Investment Income Voluntary Disclosure Program

Overview

Beginning July 1, 2025, the Department of Revenue will launch a temporary expanded Voluntary Disclosure Program under ESSB 5167. This program is for businesses with unreported investment income subject to business and occupation (B&O) tax. It allows qualifying businesses to report that revenue without incurring penalties or interest.

This temporary relief also applies to other income streams reportable on the combined excise tax returns. However, penalties will still apply to collected but unremitted retail sales tax.

The goal of this temporary program is to encourage businesses to comply with Washington tax laws, pay prior tax obligations, and register (if necessary).

Two-phase approach

The program will span two distinct 10-month phases over the next two fiscal years, allowing for structured administration.

• Phase 1 – July 1, 2025, through April 30, 2026.
• Phase 2 – July 1, 2026, through April 30, 2027.

Who qualifies

• Any business registered or unregistered who has unreported investment income subject to B&O tax.
  • Unless the taxpayer has been notified of an audit or agency enforcement action as of July 1, 2025.
• Affiliates of entities under audit that would otherwise not qualify for the VDA treatment.

Who does not qualify

• Businesses engaged in banking, lending, and security, as defined in RCW 82.04.4281.
• Continue checking the department’s website for more updates.

If you are unsure whether you are eligible, submit a letter ruling request.

Benefits of voluntary disclosure

This temporary expansion of the Voluntary Disclosure Program can offer you the following benefits:

• The “look back” period for your tax liability is limited to the prior four years plus the current year;
• Up to 39% in potential penalties can be waived, which include:
  • 5% assessment penalty for substantially underpaid tax.
  • 5% unregistered penalty.
  • 29% late payment of a return penalty.
• The department can summarize your unreported tax liability in a single tax assessment.
• Waiver of interest.

Note: If you have collected retail sales or use tax but did not remit it there is an unlimited look back period, and the 29% late payment of a return penalty will apply only to the collected and unremitted retail sales or use tax amounts (WAC 458-20-228 and 458-20-230).

Online application

All requests for voluntary disclosure must be submitted through the department’s online application starting July 1, 2025. Applications are accepted and reviewed in the order they are received. Applications that include all the following elements are considered “complete” at the time of submission and may be prioritized over incomplete applications:

• Name/address/phone number of business.
• Spreadsheet of gross income in the format specified in the sample agreement.
• Washington Business Activities Questionnaire.
• Confidential Tax/Email Authorization form.
• Copies of reseller permits, exemption certificates, or other similar documentation.

We strongly encourage you to attach and submit all the required elements at the time you complete your application to prevent delays in the process. After submitting your application, you will receive a confirmation that your application has been received.

Additional information may be requested during the voluntary disclosure process.

Unregistered applicants are required to register with the Department by submitting a business license application. Unregistered applicants should register with the Department after submitting the voluntary disclosure application. Business license applications may be completed online. For assistance completing the application, you can access our online Business Licensing Wizard.

Anonymity

If you choose to apply anonymously, you must disclose the business identity within 15 calendar days of the application date. You are afforded protection from discovery by the department for this period of time only.

The department will send a reminder email to you after submitting the application. If you do not disclose your name and contact information by the 15th day, your application will not be approved and you will need to re-submit an application.

Formal agreement

If the department has determined that you meet the voluntary disclosure qualifications, you will be approved for the program. The department will prepare a Voluntary Disclosure Agreement which must be signed and returned to the department within 30 calendar days of the original application date. If you do not return the signed agreement within 30 days, your application may not be approved and any tax and interest owed could be subject to an extended look back period of seven years plus the current year as well as penalties of up to 39 percent of the tax due.

Once the signed agreement is returned, the department will sign the agreement and return a copy to you.

Completing the voluntary disclosure process

After submitting your application, you will receive communication from an examiner with instructions on what information is needed. If you did not include all the recommended documents with your initial application, you will be required to provide them no later than 60 days from the date you submitted your application. Once your tax liability has been determined the department will prepare a tax assessment that includes the tax due, as well as any applicable penalties and interest. You will be sent a draft copy of the assessment for review. The assessment will then be submitted for processing and the Department will send an invoice to your online MyDOR account.

Full payment must be received according to the payment instructions on your invoice. If the invoice is not paid by the due date, you may forfeit participation in the program and be subject to additional penalties and interest on the remaining balance due.

Application not approved

In the event your application was not approved, you will receive an explanation from the department along with further instructions.

Need more information about the VDA Program?

If you would like more information about our Voluntary Disclosure Program, please contact us by:

Phone

360-704-5649

Email

voluntarydisclosure@dor.wa.gov

Need more information about taxability of investment income?

If you would like more information about the taxability of investment income, please request a tax ruling online or by email at rulings@dor.wa.gov.

Confidentiality

The information obtained from your application will be used by the department to determine your eligibility for the Voluntary Disclosure Program as well as to respond directly to you regarding your desire to comply with Washington's tax law. The department will maintain confidentiality of the information, as well as any Voluntary Disclosure Agreement, as provided in RCW 82.32.330. For more information please review our Privacy Statement.