The Tax Times: 2026

Wednesday, April 1, 2026

Washington State Enacts Historic Millionaire's Tax and Makes Sweeping Tax Changes

On March 30, 2026, Governor Bob Ferguson signed Senate Bill 6346 into law, making Washington the latest state to impose a personal income tax on high earners and ending its long-standing status as one of the few states without an individual income tax on wages and salary. The new law also delivers a package of sales tax relief, small business tax cuts, and other changes that will reshape the state's tax landscape over the next several years.

The Millionaire's Tax: 9.9% on Income Over $1 Million

The centerpiece of SB 6346 is a 9.9% income tax on Washington taxable income exceeding $1 million per household. The tax applies to Washington residents, part-year residents, and nonresidents with Washington-source income, and takes effect January 1, 2028, with the first returns and payments due in 2029.

Washington taxable income begins with federal adjusted gross income and applies a series of state-specific modifications. Key adjustments include:

· A $1 million standard deduction per household. Married couples and registered domestic partners share one $1 million deduction regardless of filing status. The deduction is indexed for inflation beginning in 2030 (adjusted every two years). For part-year residents, the deduction is prorated based on the ratio of Washington base income to total federal AGI.

· Charitable contributions are deductible up to $100,000 per individual (or $100,000 combined for spouses or domestic partners filing jointly or separately). Unlike the federal rules, there is no AGI percentage limitation—contributions above $100,000 simply are not deductible for state purposes.

· Long-term capital gains and losses included in federal AGI are excluded from Washington base income. However, gains already subject to Washington's separate capital gains tax are added back, along with the associated capital gains tax deduction. A credit is available for Washington capital gains taxes paid, preventing double taxation on the same income.

· State and local income taxes deducted in computing federal AGI are added back, including taxes that generated B&O or public utility tax credits.

· Loss carryforwards deducted from federal AGI are added back to the extent they are attributable to tax years ending before the law's effective date.

· Interest income from non-Washington state and local government obligations is added back.

· Pass-through entity tax (PTET) payments are added back—owners must add their distributive share of PTET expense deducted from federal AGI.

Nonresident and Part-Year Resident Rules

Nonresidents are subject to the tax only on Washington-source income, which includes wages for services performed in Washington, business income from a Washington trade or occupation, rental income from Washington property, and income from pass-through entities operating in Washington. Income from intangible property is included to the extent used in a Washington business.

There is a safe harbor for nonresidents who perform services in-state for five or fewer days during the calendar year (athletes are excluded from this safe harbor).

Part-year residents must allocate income between residency and nonresidency periods—all AGI during residency, and only Washington-source income during nonresidency.

A person is a Washington resident if (1) domiciled in Washington during the year (unless the individual kept no Washington home, maintained a home outside Washington all year, and was physically present in Washington for 30 days or fewer), or (2) not domiciled in Washington but maintained a Washington place of abode and was physically present for more than 183 days during the year. This mirrors the residency test under the existing Washington capital gains tax.

Pass-Through Entity Tax Election

Effective January 1, 2028, partnerships, LLCs classified as partnerships, and S corporations may elect to pay the millionaire's tax at the entity level on behalf of qualifying owners. This PTET election is designed to help Washington taxpayers maximize the federal deductibility of their state income tax payments. Electing entities must file annual returns and make estimated payments beginning July 1, 2029. Owners receive credits for their share of entity-level tax paid.

Available Credits

Several nonrefundable credits are available beginning with the 2028 tax year. None may be carried forward:

· Capital gains tax credit for Washington capital gains taxes paid on the same income.

· B&O/public utility tax credit for taxes paid on income also subject to the millionaire's tax.

· Other state income tax credit (OSTC) for residents who pay income taxes to other states on income also subject to Washington's tax.

· PTET credit for owners' share of entity-level tax payments.

Estimated Tax Payments

Estimated tax payments follow the federal framework under IRC section 6654, beginning July 1, 2029. No estimated payments are required if the annual tax liability is less than $5,000.

Sales Tax Relief

SB 6346 provides meaningful consumer-level tax relief:

· Grooming and hygiene products, diapers, and over-the-counter medications become exempt from retail sales and use tax beginning January 1, 2029.

· Repeal of sales tax on certain services: The sales and use taxes imposed on services under ESSB 5814 (the October 2025 sales tax expansion covering IT services, custom software, website development, security services, temporary staffing, and live presentations) are repealed effective January 1, 2029—except for advertising services, which remain taxable. This is a significant reversal of the broad services tax expansion enacted just last year.

Small Business Tax Relief

The law delivers what supporters call the largest small business tax cut in Washington history:

· The B&O tax annual filing threshold increases to $250,000 (up from $125,000), meaning businesses grossing under that amount that owe no other taxes or fees to the Department of Revenue will not need to file an annual B&O return.

· The small business B&O credit is doubled beginning January 1, 2029: for non-service businesses, the credit increases from $55 to $110 per month (effectively exempting the first $250,000 of income); for service businesses, it rises from $160 to $320 per month.

· The B&O surcharge on businesses with over $250 million in Washington taxable income (the 0.5% surcharge enacted in 2025) is set to expire one year early—on January 1, 2028, instead of January 1, 2029. Additionally, beginning July 1, 2026, wholesale sales of food and food ingredients sold by wholesalers to retailers not under common ownership are exempt from the surcharge. Beginning January 1, 2029, licensed health care providers, hospitals, and businesses warehousing and reselling prescription drugs are also exempt.

Working Families Tax Credit Expansion

SB 6346 expands the Working Families Tax Credit, which provides a refundable cash rebate of up to $1,330 to low- and moderate-income households. The expansion lowers the age eligibility to 18 years of age (from the current requirement of 25), effective for applications submitted beginning in 2029.

Revenue Allocation

The millionaire's tax is projected to generate roughly $3 billion to $3.5 billion annually from an estimated 21,000 households (less than 1% of Washington's population). Revenue is dedicated to K-12 education, health care, higher education, other essential services, the Working Families Tax Credit expansion, and county public defense services (7% of revenue).

Companion Legislation: Estate Tax Rate Reduction (SB 6347)

The same legislative session produced SB 6347, which reduces the Washington estate tax rates that were increased in 2025. For decedents dying on or after July 1, 2026, rates revert to a range of 10%–20% (down from the current range of 10%–35%), and the exemption reverts to $3,000,000 per individual. For decedents who died between January 1, 2026, and June 30, 2026, the exemption remains $3,076,000 as previously adjusted. A late amendment effectively freezes the exemption at $3,000,000 going forward by referencing a discontinued inflation index.

Legal Challenges Ahead

The law faces immediate and formidable legal obstacles. The Citizen Action Defense Fund, led by former Washington Attorney General Rob McKenna, announced it will file suit arguing that the tax violates the Washington State Constitution's uniformity requirement. The challenge relies on a 1933 Washington Supreme Court decision holding that income is property and therefore must be taxed uniformly—making a graduated income tax unconstitutional under existing precedent.

The Washington State Republican Party has also announced plans to pursue both a referendum and a ballot initiative to repeal the law. The bill includes a "necessity clause" that bars referendums, though opponents argue the clause itself is unconstitutional given the law does not take effect until 2028 with payments not due until 2029.

Governor Ferguson has said he expects the legal challenges and believes the tax is constitutional, predicting that the Washington Supreme Court will ultimately resolve the question.

Key Effective Dates

Provision	Effective Date
General effective date of SB 6346	June 11, 2026
B&O surcharge exemption for wholesale food sales	July 1, 2026
Estate tax rate reduction (SB 6347)	July 1, 2026
Early expiration of B&O surcharge	January 1, 2028
Millionaire's income tax begins	January 1, 2028
WFTC age expansion effective	January 1, 2028
First income tax returns and payments due	2029
Sales tax exemption for hygiene products, diapers, OTC meds	January 1, 2029
Repeal of services sales tax (except advertising)	January 1, 2029
Small business B&O credit doubled	January 1, 2029
B&O surcharge exemption for health care/Rx	January 1, 2029
Estimated tax payments begin	July 1, 2029

What This Means for Taxpayers

For high-income individuals with Washington connections, whether residents, part-year residents, or nonresidents with Washington-source income—the new tax demands immediate attention to residency planning, income sourcing, and entity structuring. The interaction between the new income tax, the existing capital gains tax, the PTET election, and the available credits creates a complex planning environment that will require careful modeling.

For small businesses, the doubled B&O credits, increased filing threshold, early expiration of the B&O surcharge, and repeal of the services sales tax represent genuine relief, though the staggered effective dates mean the full benefit will phase in over the next three years.

And for everyone involved, the pending constitutional litigation and potential ballot measures mean that the law's long-term survival is far from certain. Taxpayers should plan for the law as enacted while monitoring the legal and political developments closely.

Have A State Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Tuesday, March 31, 2026

BVI Beneficial Ownership Rules Just Changed: What Offshore Entity Owners Need to Know Before April 1, 2026

Starting April 1, 2026, the British Virgin Islands is opening the door for third parties to access beneficial ownership information on BVI entities. Recent amendments to the BVI Beneficial Ownership regime introduce new procedures for requesting and challenging disclosure of that information. If you own or control a BVI business company or limited partnership, these changes demand your attention now.

Who Can Request Your Information

Under the amended framework, any person who can demonstrate a "legitimate interest" may apply to the BVI Registrar of Corporate Affairs to inspect or obtain a copy of information recorded in the Register of Beneficial Owners (ROBO). A legitimate interest generally means the request is connected to investigating, preventing, or detecting money laundering, terrorist financing, or proliferation financing. Persons who carry out customer due diligence obligations under BVI law also qualify.

The information subject to disclosure is limited to individuals who directly or indirectly hold a 25% or greater ownership interest—or exercise equivalent control—over a BVI entity. What can be disclosed includes the beneficial owner's full legal name, month and year of birth, nationality, and the nature of their interest or control. Each request is subject to a non-refundable government fee of US$75.

How to Apply for an Exemption from Disclosure

Beneficial owners can apply for a general exemption from disclosure at any time after entity incorporation. Applications may be filed directly or through a legal representative. To succeed, the applicant must provide a clear explanation of the circumstances justifying the exemption, along with supporting evidence. Grounds for exemption include situations where disclosure may expose the beneficial owner—or persons connected to them—to a risk of harm or vulnerability, or where the beneficial owner is a minor or otherwise lacks legal capacity.

Supporting documentation will depend on the circumstances but may include proof of age, official government correspondence involving national security concerns, or affidavits evidencing reasonable belief and identifying individuals at risk. The Registrar reviews each application individually and may grant exemptions subject to conditions or for a specified duration. If the underlying circumstances change, the beneficial owner must notify the Registrar.

A key advantage of a general exemption is that, once granted, it can apply across multiple entities owned by the same beneficial owner.

How to Object to a Specific Disclosure Request

When the Registrar receives a request and is satisfied there is no good reason to refuse it, the Registrar will notify the legal entity through its Registered Agent. The legal entity then has five days from receipt of notice to file a notice of objection. That objection must clearly explain why the Registrar should not grant access.

The Registrar's notice will include the purpose for which the information will be used. If the requesting party is a legal entity, the notice will also identify the name of that entity.

If a timely notice of objection is filed, the legal entity has an additional five days to submit a formal application opposing disclosure. Acceptable grounds include that the request was not made for a proper purpose, contains misleading or inaccurate information, is likely to cause risk of harm to the beneficial owner, or involves a beneficial owner who is a minor or lacks legal capacity. Supporting evidence is required. If the Registrar rejects the application, the applicant has a right to appeal.

Unlike a general exemption, an objection is time-sensitive and applies only to the specific entity named in the request.

Exemption vs. Objection: Know the Difference

The two mechanisms serve different purposes and have different strategic implications. A general exemption can be filed proactively at any time and covers multiple entities. An objection is reactive, time-limited, and entity-specific. Importantly, neither mechanism restricts access by competent authorities or law enforcement.

Given the tight timelines involved—particularly the five-day windows for objections—beneficial owners of BVI entities should not wait until a disclosure request arrives to consider their options. Proactive planning, including evaluating whether to seek a general exemption now, is the best way to protect your interests.

What You Should Do Now

If you own or control a BVI entity, consult with qualified legal counsel to assess whether a general exemption application is appropriate for your circumstances. Ensure your Registered Agent is prepared to notify you immediately if a disclosure request is received so you can act within the required deadlines. The cost of being unprepared—given the five-day response windows—is far greater than the cost of planning ahead.

Have An International or Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Monday, March 30, 2026

Clock Beats Commissioner: IRS Loses $70M Easement Case on Late FPA Under BBA

The Tax Court allowed Olivian Holdings LLC to keep its full $70 million 2018 conservation easement deduction and avoid roughly $26 million of tax and all penalties, solely because the IRS issued the final partnership adjustment (FPA) too late under IRC Section 6235.

What the Tax Court Did

· The court entered a stipulated decision on March 27, 2026, granting Olivian its entire $70 million charitable contribution deduction for a Louisiana conservation easement for 2018.

· As part of that decision, Olivian owes no related tax underpayment (about $26 million) and no accuracy-related or civil fraud penalties for that year.

· The parties agreed that the IRS’s concession was based “solely” on the fact that the August 3, 2023 FPA was not timely under IRC Section 6235.

Statute of Limitations Issue

· The notice at issue was a final partnership adjustment, which is how the IRS communicates adjustments to partnership items under the BBA regime.

· Olivian argued that the IRS failed to issue the FPA within the applicable limitations period or obtain a valid extension.

· By February 20, in its summary judgment motion, Olivian pointed out that the IRS had effectively stopped arguing timeliness and instead tried to rely on the fraud exception to keep the statute of limitations open.

· On March 24, counsel for both sides signed a stipulation allowing the court to enter decision in Olivian’s favor based on the late notice.

IRS Fraud Allegations That Went Nowhere

· In earlier filings, the IRS alleged Olivian was part of a fraudulent syndicated easement shelter selling inflated deductions based on overstated appraisals.

· The IRS said managers knew of at least two lower appraisals, yet claimed an almost $700,000 per‑acre value for about 170 acres by positing infeasible clay mining, even though the land had been valued at under $3,000 per acre only 2.5 years earlier.

· The IRS asserted that the managers never intended to operate a clay mine and instead used the property purely to market pre‑packaged, overstated tax deductions.

· Despite these allegations, the court never reached the merits; the procedural defect (untimely FPA) controlled the outcome.

Parallel Agate Holdings Decision

· Earlier that same week, in a separate stipulated decision, the IRS also conceded a different 2018 Louisiana conservation easement deduction — about $48 million claimed by Agate Holdings LLC.

· In Agate, the IRS again lost all tax and penalties because the FPA notice was not timely under IRC Section 6235, amid allegations the Service had backdated extension documents to get around the statute.

· Together, Olivian and Agate underscore that, even in aggressive syndicated easement cases with asserted fraud, strict adherence to the BBA statute of limitations for FPAs can be outcome‑determinative.

Practitioner takeaway

· Treat 6235 like a hard stop. In BBA partnership exams, even in “bad facts” syndicated easement cases with strong fraud narratives, an untimely FPA is fatal to tax and penalties; Olivian and Agate show the court will not rescue the IRS from a blown 6235 deadline.

· Build a statute dossier early: calendar the base 3‑year period, track every Form 872 / Form 8984 or equivalent extension, and document when any modification requests were made and when they were fully “submitted” (which drives the 270‑day rule under 6235(a)(2)).

· Do not concede fraud‑exception arguments casually: force the IRS to prove that a valid fraud theory actually keeps the BBA assessment period open, rather than assuming fraud “automatically” rescues a late FPA.

· In any easement BBA case, make statute of limitations and notice validity a first‑tier issue alongside valuation and 170 compliance; as Olivian and Agate illustrate, clean procedural wins can obviate having to litigate abusive‑scheme allegations.

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