The Washington Board of Tax Appeals upheld the Department’s determination that certain fees and credits related to mortgage sales to government-sponsored enterprises are included in the lender’s gross income for B&O tax purposes. Specifically, the Board concluded that guaranty fees and loan-level price adjustment fees are part of the lender’s cost of doing business and cannot be deducted because they are required payments to participate in a mortgage-backed securities program.
On the other hand, the Board reversed the Department’s determination on lender credits (amounts paid toward borrower closing costs in exchange for higher interest rates. These credits were deemed part of the lender’s capital investment in the loan and therefore excluded from gross income.
The matter was remanded for recalculation of tax due based on these findings.