Official Text and Analysis.

Makes the following changes to the original bill: • Lowers the tax rate from 9 percent to 7 percent. • Increases threshold exclusion to $250,000. • Exempts all sales or exchanges of real estate. • Replaces sole proprietor deduction with a family-owned small business deduction. • Exempts the value of goodwill received when a car dealership is sold. • Deposits the first $350 million in revenues collected each year into the Education Legacy Trust Account and deposits the remainder into a new Taxpayer Relief Account..

Prohibits the state attorney general from requesting the court to reconsider its prior rulings declaring income to be property.

Eliminates the requirement for taxpayers owing the state tax to also file a copy of their federal income tax return.

Exempts all real estate from capital gains tax.

Adds a referendum clause and a new section listing prior resolutions to impose an income tax.

Provides a deduction against the capital gains tax for amounts contributed to a nonprofit organization engaged in services for individuals with disabilities.

Provides sales and use tax exemptions for clothing and prepared food. Backfills revenue impact to the state general fund by using capital gains tax revenues deposited into the taxpayer fairness account to the extent funds are available in the taxpayer fairness account.

Specifies that the state capital gains tax authorized in section 103 of this act shall not be construed in any way as providing authorization for cities or counties to impose a local version of the tax.

Makes the capital gains tax voluntary.

Removes the emergency clause. Removes language from the intent section specifying that the tax is necessary for the support of state government and its existing institutions..

Exempts the sale of a controlling interest in a business entity from capital gains tax for the portion of the sale attributable to real estate if the transaction is also subject to real estate excise tax.

Provides a deduction against the capital gains tax for amounts contributed to a nonprofit organization.

Striking amendment: 1) Modifies the title; (2) Adds intent language; (3) Eliminates the maximum number of employees a business may have for its sale to qualify for the small business deduction; (4)Increases the qualifying gross income threshold for the small business deduction from $6,000,000 to $10,000,000; (5) Removes the section of the bill that would require ambiguities to be construed in favor of the application of the tax; (6) Removes the section of the bill that would authorize reciprocal tax collection agreements; (7) Modifies the deposit and distribution of tax collections: Deposits the first $350,000,000 collected each fiscal year into the Education Legacy Trust Account, deposits the next $100,000,000 into the general fund, and deposits the remainder into a newly created taxpayer fairness account; (8) Provides annual inflationary adjustments for the $250,000 exclusion amount, $10,000,000 gross income threshold for the small business deduction, and account distribution amounts; and (9) Makes technical corrections and clarifications.

Changes the title of the bill to: "enacting a capital gains income tax.".

Specifies that applicable Title 26 federal tax code references in the bill are to the federal income tax laws.

Delays the effective date of the act until July 1, 2025, to allow the Legislature to review recommendations from the Tax Structure Work Group before imposing a state tax on capital gains.

Exempts all sales or exchanges of cattle, horses, and livestock from the capital gains tax.

Provides a total tax deduction for any sale or transfer to a family member.

Limits the capital gains tax on tangible personal property to only that property which was located in Washington during the current taxable year.

Reduces the number of years a taxpayer must own the qualified family-owned small business from eight years to five years in order to qualify for the deduction.

Removes the current distribution of tax revenues to the Education Legacy Trust Account. Deposits all tax revenue into the newly created Taxpayer Fairness Account and provides a mechanism to use the tax proceeds from the Account to provide an annual state sales and use tax rate reduction.

Provides an exemption for the value of any long-term capital gain accrued by a capital asset prior to January 1, 2022.

Defines "real estate" using the property tax definition for "real property" and clarifies that "real estate" includes all buildings, structures, and permanent improvements built upon or affixed to the land.

Removes the authorization for the Department of Revenue to require the filing of informational returns.

Clarifies that the reference to the tax being "necessary for the support of the state government and its existing institutions" shall not be interpreted as having the effects of an emergency clause.

Removes the depositing of the tax proceeds into the Education Legacy Trust Account. Directs all revenues from the tax to be deposited into the Fair Start for Kids Account created in Engrossed Second Substitute Senate Bill No. 5237.

Provides a contingent effective date that is dependent upon the Internal Revenue Service advising the Department of Revenue that the tax imposed under this act is an excise tax.

Removes reference to the tax being necessary for the support of state government and its existing public institutions.

Requires that 30 percent of the revenues from the tax be deposited into the state budget stabilization account.

Removes the requirement that all revenues from the tax be deposited in the Education Legacy Trust Account.

Allows for the deduction of any capital gain realized for the sale or transfer of a business.

Removes Section 5(2) of the bill that states the tax levied is necessary for the support of state government and its existing institutions. Adds a referendum clause to the bill.

Increases the lookback period to count the five years to determine if the taxpayer meets the material participation requirements for the qualified family-owned small business deduction.

Removes capital gains invested in federal Opportunity Zones from being added into an individual's Washington adjusted capital gain.

Provides the option for a taxpayer to claim a lifetime exemption of $1,000,000 in long-term capital gains.

Provides a credit against taxes due on any capital gains for charitable contributions made and claimed by an individual on the individual's federal tax return.

Provides a deduction in computing the tax owed on a capital gain equal to an individual's contributions to a charitable organization claimed on the individual's federal return for that tax year.

Provides a credit against taxes due on any capital gains for charitable contributions made and claimed by an individual on the individual's federal tax return. Authorizes an unused credit to be available for two subsequent tax years.

Increases the standard deduction for joint filers to $500,000.

The vote on the passage of the bill.

Beginning January 1, 2022, an annual state net CGT is imposed on the sale or other voluntary exchange of long-term capital assets by individuals. The tax rate is 7.0 percent. Generally, the tax rate is applied to the capital gains amount reported on the individual's federal income tax return.