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SALT Alert: Washington State Investment Income Voluntary Disclosure Program

SALT Alert: Washington State Investment Income Voluntary Disclosure Program

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Beginning July 1, 2025, the Department of Revenue will launch a temporary expanded Voluntary Disclosure Program allowing qualifying businesses with unreported investment income subject to business and occupation (B&O) tax to report that revenue without incurring penalties or interest.

A taxpayer may obtain relief for other income streams reportable on the combined excise tax returns; however, penalties will still apply to collected but unremitted retail sales tax.

Two-Phase Approach

The program will span two distinct 10-month phases over the next two fiscal years, allowing for structured administration.

  • Phase 1: July 1, 2025 through April 30, 2026.
  • Phase 2: July 1, 2026 through April 30, 2027.

Who Qualifies

Any registered or unregistered business that has unreported investment income subject to B&O tax, unless the taxpayer has been notified of an audit or agency enforcement action as of July 1, 2025.

Affiliates of entities under audit that would otherwise not qualify for the VDA treatment.

Who Does Not Qualify

Businesses engaged in banking, lending and security, as defined in RCW 82.04.4281. The department may update their website to list additional businesses that do not qualify.

The Department advises that if you are unsure whether you are eligible, you may submit a letter ruling request.

Benefits of Voluntary Disclosure

This temporary expansion of the Voluntary Disclosure Program can offer you the following benefits:

  • The “look back” period for your tax liability is limited to the prior four years plus the current year;
  • Up to 39% in potential penalties can be waived, which include:
    • 5% assessment penalty for substantially underpaid tax.
    • 5% unregistered penalty.
    • 29% late payment of a return penalty.
  • The department can summarize your unreported tax liability in a single tax assessment.
  • Waiver of interest.

Note: If you have collected retail sales or use tax but did not remit it there is an unlimited look back period, and the 29% late payment of a return penalty will apply only to the collected and unremitted retail sales or use tax amounts (WAC 458-20-228 and 458-20-230).

Unsure if your business qualifies?

Frazier & Deeter’s state and local tax specialists can help you determine eligibility and guide you through the voluntary disclosure process to minimize risk and penalties. Contact our team today.

Contributors

Brian Strahle, Partner, Frazier & Deeter Advisory, LLC

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