2009 Legislative Summary


Property Tax Bills – Passed in Regular Session

E2SHB 1208 Administration of property tax & REET; technical corrections (Chapter 350, Laws of 2009)
SHB 1295 Relating to agricultural fairs (Chapter 402, Laws of 2009)
2SHB 1484 Riparian forest lands; includes critical habitat (Chapter 354, Laws of 2009)
HB 1619 School levies used for M & O (maintenance and operation)(Chapter 460, Laws of 2009)
SHB 1733 Current use assessment; equestrian property (Chapter 255, Laws of 2009)
EHB 1815 Current use assessment; standing crops (Chapter 513, Laws of 2009)
HB 2331 Increases document recording fees from $10 to $30 (Chapter 426, Laws of 2009)
2SSB 5045 New local infrastructure financing program (Chapter 270, Laws of 2009)
SB 5355 Rural library district levies (Chapter 306, Laws of 2009)
SSB 5368 Annual updating of property values (Chapter 308, Laws of 2009)
SSB 5401 Riparian forest lands; includes critical habitat (Chapter 246, Laws of 2009)
SB 5426 Annexation to a fire district (Chapter 115, Laws of 2009)
2SSB 5433 Local sales taxes; supplanting other local funds; New King County property tax levy for transit; New $20 vehicle tax for local transit districts (Chapter 551, Laws of 2009)
SB 5680 Uses of exempt property rented to others by nonprofits (Chapter 58, Laws of 2009)
E2SSB 5688 Domestic partners; references in tax law (Chapter 521, Laws of 2009)
ESSB 5901 Local infrastructure financing program revised (Chapter 267, Laws of 2009)

E2SHB 1208 This legislation contains various technical changes relating to collection and distribution of property taxes and real estate excise taxes. Payment dates and application of interest for diking, drainage or sewerage district assessment are made the same as for property taxes. Property tax refund claims must be made with three years. County treasurers may accept verification of payment instead of a stamped affidavit as proof of payment of REET taxes. The destroyed property provisions are amended to allow local levies in excess of the 101 percent limit to recover abated or refunded taxes on destroyed parcels; also relief can be provided more rapidly to owners of destroyed property. The destroyed property provisions apply to taxes levied as of January 1, 2009. Finally, the approval process for open space classifications is amended to permit meetings of the granting authority by telephone.

There is no impact on state revenues resulting from this bill, which is effective on July 26, 2009.


SHB 1295 Provides a process for cities and code cities to annex territory owned by counties and used for agricultural fairs. The bill is effective as of July 26, 2009.


2SHB 1484 Pursuant to rules of the Forest Practices Board, the Department of Natural Resources administers a program that provides for acquisition of fee interests or conservation easements on lands within unconfined river channel migration areas. This bill expands the types of land to be acquired via conservation easements under the program to include critical habitat for threatened or endangered species. Private forest lands acquired by the Board are removed from the designated forest land or current use timber classifications under RCWs 84.33 and 84.34. The compensating tax for land that is removed from designation as forest land is amended to exclude from the payment of back taxes easements on private forest lands acquired under this program for critical habitat. The same change is made for forest lands classified under the open space program. Also, the bill changes the determination of compensation for landowners of forest land upon which a conservation easement is acquired, depending upon whether the easement applies only to the trees or also includes the land.

NOTE: the above provisions were included in SSB 5401 which also passed the Legislature.

In addition, the bill amends RCW 84.33.145 to expand an exemption from the compensating tax for forest land removed from designation. Currently, land transferred to a governmental entity or to certain nonprofit organizations devoted to historic preservation or nature conservancy in King County only is exempted from the requirement to pay back taxes. Section 4 broadens the exclusion to forest land in Pierce and Snohomish counties.

Finally, in Sections 6 – 10, the bill modifies a program by which the Department of Natural Resources can dispose of state forest lands in rural counties. The bill allows DNR to transfer certain small parcels of forest land to another public agency without conducting a public auction. There is no impact of these revisions on tax revenues.

The potential impact on compensating tax receipts is considered to be relatively minimal. The bill is effective on July 26, 2009.


HB 1619 Allows funds raised by school districts through construction, modernization or remodeling levies to be used for painting, major equipment repair, and other preventative maintenance purposes. School districts may transfer funds from district capital projects fund to district general fund. The types of activities that may be funded with school districts' capital projects funds generated by two- to six-year levies, adding major equipment repair, painting of facilities, and/or other major preventative maintenance purposes. Clarifies the definition of major renovation and replacement and adds major repairs, replacement and refurbishment of roofing, exterior painting, exterior walls and windows, and plumbing systems to the definition. This bill also directs the Office of the Superintendent of Public Instruction to develop accounting guidelines to allow for these new uses of capital projects funds and requires that funds used for new activities do not replace routine expenditures.

This bill is effective July 26, 2009.


SHB 1733 This bill expands the current use assessment program to include property used for equestrian purposes. The definition of farm and agricultural land now includes property devoted to equestrian activities such as stabling, riding and training of horses; clinics, schooling and shows; and lands for horse grazing. These horse-related activities include those for which a charge is made.

The bill also adds an exemption from the compensating tax for both the open space and the forest land programs for parcels that were incorrectly classified under these programs through no fault of the owner.

The equestrian provisions do not impact the state property tax levy, although there could be minor shifts of tax burden. The compensation tax exemption for improperly classified parcels would have a small impact, since the state presently receives a portion of the back taxes and penalties. The reduction for state revenues is estimated at $27,000 for the initial biennium. SHB 1733 is effective on July 26, 2009.


EHB 1815 The open space program was established in 1970. It allows certain open space, timber, and agricultural lands to be assessed for property tax purposes on the basis of their current use, rather than highest and best use of the property. Lands used for agricultural purposes has certain acreage and income requirements for inclusion in the current use program:

  • Any parcel of land of twenty acres or more devoted to agricultural purposes can be included in the program;
  • Parcels from 5 to 20 acres may be included if they generate gross income of $200 or more annually (in at least three of the prior five years)
  • Parcels of less than 5 acres may be included if they generate gross income of $1,500 or more annually (in at least three of the prior five years).

This bill expands the second category for parcels of agricultural land which are from 5 to 20 acres and which have standing crops located on the land. If the standing crops consist of short rotation hardwoods with an expected harvest cycle of 15 years or less and the owner invests at least $100 per acre in the current or previous year in the production of the hardwoods, then the parcel will qualify for current use assessment. Other standing crops (Christmas trees, vineyards, orchards, etc.) also qualify if their expected harvest occurs within seven years of planting and the owner invests at least $100 per acre in the current or previous year.

The compensating tax statute for lands removed from the current use classification is amended to require the assessor to explain appeal procedures in the notice of removal.

There is no impact on state revenues. EHB 1815 is effective on July 26, 2009.


HB 2331 Increases surcharge on document recording fees from $10.00 to $30.00. Increases costs for liens and release of liens filed for property tax deferral programs.

This bill is effective July 26, 2009.


2SSB 5045 In 2006 a program was established to encourage economic development and renovation of urban areas. Known as the local infrastructure financing tool (LIFT), the program allows increased local sales and property taxes within designated areas (Revenue Development Areas) of cities or counties to be devoted to financing of public investments intended to encourage private investment in the area. The state also provides matching funds through crediting of applicable local sales taxes against the state tax. The amount of state funds for all eligible projects is limited to $7.5 million annually. Currently, there are nine projects using LIFT financing underway in the cities of Bellingham, Bothell, Everett, Federal Way, Liberty Lake, Vancouver, Yakima, Puyallup and Mt. Vernon. Applications for new projects are no longer being accepted. (ESSB 5901 makes amendments to this program.)

This bill creates an entirely new, but similar, financing program. There are two categories of projects that will be eligible for state funds: (1) seven demonstration projects in specified local areas, and (2) other projects on a first-come basis. The applications for the demonstration projects must be made to the Department by September 1, 2009; applications for the other projects start on that date. The Department is required to make available an electronic application form for the program. Section 601 establishes a new local sales/use tax which is credited against the state tax. The maximum rate is up to 6.5% less rates of existing state-credited local sales taxes, rates that are credited under the existing LIFT program, and the portion of the state rate which is dedicated to performance audits. This tax can commence on July 1, 2010 for the seven demonstration projects and a year later for other projects that qualify under the first-come basis.

The seven demonstration projects specified in Section 402 of the bill are:

  • Pullman/Moscow corridor improvements (maximum of $200,000).
  • University Place (maximum of $500,000)
  • Tacoma financial services area/Tacoma Dome (maximum $500,000).
  • Bremerton downtown (maximum of $330,000).
  • Auburn down redevelopment (maximum $250,000).
  • Vancouver waterfront (maximum $220,000)
  • Spokane university district (maximum $250,000).

Participating local jurisdictions are required to estimate the incremental property and local sales tax revenues. Annual reports are required by participants in the first-come program. The Department is required to summarize the information submitted by local jurisdictions and to report to the Legislature annually on the program by June 1.

The aggregate annual awards for demonstration projects are $2.25 million and for other applications the state contribution is limited to $2.5 million, with no single project being eligible for more than $500,000 annually.

The cost of the program is expected to total $2.25 million in FY 2011 (demonstration projects only). Thereafter, the impact will rise to fully authorized $4.75 million annually. 2SSB 5045 is effective on July 26, 2009.


SB 5355 Rural library districts serve all of the unincorporated area of a county and may include cities of up to 100,000 population. They are allowed to levy up to 50 cents per $1,000 assessed value. This bill concerns the allowable property tax levy rate for newly formed rural library districts. It allows the petition to form such a district and the ballot proposition to include a reference to the initial levy rate which can be lower than the statutory maximum 50 cents. There is no impact on state revenues. The bill is effective on July 26, 2009.


SSB 5368 This bill relates to the frequency by which the valuation of real property is updated by the county assessor. Under current law, property must be revalued at least once every four years. Twenty of the counties update all valuations on an annual basis. Of the remaining counties, 17 update values on a four year cycle; one uses a three year cycle and the other revalues half of the county every year.

Under SSB 5368, all counties must accomplish updating of assessed property values on an annual basis by the start of 2014. The purpose is to avoid the large jumps in values that can occur when values are re-visited on a less than annual schedule and to allow owners to better plan for any resulting increases in their property tax bills that might result from any increased values. By linking assessed values more closely with current economic conditions, it also helps to reduce property tax bills during times of declining property values.

The move to annual revaluation in all counties is contingent upon the Department of Revenue providing the necessary guidance and financial assistance to the counties. Grants will help address the need to upgrade data collection methods and conduct analysis of market conditions on a neighborhood basis. The Department must also provide guidelines and training for the counties. In addition, the Department will conduct advisory appraisals of industrial property valued in excess of $25 million, upon request by the assessor.

A new subsection (3) of RCW 81.41.030 directs the Department to conduct a pilot program in one or more counties that are ready to move to annual revaluation by the end of 2009. The experience gained from the pilot study will then be applicable to other counties to assist their transition to annual revaluation. In conducting the pilot program, the Department is authorized to contract with an association that represents county assessors and other local officials.

A new section 3 of the bill establishes an annual property revaluation grant account to be used to provide financial assistance to counties in meeting the requirements of this legislation. Funding priorities are delineated in Section 4. Counties are limited to a maximum of $0.5 million in grant funds. Funding for the program comes from a $5 per affidavit fee on sales of real property. The fee was established in 2005 to help counties in upgrading their real estate excise tax reporting systems. The fee was scheduled to apply through June 30, 2010. This bill extends the fee from July 1, 2010 through December 31, 2013 and directs the proceeds to the new annual property revaluation grant account for that period.

Starting on January 1, 2014, the $5 fee receipts will be deposited into two different accounts: (1) a state real estate and property tax administration assistance account and (2) a similar account at the county level. One-half of the fee receipts are to be retained by the same county and one-half will come to the state for use in assisting all counties with these administration programs.

Starting in FY 2011, the continued $5 fee on REET affidavits is expected to generate about $1.2 million annually. The state operating budget for the 2009-11 biennium – ESHB 1244, Sec. 137(1) – provides an appropriation for implementation costs of this legislation: $469,000 for FY 2010 and $374,000 for FY 2011. SSB 5368 is effective on July 26, 2009.


SSB 5401 Pursuant to rules of the Forest Practices Board, the Department of Natural Resources administers a program that provides for acquisition of fee interests or conservation easements on lands within unconfined river channel migration areas. This bill expands the types of land to be acquired via conservation easements under the program to include critical habitat for threatened or endangered species. Private forest lands acquired by the Board are removed from the designated forest land or current use timber classifications under RCWs 84.33 and 84.34. The compensating tax for land that is removed from designation as forest land is amended to exclude from the payment of back taxes easements on private forest lands acquired under this program for critical habitat. The same change is made for forest lands classified under the open space program. Also, the bill changes the determination of compensation for landowners of forest land upon which a conservation easement is acquired, depending upon whether the easement applies only to the trees or also includes the land.

NOTE: these same provisions were included in 2SHB 1484 which also passed the Legislature.

The potential impact on compensating tax receipts is considered to be minimal. The bill is effective on July 26, 2009.


SB 5426 Allows annexation to a fire protection district of certain areas of cities or towns between 5,000 and 10,000 in population. The bill became effective July 26, 2009.


2SSB 5433 This legislation relates to existing local funding of specified programs and the prohibition against certain local taxes being used to replace those existing funds, thereby freeing the use of the existing funds for other programs.

LOCAL PUBLIC SAFETY TAX

In 2003, a local sales/use tax of up to 0.3 percent was authorized for counties to finance criminal justice (at least one-third of the proceeds) and other programs. Sales of new and used vehicles are exempt from this local tax. Counties retain 60 percent of the receipts and the remainder is shared with cities in the same county. Currently, five counties levy this tax; total receipts in calendar year 2008 amounted to $22.4 million.

The authorizing legislation for the local tax stipulated that the revenues from the tax were not to supplant existing funding for these programs. Section 1 of this bill amends this requirement to allow supplanting over the next five years, as follows:

  • Calendar year 2010- 100% of existing funds may be supplanted
  • Calendar year 2011- 80% of existing funds may be supplanted
  • Calendar year 2012- 60% of existing funds may be supplanted
  • Calendar year 2013- 40% of existing funds may be supplanted
  • Calendar year 2014- 20% of existing funds may be supplanted

Also, the provision requiring one-third of the receipts to go to criminal justice programs is amended to include "and/or fire protection purposes."

LOCAL MENTAL HEALTH TAX

In 2005 another local sales/use tax of 0.1 percent was authorized for counties to finance mental health and chemical dependency programs. Currently, eight counties levy this tax; total receipts in calendar year 2008 amounted to $45.9 million.

Section 2 amends the prohibition against supplanting other revenues by the 0.1 percent county tax. This prohibition is amended to allow supplanting over the next five years, as follows:

  • Calendar year 2010- 50% of existing funds may be supplanted
  • Calendar year 2011- 40% of existing funds may be supplanted
  • Calendar year 2012- 30% of existing funds may be supplanted
  • Calendar year 2013- 20% of existing funds may be supplanted
  • Calendar year 2014- 10% of existing funds may be supplanted

PROPERTY TAX LEVY LIMIT OVERRIDES

Section 3 amends RCW 84.55.050 which permits increased regular property tax levies above the 1 percent growth limit, if approved by the voters. In all counties except King, funds generated from levy override proposals approved after July 26, 2009 may be used to supplant existing funds for the programs specified in the ballot proposal; no time restriction apply to such supplanting. In King County the supplanting is allowed only for levy override proposals approved after July 26, 2009 and before the end of 2011.

NEW PROPERTY TAX LEVY IN KING COUNTY Section 5 authorizes a new property tax levy for King County. The maximum rate is 7.5 cents per $1,000 of assessed value. Receipts of the tax are earmarked for transit expenditures with the first one cent of the rate being devoted to expanding transit capacity along Highway 520. Partial trade-off is provided by Section 4 which reduces the maximum levy by a ferry district in King County from 75 cents to 7.5 cents (the actual levy rate is 2009 was five cents).

NEW ANNUAL VEHICE FEE

Section 8 – 11 of the bill establishes a new vehicle tax of up to $20 annually per registered vehicle to be imposed by local public transportation entities. The tax is designated as a congestion reduction tax which shall be collected by the Department of Licensing at the time of license renewal of each vehicle registered within the local jurisdiction on behalf of local PTBAs, city-owned transit systems, county public transportation authorities, etc. The vehicle tax must be approved by the voters of the local districts and collection will begin no sooner than six months after a favorable vote by the local electorate. The ballot measure must stipulate the specific transportation services or improvements to be financed by the new tax.

There is no impact on state revenues resulting from this bill, which takes effect on July 26, 2009.


SB 5680 This bill changes the allowable use of property owned by nonprofit artistic, scientific, historical organizations. Currently, real and personal property owned by such entities is exempt from tax, if the property is used by an nonexempt entity for no more than 25 days annually or for no more than seven days, if the property is used for income-producing business purposes by the renter. Further, the rental income received by the nonprofit organization for such uses must be reasonable and is limited to covering the expenses associated with the rental of the property.

SB 5680 doubles the period for which these exempt parcels may be used for nonexempt purposes to 50 days and to 15 days in the case of income-generating uses. Additional days for set-up and take-down activities associated with such events are also allowable. The existing conditions on the rental income are removed.

There is no impact on the state levy and for many local levies, whose levy rates are less than statutory maximum. Any remaining local impact is likely minimal. The bill is effective on July 26, 2009.


E2SSB 5688 The Legislature established a domestic partnership registry within the Secretary of State's office in 2007. Legislation in 2007 and 2008 extended certain rights and responsibilities to domestic partners which were already provided to spouses. This bill amends other state statutes so that provisions which currently apply to spouses will also specifically apply to domestic partners. New sections are added to the retail sales tax, the estate tax, and the property tax indicating that terms such as "spouse, marriage, marital, husband, wife, widow, widower, next of kin, family and member of the family" are to include individuals in a state registered domestic partnership.

Section 192 amends the estate tax to stipulate that a state registered domestic partner is to be considered as a surviving spouse. The Department is directed to adopt an administrative rule to this effect. The estate tax provision is effective on January 1, 2014.

The only impact on state revenues associated with this legislation is for the extension of surviving spouse status to domestic partners under the estate tax. Because of the limited number of affected estates and the magnitude of the estate tax threshold, the impact on estate tax receipts is anticipated to be relatively small. Starting in FY 2015 the change is expected to reduce estate tax receipts by approximately $260,000 annually. Except for the estate tax provision noted above, the other definitional changes for tax statutes are effective on July 26, 2009.


ESSB 5901 In 2006 a new program was established to encourage economic development and renovation of urban areas. Known as the local infrastructure financing tool (LIFT), the program allows increased local sales and property taxes within designated areas (Revenue Development Areas) of cities or counties to be devoted to financing of public investments intended to encourage private investment in the area. The state also provides matching funds through crediting of applicable local sales taxes against the state tax. The amount of state funds for all eligible projects is limited to $7.5 million annually.

Currently, there are nine projects using LIFT financing underway in the cities of Bellingham, Bothell, Everett, Federal Way, Liberty Lake, Vancouver, Yakima, Puyallup and Mt. Vernon. Applications for new projects are no longer being accepted.

ESSB 5901 makes several changes in order to make administration of the program easier and to reduce the time required for implementation of a LIFT project. Instead of determining a "base year" for local revenues within each project boundary in order to determine the incremental increases, the participating city or county will provide an estimate of the applicable local revenues. The Department will assist in making such estimates. The jurisdiction must set a rate for the local tax by September 1, 2009. LIFT revenues may be used to retire other types of indebtedness, in addition to general obligation and revenue bonds. Starting with the March, 2010 annual report by participating jurisdictions, the city or county must include a list of the specific projects and the current financing status of each project. At least once every three years the jurisdiction must update the estimated revenues received by the state and the jurisdiction for each project.

There is no impact on state revenues resulting from this bill. It takes effect on July 26, 2009, and the bill establishes an expiration date of June 30, 2039 for the LIFT program.


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