SENATE BILL REPORT
SHB 1438
As Reported by Senate Committee On:
Ways & Means, March 18, 2021
Title: An act relating to expanding eligibility for property tax exemptions for service-connected disabled veterans and senior citizens by modifying income thresholds for eligibility to allow deductions for common health care-related expenses.
Brief Description: Expanding eligibility for property tax exemptions for service-connected disabled veterans and senior citizens by modifying income thresholds for eligibility to allow deductions for common health care-related expenses.
Sponsors: House Committee on Finance (originally sponsored by Representatives Orcutt, Sutherland, Graham, Young, Volz and Eslick).
Brief History: Passed House: 3/4/21, 98-0.
Committee Activity: Ways & Means: 3/15/21, 3/18/21 [DP, w/oRec].
Brief Summary of Bill
  • Expands which medical expenses can be deducted when calculating combined disposable income for property tax relief programs.
SENATE COMMITTEE ON WAYS & MEANS
Majority Report: Do pass.
Signed by Senators Rolfes, Chair; Frockt, Vice Chair, Capital; Robinson, Vice Chair, Operating & Revenue; Wilson, L., Ranking Member; Brown, Assistant Ranking Member, Operating; Honeyford, Assistant Ranking Member, Capital; Schoesler, Assistant Ranking Member, Capital; Braun, Carlyle, Conway, Darneille, Dhingra, Gildon, Hasegawa, Hunt, Keiser, Liias, Mullet, Pedersen, Rivers, Wagoner, Warnick and Wellman.
Minority Report: That it be referred without recommendation.
Signed by Senator Muzzall.
Staff: Alia Kennedy (786-7405)
Background:

Property Tax.  All real and personal property in the state is subject to property tax each year based on its value, unless specific exemption is provided by law.  The Washington Constitution limits regular property tax levies to a maximum of 1 percent of the property's value—$10 per $1,000 of assessed value.  Excess levies are not subject to this constitutional limit and require voter approval.  There are statutory rate maximums for individual taxing districts and aggregate rate maximums to keep the total tax rate of regular property taxes within the constitutional limit.  All regular levies, except the state levies, are subject to a statutory revenue growth limit.  If the taxing authority has a population of 10,000 or more, the revenue growth limit is the lesser of inflation or 1 percent plus the value of new construction.  If the taxing authority has a population of less than 10,000, the revenue growth limit is 1 percent plus the value of new construction.

 

Senior Citizens, Disabled Veterans, and Limited Income Households Tax Relief.  Qualifying senior citizens, persons retired due to disability, and veterans are entitled to property tax relief on their principal residence.  To qualify, a person must be:

  • 61 years old in the year of the application;
  • retired from employment because of disability; or
  • a veteran of the Armed Forces of the United States receiving compensation from the United States Department of Veterans Affairs at either a combined service-connected valuation rate of 80 percent or higher, or a total disability rating for a service connected disability without regard to evaluation percent.

 

The amount of the reduced property taxes owed is based on the applicant's income and county of residence.

 

Valuation Freeze.  The valuation of the residence of an eligible individual is frozen, for calculating property tax liability, at the assessed value of the residence on the later of January 1, 1995, or January 1st of the assessment year in which the person first qualifies for the program.  Qualification for the valuation freeze is based on the applicant's income and county of residence.

 

Deferral.  Individuals who are at least 60 years of age in the year of application, or are retired by reason of disability are permitted to defer their property taxes.  Deferred taxes become a lien against the property and accrue interest at 5 percent per year.  If deferred taxes are not repaid within three years after the eligible person ceases to own and live in the residence, the lien will be foreclosed and the residence sold to recover taxes.

 

Widow and Widower of Veterans Tax Relief.  Qualifying widows or widowers of veterans can receive a grant of state funds to pay a portion of their property taxes.  Qualified applicants must be a widow or a widower of a veteran who either:

  • died as a result of a service-connected disability;
  • received compensation from the United States Department of Veterans Affairs at a total disability rating ten years prior to death;
  • was a former prisoner of war receiving compensation from the United States Department of Veterans Affairs at total disability rating one year prior to death; or
  • died in active duty or training status.

 

Applicants for the property tax assistance program must be over the age of 62 or unable to work because of disability; have a disposable income of $40,000 or less; own and occupy a primary residence in Washington; and have not been remarried.  Repayment of the grant is not required if the applicant continues to live in the residence until at least December 15th in the year a grant is received.

 

Limited Income Property Tax Deferral Program.  Individuals with an annual household income of $57,000 or less may defer 50 percent of yearly real property taxes and special assessments.  Deferred amounts, including interest, become a lien on the residence.  A claimant may not make a claim for deferral under both this program and the senior citizens limited income deferral program in the same tax year.

 

Combined Disposable Income.  For property tax relief programs, combined disposable income is defined as the sum of federally defined adjusted gross income and the following, if not already included:  capital gains; deductions for losses; depreciation; pensions and annuities; military pay and benefits; veterans benefits except attendant-care and medical-aid payments; Social Security and federal railroad retirement benefits; dividends; and interest income on state and municipal bonds.  Payments for the care of either spouse received in the home, in a boarding home, in an adult family home, or in a nursing home; prescription drugs; and Medicare health care insurance premiums are deducted when determining combined disposable income.

Summary of Bill:

For the senior citizen and disabled veterans property tax exemption, the widow and widower of veterans property tax relief program, and the limited income property tax deferral program, expenses deducted when determining combined disposable income are expanded to include:

  • medicare supplemental insurance policies;
  • durable medical equipment;
  • mobility enhancing equipment;
  • medically prescribed oxygen;
  • prosthetic devices;
  • long-term care insurance;
  • cost-sharing and co-pays, or both;
  • nebulizers;
  • naturopathic medicines;
  • ostomic items;
  • insulin;
  • kidney dialysis devices; and
  • disposable devices used to deliver prescription drugs.
Appropriation: None.
Fiscal Note: Available.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Staff Summary of Public Testimony:

PRO:  This bill addresses a problem that exists among both existing and prospective applicants.  Medical expenses are one of the greatest distinguishing factors among qualifying seniors.  It is not uncommon for a person to become ill and no longer qualify for the property tax exemption.  This is an important and much needed change to the program. 

Persons Testifying: PRO: Steven Drew, Washington State Association of County Auditors, legislative committee chair and Thurston County Assessor; Shane Inman, Veterans Legislative Coalition.
Persons Signed In To Testify But Not Testifying: No one.