January 31, 2022
Senators Carlyle and Rolfes have introduced SB 5967, which would add a new “climate resiliency and mitigation” surcharge on certain financial institutions. Essentially, this would fall on the same banks subject to the 1.2% business and occupation (B&O) surtax on large financial institutions, to the extent that they finance fossil fuel companies.
As with the B&O surtax, the proposed climate surcharge would apply to financial institutions that are members of a consolidated financial institution group with annual net income of at least $1 billion. However, to be subject to the climate surcharge, such financial institutions would also have to be “bankers of fossil fuels.” (That is, part of a consolidated financial institution group that finances fossil fuel companies in excess of $1 billion a year.)
For a particular institution, the surcharge would be based on the consolidated financial institution group’s financing for fossil fuel companies (less financing for renewable energy companies) as a percentage of the group’s total financing for all industries. If that percentage is less than 2.5%, the institution would pay a surcharge of 0.25%. If the percentage is more than 2.5% but less than 4.0%, the institution would pay a surcharge of 0.375%. And if the percentage is 4.0% or more, the institution would pay a surcharge of 0.5%.
The surcharge would be levied on gross income that is subject to the B&O tax for services and other activities and it would be on top of the B&O surtax. However, for a financial institution subject to a 0.25% climate surcharge, the 1.2% B&O surtax would be reduced to 0.95%. For a financial institution subject to a 0.375% surcharge, the 1.2% B&O surtax would be reduced to 1.075%. There would be no B&O surtax reduction for institutions subject to the 0.5% climate surcharge.
The surcharge would be in effect for CY 2023 through CY 2049. Collections would be deposited in the climate resiliency account (RCW 43.79.545).
The 1.2% B&O surtax on large financial institutions was enacted in 2019. It was challenged in court, but in September, the state Supreme Court held that it is constitutional.Categories: Budget , Energy & Natural Resources , Tax Policy.