Real or Personal Property? Advance Tax or Not? Is a Trip Permit Needed? What Taxes Are Required to be Brought Current?
September 2005
We receive so many questions regarding the taxation of mobile homes that we decided to write an article about this topic. You know that you are in trouble when a certain Washington statute (in Title 65 RCW) which addresses classification of mobile homes for titling purposes begins with these words, "The legislature recognizes that confusion exists regarding the classification of manufactured homes as personal or real property. This confusion is increased because manufactured homes are treated as vehicles in some parts of state statutes, however these homes are often used as residences to house persons residing in the state of Washington. This results in a variety of problems, including…".
This statute goes on to address certain circumstances when a mobile home needs to be titled or when title should be removed. However there seems to be other confusion surrounding the taxation of mobile homes such as when should they be classified as real property or personal property? When should advance tax be collected on a mobile home being removed from its current location? Should the advance tax reflect the taxes on the assessed value of both the land and mobile as a parcel of real property, or should the advance tax reflect only the assessed value of the property being removed? This article will attempt to answer many of these questions.
Advance Tax or Not?
Regardless of how the mobile is classed, either as real or personal, at the time the owner declares that it will be moved out of county an advance tax may be due. If it is classed as real property should the amount of advance tax collected be the amount attributable to the improvement (mobile) only? The answer is yes, the advance tax is only collected on the property being moved out of county.
Is it Real or is it Personal Property?
Many counties create a third category called "mobile home parcel" or "mobile home roll" or some other unique name given to mobile home parcels. This is fine but it can be confusing. Mobile homes can only be classed as one of two categories, either as real property or as personal property. Mobile homes that are "affixed" to land are considered real property for assessment purposes even if the land is leased such as in a mobile home park. As a result of being considered real property when the mobile is "affixed" the assessment should be on the same revaluation cycle as other real property in the county. If the mobile home is separated from the land it was once affixed to and will be moved to another county it should be treated, once separated, like personal property for tax collection purposes. If the mobile being separated is not moving out of county but instead will be reaffixed to land in-county, then advance tax need not be collected.
Trip Permits, Advance Tax, Licensing — Yes/No?
When Mobile Homes are Assessed as Real Property
2004 Assessment
If the mobile was characterized as real property as of January 1, 2004, was assessed as an "improvement" on real property and was included in the overall value of the real property parcel, then the taxes due in 2005 on that parcel of real property would be based on the total value of that parcel of real property as of January 1, 2004, including any improvement (the mobile home). If the mobile home sells mid-year 2005, the property tax may be paid in 2005 as agreed upon between the parties to the sale, based upon the assessed value of the improvement (mobile home). That is, when the buyer property taxes attributable to the mobile home, then those taxes on just the mobile home (not the entire parcel of real estate) are paid in accordance with that agreement. (See RCW 84.56.370 regarding segregation of the improvement value from the land value.) If there is no agreement, then the parties are liable for the taxes attributable to the mobile home in accordance with RCW 84.60.020, on an apportioned basis relative to the proportion of the calendar year (in 2005) that the parties owned the mobile home.
2005 Assessment
The same characterization, as to real or personal property, would apply to the mobile home as well for the assessment as of January 1, 2005. This would be true regardless of whether the mobile was moved off the property at some point in 2005. Since the mobile was characterized as real property on the lien date, and assuming that the parcel of land on which the mobile was located was not leased by the owner of the mobile (see RCW 84.04.090), the tax that becomes due in 2006 is based on the assessed value of the mobile as real property on January 1, 2005. In our discussion, since the mobile home sold midyear 2005, the 2005 taxes in this example were apportioned between buyer and seller. The 2006 taxes however are the liability of the purchaser regardless of whether the purchaser leaves the mobile home in place or moves it to a different location.
When Mobile Homes are Assessed as Personal Property
When the mobile home is characterized as personal property and has been assessed as such as of January 1 of the year of sale, then the provisions of chapter 84.56 RCW apply and advance tax may be collected, as appropriate.
The advance tax would be based upon the value of the mobile home as of January 1, 2005, as personal property, and calculated as set out in RCW 84.56.090. The sale in March 2005 (under the facts outlined above) would seem to be a pretty good indicator of value, but not necessarily the sole determining factor as to what the actual market value was on January 1. The payer of the advance tax would have a right to appeal that value to the local board, as noted above.
RCW 84.56.070 states, in pertinent part, as follows:
AND PROVIDED FURTHER, That if the county treasurer has reasonable grounds to believe that any personal property upon which taxes have been levied, but not paid, is about to be removed from the county where the same has been assessed, or is about to be destroyed, sold or disposed of, the county treasurer may demand such taxes, without the notice provided for in this section, and if necessary may forthwith distrain sufficient goods and chattels to pay the same. (Emphasis added.)
In this case (assuming for purposes of this discussion that the mobile was assessed as personal), the mobile was "personal property upon which taxes [had] been levied, but not paid." The treasurer then has reasonable grounds to believe that the mobile has been sold and the treasurer then "may demand such taxes." Under 84.56.090, the treasurer is authorized to collect advance tax on personal property which has not yet been levied upon. So, under RCW 84.56.070, the treasurer could collect advance taxes for assessment year 2004 and under RCW 84.56.090, the treasurer could collect advance taxes for assessment year 2005.
Some examples might be of assistance:
Example 1
Mobile home is currently assessed as real property and is being moved to a new location where it will again be considered real property. What is required before it can be moved? Taxes need to be brought current, on the mobile only, in order to obtain a trip permit from Department of Licensing (DOL), and an advance tax may be collected if it is being moved out of county.
Example 2
Mobile home is currently assessed as real property but is being separated and moved to a mobile home park where the land is leased in its new location. Since the mobile will be located on leased land it should be assessed like real property since it will be "affixed". However, for collection of taxes it should be treated like personal property for the purposes of moving it. For purposes of ownership records since the mobile is going to be affixed on leased land it is considered personal property and will need a title from Department of Licensing (DOL). What is required before it can be moved? All taxes including property taxes need to be brought current on the mobile home in order to obtain a trip permit from DOL. RCW 65.20.040 requires property taxes to be paid before it is re-titled, however this statute does not specify that it means property taxes on both the land and improvements. Property taxes may be brought current on just the improvements (mobile) only. If the mobile home is being moved out of county, then advance tax may be collected and as well the mobile has to be issued a new title from DOL since its new location will be on leased land, (RCW 46.12.055 and 65.20.040).
Example 3
Mobile home is assessed as personal property because it is not attached to "owned" land, and instead is located on leased land. The mobile home sells to a new individual who will move it to a new location. What is required before it can be moved? A transfer of title to the new owner from DOL and all taxes on the mobile home has to be paid including personal property taxes. If the mobile is being moved out of county, then advance tax is applicable similar to any other personal property. If the mobile is not moving anywhere, i.e., is being sold in place, all that is required is a new title from DOL.
Remaining Issues
Moving the Mobile "Out of County"
The next question is whether, when the mobile in our example, is moved to a location outside the county sometime in 2005, the treasurer has the authority to collect the property taxes from the purchaser, that will become due in 2006 on the mobile home, in advance of the due date. The answer is a qualified "yes." Under RCW 84.56.090, if in the judgment of the treasurer, the collection of the taxes to become due in 2006 is in jeopardy, an advance tax may be collected. The fact that the mobile home changed from real property to personal property after January 1, 2005, makes the advance tax collectable by the treasurer. However, the assessed value remains what it was on January 1, as real property, and the advance tax would be calculated based upon that value.
Since the purchaser of the mobile home is the "taxpayer" of the advance tax, they have the right to petition the board of equalization regarding the assessed value of the mobile under RCW 84.40.038 and WAC 458-14-056. On any petition to the board by the purchaser of the mobile home, the board would determine whether the assessed value of the mobile home as real property was the true and fair value of the mobile as of January 1 of the year of sale. In determining whether that value, which is presumed correct under RCW 84.40.0301, is the true and fair value of the mobile as of January 1, 2005, the actual sale price of the mobile home is a valid consideration. (In many cases the mobile home as real property would be valued greater than the value as personal property.)
New Construction - Yes/No?
If the mobile home is moved and again becomes real property in the same county or in a different county, there is no "new construction" value associated with the mobile home at its new location. RCW 36.21.090 only authorizes placement of the mobile home on the assessment rolls when the mobile home has never been subject to property taxes in Washington, or when no advance tax was paid when the mobile was moved from its original county.
Destroyed Property?
Also, it should be noted that moving the mobile home to a different location does not invoke RCW 84.70.010, the destroyed property statute. That statute only applies where property has actually been destroyed.