Washington Appeals Board Upholds B&O Tax on Guaranty Fees, Reverses Tax on Lender Credits

The Washington Board of Tax Appeals issued a final decision, sustaining the Department of Revenue’s (DOR) assessment of business and occupation (B&O) tax on the guaranty fees and loan level pricing adjustments (LLPAs) paid by the taxpayer to government-sponsored enterprises (GSEs) when selling mortgage loans, but reversing the assessment on lender credits paid by the taxpayer to borrowers in exchange for higher interest rates. The taxpayer, a California-based mortgage lender, argued that the guaranty fees and LLPAs were adjustments to the loan sale price rather than part of its gross income, while the DOR asserted that they were expenses incurred ...