Lawmakers Eye Mortgage Lender Tax Break Rollback to Fund WA Wildfire Programs

Proposed legislation would eliminate tax break for large mortgage lenders to help replenish wildfire prevention budget.

Published on Feb. 28, 2026

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Legislation is progressing in the Washington state legislature that would eliminate a tax break for large mortgage lenders and use the revenue to partially restore funding for wildfire prevention programs. The Department of Natural Resources says it will have to cut staff, firefighters, and community grants if the funding isn't restored after last year's budget cuts.

Why it matters

Wildfire risk and severity have been increasing in Washington due to climate change, impacting communities across the state. Maintaining robust wildfire prevention and response programs is crucial, but the state budget has struggled to keep up with funding needs. This legislation aims to find a new revenue source to help address the funding shortfall.

The details

House Bill 2089, sponsored by Rep. Shaun Scott, would eliminate a tax break for mortgage lenders that issue more than $10 billion in mortgages annually. The tax break was originally passed in 2021 to benefit community banks, but the Department of Revenue found that 65% of the savings went to large, "placeless financial institutions." Eliminating the tax break is estimated to generate around $20 million per year, less than half of what was cut from the wildfire prevention budget last year.

  • In 2021, the Legislature passed a tax deduction for the interest received by community banks on first mortgages.
  • In 2024, the Department of Revenue found that 65% of the tax savings went to 'placeless financial institutions'.
  • Last year, the Legislature cut the wildfire funding in half to help offset a state budget deficit.

The players

Shaun Scott

A socialist state representative from Seattle who sponsored House Bill 2089 to eliminate the mortgage lender tax break.

Pat Sullivan

The director of governmental and external affairs for the Washington Department of Natural Resources, who testified in support of the bill.

Dave Upthegrove

The Lands Commissioner who has previously urged lawmakers to tap a state account for climate-related programs to fund wildfire prevention.

Brad Tower

The lobbyist for the Community Bankers of Washington, who said the organization is neutral on the bill as they don't see the connection between taxing first mortgages and funding wildfire mitigation.

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What they’re saying

“The connection between these two issues is that … these large financial institutions that tend to conduct a lot more of their business virtually or digitally — those transactions are going through data centers, data centers that gobble up large plots of deforested lands and lots of water, that exacerbate climatic warming trends.”

— Shaun Scott, State Representative (The Standard)

“With climate change, I think you're going to continue to see bigger and worse fires here on the west side.”

— Pat Sullivan, Director of Governmental and External Affairs, Department of Natural Resources (The Standard)

What’s next

Democrats in the House and Senate are expected to release budget legislation next week, which will determine if the wildfire prevention funding is restored using the revenue from the proposed tax change or other sources.

The takeaway

This legislation highlights the ongoing challenge of funding critical wildfire prevention and response programs in the face of growing climate change impacts. By targeting a tax break for large mortgage lenders, lawmakers are seeking a new revenue source to help address this pressing issue and protect Washington communities.