International investment management services – Fund distribution, fund administration, & related investment services (e.g., transfer agent services)

The purpose of this tax topics article is to provide clarification regarding the “management component” described in ETA 3183.2014, International Investment Management Services. 

As explained in the ETA, a taxpayer may qualify for the International Investment Management Services (“IIMS”) preferential B&O tax rate under RCW 82.04.290 if it is primarily engaged in the business of providing “investment management services” and satisfies the remaining elements of RCW 82.04.293. “Investment management services” includes investment research, investment consulting, portfolio management, fund administration, fund distribution, investment transactions, or related investment services.

ETA 3183.2014 was issued on February 28, 2014. In that ETA, the Department clarified that to qualify for the IIMS preferential B&O tax rate, a taxpayer is required to demonstrate some management component in each of the services listed in the definition of “investment management services.”

Fund distribution/fund administration/related investment services (e.g.,transfer agent services)

Taxpayers that are engaged in fund distribution, fund administration, or related investment services (e.g., transfer agent services) may qualify for the IIMS preferential B&O tax rate if these services have a management component.
 

• If the services are performed by the fund administrator, fund distributor, or transfer agent of a mutual fund named in the mutual fund’s materials filed with the Securities and Exchange Commission (a regulated mutual fund), the Department will presume that these activities include a management component because the taxpayer is responsible for the activity and manages others involved in the performance of these functions. 
• In all other instances, taxpayers engaged in these activities will need to demonstrate that their services include a management component similar to those entities named by a regulated mutual fund.

Accordingly, if taxpayers are engaged in the services as described in this tax topics article, they may qualify for the IIMS preferential B&O tax rate, assuming all of the other elements of RCW 82.04.293 have been met.