one cent, but less than $50, the
 remittance amount is $50.
     (d) The remittance amounts in this section shall be adjusted for
 inflation every year beginning January 1, 2024, based upon changes in
 the consumer price index during the previous calendar year.
     (e) For purposes of this section, "consumer price index" means,
 for any calendar year, that year's average consumer price index for
 the Seattle, Washington area for urban wage earners and clerical
 workers, all items, compiled by the bureau of labor statistics,
 United States department of labor.
     (4) ((For any fiscal period, the working families' tax exemption
 authorized under this section shall be approved by the legislature in
 the state omnibus appropriations act before persons may claim the
 exemption during the fiscal period.
     (5))) The working families' tax exemption shall be administered
 as provided in this subsection.
     (a) The remittance paid under this section will be paid to
 eligible filers who apply pursuant to this subsection.
     (i) Application must be made to the department in a form and
 manner determined by the department. If the application process is
 initially done electronically, the department must provide a paper
 application   upon  request.    The  application  must   include  any
 information and documentation as required by the department.
                                     p. 4                     ESHB 1297.SL
     (ii) Application for the remittance under this section must be
 made in the year following the year for which the federal return was
 filed, but in no case may any remittance be provided for any period
 before January 1, 2022. The department must use the eligible person's
 most recent federal tax filing to process the remittance.
     (iii) A person may not claim an exemption on behalf of a deceased
 individual. No individual may claim an exemption under this section
 for any year in a disallowance period under Title 26 U.S.C. Sec.
 32(k)(1) or for any year for which the individual is ineligible to
 claim the credit in Title 26 U.S.C. Sec. 32 by reason of Title 26
 U.S.C. Sec. 32(k)(2).
     (b) The department shall protect the privacy and confidentiality
 of personal data of remittance recipients in accordance with chapter
 82.32 RCW.
     (c) The department shall, in conjunction with other agencies or
 organizations, design and implement a public information campaign to
 inform potentially eligible persons of the existence of, and
 requirements for, this section.
     (d) The department must work with the internal revenue service to
 administer the exemption on an automatic basis as soon as
 practicable.
     (5) Receipt of the remittance under this section may not be used
 in eligibility determinations for any state income support programs
 or in making public charge determinations.
     (6) The department may adopt rules necessary to implement this
 section. This includes establishing a date by which applications will
 be accepted, with the aim of accepting applications as soon as
 possible. The department may gather necessary data through audit and
 other administrative records, including verification through internal
 revenue service data.
     (7) The department must review the application and determine
 eligibility for the working families' tax exemption based on
 information provided by the applicant and through audit and other
 administrative records, including, when it deems it necessary,
 verification through internal revenue service data.
     (8) If, upon review of internal revenue service data or other
 information obtained by the department, it appears that an individual
 received a remittance that the individual was not entitled to, or
 received a larger remittance than the individual was entitled to, the
 department may assess against the individual the overpaid amount. The
                                     p. 5                     ESHB 1297.SL
 department may also assess such overpaid amount against the
 individual's spouse if the remittance in question was based on both
 spouses filing a joint federal income tax return for the year for
 which the remittance was claimed.
     (a) Interest as provided under RCW 82.32.050 applies to
 assessments authorized under this subsection (8) starting six months
 after the date the department issued the assessment until the amount
 due under this subsection (8) is paid in full to the department.
 Except as otherwise provided in this subsection, penalties may not be
 assessed on amounts due under this subsection.
     (b) If an amount due under this subsection is not paid in full by
 the date due, or the department issues a warrant for the collection
 of amounts due under this subsection, the department may assess the
 applicable penalties under RCW 82.32.090. Penalties under this
 subsection may not be made due until six months after their
 assessment.
     (c) If the department finds by clear, cogent, and convincing
 evidence that an individual knowingly submitted, caused to be
 submitted, or consented to the submission of, a fraudulent claim for
 remittance under this section, the department must assess a penalty
 of 50 percent of the overpaid amount. This penalty is in addition to
 any other applicable penalties assessed in accordance with (b) of
 this subsection (8).
     (9) If, within the period allowed for refunds under RCW
 82.32.060, the department finds that an individual received a lesser
 remittance than the individual was entitled to, the department must
 remit the additional amount due under this section to the individual.
     (10) Interest does not apply to remittances provided under this
 act.
      (11) Chapter 82.32 RCW applies to the administration of this
 section.
     (((a) An eligible low-income person claiming an exemption under
 this section must pay the tax imposed under chapters 82.08, 82.12,
 and 82.14 RCW in the year for which the exemption is claimed. The
 eligible low-income person may then apply to the department for the
 remittance as calculated under subsection (3) of this section.
     (b) Application shall be made to the department in a form and
 manner determined by the department, but the department must provide
 alternative filing methods for applicants who do not have access to
 electronic filing.
                                     p. 6                     ESHB 1297.SL
     (c) Application for the exemption remittance under this section
 must be made in the year following the year for which the federal
 return was filed, but in no case may any remittance be provided for
 any period before January 1, 2008. The department may use the best
 available data to process the exemption remittance. The department
 shall begin accepting applications October 1, 2009.
     (d) The department shall review the application and determine
 eligibility for the working families' tax exemption based on
 information provided by the applicant and through audit and other
 administrative records, including, when it deems it necessary,
 verification through internal revenue service data.
     (e) The department shall remit the exempted amounts to eligible
 low-income persons who submitted applications. Remittances may be
 made by electronic funds transfer or other means.
     (f) The department may, in conjunction with other agencies or
 organizations, design and implement a public information campaign to
 inform potentially eligible persons of the existence of and
 requirements for this exemption.
     (g) The department may contact persons who appear to be eligible
 low-income persons as a result of information received from the
 internal revenue service under such conditions and requirements as
 the internal revenue service may by law require.
     (6) The provisions of chapter 82.32 RCW apply to the exemption in
 this sec