Article
Washington supreme court decision could impact some Washington state taxpayers
Nov. 6, 2024 · Authored by Adam Cline, Matt Graham
On Oct. 24, 2024, the Washington Supreme Court decided Antio LLC et. al. v. Department of Revenue, which could impact Washington taxpayers with investment income or that receive passive income from investments. Learn more about this ruling and how it could impact your tax planning and compliance.
Who is affected by the Antio ruling?
This ruling may significantly impact Washington taxpayers, particularly those with investment income or passive income derived from investments, including limited liability companies (LLCs) and other entities structured primarily for investment activities.
Background of Antio
In Antio, 16 related LLCs generated all their income from investments. RCW 82.04.4281(1)(a) allows a person, which is a taxpayer under Washington law, to deduct “amounts derived from investments” from its gross income.
In 1986, the Washington Supreme Court in O’Leary v. Department of Revenue determined that investments for purposes of the deduction statute meant amounts incidental to the main purpose of their business. This meant that companies couldn’t take the investment income deduction if investing constitutes their primary business, or at least wasn’t merely incidental to the main purpose of their business. In Antio, this meant the LLCs couldn’t deduct any amounts under the statute, because investing was the primary businesses.
After O’Leary was decided, and in 2002, the Washington Legislature amended the deduction statute. The amendment changed the statute such that there was a question remaining as to whether the amendment abrogated O’Leary to allow those with investment income as their primary revenue stream or those who receive investment income that’s not merely incidental to the main purpose of their business a deduction under the statute.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.