Interest on loans that are primarily secured by first mortgages or trust deeds on non-transient residential properties is currently subject to the service and other activities B&O tax rate if the loan originator is located in more than 10 states (RCW 82.04.29005). Otherwise, such interest is deducted from B&O tax.

SHB 2089, which has been signed by Gov. Ferguson, amends the statute so that high volume mortgage lenders pay the service and other activities B&O tax rate for interest on such loans. The number of the lenders’ locations will no longer affect the deduction.

A “high volume mortgage lender” is defined as a financial institution that is subject to the 1.2% B&O tax surcharge or has annual closed mortgage origination volume of at least $10 billion.

This change is estimated to increase revenues to the general fund–state (GFS) and the workforce education investment account (WEIA). SHB 2089 requires the Department of Revenue (DOR) to estimate the amount of increased GFS revenues due to the bill and transfer them to the wildfire response, forest restoration, and community resilience account. The increased revenues to the WEIA would remain in the WEIA.

The bill is effective July 1, 2026. According to the fiscal note, though, DOR can’t implement the bill until Jan. 1, 2027. The bill is estimated to increase revenues by $7.1 million in 2025–27 and $36.3 million in 2027–29. Of the 2025–27 amount, $1.0 million would go to the WEIA and $6.1 million would be transferred to the wildfire account. Of the 2027–29 amount, $4.9 million would go to the WEIA and $31.4 million would be transferred to the wildfire account.

The wildfire account was created in 2021. As part of 2SHB 1168, the Legislature intended to provide $125 million a biennium to the new wildfire account, for a total of $500 million. The Legislature did not establish a dedicated funding source.

In 2021, the Legislature appropriated $125.0 million from the GFS to implement the bill. Based on a review of budget documents, the Legislature has since transferred or appropriated $316.1 million to the wildfire account from the GFS and the natural climate solutions account (NCSA). (The NCSA receives funding from the carbon emission allowance auctions.)