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  5. Changes To B&O Exemption For Credit Unions

Changes to B&O exemption for credit unions

Issue Date

Intended audience: Credit unions merging with, or acquiring, banks regulated by the Department of Financial Institutions.

Effective Jan. 1, 2026, a credit union organized under the laws of Washington that merges with or acquires a bank that is regulated by the Department of Financial Institutions is subject to business and occupation (B&O) tax.

How do I report? 

Credit unions subject to B&O tax must report gross income under the Credit Union tax classification. The tax rate for this classification is 1.2%. Income subject to this classification is apportionable under WAC 458-20-19404.  

Are there any exceptions

Yes. The following remain exempt from B&O tax:

  • Washington credit unions that submitted an application for regulatory approval before Jan. 1, 2026.
  • Credit unions organized under the laws of any other state.
  • Federally chartered credit unions.

More information

RCW 82.04.405 Credit union – Tax – Exemptions.

Engrossed Senate Substitute Bill (ESSB) 5794, Chapter 423, Laws of 2025 (Sec. 104).

Questions? 

Please call 360-705-6705, or you may request a ruling.