On October 24, 2024, the Washington Supreme Court upheld the Court of Appeals decision in favor of the Washington Department of Revenue (DOR) in the case of Antio, LLC v. Washington Department of Revenue. This decision means that the taxpayers were not eligible for the investment deduction when calculating amounts subject to Washington Business and Occupation (B&O) tax.

The Antio decision provided clarification that investment income is subject to Washington B&O tax.

This applies to investments that are incidental to the main purpose of the taxpayer’s business. If investment activities generate less than 5% of the taxpayer’s annual gross receipts, it is not considered part of the main activity of the taxpayer and may be excluded under the safe harbor rule. Please note that the safe harbor rule may be up for interpretation by the court or DOR in the future.

Since this is an interpretation of an existing law, it is possible the Washington DOR may apply this definition of amounts derived from investments to prior years, retroactively. For registered taxpayers, this would create a look back of four years and may result in additional taxes owing for those taxpayers who historically deducted investment income in excess of the safe harbor rule.

For nonprofit organizations, this will impact those who rely on investment income to support their organizational goals. Currently, there is no exemption or special carve-out for nonprofit organizations subject to Washington B&O tax; however, they may qualify for a small business B&O tax credit.

There is a lot of uncertainty regarding this recent ruling and if or when we may see a more taxpayer friendly bill to fix the Antio decision. Our team at Larson Gross is closely monitoring legislative proposals and guidance issued by the Washington Department of Revenue. We will provide additional information as it becomes available.

Please contact us if you have any questions or would like to speak one of our professionals regarding your specific Washington B&O compliance requirements.