The Legislature must meet a late-night deadline Thursday for fixing a legal glitch in the Washington estate tax law or as many as 10 refund checks worth more than $13 million will go into the mail Friday morning.
Lawmakers are under pressure to respond to a state Supreme Court ruling last year that in effect struck down the estate tax as it applies to married couples who set up certain property trusts. That ruling left the estate tax in place for single adults who leave behind estates valued at more than $2 million.
The longer lawmakers delay a fix, the bigger the hit to the state budget. The Department of Revenue has 70 refund requests in hand worth up to $50 million, and officials believe there are other potential claims that could bring the state’s total exposure to refunds to $96 million for 125 claims, agency spokesman Mike Gowrylow said.
Cost to the treasury in the next two-year budget is expected to hit $160 million.
“We’ve been holding off processing refunds as long as we possibly can in deference to the Legislature,” Revenue spokesman Mike Gowrylow said. “Basically the timeline was to issue them sometime Thursday. But the fact is, we have a little wiggle room and we could wait until first thing Friday morning. We have to have the checks in the mail before we go to court before Judge Gary Tabor.’’
The state is due in Thurston County court at 9 a.m. Friday on a case brought by an estate seeking a refund. Gowrylow said officials must be able to tell the judge that either they have mailed refunds or the Legislature has made a change in the law.
On Wednesday afternoon, lawmakers from the House and Senate said they were in talks to see if they could reach agreement.
House Finance Committee chair Reuven Carlyle, D-Seattle, said they were getting closer on a deal. Whether one is struck or not, House Majority Leader Pat Sullivan, D-Covington, plans a House vote on an estate tax bill Thursday – leaving the ball in the Senate’s hands.
In the past week, the Senate backed off its insistence on raising the minimum size of a taxable estate from $2 million to $5 million and cutting rates for the estates that would still be taxed under that exemption.
Sen. John Braun, R-Chehalis, and others had been working recently on a new approach that would raise the highest tax rate on the wealthiest to defray the costs of a new exemption for family-owned business assets.
But as Gov. Jay Inslee pointed out in a Tuesday news conference, the proposal advanced by Braun’s colleagues would collect less money than the original estate tax created in 2005 and upheld by voters in 2006. The GOP’s plan also earmarks the money for social programs, not the public school system that the Legislature is on the hook to better fund.
Adding complexity to the talks, some of the GOP’s own members are reluctant to accept any estate tax — the Senate Majority Coalition failed to muster enough votes in the Senate Ways and Means Committee on Tuesday even to advance Braun’s idea.
Brad Shannon: 360-753-1688