WSR 02-02-009

PERMANENT RULES

DEPARTMENT OF REVENUE


[ Filed December 20, 2001, 4:42 p.m. ]

Date of Adoption: December 20, 2001.

Purpose: These rules explain how to obtain and retain a property tax exemption; how a determination by the Department of Revenue (DOR) regarding an exemption may be appealed; and what occurs when a change in ownership or use of exempt property causes the property to lose its exempt status. The rules also explain the procedures used to place previously exempt, now taxable, property back on the tax rolls; and the supplemental conditions that most nonprofit entities must satisfy to obtain and retain a property tax exemption under chapter 84.36 RCW. The majority of the changes being made are a direct result of legislative amendments to the underlying statutes. The revised rules also clarify existing practices and procedures in the administration of property tax and leasehold excise tax exemptions.

Citation of Existing Rules Affected by this Order: Amending WAC 458-16-110 Applications -- Who must file, initial applications, annual declarations, appeals, filing fees, penalties, and refunds, 458-16-120 Appeals ((and Notice of Determination)), 458-16-130 Change in taxable status of ((nongovernmental)) real property, 458-16-150 Cessation of use -- Taxes collectible for prior years, and 458-16-165 Conditions under which nonprofit organizations, associations, or corporations may obtain a property tax exemption.

Statutory Authority for Adoption: RCW 84.36.865.

Other Authority: RCW 84.36.040, 84.36.042, 84.36.045, 84.36.046, 84.36.050, 84.36.385, 84.36.560, 84.36.570, 84.36.800, 84.36.805, 84.36.810, 84.36.815, 84.36.820, 84.36.825, 84.36.830, 84.36.833, 84.36.840, 84.36.850, and 84.40.350 through 84.40.390.

Adopted under notice filed as WSR 01-22-077 and 01-22-078 on November 2, 2001.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 4, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 5, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 5, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 5, Repealed 0.
Effective Date of Rule: Thirty-one days after filing.

December 20, 2001

Russell W. Brubaker

Assistant Director

Legislation and Policy Division

OTS-5217.2


AMENDATORY SECTION(Amending WSR 98-18-006, filed 8/20/98, effective 9/20/98)

WAC 458-16-110   Applications -- Who must file, initial applications, annual declarations, appeals, filing fees, penalties, and refunds.   (((1) Introduction. This section explains the procedures property owners must follow to apply for and to renew all real and personal property tax exemptions provided under chapter 84.36 RCW for which the taxpayer must apply in order to receive. It also specifies the fee that must be submitted with an initial application or renewal declaration for exemption, as well as the late filing penalty that is due whenever an initial application or renewal declaration is received after the filing deadline.

(2) Application required. All foreign national governments, cemeteries, nongovernmental nonprofit corporations, organizations, and associations, and soil and water conservation districts seeking exemption from property taxation under the provisions of chapter 84.36 RCW shall apply for exemption with the department of revenue. Unless otherwise exempted by law, no real or personal property shall be exempt from taxation until an application has been filed and an exemption has been granted.

(3) Where to obtain application forms. Applications for exemption may be obtained from any county assessor's office or the department of revenue.

(4) Initial applications. Generally, initial applications for exemption of real or personal property shall be filed with the department of revenue on or before March 31 to exempt the property from taxes due the following calendar year. However, an initial application may be filed after March 31st if the property is acquired for or converted to an exempt use after that date, if the property may qualify for exemption under one of the statutes contained in chapter 84.36 RCW, and if, following the acquisition or conversion of the property, an application for exemption is submitted within sixty days. If an initial application under these circumstances is not received within sixty days, the late filing penalty described in subsection (9) of this section will be imposed. All initial applications shall comply with the following:

(a) A filing fee of thirty-five dollars shall be submitted with each application.

(b) The application shall be made on a form prescribed by the department and signed by the applicant or the applicant's authorized agent.

(c) Each application for exemption of real property may include all property that is contiguous and part of a homogeneous unit. A separate application must be submitted for real property that is not both contiguous and part of a homogeneous unit. However, a separate application shall not be required for church property involving a noncontiguous parsonage or convent.

(i) Contiguous property means real property adjoining other real property, all of which is under the control of a single applicant even though the properties may be separated by public roads, railroads, rights of way, or waterways.

(ii) A homogeneous unit means one where the property is under the control of a single applicant and the operation and use of the property is integrated with and directly related to the exempt activity of the applicant.

(d) The application shall include copies of the articles of incorporation or association, or constitution or other establishing document, together with all current amendments thereto, showing nonprofit status and a copy of the bylaws of the nonprofit entity applying for exemption. The application shall also include a copy of any current letter from the Internal Revenue Service that grants the applicant exemption from paying federal income taxes, unless the nonprofit organization, association, or corporation is part of a larger organization, association, or corporation, like a church or the boy scouts, that has been issued a group 501 (c)(3) exemption ruling by or is otherwise exempt from filing with the Internal Revenue Service. If copies of these documents have previously been filed with the department and are still current, they do not have to be resubmitted.

(e) The application shall include an accurate map identifying by dimension the use or proposed use of all real property including buildings, building sites, parking areas, landscaping, vacant areas, and, if requested by the department, floor plans of multistoried buildings. This map will be used to determine whether the property is entitled to a total exemption or a partial exemption based upon the use of the total area.

(f) The application shall accurately describe the real and personal property for which exemption is sought. The application shall include a legal description of all real property, provide the county tax parcel number for each parcel of real property, and, if the property is owned by the applicant, a copy of the current deed relative to the real property.

(g) The application shall indicate whether any of the real or personal property included in the application is rented or loaned from or to others. If the property is rented or loaned, the applicant must include a copy of the rental agreement with the application and answer the following questions:

(i) Which property, in whole or in part, is rented or loaned;

(ii) The amount of the rent or other consideration received;

(iii) To whom or from whom the property is rented or loaned;

(iv) What use is being made of the property; and

(v) The monthly amount of operation and maintenance costs related to the rented or loaned property.

(5) Effective date of exemption. If the application for exemption is approved, the property shall be exempt from property taxes due the year immediately following the year the application was submitted. For example, if an application is submitted in 1995 and the property is eligible for exemption effective 1/1/95, the property will be exempt from taxes due in 1996. Applications for previous years may by submitted, up to a maximum of three years from the date the taxes were paid, if the applicant provides proof acceptable to the department that the property qualified for exemption in the assessment year prior to the tax year for which exemption is claimed and the initial filing fee and late filing penalties are paid.

(6) Annual renewal declaration. In order to retain a property tax exemption, each nonprofit entity (except nonprofit cemeteries) receiving an exemption shall annually file a renewal declaration with the department certifying that the use and exempt status of the real and personal property claimed as exempt has not changed. The declaration shall be on a form prescribed by the department and shall be in accordance with the following:

(a) The department shall annually on or before January 1 mail a renewal declaration to the owners of record of exempt property at their last known address.

(b) The renewal declaration shall be filed with the department no later than March 31, signed by the owner, and accompanied by a filing fee of eight dollars and seventy-five cents. This declaration shall include information regarding any change of use and a certification as to the truth and accuracy of the information listed. It shall be due on or before March 31 regardless of whether the department mailed the declaration to the owner.

(c) If the owner fails to file the renewal declaration by the due date, and after the department has mailed an additional notice to the owner at the owner's last known address, the department shall remove the exemption from the property and notify the assessor in the county where the property is located that the exemption is removed and that the property is to be placed back on the tax rolls.

(7) Failure to file annual renewal declaration. When the exemption has been removed as a result of an owner's failure to file an annual renewal declaration and the owner wishes to reapply for the property tax exemption:

(a) Within the same assessment year, the owner must complete and file an annual renewal form and pay any required late filing penalties; or

(b) Within a subsequent assessment year, the owner must file an initial application, pay the initial filing fee, and pay any required late filing penalties.

(8) Full payment of filing fees is required before an initial application or renewal declaration will be processed. The department will not process an application or a renewal form for a property tax exemption until all filing fees and penalties, if applicable, have been paid.

(9) Late filing penalty. When an initial application or renewal form is not submitted by the due date, a late filing penalty of ten dollars is due for every month, or portion thereof. This penalty is calculated from the date the filing was due up to the postmark date shown on the application or renewal declaration.

(10) Refund of filing fee or penalty. No filing fees or late filing penalty will be refunded after a determination on the application or renewal is issued by the department. However, filing fees and the late filing penalty will be refunded under the following circumstances:

(a) When a duplicate application or renewal form for exemption for the same property is filed for the same year;

(b) When an application or renewal form for exemption is received by the department and the department has no authority to grant the exemption requested; or

(c) When a written request to withdraw the application or renewal form for exemption is received before a determination has been issued by the department. The request to withdraw the application or renewal form must be signed by the owner or the owner's authorized agent.)) (1) Introduction. This rule explains the procedures property owners must follow to apply for and renew all real and personal property exemptions or leasehold excise tax exemptions under chapter 84.36 RCW for which the taxpayer must apply in order to receive. It also specifies the fee that must be submitted with each initial application or renewal declaration for exemption, as well as the late filing penalty that is due whenever an application or renewal declaration is received after the filing deadline.

(2) Application required. All foreign national governments, cemeteries, nongovernmental nonprofit corporations, organizations, or associations, soil and water conservation districts, and a public hospital district established under chapter 70.44 RCW seeking a property tax exemption or a leasehold excise tax exemption under chapter 84.36 RCW must submit an application for exemption and supporting documentation to the state department of revenue (department). Unless otherwise exempted by law, no real or personal property or leasehold interest is exempt from taxation until an application is submitted and an exemption is granted.

(3) Where to obtain application and annual renewal declaration forms. Applications for exemption may be obtained from any county assessor's office, the department's property tax division, or on the internet at http://dor.wa.gov/index.asp under Property Tax, "Forms." Annual renewal declaration forms are mailed by the department to all entities receiving a property tax or leasehold excise tax exemption. If such a form is not received in the mail, an annual renewal declaration may be obtained from the department's property tax division or an application form may be obtained and adapted for use as an annual renewal declaration.

(4) Initial application, filing deadlines, and other requirements. In general, initial applications for exemption must be filed with the department on or before March 31st to exempt the property from taxes due in the following year. However, an initial application may be filed after March 31st if the property is acquired or converted to an exempt use after that date, if the property may qualify for an exemption under chapter 84.36 RCW. In this situation, the application must be submitted within sixty days of acquisition or conversion of the property to an exempt use. If an initial application is not received within this sixty day period, the late filing penalty described in subsection (12) of this rule is imposed.

(a) The following requirements apply to all initial applications:

(i) A filing fee of thirty-five dollars must be submitted with each application for exemption. The department will not process any application unless this fee is paid;

(ii) The application must be made on a form prescribed by the department and signed by the applicant or the applicant's authorized agent;

(iii) One application can be submitted for all real property that is contiguous and part of a homogeneous unit. If exemption is sought for multiple parcels of real property, which are not contiguous nor part of a homogeneous unit, a separate application for each parcel must be submitted. However, multiple applications are not required for church property with a noncontiguous parsonage or convent.

(A) "Contiguous property" means real property adjoining other real property, all of which is under the control of a single applicant even though the properties may be separated by public roads, railroads, rights of way, or waterways.

(B) "Homogeneous unit" means the property is controlled by a single applicant and the operation and use of the property is integrated with and directly related to the exempt activity of the applicant.

(5) Documentation a nonprofit organization must submit with its application for exemption. Unless the following information was previously submitted to the department and it is still current, in addition to the application for exemption, a nonprofit organization, corporation, or association must also submit:

(a) Copies of the articles of incorporation or association, constitution, or other establishing documents, as well as all current amendments to these documents, showing nonprofit status;

(b) A copy of the bylaws of the nonprofit entity, if requested by the department;

(c) A copy of any current letter issued by the Internal Revenue Service that exempts the applicant from federal income taxes. This letter is not usually, but may be, required if the nonprofit entity applying for an exemption is part of a larger organization, association, or corporation, like a church or the Boy Scouts of America, that was issued a group 501 (c)(3) exemption ruling by or is otherwise exempt from filing with the Internal Revenue Service; and

(d) The information required in subsection (6) of this rule.

(6) Other documentation a nonprofit entity, foreign national government, hospital owned and operated by a public hospital district, or soil and water conservation district must submit with its initial application for exemption. In addition to the initial application for exemption, a nonprofit entity, foreign national government, and public hospital district established under chapter 70.44 RCW, or soil and water conservation district must submit the following information regarding the real or personal property for which exemption is sought, unless it was previously submitted to the department and it is still current:

(a) An accurate description of the real and personal property;

(b) An accurate map identifying by dimension the use or proposed use of all real property that shows buildings, building sites, parking areas, landscaping, vacant areas, and if requested by the department, floor plans of the buildings. The map will be used to determine whether the property is entitled to a total or partial exemption based upon the use of the total area;

(c) A legal description of all real property, listing the county tax parcel number, and if the property is owned by the applicant, a copy of the current deed; and

(d) If the property is rented or loaned to or from another property owner, a copy of the rental agreement or other document explaining the terms of the lease or loan. This documentation must describe:

(i) What property is rented or loaned;

(ii) The amount of the rent or other consideration paid or received;

(iii) The name of the party from whom and the name of the party to whom the property is rented or loaned;

(iv) How the property is being used; and

(v) The monthly amount of maintenance and operation costs related to rented or loaned property if a nonprofit entity is claiming an exemption for property leased to another party.

(7) Department's review of the application and notice of its determination. Upon receipt of an application for exemption, the department will review the application and all supporting documentation. Additional information may be requested about the ownership and use of the property, if the department needs this information to determine if the exemption should be granted. An application for exemption is not considered complete until all required and requested information is received by the department.

(a) Physical inspection. The department will physically inspect the property as part of the application review process.

(b) Deadline. If a complete application is received by March 31st for that assessment year, the department will issue a determination about the application by August 1st. If a complete application is not received by March 31st, the determination will be made within thirty days of the date the complete application is received by the department or by August 1st, whichever is later.

(c) Notice to applicant. The department will mail a written determination about the exemption application to the applicant. An application may be approved or denied, in whole or in part. If the application is denied for any portion of the property covered by the application, the department must clearly explain its reason for denial in its written determination.

(d) Notice to assessor. Once the department makes its determination about the application for exemption, it will notify the assessor of the county in which the property is located about the determination made. In turn, the assessor takes appropriate action so that the department's determination is reflected on the county's assessment roll(s) for the years covered by the determination.

(8) Effective date of the exemption. If an application is approved, the property is exempt from property taxes due the year immediately following the year the application for exemption is submitted.

(a) For example, if an application for exemption is submitted to the department in 2000 and the application is approved in assessment year 2000, the property will be exempt from taxes due in 2001.

(b) Retroactive applications for exemption for previous years are accepted, up to a maximum of three years from the date taxes were paid on the property, if the applicant provides the department with acceptable proof that the property qualified for exemption during the pertinent assessment years and pays the initial application filing fee, renewal declaration fees, and late filing penalties.

(9) Annual renewal declaration. To retain a property tax exemption, each nonprofit entity (except nonprofit cemeteries), foreign national government, public hospital district, and soil and water conservation district receiving an exemption must annually submit a renewal declaration certifying that the use and exempt status of the real and personal property has not changed. The renewal declaration is a form prepared by the department.

(a) On or before January 1st each year, the department mails a renewal declaration to the entity receiving an exemption for the property at the entity's last known address. Within sixty days of changing its mailing address, the exempt entity must notify the department about the change.

(b) The renewal declaration, signed by the exempt entity or the exempt entity's authorized agent, and renewal fee of eight dollars and seventy-five cents must be submitted to the department no later than March 31st each year. The department will not process a renewal declaration unless this fee is paid.

(i) The renewal declaration must include information about any change of use of the exempt property and a certification as to the truth and accuracy of the information listed.

(ii) The renewal declaration is due on or before March 31st even if the department fails to mail the declaration to the exempt entity. If an exempt entity does not receive a renewal declaration, an application form may be submitted to the department to renew the exemption.

(c) If the renewal declaration and renewal fee are not received by March 31st, the department will mail a second notice to the exempt entity at the entity's last known mailing address. If the exempt entity fails to respond to the second notice, the department will remove the exemption from the property and notify the assessor of the county in which the property is located that the exemption has been cancelled.

(d) Real property, which was previously exempt from taxation, is assessed and taxed as provided in RCW 84.40.350 through 84.40.390 when it loses its exempt status.

(i) Property that no longer retains its exempt status is subject to a pro rata portion of the taxes allocable to the remaining portion of the year after the date the property lost its exempt status.

(ii) The assessor lists and assesses the property with reference to its true and fair value on the date the property lost its exempt status.

(iii) RCW 84.40.380 sets forth the dates upon which taxes are payable when property loses its exempt status. Taxes due and payable under RCW 84.40.350 through 84.40.390 constitute a lien on the property that attaches on the date the property loses its exempt status.

(10) Failure to submit an annual renewal declaration and reapplication for exemption. If property loses its exempt status because the annual renewal declaration and renewal fee were not submitted and subsequently the owner wishes to reapply for the property tax exemption:

(a) If the owner reapplies within the same assessment year during which the exemption is cancelled, the owner must submit the annual renewal declaration and pay the renewal fee and any required late filing penalties; or

(b) If the owner reapplies after the assessment year during which the exemption is cancelled, the owner must submit an initial application and pay the initial application fee, any unpaid renewal fees for the intervening years, and required late filing penalties.

(11) Initial application and renewal declaration procedures regarding cemeteries. There are several types of cemeteries. The initial application for exemption and renewal declaration procedures are specific as to the type of cemetery at issue.

(a) The assessor shall consider the following types of cemeteries exempt from property tax, no initial application or renewal declaration is required for:

(i) Cemeteries owned, controlled, operated, and maintained by a cemetery district authorized by RCW 68.52.090; or

(ii) Indian cemeteries, which are considered to be held by the tribe or held in trust for the tribe by the United States.

(b) An initial application is submitted to the department, but no renewal declaration is required, for:

(i) Family cemeteries;

(ii) Historical cemeteries;

(iii) Community cemeteries; and

(iv) Cemeteries belonging to nonprofit organizations, associations, or corporations.

(c) An initial application for exemption and a renewal declaration must be submitted by all for-profit cemeteries seeking a property tax exemption.

(12) Late filing penalty. When an initial application or renewal declaration is submitted after the due date, a late filing penalty of ten dollars is due for every month, or portion thereof. This penalty is calculated from the date the application or renewal declaration was due until the postmark date shown on the application or declaration or the date the application or declaration is given to the department.

(13) Refund of filing fee or penalty. No filing fees or late filing penalty are refunded after a determination on the application is issued by the department. However, filing fees and the late filing penalty will be refunded under the following circumstances:

(a) When a duplicate application or renewal declaration for the same property is submitted during the same calendar year;

(b) When an application or renewal declaration is received by the department and the department has no authority to grant the exemption requested; or

(c) When a written request to withdraw the application is received before the department issues a determination. The withdrawal request must be signed by the owner or the owner's authorized agent.

(14) Appeals. Any applicant that receives a negative determination from the department on either an initial application or a renewal declaration may appeal this determination to the state board of tax appeals (BTA). Similarly, any assessor who disagrees with the department's determination may appeal the determination to the BTA. See WAC 458-16-120 for specific information about the appeal process.

[Statutory Authority: RCW 84.36.865, 84.36.037, 84.36.805, 84.36.815, 84.36.825 and 84.36.840. 98-18-006, 458-16-110, filed 8/20/98, effective 9/20/98. Statutory Authority: RCW 84.08.010, 84.08.070 and chapter 84.36 RCW. 94-07-008, 458-16-110, filed 3/3/94, effective 4/3/94. Statutory Authority: RCW 84.36.865. 85-05-025 (Order PT 85-1), 458-16-110, filed 2/15/85; 81-05-017 (Order PT 81-7), 458-16-110, filed 2/11/81; Order PT 77-2, 458-16-110, filed 5/23/77; Order PT 76-2, 458-16-110, filed 4/7/76. Formerly WAC 458-12-146.]

OTS-5216.2


AMENDATORY SECTION(Amending Order PT 81-7, filed 2/11/81)

WAC 458-16-120   Appeals ((and notice of determination)).   ((The department of revenue shall review each completed application and make a determination thereon, by August 1 or within thirty days whichever is later.

Any property owner aggrieved by the department's denial of an exemption application may, within 30 days of notification thereof, petition the State Board of Tax Appeals at 1010 Cherry Street, Olympia, WA 98504 for review. Any county assessor who feels the department's determination of exemption is unwarranted may, within 30 days after receiving a copy of the notification, petition the state board of tax appeals for review. To determine whether an appeal taken to the board of tax appeals, is timely the period for giving notice of appeal shall commence on the third day following the day upon which the notice was placed in the mail. (WAC 456-08-003, Board of tax appeals)

Appeal forms shall be available at the board of tax appeals in Olympia and county auditor's offices except in King county where they are available at the office of the clerk of the county council. Appeals shall be filed with the board of tax appeals and, concurrently, a copy shall be filed with the department of revenue. The appellant shall prepare an original and three copies of the notice of appeal. They shall be distributed as follows:

(1) The original shall be filed with the board of tax appeals.

(2) One copy shall be filed with the department of revenue.

(3) If the property owner is the appellant, one copy of the notice must be filed with the assessor of the county in which the property is located. If the assessor is the appellant, one copy of the notice must be provided to the property owner.

(4) One copy of the notice shall be retained in the appellant's files.

The state board of tax appeals shall consider any appeals which are timely filed to determine (1) if the property is or is not entitled to an exemption, and (2) the amount or portion thereof.

Failure to timely file a claim for exemption is not subject to appeal.)) (1) Introduction. This rule outlines the appeal process an aggrieved party uses when the department issues a determination regarding a property tax exemption with which that party disagrees.

(2) Definitions. For purposes of this rule, the following definitions apply:

(a) "Appellant" means a person, natural or otherwise, who appeals any order or decision made by the department to the board of tax appeals.

(b) "Board" or "BTA" means the state board of tax appeals described in chapter 82.03 RCW and chapters 456-09 and 456-10 WAC.

(c) "Department" means the state department of revenue.

(d) "Formal hearing" means a proceeding before the BTA conducted in accordance with RCW 82.03.160, the Administrative Procedure Act (chapter 34.05 RCW), and chapter 456-09 WAC.

(e) "Informal hearing" means a proceeding before the BTA conducted in accordance with RCW 82.03.150 and chapter 456-10 WAC.

(3) General provisions - formal or informal hearing. Any nonprofit organization, association, or corporation, foreign national government, cemetery, soil and water conservation district, public hospital district, or county assessor may appeal a determination made by the department to the BTA. The duties, responsibilities, and jurisdiction of the BTA are outlined in chapter 82.03 RCW. RCW 82.03.140 allows the party appealing (appellant) to the BTA to request either a formal or informal hearing in its notice of appeal. If the appellant fails to specify the type of hearing requested in the notice, the BTA will conduct an informal hearing. The department also has the right to request a formal hearing after being notified that its determination has been appealed to the BTA.

(a) Formal hearings are usually requested by parties who wish to have a complete record of the appeal that may be used in a subsequent court appeal, if desired. Formal hearings are conducted in accordance with the Administrative Procedure Act, chapter 34.05 RCW.

(b) Informal hearings are requested by the majority of parties appearing before the BTA. Decisions entered in an informal appeal cannot be appealed to court.

(4) Where to obtain an appeal notice. A notice of appeal can be obtained from the BTA or downloaded from the internet site (http://bta.state.wa.us/), the department's property tax division, county auditor's offices, or the office of the clerk of the county council in King County.

(5) Deadline to appeal. A notice of appeal must be submitted to the BTA no later than thirty days after the postmark date on the department's notice of determination or the date on which the notice was given to the applicant, whichever is later. Appeals not timely filed will be dismissed. Likewise, appeals not properly filed may be dismissed if the appellant fails to substantially comply with WAC 456-09-320 or 456-10-320.

(6) Grounds for appeal. A party aggrieved by any of the following determinations made by the department may appeal it to the BTA:

(a) A determination denying an exemption on an initial application or renewal declaration;

(b) A determination exempting only a portion of the property from property tax;

(c) A property tax exemption is cancelled or removed, in whole or in part;

(d) The property tax exemption is cancelled or removed and back taxes are assessed in accordance with RCW 84.36.810 or 84.36.262; or

(e) An exemption application or renewal declaration is approved and the assessor of the county in which the property is located believes the exemption should not have been granted (see RCW 84.36.850).

[Statutory Authority: RCW 84.36.865. 81-05-017 (Order PT 81-7), 458-16-120, filed 2/11/81; Order PT 77-2, 458-16-120, filed 5/23/77; Order PT 76-2, 458-16-120, filed 4/7/76. Formerly WAC 458-12-147.]

OTS-5215.1


AMENDATORY SECTION(Amending WSR 94-07-008, filed 3/3/94, effective 4/3/94)

WAC 458-16-130   Change in taxable status of ((nongovernmental)) real property.   (1) Introduction. ((This section explains what occurs when a change in ownership or use of real property owned or used by a nongovernmental entity causes the property to either gain or lose its tax exempt status.

(2) Definitions. For purposes of this section, the following definitions apply:

(a) "Cessation of use" means that an owner or user of exempt real property has ceased to physically use the property for an exempt use. The term also refers to property that has lost its exempt status because it was transferred, loaned, or rented to an owner that is not entitled to an exemption.

(b) "Real property" means real property owned or used by a nongovernmental organization, association, corporation, or private individual.

(c) "Rollback" refers to the provisions of RCW 84.36.810 that make previously exempt property subject to back taxes and interest because of a change in ownership or a cessation of an exempt use unless the subject property has been exempt for at least ten years.

(3) Exempt to taxable status. A change in the ownership or use of real property that makes the property no longer exempt from taxation shall cause the real property to be assessed and taxed as of the date of the cessation of use or change of ownership, as provided in RCW 84.40.350 through 84.40.390. If the owner or new owner begins to use the property for an exempt use within one hundred twenty days of the date the previous exempt use ceased, the property will not be placed back on the tax assessment roll as of the date of cessation. However, if an agreement establishing an alternate exempt use has not been signed or an alternative exempt use has not been found within one hundred twenty days, the property will be placed back on the assessment roll and, if appropriate, the rollback provisions of RCW 84.36.810 will be applied as of the date the cessation of use occurred. All real property that is no longer exempt from taxation shall be subject to a pro rata share of taxes allocable for the remaining portion of the year in which the cessation of use or change in ownership occurred. If only a portion of the property no longer qualifies for tax exemption, only that portion shall be assessed and taxed.

(a) Real property changes from exempt to taxable status whenever the property:

(i) Is transferred through either sale, exchange, gift, or contract from tax exempt ownership to taxable ownership;

(ii) Is transferred through either sale, exchange, gift, or contract from tax exempt ownership to another nonprofit organization, association, or corporation that has not applied for a property tax exemption;

(iii) Is converted to a taxable use; or

(iv) When it otherwise loses its exempt status.

(b) Examples.

(i) Example 1. For five years, nonprofit "A" operates a rehabilitative social service facility and receives a property tax exemption for this property. Nonprofit "A" transfers this property to nonprofit "B," who continues to receive the exemption for this property. Two years after acquiring the property nonprofit "B" ceases to use the exempt property for an exempt purpose. One hundred days after the exempt activity ceased, nonprofit "B" sells the exempt property to XYZ Printing Company, a profit seeking business. This property became taxable at the time nonprofit "B" vacated the premises. The provisions of RCW 84.34.810 will be applied as of the date of the move.

(ii) Example 2. A nonprofit hospital owns and occupies a building for which it receives a property tax exemption. The hospital ceases to use the property on January 1, 1992, and does not intend to use or occupy the exempt property any longer. It intends to rent this property to another nonprofit organization and actively advertises and looks for such a tenant. On April 15, 1992, a nonprofit nursing home signs a lease agreement with the hospital to use and occupy the property for an exempt purpose effective June 1, 1992. In this instance, the property will not be subject to taxation for the interim period.

(c) The taxes owing when property changes from exempt to taxable ownership shall be prorated as of:

(i) The date the instrument of sale, exchange, gift, or contract is executed; or

(ii) The date the property is converted to a taxable use.

(d) When the status of real property changes from exempt to taxable, the rollback provisions of RCW 84.36.810 apply. Taxes are collected by the county treasurer in accordance with that statute if this property was previously exempt from ad valorem taxation under any of the following provisions:

(i) It was owned and used by:

(A) A nonprofit organization, association or corporation for character building, benevolent, protective, or rehabilitative social services (RCW 84.36.030);

(B) A nonprofit church, denomination, group of churches, or an organization or association, the membership of which is comprised solely of churches and/or their qualified representatives, as a church camp (RCW 84.36.030);

(C) An organization or society of veterans of any war of the United States (RCW 84.36.030);

(D) Corporations formed under an act of congress to furnish volunteer aid to members of the armed forces of the United States (RCW 84.36.030);

(E) Corporations formed under an act of congress to carry on a system of national and international relief to mitigate and to prevent suffering caused by pestilence, famine, fire, floods, and other national calamities (RCW 84.36.030);

(F) Nonprofit organizations exempt from federal income tax under section 501 (c)(3) of the Internal Revenue Code that are guarantee agencies under the federal guaranteed student loan program or guarantee agencies that issue debt to provide or acquire student loans (RCW 84.36.030);

(G) Nonprofit organizations, associations or corporations in connection with the operation of a public assembly hall, public meeting place, community meeting hall, or community celebration facility (RCW 84.36.037);

(H) Nonprofit organizations for solicitation or collection of gifts, donations, or grants for character building, benevolent, protective, or rehabilitative social services or for distribution to at least five other nonprofit organizations or associations that provide such social services (RCW 84.36.550);

(I) Associations maintaining and exhibiting art, scientific or historical collections for the benefit of the general public and not for profit (RCW 84.36.060);

(J) Fire companies for preventing and fighting fires (RCW 84.36.060); or

(K) Humane societies (RCW 84.36.060).

(ii) It was used by:

(A) Nonprofit day care centers (RCW 84.36.040);

(B) Free public libraries (RCW 84.36.040);

(C) Nonprofit orphanages (RCW 84.36.040);

(D) Nonprofit homes for the sick or infirm or nonprofit hospitals for the sick (RCW 84.36.040);

(E) Nonprofit outpatient dialysis facilities (RCW 84.36.040); or

(F) Nonprofit homes for the aging (RCW 84.36.041).

(iii) It was owned or used for nonprofit schools or colleges (RCW 84.36.050).

(iv) It was owned or leased, and used by:

(A) Nonprofit organizations providing emergency or transitional housing to low-income homeless persons or victims of domestic violence (RCW 84.36.043); or

(B) Associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works for the benefit of the general public and not for profit (RCW 84.36.060).

(e) When real property that was previously exempt under the provisions of RCW 84.36.260, that is, the property was used to conserve ecological systems, natural resources, or open space, becomes taxable, the rollback provisions of RCW 84.36.262 shall apply.

(4) Acquiring tax exempt status. Within sixty days of acquiring real property that may qualify for exemption, or within sixty days of converting real property to a use that may qualify for exemption, any nongovernmental organization, association, or corporation that wishes to have the property exempted from ad valorem taxation must file an application with the department of revenue relating to the subject property seeking either a new or continued exemption from property tax under the provisions of chapter 84.36 RCW. All applications must comply with the requirements set forth in WAC 458-16-110 and 458-16-111.

(a) If the application is approved, the property will be exempt from taxes payable the following year.

(b) If exempt property is transferred from one nonprofit organization, association, or corporation to another, the property shall continue to be exempt from taxation upon the timely receipt of the required application from the purchasing organization and after approval of this application.)) This rule explains what occurs when taxable property becomes exempt and when exempt property becomes taxable. It also describes how property will be treated when exempt use is pending.

(2) Definitions. For purposes of this rule, the following definitions apply:

(a) "Back taxes" means the property taxes that would have been paid but for the existence of the property tax exemption during the three years immediately preceding the cancellation or removal of the exemption or during the life of the exemption, whichever is less, plus interest at the same rate and computed in the same way as delinquent property taxes, see RCW 84.36.810. However, "back taxes" are calculated differently when an exemption is cancelled or removed from property owned by a not-for-profit foundation established for the exclusive support of an institution of higher education under RCW 84.36.050(2) or a nature conservancy under RCW 84.36.260. See RCW 84.36.810 (1)(b) and WAC 458-16-150 regarding not-for-profit foundations and RCW 84.36.262 and WAC 458-16-290 regarding nature conservancies for a more detailed explanation of the back taxes imposed on these entities.

(b) "Cessation of use" means that an owner or user of exempt real property has ceased to use the property for an exempt purpose. The term also refers to property that has lost its exempt status because it was sold, transferred, loaned, or rented to an owner or user that is not entitled to a property tax exemption under chapter 84.36 RCW.

(c) "Department" means the state department of revenue.

(d) "Real property" means real property, as defined in RCW 84.04.090, owned or used by a nongovernmental nonprofit organization, association, or corporation, a foreign national government, cemetery, soil and water conservation district, and public hospital district established under chapter 70.44 RCW.

(e) "Rollback" means the back taxes and interest imposed in accordance with RCW 84.36.810 because the exempt property lost its exempt status and is now taxable for property tax purposes. However, when an exemption granted to a nature conservancy under RCW 84.36.260 is cancelled or removed different rollback procedures are applied. See RCW 84.36.262 and WAC 458-16-290.

(3) Acquiring tax exempt status. Within sixty days of acquiring real property that may qualify for exemption or converting real property to a use that may qualify for exemption, any nongovernmental nonprofit organization, association, or corporation, foreign national government, cemetery, or public hospital district established under chapter 70.44 RCW that wants to obtain a property tax exemption for this property must file an application with the department. The applicant may file an application for either a new or continued exemption from property tax under chapter 84.36 RCW. All applications must comply with the requirements set forth in WAC 458-16-110.

(a) If an application for a new exemption is approved, the property will be exempt for taxes payable during the following calendar year. For example, a nonprofit hospital acquires a new building on February 10, 2001, converts it to an exempt use by April 1, 2001, and applies for a property tax exemption on April 14, 2001. If the application is approved, the property tax exemption will be effective for taxes payable in 2002.

(b) When exempt property is acquired by an entity that is eligible for a property tax exemption under chapter 84.36 RCW, the exempt status of the property will continue as long as the purchaser makes an application to continue the property tax exemption within sixty days of the date of acquisition and the application is subsequently approved by the department. For example, if a nonprofit home for the aging acquires exempt property from a nursing home, the exempt status of the propertywill not change as long as the home for the aging makes application to the department within sixty days of acquiring the nursing home and the application for exemption is later approved by the department.

(4) Exempt to taxable status - pro rata share of taxes for current tax year. Real property may lose its exempt status for a number of reasons; when this occurs the property tax exemption will be cancelled or removed. Once the exemption is cancelled or removed, the property becomes subject to the following year's taxes. The property will be assessed and taxed at its true and fair value as of the date of the cessation of use or the change of ownership occurred, as provided in RCW 84.40.350 through 84.40.390. Additionally, the treasurer of the county in which the property is located shall collect a pro rata portion of the taxes allocable to the remaining portion of the current tax year after the date the exemption is cancelled or removed. If only a portion of the property no longer qualifies for a tax exemption, the exempt status for only that portion of the property shall be cancelled and subjected to assessment and taxation during the current tax year.

(a) Real property changes from exempt to taxable status whenever the property is:

(i) Transferred as a result of a sale, exchange, gift, or contract from tax exempt to taxable ownership;

(ii) Transferred as a result of a sale, exchange, gift, or contract from tax exempt ownership to another nonprofit organization, association, or corporation that fails to apply for or has been denied a property tax exemption;

(iii) Converted to a taxable use; or

(iv) Loses its exempt status for some other reason.

(b) The rollback provisions of RCW 84.36.810 apply when the status of real property changes from exempt to taxable. See WAC 458-16-150 for specific information. However, the rollback provisions of RCW 84.36.262 apply when the property was exempt under RCW 84.36.260 for the conservation of ecological systems, natural resources, or open space. When property changes from exempt to taxable status, the taxes owing will be prorated as of:

(i) The date the instrument of sale, exchange, gift, or contract is executed; or

(ii) The date on which the property is converted to a taxable use.

(c) Example 1. For five years, nonprofit "A" operated a day care center and received a property tax exemption for this property. Nonprofit "A" transfers this property to nonprofit "B," a nonprofit hospital, that continues to receive a property tax exemption for this property. Two years after acquiring the property nonprofit "B" ceases to use the exempt property for an exempt purpose. One hundred days after the exempt activity ceased, nonprofit "B" sells the exempt property to XYZ Printing Company, a profit seeking business. The property became taxable and the provisions of RCW 84.34.810 will be applied as of the date "B" ceased to use the property for an exempt purpose.

(d) Example 2. A nonprofit shelter for low-income persons owned and occupied a building for which it received a property tax exemption. The shelter ceased to use the property on January 1, 2001, and had no intent to reoccupy the property. But it hoped to rent the property to another nonprofit organization for a tax exempt purpose and actively advertised and looked for such a tenant. On June 1, 2001, the nonprofit shelter, which had been unable to find a suitable tax exempt tenant for the property, signed a lease agreement with a for-profit business enterprise, which intended to use and occupy the property effective June 1, 2001. The rollback provisions of RCW 84.36.810 must be applied as of January 1, 2001.

(5) Change of ownership or use - exempt use pending. If the ownership of exempt property changes or the use of exempt property ceases but the owner of the property begins to use it for an exempt purpose within one hundred twenty days of the date the ownership changed or the previous exempt use ceased, the property will continue to be exempt from property tax. However, if an agreement establishing an alternate exempt use is not signed or an alternate exempt use is not found within one hundred twenty days, the property becomes taxable and is noted as such on the assessment roll as of the date the ownership changed or the exempt use ceased. Additionally, if appropriate, the rollback provisions of RCW 84.36.810 will be applied or RCW 84.36.262 if the exempt property was exempt as a nature conservancy. A pro rata share of taxes allocable for the remaining portion of the year in which the cessation of use or change in ownership occurred will be collected.

[Statutory Authority: RCW 84.08.010, 84.08.070 and chapter 84.36 RCW. 94-07-008, 458-16-130, filed 3/3/94, effective 4/3/94. Statutory Authority: RCW 84.36.389 and 84.36.865. 88-13-041 (Order PT 88-8), 458-16-130, filed 6/9/88. Statutory Authority: RCW 84.36.865. 85-05-025 (Order PT 85-1), 458-16-130, filed 2/15/85. Statutory Authority: RCW 84.36.389 and 84.36.865. 83-19-029 (Order PT 83-5), 458-16-130, filed 9/14/83. Statutory Authority: RCW 84.36.865. 81-21-009 (Order PT 81-13), 458-16-130, filed 10/8/81; 81-05-017 (Order PT 81-7), 458-16-130, filed 2/11/81; Order PT 77-2, 458-16-130, filed 5/23/77; Order PT 76-2, 458-16-130, filed 4/7/76. Formerly WAC 458-12-148.]

OTS-5218.2


AMENDATORY SECTION(Amending WSR 94-07-008, filed 3/3/94, effective 4/3/94)

WAC 458-16-150   Cessation of use -- Taxes collectible for prior years.   (1) Introduction. ((This section explains what occurs when property loses its tax exempt status and is placed back on the tax rolls, as well as the back taxes and interest that are collected under the provisions of RCW 84.36.810 when an exempt use ceases, unless the property has been exempt for more than ten years or is otherwise exempt from the provisions of this statute.

(2) Definitions. For purposes of this section, the following definitions apply:

(a) "Cessation of use" means that an owner or user of exempt real property has ceased to physically use the property for an exempt purpose. The term also refers to property that has lost its exempt status because it was transferred, loaned, or rented to an owner that is not entitled to an exemption.

(b) "Relocation of the activity" means that a portion or all of an exempt use has been relocated from the original site to a new location. The term shall not include undeveloped property of camp facilities.

(c) "Rollback" refers to the provisions of RCW 84.36.810 that make previously exempt property subject to back taxes and interest because of a cessation of an exempt use or a change in ownership unless the subject property has been exempt for at least ten years.

(3) Applicability of this section. In accordance with RCW 84.36.810, upon cessation of any exempt use the county treasurer shall collect all taxes that would have been paid if the property had not been exempt during the preceding three years, or for the life of the exemption, whichever is less, plus interest computed at the same rate and in the same manner as that upon delinquent property taxes. If the property has been exempt for more than ten years, this section is not applicable.

(a) When the status of real property changes from exempt to taxable, the rollback provisions of RCW 84.36.810 apply. Taxes are collected by the county treasurer in accordance with that statute if this property was previously exempt from ad valorem taxation under any of the following provisions:

(i) It was owned and used by:

(A) A nonprofit organization, association or corporation for character building, benevolent, protective, or rehabilitative social services (RCW 84.36.030);

(B) A nonprofit church, denomination, group of churches, or an organization or association, the membership of which is comprised solely of churches and/or their qualified representatives, as a church camp (RCW 84.36.030);

(C) An organization or society of veterans of any war of the United States (RCW 84.36.030);

(D) Corporations formed under an act of congress to furnish volunteer aid to members of the armed forces of the United States (RCW 84.36.030);

(E) Corporations formed under an act of congress to carry on a system of national and international relief to mitigate and to prevent suffering caused by pestilence, famine, fire, floods, and other national calamities (RCW 84.36.030);

(F) Nonprofit organizations exempt from federal income tax under section 501 (c)(3) of the Internal Revenue Code that are guarantee agencies under the federal guaranteed student loan program or guarantee agencies that issue debt to provide or acquire student loans (RCW 84.36.030);

(G) Nonprofit organizations, associations or corporations in connection with the operation of a public assembly hall, public meeting place, community meeting hall, or community celebration facility (RCW 84.36.037);

(H) Nonprofit organizations for solicitation or collection of gifts, donations, or grants for character building, benevolent, protective, or rehabilitative social services or for distribution to at least five other nonprofit organizations or associations that provide such social services (RCW 84.36.550);

(I) Associations maintaining and exhibiting art, scientific or historical collections for the benefit of the general public and not for profit (RCW 84.36.060);

(J) Fire companies for preventing and fighting fires (RCW 84.36.060); or

(K) Humane societies (RCW 84.36.060).

(ii) It was used by:

(A) Nonprofit day care centers (RCW 84.36.040);

(B) Free public libraries (RCW 84.36.040);

(C) Nonprofit orphanages (RCW 84.36.040);

(D) Nonprofit homes for the sick or infirm or nonprofit hospitals for the sick (RCW 84.36.040);

(E) Nonprofit outpatient dialysis facilities (RCW 84.36.040); or

(F) Nonprofit homes for the aging (RCW 84.36.041).

(iii) It was owned or used for nonprofit schools or colleges (RCW 84.36.050).

(iv) It was owned or leased, and used by:

(A) Nonprofit organizations providing emergency or transitional housing to low-income homeless persons or victims of domestic violence (RCW 84.36.043); or

(B) Associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works for the benefit of the general public and not for profit (RCW 84.36.060).

(b) This section applies only when the ownership of the property is transferred or when fifty-one percent or more of the area has lost its exempt status. For example, if a nonprofit school or college that owns or uses two hundred acres for educational purposes and is receiving a property tax exemption for this property transfers ten acres, the ten acres are subject to the rollback provisions set forth in subsection (3) of this section if the property has been exempt for less than ten years. The nonprofit school or college will continue to receive a property tax exemption for the remaining one hundred ninety acres as long as the exempt property is used for the exempt use.

(c) This additional tax shall not be imposed if the cessation of use results solely from any of the following:

(i) Transfer to a nonprofit organization, association, or corporation for a use that also qualifies for and is granted exemption under the provisions of chapter 84.36 RCW;

(ii) A taking through an exercise of the power of eminent domain;

(iii) A sale or transfer to an entity having the power of eminent domain in anticipation of the exercise of this power;

(iv) An official action by an agency of the state of Washington or by the county or city within which the exempt property is located that disallows the present exempt use of the property;

(v) A natural disaster (such as a flood, windstorm, earthquake, or other such calamity) that changes the use of the property;

(vi) Relocation of the activity and use of another location or site;

(vii) Cancellation of a lease on property previously exempt as:

(A) A nonprofit day care center;

(B) A library;

(C) An orphanage;

(D) A home for the sick or infirm;

(E) A hospital;

(F) An outpatient dialysis facility;

(G) A nonprofit home for the aging;

(H) A nonpermanent shelter for low-income homeless persons or victims of domestic violence; and

(I) An organization that either produces or performs, or both, musical, dance, artistic, dramatic, or literary works.

(viii) A change in the exempt portion of a home for the aging, as long as some portion of the home remains exempt; or

(ix) The conversion of a home for the aging from full exemption to a partial exemption or to taxable status for taxes payable in 1994, 1995, and 1996 (RCW 84.36.041).

(4) Duty to notify.

(a) An owner of exempt property who knows of or who has information regarding a change in the use of exempt property shall notify the department of revenue of this change. An owner of exempt property must also report the loan or rental of all or a portion of the exempt property since the loan or rental of exempt property may change its taxable status.

(b) Any other person who knows or has information regarding a change in use of exempt property shall notify the county assessor of any such change. The assessor, in turn, shall report this information to the department of revenue.

(c) After being notified about a change in use of exempt property, the department may physically inspect the property to determine if the reported change has taken place.

(d) After a change in use, the final determination of the taxable status of the subject property will be made by the department of revenue.

(5) Notice to owner. When it is determined that a change in use has occurred and the rollback provisions may apply, the department of revenue shall notify the current owner of exempt property and, in the case of a transfer, the previous legal owner of exempt property that the change in use changed the taxable status of the property and that the property may be subject to the rollback provisions set forth in subsection (3) of this section. The owner(s) of this property shall have thirty days from the date of the notice to submit any comments or information to the department as to why the rollback provisions should not be applied. The department shall then issue a final determination.

(6) County treasurer. Upon notification from the department of revenue that the exempt use of the property has ceased, the county treasurer shall compute and collect the taxes payable, including interest computed at the same rate and in the same manner as that upon delinquent property taxes. The interest collected shall be placed in the county current expense fund.)) This rule explains what occurs when property loses its tax exempt status and is placed back on the tax rolls. It also describes the back taxes and interest that are collected when an exempt use ceases, unless the property has been exempt for more than ten consecutive years or is otherwise exempt from the provisions of RCW 84.36.810. This rule does not apply to property that received an exemption as a nature conservancy under RCW 84.36.260; see RCW 84.36.262 and WAC 458-16-290 for more information about the collection of back taxes in this situation.

(2) Definitions. For purposes of this rule, the following definitions apply:

(a) "Back taxes" means the property taxes that would have been paid but for the existence of the property tax exemption during the three years immediately preceding the cancellation or removal of the exemption or during the life of the exemption, whichever is less, plus interest at the same rate and computed in the same way as delinquent property taxes. However, if the property was exempt under RCW 84.36.050(2), "back taxes" means the taxes that would have been collected but for the existence of the property tax exemption during the seven years immediately preceding the cancellation or removal of the exemption or during the life of the exemption, whichever is less.

(b) "Cessation of use" means that an owner or user of exempt real property has ceased to use the property for an exempt purpose. The term also refers to property that has lost its exempt status because it was transferred, loaned, or rented to an owner that is not entitled to an exemption.

(c) "Department" means the state department of revenue.

(d) "Relocation of the activity" means that a portion or all of an exempt use has been relocated from the original site to a new location. The term shall not include undeveloped property of camp facilities.

(e) "Rollback" means the back taxes and interest imposed in accordance with RCW 84.36.810 because the exempt property has lost its exempt status and is now taxable. However, when an exemption granted to a nature conservancy under RCW 84.36.260 is cancelled or removed different rollback procedures are applied, see RCW 84.36.262 and WAC 458-16-290.

(3) Applicability of this rule. Upon cessation of a use for which an exemption was granted under one of the statutes listed below and if directed to do so by the department, the county treasurer shall collect all taxes which would have been paid but for the existence of the property tax exemption. If the property was exempt for more than ten consecutive years, no back taxes or interest are due. Back taxes and interest will be collected only when ownership of property is transferred or when fifty-one percent or more of the total exempt property loses its exempt status.

(a) Generally applied rollback - three years of back taxes plus interest. When the status of real property changes from exempt to taxable, all taxes that would have been collected but for the existence of the exemption during the three preceding years, or the life of the exemption, whichever is less, plus interest at the same rate and computed in the same way as that upon delinquent property taxes are due. The rollback provisions of RCW 84.36.810 apply if the property was previously exempt from property tax under any of the following statutes:


TYPE OF EXEMPT ORGANIZATION AUTHORIZING STATUTE
A nonprofit character building, benevolent, protective, or rehabilitative social service organization, association or corporation RCW 84.36.030
A church camp owned by a nonprofit church, denomination, group of churches, or an organization or association, the membership of which is comprised solely of churches and/or their qualified representatives RCW 84.36.030
A nonprofit organization or association engaged in character building of boys and girls under eighteen years of age or to serve boys and girls up to twenty-one years if the charter of the nonprofit organization or association requires it RCW 84.36.030
An organization or society of veterans of any war of the United States RCW 84.36.030
Corporations formed under an act of Congress to furnish volunteer aid to members of the armed forces of the United States RCW 84.36.030
Corporations formed under an act of Congress to carry on a system of national and international relief to mitigate and to prevent suffering caused by pestilence, famine, fire, floods, and other national calamities RCW 84.36.030
Nonprofit organizations exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code that are guarantee agencies under the federal guaranteed student loan program or guarantee agencies that issue debt to provide or acquire student loans RCW 84.36.030
Nonprofit organizations, associations or corporations in connection with the operation of a public assembly hall, public meeting place, community meeting hall, or community celebration facility RCW 84.36.037
Nonprofit day care centers RCW 84.36.040
Free public libraries RCW 84.36.040
Nonprofit orphanages RCW 84.36.040
Nonprofit homes for the sick or infirm or nonprofit hospitals for the sick RCW 84.36.040
Nonprofit outpatient dialysis facilities RCW 84.36.040
Public hospital district established under chapter 70.44 RCW for hospital purposes RCW 84.36.040
Nonprofit homes for the aging RCW 84.36.041
A nonprofit organization, corporation, or association providing housing for low income eligible persons with developmental disabilities RCW 84.36.042
Nonprofit organizations providing emergency or transitional housing to low-income homeless persons or victims of domestic violence RCW 84.36.043
A nonprofit organization, corporation, or association in connection with a nonprofit cancer clinic or center RCW 84.36.046
Nonprofit schools or colleges RCW 84.36.050
Associations maintaining and exhibiting art, scientific or historical collections for the benefit of the general public and not for profit RCW 84.36.060
Associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works for the benefit of the general public and not for profit RCW 84.36.060
Fire companies for preventing and fighting fires RCW 84.36.060
Humane societies RCW 84.36.060
Nonprofit organizations created for the solicitation or collection of gifts, donations, or grants for character building, benevolent, protective, or rehabilitative social services or for the distribution of funds to at least five other nonprofit organizations or associations that provide such social services RCW 84.36.550
A nonprofit organization, corporation, or association providing rental housing for very low-income households RCW 84.36.560
A nonprofit organization, corporation, or association providing a demonstration farm with research and extension facilities, a public agricultural museum, and an educational tour site, which is used by a state university for agricultural research and education programs RCW 84.36.570

(b) Exception to general rollback provision - property exempt under RCW 84.36.050(2) - seven years of back taxes plus interest. If property owned by a not-for-profit foundation but leased to and used by an institution of higher education, as defined in RCW 28B.10.016, loses its exempt status and it has not been exempt for at least ten consecutive years under RCW 84.36.050(2), the county treasurer, if directed by the department to do so, will collect all taxes that would have been paid on the property but for the existence of the exemption during the seven preceding years, or the life of the exemption, whichever is less, plus interest at the same rate and computed in the same way as that upon delinquent property taxes are due.

(c) No rollback imposed. Back taxes and interest are not imposed if the cessation of use results solely from any of the following:

(i) Transfer to a nonprofit organization, association, or corporation for a use that also qualifies for and is granted exemption under the provisions of chapter 84.36 RCW;

(ii) A taking through an exercise of the power of eminent domain;

(iii) A sale or transfer to an entity having the power of eminent domain in anticipation of the exercise of this power;

(iv) An official action by an agency of the state of Washington or by the county or city within which the exempt property is located that disallows the present exempt use of the property;

(v) A natural disaster (such as a flood, windstorm, earthquake, or other such calamity) that changes the use of the property;

(vi) Relocation of the activity and use of another location or site except for undeveloped properties of camp facilities exempt under RCW 84.36.030. This exemption does not apply to property leased to a state institution of higher education and exempt under RCW 84.36.050(2);

(vii) Cancellation of a lease on property previously exempt as:

(A) A nonprofit day care center;

(B) A library;

(C) An orphanage;

(D) A home for the sick or infirm;

(E) A hospital;

(F) An outpatient dialysis facility;

(G) A nonprofit home for the aging;

(H) A nonpermanent shelter for low-income homeless persons or victims of domestic violence;

(I) An organization that either produces or performs, or both, musical, dance, artistic, dramatic, or literary works;

(J) Housing for low-income eligible persons with developmental disabilities;

(K) A nonprofit cancer clinic or center; or

(L) Rental housing for very low-income households.

(viii) A change in the exempt portion of a home for the aging that is partially exempt from property tax, as long as some portion of the home remains exempt.

(4) Duty to notify.

(a) An owner of exempt property who knows of or who has information regarding a change in the use of exempt property shall notify the department of this change. If any portion of the exempt property is loaned or rented, the owner is required to report this change to the department because the loan or rentalmay affect the taxable status of the property (see RCW 84.36.813).

(b) Any other person who knows or has information regarding a change in use of exempt property is to notify the county assessor of any such change. The assessor, in turn, is required to report this information to the department.

(c) The department may physically inspect exempt property after being notified about a change in the use or ownership of exempt property. It may also conduct physical inspections at any time that it deems necessary to ascertain the exempt use of the property; this may include routine inspections.

(d) The department will determine whether the property may retain its exempt status or whether it will become taxable after a change in use is reported.

(5) Notice to owner. The department must notify the current owner and, in the case of a transfer, the previous legal owner of the exempt property that the cessation of use of the property for an exempt purpose has changed the property's taxable status. The notice must address the applicability of the rollback provisions set forth in subsection (3) of this rule. Within thirty days of receiving this notice, the owner(s) may submit comments or information to the department as to why the exemption should not be removed or rollback provisions should not be applied. The department will then issue a final determination.

(6) County treasurer. The treasurer will compute and collect the back taxes and interest due when the department notifies the treasurer that the property tax exemption is to be cancelled or removed. The interest will be computed at the same rate and in the same manner as that upon delinquent property taxes. The back taxes collected are to be disbursed to the taxing districts impacted by the previous property tax exemption. The interest collected is to be placed in the county current expense fund.

[Statutory Authority: RCW 84.08.010, 84.08.070 and chapter 84.36 RCW. 94-07-008, 458-16-150, filed 3/3/94, effective 4/3/94. Statutory Authority: RCW 84.36.865. 86-12-034 (Order PT 86-2), 458-16-150, filed 5/30/86; 85-05-025 (Order PT 85-1), 458-16-150, filed 2/15/85. Statutory Authority: RCW 84.36.389 and 84.36.865. 83-19-029 (Order PT 83-5), 458-16-150, filed 9/14/83. Statutory Authority: RCW 84.36.865. 82-22-060 (Order PT 82-8), 458-16-150, filed 11/2/82; 81-05-017 (Order PT 81-7), 458-16-150, filed 2/11/81; Order PT 77-2, 458-16-150, filed 5/23/77; Order PT 76-2, 458-16-150, filed 4/7/76. Formerly WAC 458-12-151.]

OTS-5219.2


AMENDATORY SECTION(Amending WSR 98-18-006, filed 8/20/98, effective 9/20/98)

WAC 458-16-165   Conditions under which nonprofit organizations, associations, or corporations may obtain a property tax exemption.   (1) Introduction. ((Nonprofit organizations, associations, and corporations may obtain a property tax exemption under the provisions of RCW 84.36.030, 84.36.035, 84.36.037, 84.36.040, 84.36.041, 84.36.043, 84.36.045, 84.36.046, 84.36.047, 84.36.050, 84.36.060, 84.36.350, 84.36.480, 84.36.550, and chapter 202, Laws of 1998. To be exempt from property taxation, these nonprofit organizations, associations, or corporations must also comply with the requirements contained in RCW 84.36.805 and RCW 84.36.840. This section explains the conditions and requirements set forth in RCW 84.36.805 and 84.36.840. Property exempt under RCW 84.36.030 is not subject to the requirements of RCW 84.36.840.)) In order to receive the property tax exemption authorized in chapter 84.36 RCW, most nonprofit organizations, associations, and corporations must also satisfy the conditions set forth in RCW 84.36.805 and 84.36.840. This rule describes these conditions.

(2) Definitions. For purposes of this ((section)) rule, the following definitions apply:

(a) "Department" means the state department of revenue. (b) "Maintenance and operation expenses" means items of expense allowed under generally accepted accounting principles to maintain and operate the loaned or rented portion of the exempt property.

(((b))) (c) "Revenue" means income received from the loan or rental of exempt property when the income exceeds the amount of maintenance and operation expenses attributable to the portion of the property loaned or rented.

(((c))) (d) "Personal service contract" means a contract between a nonprofit organization, association, or corporation and an independent contractor under which the independent contractor provides a service on the organization's, association's, or corporation's tax exempt property. (See example contained in subsection (((3))) (4)(c) of this ((section)) rule.)

(3) Applicability of this rule. This rule does not apply to exemptions granted to:

(a) Public burying grounds or cemeteries under RCW 84.36.020;

(b) Churches, parsonages, convents, and church grounds under RCW 84.36.020;

(c) Administrative offices of nonprofit recognized religious organizations under RCW 84.36.032;

(d) Water distribution property owned by a nonprofit corporation or cooperative association under RCW 84.36.250; or

(e) Property used for the conservation of ecological systems, natural resources, or open space by a nonprofit corporation or association under RCW 84.36.260.

(4) Exclusive use. ((Unless the applicable statute states otherwise, the)) Exempt property ((shall)) must be exclusively used for the actual operation of the activity for which the nonprofit organization, association, or corporation ((applied and)) or public hospital district established under chapter 70.44 RCW received the property tax exemption unless the authorizing statute states otherwise. The ((amount of exempt)) property exempted from taxation shall not exceed an area reasonably necessary to facilitate the exempt purpose.

(a) Loan or rental of exempt property. As a general rule, the loan or rental of exempt property does not make it taxable if the rents or donations received for the use of the property are reasonable and do not exceed the maintenance and operation expenses attributable to the portion of the property loaned or rented and the property would be exempt from tax if owned by the organization to which it is loaned or rented. Property owned by organizations and societies of war veterans, public assembly halls, public meeting places, community meeting halls, and community celebration facilities are not subject to these limitations.

(i) Exception - loaned or rented for less than fifteen days. The status of exempt property will not be affected if:

(A) The property is loaned or rented for a period of fifteen consecutive days or less;

(B) The property is loaned or rented to another nonprofit organization, association, or corporation or public hospital district established under chapter 70.44 RCW that would qualify for exemption if it owned the loaned or rented property((. This limitation does not apply to exempt property owned by organizations and societies of war veterans, public assembly halls, public meeting places, community meeting halls, and community celebration facilities)); and

(C) All income received from the rental is devoted exclusively to the exempt purpose of the nonprofit organization, association, or corporation or public hospital district established under chapter 70.44 RCW receiving the tax exemption.

(ii) Loaned or rented to produce income. If the lessor or lessee of exempt property intends to produce income from exempt property ((loaned or rented)), the property will lose its exempt status. Property loaned or rented to produce income must be segregated from ((exempt)) property used for exempt purposes. However, property exempt under RCW 84.36.030(4) (an organization or society of veterans of any war of the United States for veterans) and RCW 84.36.037 (public assembly halls, public meeting places, community meeting halls, and community celebration facilities) may be loaned or rented:

(A) For pecuniary gain or to promote business activities for a maximum of seven days each assessment year; or

(B) In a county with less than ten thousand people, the property may be used to promote the following business activities: Dance lessons; art classes; or music lessons (see WAC 458-16-300 and 458-16-310).

(iii) Example. If a portion of a building owned by a nonprofit hospital is rented to a ((pharmacy and the hospital and/or the pharmacy intend to use this area to produce income)) sandwich shop, this portion of the hospital must be segregated from the remainder of the building that is being used for exempt hospital purposes. The portion of the building rented to the ((pharmacy)) sandwich shop is subject to property tax.

(b) Fund-raising activities. The use of exempt property for fund-raising activities sponsored by an exempt organization, association, or corporation or public hospital district established under chapter 70.44 RCW does not ((subject the property to taxation)) jeopardize the exemption if the fund-raising activities are consistent with the purposes for which the exemption was granted. The term "fund-raising" means any revenue-raising activity limited to less than five days in length that disburses fifty-one percent or more of the profits realized from the activity to the exempt nonprofit ((organization, association, or corporation)) entity holding the fund-raising event.

(i) Example 1. A nonprofit social service agency holds an art auction in the auditorium of its tax exempt facility to raise funds. The activity must be less than five days in length and fifty-one percent of the profits must be disbursed to the social service agency because the fund-raising activity is being held on exempt property.

(ii) Example 2. A nonprofit school has a magazine subscription drive to raise funds and the subscriptions are being sold door-to-door by students. There are no limitations on this fund-raising activity because the subscription drive is not being held on exempt property.

(c) Personal service contract - exempt programs. Programs provided under a personal service contract will not jeopardize the exemption if the following conditions are met:

(i) The program is compatible and consistent with the purposes of the exempt organization, association, or corporation;

(ii) The exempt organization, association, or corporation maintains separate financial records as to all receipts and expenses related to the program; and

(iii) A summary of all receipts and expenses of the program are provided to the department ((of revenue)) upon request.

(iv) Example. A nonprofit school may decide to contract with a provider to offer aerobic classes to promote general health and fitness. All brochures and bulletins advertising these classes must show that the school is sponsoring the classes. Under the terms of the contract between the nonprofit school and the aerobic instructor, an independent contractor, the instructor must provide the classes for a predetermined fee. All fees collected from the participants of the classes must be received by the school; the school, in turn, will absorb all costs related to the classes.

(d) Personal service contract - nonexempt programs. Programs provided under a personal service contract (i) that require the contractor to reimburse the nonprofit organization for program expenses or (ii) in which the instructor is paid a fee based on the number of people who attend the program will be viewed as a rental agreement and will subject the property to property tax.

(4) Irrevocable dedication required. The property must be irrevocably dedicated to the purpose for which the exemption was granted. Upon the liquidation, dissolution, or abandonment by ((a)) an exempt nonprofit ((organization, association, or corporation)) entity, the property ((shall)) must not directly or indirectly benefit any shareholder or other individual except a nonprofit organization, association, or corporation that would be entitled to receive a property tax exemption if it applied for it.


((Exception: If, under the terms of a loan or rental agreement, a nonprofit organization, association, or corporation receives the benefit of the property tax exemption, the property need not be irrevocably dedicated if it is loaned or rented to a nonprofit organization, association, or corporation for use as:
(a) A nonprofit organization engaged in procuring, processing blood, plasma, or blood products (RCW 84.36.035);
(b) A nonprofit day care center (RCW 84.36.040);
(c) A library (RCW 84.36.040);
(d) An orphanage (RCW 84.36.040);
(e) A home for the sick or infirm (RCW 84.36.040);
(f) A hospital (RCW 84.36.040);
(g) An outpatient dialysis facility (RCW 84.36.040);
(h) A nonprofit home for the aging (RCW 84.36.041);
(i) A nonpermanent shelter to low-income homeless persons or victims of domestic violence (RCW 84.36.043);
(j) A nonprofit organization conducting medical research or training of medical personnel (RCW 84.36.045);
(k) A nonprofit cancer clinic or center (RCW 84.36.046);
(l) A facility used to produce or perform musical, dance, artistic, dramatic, or literary works (RCW 84.36.060); or
(m) Residential housing occupied by low-income developmentally disabled persons (chapter 202, Laws of 1998).))

Irrevocable dedication is not required if the property is leased or rented to an entity qualified for a property exemption under chapter 84.36 RCW. This exception only applies if the lease or rental agreement requires the lessee nonprofit organization, association, or corporation or public hospital district established under chapter 70.44 RCW to receive the benefit of the exemption.

(5) No discrimination allowed. The ((facilities located on)) exempt property and the services offered ((on the exempt property shall)) thereon must be available to all persons regardless of race, color, national origin, or ancestry.

(6) Compliance with licensing or certification requirements. A nonprofit ((organization, association, or corporation)) entity or public hospital district established under chapter 70.44 RCW seeking or receiving a property tax exemption ((shall)) must comply with all applicable licensing and certification requirements imposed by law or regulation.

(7) Property sold subject to an option to repurchase. Property sold to a nonprofit ((organization, association, or corporation subject to)) entity or public hospital district established under chapter 70.44 RCW with an option to ((repurchase)) be repurchased by the seller ((shall not)) cannot qualify for an exemption. This prohibition does not apply to property sold to a nonprofit entity, as defined in RCW 84.36.560(7), by:

(a) A nonprofit as defined in RCW 84.36.800 that is exempt from income tax under section 501(c) of the federal Internal Revenue Code;

(b) A governmental entity established under RCW 35.21.660, 35.21.670, or 35.21.730;

(c) A housing authority created under RCW 35.82.030;

(d) A housing authority meeting the definition of RCW 35.82.210 (2)(a); or

(e) A housing authority established under RCW 35.82.300.

(8) Duty to produce financial records. In order to determine whether ((an organization, association, or corporation is exempt)) a nonprofit entity is entitled to receive a property tax exemption under the provisions of chapter 84.36 RCW and before the exemption is renewed each year, the ((organization, association, or corporation)) entity claiming ((a property tax)) exemption ((shall file)) must submit a signed statement, made under oath, with the department ((of revenue)). This sworn statement must include a declaration that ((its)) the income, receipts, and donations of the entity seeking the exemption have been used to pay the actual expenses incurred to maintain and operate the exempt facility or for its capital expenditures and to no other purpose. ((This signed statement)) It shall also include a statement listing the receipts and disbursements of the organization, association, or corporation. This statement shall be made on a form prescribed and furnished by the department.

(a) The provisions of this subsection do not apply to an ((organization, association, or corporation)) entity either applying for or receiving an exemption under RCW 84.36.020 or 84.36.030.

(b) ((When an organization, association, or corporation is currently receiving a property tax exemption,)) This signed statement must be submitted on or before April 1 each year by any entity currently receiving a tax exemption. If this statement is not received on or before April 1, the department shall remove the tax exemption from the property. However, the department shall allow a reasonable extension of time for filing if the exempt ((organization, association, or corporation)) entity has submitted a written request for an extension on or before the required filing date and for good cause.

(9) Caretaker's residence. If a nonprofit ((organization, association, or corporation)) entity or public hospital district established under chapter 70.44 RCW exempt from property tax under chapter 84.36 RCW employs a caretaker to provide either security or maintenance services and ((a)) the caretaker's residence is located on exempt property, the residence may qualify for exemption if the following conditions are met:

(a) The caretaker's duties include regular surveillance, patrolling the exempt property, and routine maintenance services;

(b) The nonprofit entity or the public hospital district established under chapter 70.44 RCW demonstrates the need for a caretaker at the facility;

(c) The size of the residence is reasonable and appropriate in light of the caretaker's duties and the size of the exempt property; and

(((c))) (d) The caretaker receives the use of the residence as part of his or her compensation and does not pay rent. Reimbursement of utility expenses created by the caretaker's presence are not rent.

[Statutory Authority: RCW 84.36.865, 84.36.037, 84.36.805, 84.36.815, 84.36.825 and 84.36.840. 98-18-006, 458-16-165, filed 8/20/98, effective 9/20/98. Statutory Authority: RCW 84.08.010, 84.08.070 and chapter 84.36 RCW. 94-07-008, 458-16-165, filed 3/3/94, effective 4/3/94.]

Washington State Code Reviser's Office