Court grants stay in capital gains tax case, allows state to prepare to collect tax

December 2, 2022

The fight to strike down the state’s capital gains tax as an unconstitutional income tax continues, despite a state Supreme Court ruling Nov. 30 to stay the lower court’s ruling.

In Quinn v. State of Washington, the lower court struck down the tax as unconstitutional and void. BIAW and the Washington Cattlemen’s Association filed a brief supporting the groups challenging the new tax.

Attorney General Bob Ferguson filed an appeal of the lower court’s decision to the state Supreme Court. Washington’s Department of Revenue (DOR) started rulemaking to implement the tax as originally planned.

Notice of improper rulemaking

After receiving complaints from groups and legislators that they were proceeding to enforce a tax that a court had declared illegal, Revenue responded initially by claiming that its proposed rules were guidance and would not be binding unless the Supreme Court upheld the tax.

Despite this position, the state eventually filed a motion to stay the trial court ruling which essentially sought permission from the state high court to collect the tax while the court considered the appeal.

Court decision allows state to prepare to collect tax

The Supreme Court’s Nov. 30 order allows the Department of Revenue to proceed with rulemaking to implement the tax despite the fact the lower court has struck it down. The case is set for oral argument on the merits on Jan. 26, 2023.

BIAW will submit another amicus brief with other business groups supporting the challenge.