Businesses Seek Exemption From Intangible Property Tax

“Intangible property tax.” The phrase may make your eyes glaze over, but among business interests, it is stirring anger and a push for legislation.

The Republican House is poised to vote on a bill, HB2745, that would ban state and local governments from taxing any property considered intangible. The measure would face an uphill fight if it reaches the Democrat-led Senate.

Intangible property is a business asset that has no physical substance, unlike a building, machinery or real estate. Its taxation is allowed under the state Constitution.

Some types of intangible assets are exempt from taxation, including mortgages, notes and stocks. Other types are not exempt, such as trademarks, brand names, patents, copyrights, trade secrets, franchise agreements, licenses, permits, customer lists and business good will.

A company may own little in the way of physical assets but have nearly the entire value of its business in a key copyright or patent for a product, the customers it has developed, its reputation or a hard-to-get license.

The Washington Association of Business is pushing for the tax exemption and has found allies in the House.

But the question of how to value the intangibles for taxing purposes means nobody can say how much the tax exemption might be worth. That could be its downfall in the Senate.

Dave Wood of People for Fair Taxes contends that exempting intangibles from taxation eventually would cost taxpayers millions of dollars in new property taxes to cover the hole the exemption would create.

“It is a bad idea,” he said.