I’m sharing this because the Washington capital-gains tax conversation just took a turn that founders, early employees, and investors cannot ignore as they think about exits, liquidity timing, and planning.
Currently there are companion bills in the WA Legislature – SB 6229 and HB 2292 – that would explicitly make gains excluded under federal §1202/QSBS taxable for Washington capital-gains purposes, even though federal tax law allows those gains to be excluded from federal income tax.
As of February 1, 2026, these bills remain in the Senate Ways & Means and House Finance committees. Their initial hearings were held on January 27, and as of this update no substitute text or updated fiscal notes have been released and the Department of Revenue has not posted any guidance. There is therefore no overnight rule change and QSBS conformity remains unchanged for now.
That said, the legislative risk is live and immediate:
- No overnight rule change has taken effect, and there has been no posted Department of Revenue guidance or rule update over the weekend that alters QSBS conformity or immediate payroll/B&O treatment
- According to the state’s current estimates, only a few thousand Washington taxpayers are expected to be affected. We believe this estimate significantly understates the real-world impact and reflects a narrow view of who will ultimately bear the tax as startup liquidity events occur.
- If these bills advance out of committee with fiscal notes, rules, or amendments early this week, that could materially change planning assumptions for near-term liquidity events or exits.
- Founders and investors should treat this as an active policy risk, update stakeholders, and consider pausing or reevaluating timing decisions until any committee filings or fiscal-note releases make the impact clear.
I will continue to monitor the Legislature and provide updates as new information becomes available. In the meantime, it’s prudent to stay informed and consult with advisors when planning any liquidity events involving QSBS.
