Washington state income tax could affect nonresidents

Discussions within the Washington state income tax advisory group have highlighted that nonresidents could potentially be subject to the state’s new millionaire’s tax. One scenario presented by the Multistate Tax Commission involves a nonresident partner in a New York-based LLC that invests in another LLC generating income within Washington. Under this structure, the nonresident might be required to file a Washington state income tax return.

Tax experts, including Brian Mahon of Perkins Coie, noted that the separation of the capital gains tax from other income structures has created complexities. This interplay could lead to effective tax rates exceeding 9.9% in certain anomalous situations.

State Representatives Noel Frame and April Berg addressed these concerns during the meeting. Frame suggested the focus should remain on current administration rather than hypothetical future scenarios, while Berg emphasized that the advisory group should prioritize the existing law without engaging in speculative future tax code changes.