OLYMPIA — The Washington state Legislature on Thursday approved a legislative fix to a court ruling on the estate tax, a move meant to prevent issuing millions of dollars in refunds that were set to start going out Friday morning.
The House approved the measure 53-33 earlier in the day Thursday, while the Senate approved it 30-19 just before midnight, sending it to Gov. Jay Inslee for his signature. Inslee signed the bill into law just after midnight.
Officials with the state Department of Revenue had said the state could have to pay out $160 million over the next two years if the fix wasn’t made to the law. The figure includes money lost through refunds and a decline in future collections.
Lawmakers were trying to reach a deal in time to prevent the first $13 million the state agency said it must send to 10 estates before a 9 a.m. court hearing on Friday unless a measure passed and was signed into law. Additional checks were to be processed in coming weeks.
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Supporters wanted a legislative workaround to last year’s ruling by the state Supreme Court, which determined the estate tax did not apply to married couples who had used a certain type of trust in their estate planning.
The Department of Revenue said it had already received 70 refund requests totaling more than $40 million from estates that had paid the taxes before the court ruling. Others have gone to court to seek refunds.
The bill passed Thursday closes the marital trust exemption, while also creating an exemption for some small businesses and increasing the tax rate on the largest estates.
“I think we can all accept that we had to move forward with a responsible, thoughtful resolution to this particular court case,” said Rep. Reuven Carlyle, D-Seattle. “That’s what this legislation accomplishes.”
Republicans expressed concern about the retroactivity of the law, saying it was unfair.
“The reality is this money belongs to those families because it was not lawfully taken from them in the first place,” said Rep. Maureen Walsh, R-Walla Walla. “We’re going against a decision made by the Supreme Court to refund these families.”
The agreement on the estate-tax measure may have indicated the first agreement between the House and Senate, which have been locked in budget negotiations for weeks.
Democrats control the House, and a mostly Republican coalition, led by Democrat Rodney Tom, controls the Senate. Lawmakers started a second, potentially 30-day special session on Wednesday after adjourning their first special session on Tuesday without a deal on the state operating budget.
The Senate majority has been seeking movement on a handful of policy bills, and during passage of its budget last week, lawmakers said on the Senate floor that revenue-related bills, including the estate tax, would not pass without some of those bills, including one dealing with workers’ compensation settlements.
Lawmakers face a $1.2 billion budget shortfall for the two-year cycle that ends in the middle of 2015 — an amount that doesn’t include money lawmakers are seeking for education in response to a Supreme Court ruling that the state isn’t fulfilling its constitutional obligations.
Associated Press writer Mike Baker contributed to this report.