2006 Legislative Summary


Property Tax Bills – Passed in Regular Session

EHB 1069 An Act Relating to Performance Audits of Tax Preferences
SHB 1510 An Act Relating to the Property Taxation of Nonprofit Entities
SHB 2345 An Act Relating to Regional Fire Protection Service Authorities
SHB 2569 An Act Relating to the Property Tax Deferral Program
E2SHB 2673 An Act Relating to Creating the Local Infrastructure Financing Tool (LIFT)
SHB 2804 Modifying Property Tax Exemption for Nonprofit Schools and Colleges
SHB 2812 Modifying School District Levy Provisions
HB 2908 Island County Boundaries
SHB 3164 and HJR 4223 An Act Increasing the Personal Property Tax Exemption for the Head of a Family
SSB 6141 An Act to Include the Value of Locally Assessed Electric Generation Wind Turbine Facilities in the Property Tax Levy Limit Calculation
SB 6280 Removes the Irrevocable Dedication Requirement for Exemption from Property Tax for Property Owned by Nonprofit Entities
SB 6338 Relating to Property Tax Exemptions and Deferrals for Senior Citizens and Persons Retired for Reasons of Disability
SSB 6441 An Act Relating to Judicial Orders Concerning Distraint of Personal Property
SB 6816 Allowing Cemetery Districts to Include Areas Within Cities and Towns

EHB 1069 - An Act Relating to Performance Audits of Tax Preferences - This bill creates a citizen commission for Performance Measurement of Tax preferences by the Legislative Budget Committee (JLARC). The Commission will consist of the State Auditor, a nonvoting member; the chair of JLARC, a nonvoting member; an appointee of the Governor; and four additional members who cannot be legislators, each appointed by the chair of the two largest caucuses of the House and Senate. The Commission must establish a schedule to review tax preferences at least once every ten years. The Commission shall review tax preferences in the order the tax preferences were enacted into law, except that the Commission may elect to include, anywhere in the schedule, a tax preference that has a statutory expiration date. The Commission shall omit from the schedule the following tax preferences:

  • Those that are required by constitutional law;
  • The sales and use tax exemptions for machinery and equipment for manufacturing, research and development, or testing;
  • The small business credit for the business and occupation tax;
  • The sales and use tax exemptions for food and prescription drugs;
  • Property tax relief for retired persons; and
  • Property tax valuations based on current use.

The Commission may also omit any tax preference that the Commission determines is a critical part of the structure of the tax system. As an alternative to the process under section 5 of the act, the Commission may recommend to the Joint Legislative Audit and Review Committee (JLARC) an expedited review process for any tax preference that has an estimated biennial fiscal impact of $10 million or less. The Commission shall revise the schedule as needed each year; taking into account newly enacted or terminated tax preferences. The Commission must deliver the schedule to JLARC by September 1 of each year. The Commission must provide a process for effective citizen input during its deliberations.

This legislation requires the Department of Revenue to supply information to the new Commission and to JLARC to assist in their review of tax preferences. Back to top


SHB 1510 - An Act Relating to the Property Taxation of Nonprofit Entities - The bill allows exempt property of nonprofit social service organizations located in a county with a population less than 20,000 to be used by people or organizations that would not qualify for exemption for private purposes or for pecuniary gain or business activities up to 15 days per year. The loan or rental of the property nullifies the exemption if there is a comparable private for-profit facility within 10 miles of the exempt property that could be used for the same purpose.

Exempt property of veteran’s organizations may be used for pecuniary gain for up to 15 days each year. Prior to adoption of this legislation, the property could be used in this manner for up to three days each year.

Nonprofit public assembly halls may be used up to 15 days (up from seven days) for pecuniary gain or business activities and may also be used for dance lessons, art classes, or music lessons in counties with a population less than 20,000 (increased from 10,000).

Rental income for social service organizations and public assembly halls must be used for capital improvements to the exempt property, maintenance and operation of the exempt property, or for exempt purposes.

The bill also provides an exception from the imposition of back taxes when the property is being transferred to the state of Washington, the city, or the county in which the property is located.

The bill becomes effective 90 days after adjournment of the session.


SHB 2345 - An Act Relating to Regional Fire Protection Service Authorities - Under current law, Regional Fire Protection Service Authorities may establish a system of ambulance service if the participating jurisdictions determine that their members are not adequately served by private ambulance services.

The bill imposes additional requirements on authorities in order to establish a system of ambulance service, including a financing plan. The bill also clarifies the voter approval needed to impose benefit charges and property taxes. When a property tax or benefit charge proposed by a regional fire protection service authority requires 60 percent voter approval, the plan containing the proposed tax or benefit charge must be approved by 60 percent of the voters. Further, the bill includes provisions related to the transfer of employees from participating jurisdictions to authorities.

The bill takes effect 90 days after the adjournment of the session.


SHB 2569 - An Act Relating to the Property Tax Deferral Program - This bill changes the interest rate on the payback of taxes from eight percent to five percent when senior citizens, retired persons, and veterans with 100 percent service connected disability with disposable incomes of $40,000 or less have deferred property taxes and special benefit assessments imposed on their residence. Deferred taxes and special assessments are repaid upon sale or transfer of the property or the death of the claimant and a payback interest rate of eight percent is included. The eight percent rate was set forth in the statute in 1981, and commensurate with the trend in declining interest rates in recent years, this bill reduces the interest rate on the payback to five percent. The reduced interest rate will apply to taxes and special assessments deferred after January 1, 2007. Therefore, some individuals will be charged two different interest rates – 8% interest on taxes deferred prior to January 1, 2007 and 5% interest on taxes deferred after January 1, 2007. The bill also requires the Department of Revenue to review the adequacy and appropriateness of the interest rate in relation to the Legislature’s objective of assisting retired persons in maintaining their dignity and a reasonable standard of living.

This bill takes effect 90 days after the session ends and applies to taxes levied for collection in 2007 and thereafter.


E2SHB 2673 - An Act Relating to Creating the Local Infrastructure Financing Tool (LIFT) - The bill creates, defines, and describes a local infrastructure financing tool (LIFT) for projects in revenue development areas. Projects resulting from this bill are investments in public infrastructure in order to promote community and economic development. According to the bill's intention it will stimulate business activity and help create jobs; stimulate the redevelopment of brownfields and blighted areas in the inner city; lower the cost of housing; and promote efficient land use.

The first two parts of the bill create and define requirements for the local infrastructure financing tool demonstration program. Specific limitations and conditions are outlined for the process of creating a local infrastructure program.

Part III of the bill describes revenue allocation of "local excise tax" and "local property tax" for the local infrastructure financing tool program.

This bill takes effect July 1, 2006 and the program expires June 30, 2039.


SHB 2804 - Modifying Property Tax Exemption for Nonprofit Schools and Colleges - Currently, property owned or used by a nonprofit school or college may qualify for a property tax exemption if it is exclusively used for college or campus purposes.

The bill removes the requirement that the exempt property be exclusively used for college or campus purposes. It allows nonprofit schools and colleges to loan or rent their property to students, alumni, faculty, staff, or other persons or entities for use in a manner that is consistent with the school’s educational, social, or athletic programs without jeopardizing the property tax exemption. The bill also allows limited use of exempt school or college property for business activities or pecuniary gain.

The bill takes effect 90 days after the adjournment of the session.


SHB 2812 - Modifying School District Levy Provisions - SHB 2812 deals with funding of local school districts and helps districts in multiple ways. Local school districts may impose excess levies for maintenance and operations, transportation, and capital projects. The amount that may be levied is limited based on a complex formula. Certain additions to the levy base for school districts are allowed for levies collected in the 2005 through 2007 calendar years.

The amendment to RCW 84.52.0531, which determines the levy limit for local maintenance and operation levies, simply extends through 2011 the temporary increase in the levy base that would have otherwise expired at the end of 2007.

RCW 28A.500.030 is also amended so that allocations of state matching funds will be fully funded at 100 percent beginning in 2007. These allocations were previously reduced to 99 percent in 2003, 93.7 percent in 2004 and 2005, and 95.63 percent in 2006.


HB 2908 - Island County Boundaries - Apparently there are several islands near Island County that were not included within the county boundaries. This bill includes Strawberry Island, Baby Island, Minor Island, Kalamut, and Ben Islands to be within Island County. The boundary for Island County will be redrawn to include these islands.


SHB 3164 and HJR 4223 - An Act Increasing the Personal Property Tax Exemption for the Head of a Family - The Washington Constitution exempts $3,000 of personal property owned by a head of family from property tax. HB 3164 changes this amount to $15,000. Head of family is an individual who owns, operates, and is a sole proprietor of a business that meets certain qualifications. The Head of Family Exemption should not be confused with the exemption from property tax for household goods, furnishings, and personal effects. This increase in exemption will only be effective if the Constitutional Amendment is approved by the voters this Fall.

HJR 4223 is the constitutional amendment that amends the Washington Constitution to increase the value of personal property owned by a head of family and exempt from property tax to $15,000. SHB 3164 is the statutory enacting legislation that amends statutory provisions consistent with the constitutional amendment.

What is the Head of Family Exemption? Each head of a family is entitled to an exemption from his or her taxable personal property in an amount up to $3,000 of actual value. This bill changes this to $15,000. The taxpayer must qualify for the head of a family exemption on January 1st of the assessment year (the assessment date) or the exemption is lost for taxes payable the following year. The taxpayer must also ask for the exemption at the time they file their personal property listing with the county assessor. Household goods, furnishings, and personal effects not used for business or commercial purposes are already exempt from property taxation; therefore, the exemption for the head of a family does not apply to such property.

The exemption for the head of a family applies only to individuals (i.e., natural persons) and does not apply to artificial entities such as corporations, limited liability companies, or partnerships. The head of a family includes the following residents of the state of Washington:

  • Any person receiving an old age pension under the laws of this state;
  • Any citizen of the United States, over the age of sixty-five years, who has resided in the state of Washington continuously for ten years;
  • The husband or wife, when the claimant is a married person, or a surviving spouse not remarried; and
  • Any person who resides with, and has under his or her care and maintenance, any of the following:
    • His or her minor child or grandchild, or the minor child or grandchild of his or her deceased spouse;
    • His or her minor brother or sister or the minor child of a deceased brother or sister;
    • His or her father, mother, grandmother, or grandfather, or the father, mother, grandmother, or grandfather of a deceased spouse; or
    • Any of the other relatives mentioned in this subsection who have attained the age of majority and are unable to take care of or support themselves.

The bill is effective January 1, 2007 if the constitutional amendment is approved by the voters.


SSB 6141 - An Act to Include the Value of Locally Assessed Electric Generation Wind Turbine Facilities in the Property Tax Levy Limit Calculation - This bill amends six property tax levy statutes concerning the limit for regular property taxes by taxing districts. Under current law, a taxing district's levy is limited to a one percent growth factor. However, additional dollar amounts due to new construction, improvements to property, and increases in the value of state assessed utility property are not subject to this limit.

The value of electrical generation wind turbines assessed locally (by the county) under current law are not included as new construction or improvements to the underlying land. These amendments allow locally assessed wind turbine property to be treated the same as centrally assessed wind turbine projects in the levy process.

Wind turbine property is classified as personal property and is assessed with reference to its value on January 1. That value will be used in the levy calculation; much like the value of new construction is already used, to determine the levies to be collected in the following year.

This bill becomes effective 90 days after the end of session.


SB 6280 - Removes the Irrevocable Dedication Requirement for Exemption from Property Tax for Property Owned by Nonprofit Entities - Many nonprofit organizations qualify for a property tax exemption based on the use of their property. Most exemptions are contingent on the property being irrevocably dedicated to the exempt purpose when the property is owned by the nonprofit organization. When property is leased by a nonprofit organization, there is no irrevocable dedication requirement.

The bill eliminates the requirement that the property be irrevocably dedicated to the exempt purpose of the nonprofit organization. The property must still be used for the exempt purpose of the nonprofit organization, but conditions such as reversionary clauses on deeds will no longer disqualify the property from exemption.

The bill becomes effective 90 days after adjournment of the session.


SB 6338 - Relating to Property Tax Exemptions and Deferrals for Senior Citizens and Persons Retired for Reasons of Disability - This bill increases the one-acre limitation on residence size "up to" 5 acres if the larger parcel size is what is required by local zoning for the Senior Citizen and Disabled Person Exemption Program and the Widows/Widowers of Veterans Property Tax Assistance Program. This bill has now been signed into law and applies to taxes levied for collection in 2007 and thereafter.


SSB 6441 - An Act Relating to Judicial Orders Concerning Distraint of Personal Property - Current law directs the treasurer to distrain, or seize, sufficient goods and chattels belonging to the person charged with the taxes to pay the taxes when taxes are delinquent. Notice is required to be posted in three public places in the county, stating when and where the property will be sold. If, in the judgment of the assessor or county treasurer, personal property is being removed beyond state lines, dissipated, sold, or disposed of so as to jeopardize collection of taxes, the treasurer will immediately prepare papers in distraint and will distrain sufficient goods and chattels belonging to the person charged with the taxes.

This law is a change in that now the treasurer may obtain a warrant for "probable cause" if they believe there is property within the county subject to distraint. Any superior or district court judge in the county may, upon the request of the sheriff, county treasurer, or agent of the county treasurer, issue a warrant commanding the search for and seizure of the property described in the request for the warrant at the place described in the request for the warrant. The criminal rules of superior court and district court govern the procedure for issuance and execution and return of the warrant and for return of any property seized.

This bill takes effect 90 days after session ends.


SB 6816 - Allowing Cemetery Districts to Include Areas Within Cities and Towns - Current law says that a cemetery district may include within its boundaries any city or town with a population of less than 10,000. The 10,000 limit was added in 1994 during a re-organization of statutes governing cities. Prior to 1994, there was no population limit and a cemetery district could include towns and up to third class cities. The 1994 re-organization eliminated third and fourth class cities and all references to them. This bill removes the 10,000 population limit requirement for cities that can be included in a cemetery district.

This bill takes effect 90 days after session.


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