FINAL BILL REPORT

                 ESHB 1831

                        C 22 L 91 E1

                     Synopsis As Enacted

Brief Description:  Designating certain transfers or purchases of ownership interest as a transfer of the ownership of real property and subject to the real estate excise tax.

By House Committee on Revenue (originally sponsored by Representatives Wang and Appelwick).

House Committee on Revenue

Background:  The real estate excise tax is imposed on each sale of real property.  The state tax rate is 1.28 percent.  Additional local rates are allowed.  Most cities and counties have imposed an additional 0.25 percent rate for capital improvements.  This makes the total rate 1.53 percent in most areas.

An additional 0.25 percent rate is available for cities and counties not imposing the second 0.5 percent of the local sales tax.  Also, a 0.25 percent rate is available for capital projects specified in a comprehensive plan.  An additional 1 percent rate for acquisition and maintenance of conservation areas is available when approved by the voters.

The tax is applied to the selling price and the tax is paid by the seller except for the 1.0 percent rate for conservation areas.  This portion is paid by the buyer.

The tax is applied when a sale occurs.  A sale is defined as any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property.  The acquisition of ownership of real property through stock purchases in the owning corporation is not a transaction subject to the real estate excise tax.

Summary:  An excise tax is applied to transfers of corporate ownership that are comparable to a sale of real property.  The rate of tax is equal to the state real estate excise tax.

The tax only applies when there is a transfer or series of transfers in any consecutive 12 month period of ownership of more than 50 percent of the stock of the corporation.  Also, the tax only applies when the value of the real property assets of the corporation is more than 50 percent of the value of all assets held by the corporation.  The tax does not apply to corporations with stock that is traded on public exchanges.  The tax does not apply to partnerships.  The tax does not apply if the taxpayer can show there is no intent to avoid the real estate excise tax.

Votes on Final Passage:

House  97   1

First Special Session

House  90   0

Senate 47   0

Effective:    July 2, 1991