S-4643               _______________________________________________

                                         SUBSTITUTE SENATE BILL NO. 6528

                        _______________________________________________

State of Washington                              50th Legislature                              1988 Regular Session

By Senate Committee on Economic Development and Labor (originally sponsored by Senators Fleming, Lee, Bailey, Deccio, Warnke, Smitherman, Gaspard, Stratton, Garrett, Niemi and Moore)

Read first time 2/1/88.

AN ACT Relating to excise taxation on the construction of multifamily rental housing; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating new sections; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.     The legislature finds and declares that:

          (1) The tax reform act of 1986 has placed new restrictions on the use of tax-exempt bonds to finance the construction of affordable multifamily housing in Washington state;

          (2) The use of tax-exempt bonds to finance affordable multifamily housing has been an important element of the state's housing delivery system since the housing finance commission was created in 1983;

          (3) The potential loss of more than six thousand units of federally-subsidized multifamily housing in the state between 1987 and 1992 may be caused by the prepayment of federally insured mortgages and the release of federal subsidy contracts;

          (4) After 1992 thousands of additional federally subsidized multifamily housing units will also be subject to prepayment of mortgages and the potential loss of rental subsidy contracts;

          (5) The state of Washington has an opportunity to provide additional financing incentives for the construction of affordable multifamily housing to match the federal incentives offered by the low income housing tax credit program, which is authorized through 1989; and

          (6) The state can provide additional financial incentives for the construction of affordable multifamily housing through sales and use tax exemptions.

NEW SECTION. Sec. 2.  A new section is added to chapter 82.08 RCW to read as follows:

          (1) The tax levied by RCW 82.08.020 shall not apply to sales of or charges made for:

          (a) Tangible personal property to be incorporated as a component of real property included in an eligible housing project; and

          (b) Labor and services rendered in respect to constructing, repairing, decorating, or improving an eligible housing project, including the clearing of land or moving of earth for an eligible housing project.

          (2) For the purposes of this section, "eligible housing project" means a new or existing multifamily rental housing project which both:

          (a) Includes one or more buildings receiving an allocation, or reservation for an allocation, of the federal low income housing tax credit under section 42 of the internal revenue code of 1986, or qualifying for such credit without an allocation; and

          (b) Receives financing, or has a reservation for financing, through the issuance of bonds by the state housing finance commission for at least sixty percent of the total cost of the labor, materials, and services for the initial construction or rehabilitation of such project.

          If a project constituting an "eligible housing project" by reason of a reservation for an allocation of the federal low income housing tax credit or a reservation for financing through issuance of bonds by the state housing finance commission fails to obtain a tax credit allocation and bond financing, then all tangible personal property, labor, and services otherwise exempt from tax under subsection (1) of this section shall be taxable under this chapter at the time of termination of the reservation.

NEW SECTION. Sec. 3.  A new section is added to chapter 82.12 RCW to read as follows:

          The provisions of this chapter shall not apply in respect to the use of tangible personal property, labor, and services exempt under section 2 of this act.

NEW SECTION. Sec. 4.     The exemptions provided in sections 2 and 3 of this act shall cease to exist after December 31, 1989, unless extended by law for an additional fixed period of time.

NEW SECTION. Sec. 5.     If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 6.     This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.