Bravern Residential Ii, Llc v. Dept. Of Revenue, State Of Wa, 44730-4

Bravern Residential II, LLC (Bravern) was an LLC formed to build a condominium tower; members were Bravern Residential Mezz II, LLC (BRM, 99%) and PCL Construction Services, Inc. (PCL, 1%).
The operating agreement required BRM to fund the project and PCL to perform and manage construction; PCL was to receive credits to its Bravern capital account (periodic progress-billing value) and monthly distributions tied to those credits.
PCL performed the construction as a separate entity, received over $121 million in capital-account distributions during construction, and later assigned its LLC interest to BRM; PCL received no profit distributions.
The Department of Revenue concluded Bravern was not a "speculative builder" under WAC 458-20-170 and denied Bravern’s ruling request and appeals; Bravern paid taxes and sued for a refund in superior court.
The trial court granted summary judgment for the Department; the Court of Appeals reviewed de novo whether Bravern was entitled to a refund.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Bravern qualifies as a "speculative builder" exempt from retail sales and B&O taxes	Bravern: PCL was a member of Bravern, so the LLC should be treated as the entity constructing on its own land and qualify as a speculative builder	Dept: PCL performed services as a separate entity and thus sold taxable construction services to Bravern; owners and entity are distinct	Court: Bravern is not a speculative builder because PCL, a separate entity/member, performed the construction on Bravern’s property; WAC 458-20-170(2) controls
Whether capital-account credits to PCL convert construction services into a nontaxable capital contribution under WAC 458-20-106	Bravern: PCL received only capital-account credits (not cash/profit), so the transfer was a contribution of capital and not taxable	Dept: The transfer was PCL’s provision of services (consideration includes credits/rights) and therefore taxable; WAC 458-20-106 applies only to capital assets	Court: WAC 458-20-106 inapplicable because construction services are not "capital assets;" credits constitute taxable consideration

Booker Auction Co. v. Dep't of Revenue, 158 Wn. App. 84 (holding regarding Department ruling-request review procedure relied on in posture)
Dept. of Revenue v. Nord Nw. Corp., 164 Wn. App. 215 (separate-entity principle: members and LLC are distinct for speculative-builder analysis)
Tesoro Ref. & Mktg. Co. v. Dep't of Revenue, 164 Wn.2d 310 (regulation interpretation principles)
Overlake Hosp. Ass'n v. Dep't of Health, 170 Wn.2d 43 (give plain regulatory language effect; consider context)
TracFone Wireless, Inc. v. Dep't of Revenue, 170 Wn.2d 273 (tax exemptions construed narrowly; burden to show exemption)
HomeStreet, Inc. v. Dep't of Revenue, 166 Wn.2d 444 (narrow construction of tax exemptions)
Budget Rent-A-Car v. Dep't of Revenue, 81 Wn.2d 171 (definition of "capital asset" for WAC 458-20-106)