MAY 31, 2012
New Law Limits First Mortgage Deduction for B&O Tax
New law Effective July 1, 2012, Part I of Engrossed Senate Bill 6635, Chapter 6, Laws of 2012
narrows the business and occupation (B&O) tax deduction for interest on rst mortgages
or trust deeds.
Limits to the RCW 82.04.4292 provides a deduction for persons engaging in banking, loan, security,
deduction or other nancial businesses on interest received on investments or loans primarily
secured by rst mortgages or trust deeds on nontransient residential properties.
Beginning July 1, 2012, RCW 82.04.4292 will exclude from the deduction the amounts
received as interest on loans originated by a person or an afliate of such person located
in more than ten states.
Determining the A person is located in a state if:
number of states
• The person or an afliate of the person maintains a branch, ofce, or one or more
employees or representatives in the state; and
• Such in-state presence allows borrowers or potential borrowers to contact the branch,
ofce, employee, or representative concerning the acquiring, negotiating,
renegotiating, or restructuring of, or making payments on, mortgages issued or
to be issued by the person or an afliate of the person.
Denitions Afliate – means a person is afliated with another person, and “afliated” means under
common control.
Control – means the possession, directly or indirectly, of more than 50 percent of the
power to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting shares, by contract, or otherwise.
Interest – includes the portion of fees charged to borrowers, including points and loan
origination fees, that is recognized over the life of the loan as an adjustment to yield in
the taxpayer’s books and records according to generally accepted accounting principles.
It also includes servicing fees described in RCW 82.04.4292(4).
For more Contact the Department’s Telephone Information Center at 1-800-647-7706.
information