HOUSE BILL REPORT

HB 1819

BYRepresentatives Unsoeld, Belcher, Holm, Sayan, Brough, Haugen, Appelwick, Crane, Dellwo and Ebersole

Revising the property tax exemption for houses for the aged.

House Committe on Ways & Means

Majority Report:  Do pass.  (9)

      Signed by Representatives Appelwick, Chair; Basich, Dellwo, Holland, Rust, Schoon, Taylor, Valle and Winsley.

House Staff:Bill Freund (786-7136)

AS PASSED HOUSE FEBRUARY 10, 1988

BACKGROUND:

A nonprofit Home for the Aged can secure property tax exempt status if it meets various statutory requirements for nonprofit entities. The requirements do not include any restrictions on the income of the residents.  The main requirements are as follows:

1.  The property must be used exclusively for the purpose the exemption is granted; and

2.  No part of the income of the organization may be paid to its members, stockholders, officers, directors or trustees except for actual services rendered; and

3.  The facilities and services must be available to all regardless of race, color, national origin or ancestry.

Property tax exemptions are available for senior citizens of age 61 and older who own their home or have a lifetime lease. These exemptions are based on disposable income of $18,000 and below.  The exemption may be less than 100% depending on the value of the property.

When nonprofit organizations acquire or convert real property qualified for exemption the property, upon approval of the application, is entitled to a cancellation of the pro rata portion of taxes payable for the remainder of the year in which the application is made and exemption for the subsequent year.

Requalification of exempt status is required every four years by filing an application for renewal.

SUMMARY:

Additional requirements are added for homes for the aged property tax exemptions.  To secure the exemption a home must satisfy one of three conditions.  Either:

1.  Have been continuously exempt from property taxes as a home for the aged for taxes levied during 1986 and thereafter; or

2.  The home is owned or operated by an eligible nonprofit organization which has had federal tax exempt status for five years before the date of application for property tax exemption; or

3.  Upon initial application for property tax exemption, 60% or more of the dwelling units in the home must be occupied by persons meeting the requirements for senior citizen property tax exemption other than the ownership requirement.

For the purpose of a home for the aged, an eligible nonprofit organization is defined as one that:

(a)  Meets the statutory definition of nonprofit, and

(b)  Has secured federal tax exempt status under section 501(c) of the Internal Revenue Code, and

(c)  Certifies to the department that no officer, director, trustee, or employee of the organization has had any financial ownership or interest in the property within five years before the date of application for exemption from property tax.

Property tax exemptions for homes for the aged shall become effective in the year following the year of application.

If the department has reason to believe that property of a Home for the Aged may be taxable, it may require new initial applications prior to the time that reapplication is required.

This act is effective for taxes levied for collection in 1987 and thereafter.

EFFECT OF SENATE AMENDMENTS:  Strikes everything after the enacting clause.  Structures of a Home for the Aged that are converted to tax exempt status after January 1, 1988, are exempted from the state property tax, the port property tax, and all excess property tax levies.  Liability for other property taxes, (i.e. city , county, fire, etc.) may commence prior to January 1, 1988 if agreed to by a Home for the Aged converting property to tax exempt status.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Available.

Effective Date:This bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Ann Clifton, Thurston County Assessor; Kay Boyd, Mayor of Lacey; Representative Unsoeld; Lon Dickerson, Timberland Regional Library; and Stan Finkelstein, Association of Washington Cities.

House Committee - Testified Against:      J.T. Quigg, Panorama City; Ernie Dantini, Panorama City; and George Stevens, President, Resident Council, Panorama City.

House Committee - Testimony For:    Senior citizen property tax exemptions are based on income level.  Property tax exemptions for homes for the aged do not depend on the income levels of the occupants.

Less than ten percent of the residents in Panorama City would qualify for property tax exemption under the senior citizen property tax exemption act.

City services are provided to homes for the aged, but because of the property tax exemption the cost of the services is borne by the rest of the taxpayers.

If the state were asked to make an appropriation in the amount of the value of the tax exemption the state would probably not appropriate the money.

The state should tighten eligibility criteria for tax exemption for homes for the aged or else it will become a retirement mecca.

House Committee - Testimony Against:      Panorama City should not be singled out and treated differently than other homes for the aged.  This bill would preclude new homes for the aged from getting tax exemptions available to other organizations that have them by virtue of being grandfathered.

Panorama City performs beneficial, charitable services.  Panorama residents shop in the community and pay sales tax which helps pay for city services.  It has its own security and has had little need for fire department services.

The residents of Panorama City will be the beneficiaries of the conversion from profit to nonprofit in that rate increases will be less than they would otherwise have been.  Panorama City had to do something since it has been sustaining losses for years.  The option chosen, (conversion from profit to nonprofit), was the option that was in the best interests of the residents.  It could have been sold to an out-of-state purchaser.

VOTE ON FINAL PASSAGE:

      Yeas 77; Nays 20; Excused 1

Voting Nay: Representatives Amondson, Beck, Betrozoff, Brooks, Bumgarner, Butterfield, Chandler, Ferguson, Fuhrman, Hankins, Holland, Miller, Moyer, Padden, Patrick, Sanders, Schoon, Silver, Smith C, Walker

Excused:    Representative Williams B