SENATE BILL REPORT

SB 5198

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Summary of Bill

Provides a leasehold excise tax exemption for public or entertainment areas of certain arenas.

Majority Report: Do pass.

Signed by Senators Rolfes, Chair; Frockt, Vice Chair, Operating, Capital Lead; Mullet, Capital Budget Cabinet; Billig, Carlyle, Conway, Darneille, Hasegawa, Hunt, Keiser, Liias, Palumbo and Van De Wege.

Minority Report: That it be referred without recommendation.

Signed by Senators Braun, Ranking Member; Brown, Assistant Ranking Member, Operating; Honeyford, Assistant Ranking Member, Capital; Bailey, Becker, Pedersen, Schoesler, Wagoner and Warnick.

Background: Leasehold excise tax is assessed on the use of public property by a private party and is in lieu of property tax. The tax rate is 0.1284 of the rent paid for the property. Approximately 53 percent of the tax is directed to the state general fund and 47 percent of the tax is returned to the county and city in which the leased property is located.

All new tax preference legislation must include a tax preference performance statement. Tax preferences include deductions, exemptions, preferential tax rates, and tax credits. The performance statement must clearly specify the public policy objectives of the tax preference and the specific metrics and data that will be used by the Joint Legislative Audit and Review Committee (JLARC) to evaluate the efficacy of the tax preference. New tax preferences expire ten years after the effective date of the tax preference, unless otherwise provided.

Summary of Bill: This bill exempts all leasehold interests in the public or entertainment areas of any arena from leasehold excise tax if the arena:

has a seating capacity of more than 2000;

is located on city owned land; and

is owned by a city with a population over 200,000 within a county with a population of less than 1,500,000.

The automatic ten-year expiration date for new tax preferences does not apply to the leasehold excise tax exemption.

Staff Summary of Public Testimony: PRO: The Tacoma Dome has been in existence for over thirty years. For almost that entire time, the facility qualified for the exemption. It was only after a tax audit led to a new interpretation that the exemption no longer applied. We coordinated with the Department of Revenue to ensure that it is constitutional and otherwise legal in how it is drafted. A previous version of this bill applied to both the Tacoma Dome and Key Arena. The bill before you exclusively applies to the Tacoma Dome. We would like to see the exemption restored to provide equal tax treatment with our competing venues such as baseball and football stadiums and large fairs. This is a competitive disadvantage that should be eliminated. Our food and beverage partner pays leasehold excise tax at the Tacoma Dome, but does not pay the tax at the Tacoma Convention Center.