News and Insights

Retroactive Legislation in Washington Challenged

Tax Development Dec 12, 2016

The Washington Department of Revenue has submitted a brief in opposition to a petition for certiorari in the United States Supreme Court case Dot Foods, Inc. v. Department of Revenue of the State of Washington. Dot Foods, Inc. has challenged the retroactive amendment passed by the Washington legislation in 2009 on substantive due process grounds.

The Washington Supreme Court expanded a Business and Occupations Tax exemption in 2009 to out-of-state businesses which created a significant tax advantage not available to in-state businesses. The substantial drop in revenue created by this interpretation led the state legislature to retroactively close the loophole shortly after the Dot Foods decision.

After the recent activity regarding Michigan’s retroactive legislation, this case potentially adds to the growing list of challenges to legislative activity in the states. Previously, the challenges have primarily involved situations regarding the Multistate Tax Compact, where legislation was enacted to retroactively repeal the Compact. A review by the Supreme Court could provide guidance in this area of concern regarding retroactive legislation raised by several taxpayers in multiple states.