2010 Legislative Highlights
Yesterday marked the third cutoff in Olympia, where bills must be passed out of their house of origin in order to continue. Some of the bills we opposed did not make it past this deadline. Sometimes good things happen in a short session!
Two of the areas we expected to see a lot of activity in this short session were liability issues, along with the budget and taxes, of course. Below are some of the highlights (or lowlights) of the session so far.
Budget/Taxes
We have been anxiously awaiting details on a new revenue package to fill the huge gap in the state budget, for fear that it would contain a B&O tax increase on professional services. But when a new omnibus revenue proposal (HB3176) was introduced this week, there was no B&O tax increase included! The bill was heard in the House Finance Committee over the weekend. It includes major tax policy changes in order to raise revenue to help balance the state budget. HB 3176 includes language from Tax Avoidance HB 2970, Tax Preferences HB 2971, Limiting Tax Incentives HB 2972 and Economic Nexus HB 3157 among other bills. HB 3176 will:
(1) Establish economic nexus standards;
(2) Create tax avoidance transactions;
(3) Place a cap on the first mortgage deduction;
(4) Clarify direct seller business and occupation tax exemption;
(5) Limit business and occupation tax preferences for manufacturers of products derived from certain agricultural products;
(6) Eliminate tax preferences for bullion;
(7) End the preferential business and occupation tax treatment received by directors of corporations;
(8) Impose airplane excise tax;
(9) Impose public utility tax on interstate hauls;
(10) Limit foreclosure exemption;
(11) Address tax debts;
(12) Repeal the nonresident sales tax exemption;
(13) Remove the sales and use tax exemption for livestock nutrient equipment and facilities; and
(14) Eliminate the business and occupation tax credit for new employment for international service activities.
We are not out of the woods until “sine die,” so far there is no increase in store for professional services. One might wonder how they will ever squeeze $2.8 billion out of the above list, so we remain vigilant.
By this Thursday, Senate Democrats plan to unveil their plan for closing the budget shortfall.
Liability
Senate Judiciary Committee Chair Adam Kline resurrected a homeowner’s warranty bill (SB6701) that would establish statutory implied warranties for the new construction or substantial remodel of residential real property. These provisions are uninsurable for engineers and architects. ACEC and the construction industry support a striking amendment from Senator Haugen that would tighten licensure requirements for contractors and exempt A/E’s from the bill. The bill has been sent to the floor of the Senate and placed on the floor calendar for a second reading.
Despite the financial dire straits of the state and local governments, many lawmakers seem insistent on adding to the budget woes by increasing government liability in the form of expanding the wrongful death and survival statutes, e.g., the Senate’s vote to pass ESSB 6508 over the weekend. Before moving to final passage, the Senate adopted an amendment (#152 offered by Senators Hargrove and Brandland) to limit the joint and several liability of government entities for the class of new claimants under the bill. It is the same amendment that was rejected on a 23-23 tie vote on Saturday. The amendment was adopted by voice vote yesterday.
After the amendment was adopted, the bill was approved by a 30-18 vote. The House Judiciary Committee will hold a public hearing on ESSB 6508 on February 17 at 8:00 am.
Another mind-boggling bill passed the Senate today, SB 6764, which increases the tort judgment interest rate (the amount of interest a defendant pays on an award while awaiting appeal) from two points above the T-bill to at least 12%. That increases the rate by about nearly ten percentage points. At this point the bill only impacts private sector defendants, not public entities. The Senate adopted an amendment (#185 offered by Senator Carrell) providing that nonprofit, charitable organizations or businesses employing fewer than 50 people will pay interest on judgments founded on tortuous conduct at a rate of 2% above the T-bill rate. The final vote was 29-19, with Senators Haugen and Sheldon joining 17 Republicans in an otherwise party-line vote.
Finally, some good news on the liability front! The second draft of the ACEC amendment to the anti-indemnity statutes is out of the Code Reviser’s Office. It parrots language that was passed in California in 2008 that limits public agencies’ ability to obtain contractual indemnification from design professionals. The bill requires that all indemnity clauses be limited to claims that arise out of, or relate to, the negligence, recklessness or willful misconduct of the design professional. Previously, public agencies could obtain contractual indemnification from design professionals for claims that also involved the public agencies’ negligence or other fault.
Rep. Bruce Dammeier (R-25th) has agreed to co-sponsor the bill. We are currently seeking a co- sponsor from the other side of the aisle and are looking forward to introducing the bill. Take a look at the bill.
