The State of Washington announced that starting July 1, 2025, they will offer an expansion of the Voluntary Disclosure Program (VDP) on a temporary basis for businesses with unreported investment income that would be subject to the Business and Occupation (B&O) tax. The VDP will allow qualifying businesses to report revenue without being charged for accrued penalties and interest and will be in two ten-month phases from July 1, 2025, through April 30, 2026, and from July 1, 2026, through April 30, 2027. Taxpayers who wish to take advantage will need to complete an online application at the Washington Department of Revenue website.
A business, whether registered or not, can qualify for the VDP if they have unreported investment income subject to B&O tax and as long as they have not been notified of agency enforcement actions or audit as of July 1, 2025. Most businesses will qualify, but businesses who are engaged in banking, lending, and security as defined in the Revised Code of Washington (RCW) 82.04.4281 will not. Businesses who are affiliates of entities under audit that would normally not qualify for consideration under the VDP, do under this program.
This VDP offers many benefits to taxpayers who can take advantage of it. The lookback period will be limited to the prior four years plus the current year, up to 39% in penalties can be waived, taxpayers will receive a single assessment, and Washington will provide a waiver of interest. However, if taxpayers have collected sales and use tax but did not remit it to the state, the lookback period is unlimited, and penalties will apply to all collected and unremitted tax amounts. Note that if you apply anonymously, you will need to disclose your business identity within 15 calendar days from the application date.
Taxpayers who can take advantage of disclosure programs offered by states should strongly consider doing so. Waived interest and penalties are often significant savings when attempting to remit back taxes and come into compliance with a state. Additionally, taxpayers can avoid multiple notices or assessments and can resolve years of debt in a single streamlined process. (Investment Income Voluntary Disclosure Program, Washington State Department of Revenue, dor.wa.gov/open-business/apply-business-license/voluntary-disclosure-program/investment-income-voluntary-disclosure-program.)