State Supreme Court Rules on Scope of B&O Tax Mortgage Interest Deduction
Lane Powell Attorneys Scott Edwards and Dan Kittle co-authored an article in the November/December 2014 issue of Washington Bankers Association’s (WBA) Issues and Answers magazine titled “State Supreme Court Rules on Scope of B&O Tax Mortgage Interest Deduction.” In the article, Edwards and Kittle discussed B&O taxes as they relate to financial institutions. They also discussed the possible elimination of a legislature-provided deduction for “amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds” on residential properties.
The department’s efforts to amend the law in response to the court’s decision resulted in the legislature effectively codifying the result in HomeStreet, Inc. v. Department of Revenue in 2010 but limiting the availability of the deduction effective 2012 to banks operating in fewer than 10 states. It also added a requirement that the entity claiming the deduction must have originated the loan, acquired the loan from the originator or be under common control with the originator, and adding some express exclusions from the deduction.