UPDATE: The House vote on the new version of the estate tax passed on a 53-to-33 vote this morning. A few Republican members objected to making the law retroactive to include certain estate trusts formed prior to 2005 that are now eligible for tax refunds after a 2012 court ruling.
Republican Reps. Gary Alexander of Thurston County and Chad Magendanz of Issaquah voted with Democrats in favor. Alexander said he had qualms about the policy but thought the bill might ease the budget stalemate.
ORIGINAL POST: House Majority Leader Pat Sullivan and Finance Committee chair Reuven Carlyle say they and Senate Republican leaders have reached agreement on policy changes to the Washington estate-tax law.
As we reported this morning, the clock is ticking for action on the estate tax before the state Revenue Department’s lawyers go into court at 9 a.m. Friday on yet another estate-tax refund case, and failing a legal fix to the tax law the state needs to tell the judge that as many as 10 refund checks are in the mail.
The House plans a vote later this morning on the latest version of House Bill 2075.
But the Republican-led Senate says it has not agreed to final deal – which may depend on Democrats agreeing to other policy bills, which Sullivan said his caucus still is rejecting as part of budget talks.
Republican Sen. John Braun of Centralia told The Olympian on Wednesday evening: “We do have a revenue neutral solution that we’re pretty much agreed on with the House.’’
“I don’t know where we’ll go tomorrow [Thursday]. It depends on negotiations at a different level,’’ Braun said.
It remains to be seen whether the Senate Majority Coalition’s desire for House agreements on other reform bills – such as workers compensation – is as firm as its budget stance, which has helped nudge the Legislature into a second special session that began Wednesday. Senate Majority Leader Rodney Tom said today through a spokesman that a final agreement was not reached.
The estate tax issue arose after a 2012 Supreme Court ruling affecting certain assets of married couples who put certain assets into a certain kind of trust. Lawmakers say the ruling in effect created a glitch or loophole that lets married couples avoid the estate tax by using the trust and that failure to act with legislation that is retroactive to 2005 would leave the state open to $139 million in tax refunds.
Already, Revenue has 40 refund requests in hand worth up to $50 million.
Carlyle, a Seattle Democrat, said the agreement he helped hammer out with Braun preserves the revenue from the estate tax for the Education Legacy Trust which helps fund K-12 and higher education programs.
Carlyle said the bill allows a deduction of up to $2.5 million for certain family-owned businesses. It also raises the top four tax rates among nine in the estate tax law by small amounts to make up for all but $100,000 of the revenue the law changes would cost.
A qualifying estate would have $6 million or less interest in a qualifying business.
Carlyle said the top for tax rates each will go up 1 percent – to new rates of 18 percent, 19 percent, 19.5 percent and 20 percent.
The Democrat, who has pushed for closure of tax exemptions this year, said his caucus would not agree to the changes if they did not agree that the small-business exemption was a good idea. He said the $2.5 million exemption would be on top of the base $2 million exemption for all estates.
Braun described things this way: “I think the shared vision we got to is there are small businesses that are capital intensive, that are low margin and do not have the flexibility in dealing with the estate tax that larger organizations … might have.’’
“The real goal is to save the jobs that go with those businesses,’’ Braun said.