menu
  • Our Story

    • Overview
    • Careers
    • Locations
    • Diversity, Equity & Inclusion
    • Pro Bono
    • Community Involvement
    • Firm Leadership
    • History
    • Alumni
    • Affiliations
    • Media Inquiries
    • Make a Payment
  • Our People

  • Our Insights

    • Events/CLE
    • Publications
    • News
    • Blogs
  • Our Practices & Industries

    • Business
      • Business Transitions
      • Construction
      • Corporate, Securities, and M&A
      • ERISA, Life, Health & Disability
      • Finance & Banking
      • Health Care Transactions
      • Immigration
      • Intellectual Property Transactions
      • Labor, Employment & Benefits
      • Private Investment Funds
      • Private Client Services
      • Real Estate
      • Startups & Emerging Companies
      • Tax
      • Wage & Hour
    • Litigation
      • Antitrust, Competition & Trade
      • Appellate
      • Class Actions
      • Commercial Litigation
      • Construction
      • Creditors' Rights & Bankruptcy
      • Electronic Discovery, Technology & Strategy
      • ERISA, Life, Health & Disability
      • Fiduciary Litigation
      • Financial Institutions Litigation & Investigations
      • Insurance
      • Intellectual Property Litigation
      • International Arbitration
      • Labor, Employment & Benefits
      • Securities & Corporate Governance Litigation
      • Wage & Hour
    • Industries
      • Blockchain & Cryptocurrency
      • Food, Beverage & Hospitality
      • Government Law
      • Investigations, Compliance & White Collar
      • Japan Practice
      • Nonprofit & Social Enterprise
      • Privacy & Data Security
      • Senior Living & Long Term Care
      • Transportation
    • Services
      • COVID-19 Landlord/Tenant Response Team
      • COVID-19 Resource Center
      • Business Dispute Resolution
  • Our Locations

    • Anchorage
    • Portland
    • Seattle
  • Our Careers

    • Attorneys
    • Summer Associates
    • Professional Staff
  • Our Diversity

    • Diversity, Equity & Inclusion
    • Our Story
Lane Powell Web Site
  • OUR PEOPLE
  • STORY
  • INSIGHTS
  • PRACTICES & INDUSTRIES
Search
  • 日本語
  • 中文
  • 한국어
Email this pagePrint this pagePrint to PDF

Topics

  • Tax
  • Washington Tax

Related People

  • Callie A. Castillo
  • Scott M. Edwards

Related Practices & Industries

  • Business
  • Tax
March 1, 2022Publication

Court Finds Washington’s Capital Gains Tax Unconstitutional

Tax Legal Update

On March 1, 2022, the Douglas County Superior Court ruled that Washington’s new capital gains tax is unconstitutional. The tax, enacted in 2021, would have imposed a seven percent tax on long term capital gains over $250,000 reported by Washington residents and other individuals on their federal income tax returns. The law went into effect on January 1, 2022, and the first tax returns would have been due at the same time the individual’s 2022 federal income tax return was due.

Lawyers from Lane Powell and the Freedom Foundation joined forces representing Washington residents impacted by the tax and promptly filed suit in Douglas County, Washington, to challenge the validity of the tax on April 28, 2021. The state initially sought to dismiss the case merely because no one had yet had to pay the unconstitutional tax. After the court ruled that state law permitted the suit as a proper way to challenge the validity of a tax statute, all parties filed motions for summary judgment asking the court to address the merits of the tax.

The court’s ruling found that the tax is an income tax, noting that it relies on federal income tax returns and imposes the tax “on the same long term capital gains that the IRS characterizes as income under federal law.” The court also emphasized that, like other income taxes, it is levied annually and is based on an aggregate calculation of net gains. In so ruling, the court rejected the state’s attempt to characterize the tax as an excise tax on the transaction of selling capital assets. In this regard, the court noted that, unlike excise taxes, the capital gains tax is not imposed on a transactional basis and is not based on the selling price or value of the item sold.

While the plaintiffs argued that the tax violates both the state constitution and the federal constitution, the court found it sufficient to rule that the tax violated Washington’s constitution, which prohibits both graduated income taxes and income taxes with a tax rate in excess of one percent unless the rate is approved by a vote of the people. While the court’s ruling today is a welcome victory, we expect the state to appeal the decision, so the fight is not yet over.

Scott Edwards and Callie Castillo of Lane Powell PC are litigating this case. If you have tax advice or litigation questions, please contact either Scott (edwardss@lanepowell.com, 206.223.7010) or Callie (castilloc@lanepowell.com, 206-223-7145).

 

You May Also Like

  • April 28, 2021News
    Lane Powell & Freedom Foundation File Lawsuit Challenging Washington Capital Gains Income Tax
    Firm Announcement
  • October 14, 2021Publication
    Washington’s New Capital Gains Tax: When, Where, How, and Why
    Tax Legal Update
  • May 3, 2022Publication
    Washington Capital Gains Tax: FAQs in May 2022
    Tax Legal Update

Before proceeding, please note:  If you are not a current client of Lane Powell PC, please do not include any information in this email that you or someone else considers to be confidential or secret in nature.  Prior to the establishment of a lawyer-client relationship, unsolicited emails from non-clients containing confidential or secret information cannot be protected from disclosure.

back to top
  • Our Story

    • Overview
    • Careers
    • Locations
    • Diversity, Equity & Inclusion
    • Pro Bono
    • Community Involvement
    • Firm Leadership
    • History
    • Alumni
    • Affiliations
    • Media Inquiries
    • Make a Payment
  • Our People

    • Our Insights

      • Events/CLE
      • Publications
      • News
      • Blogs
    • Our Practices & Industries

      • Business
      • Litigation
      • Industries
      • Services
      • View All

    Blogs

    Boom: The ERISA Law Blog
    Earth & Table Law Reporter

    • Site Map
    • Disclaimer
    • Data Privacy & Security
    • Contact Us
    • Subscribe
    © 2023 Lane Powell PC Lane Powell & LP
    Logo, Reg. U.S. Pat. & Tm. Off.
    Sitemap
    Connect With Us
    • Twitter
    • Facebook
    • Linkedin
    • Vimeo
    • Make a Payment