Z-0548

AN ACT Relating to valuation for property tax purposes; amending RCW 84.36.381 and 84.36.383; adding new sections to chapter 84.36 RCW; creating a new section; providing an effective date; providing a contingent effective date; and declaring an emergency.

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

NEW SECTION. Sec. 1. It is the intent of this act to provide property tax relief for homeowners whose home values are increasing at a rapid rate. This rapid increase in home values often has the effect of increasing property taxes without an accompanying increase in a homeowner's ability to pay. This act provides for a limitation on the rate of increase of the assessed values of owner-occupied real property so that the effect of rapidly rising property taxes is spread over a period of years.

The legislature finds that inflation has significant detrimental effects on the senior citizen property tax relief program. Inflation increases income without increasing real buying power. Inflation also raises the values of homes, and thus the taxes on those homes. This act increases the assessed value exemption tied to home value and the income levels are adjusted to reflect the increase in inflation. Because the income of most senior citizens does not keep pace with inflation, it is the legislature's intent that inflationary increases in income will not result in program disqualification. Additionally, the legislature finds that in addition to nursing home expenses, in-home care and treatment expenses of senior citizens should not be included in income for purposes of the senior citizen property tax relief program.

NEW SECTION. Sec. 2. For purposes of sections 3 through 9 of this act, unless the context requires otherwise:

(1) "Change of ownership" means a transfer of a present interest in real property, including a transfer of the beneficial use of real property.

(a) Except as provided in (c) of this subsection, a change of ownership of a present interest in real property shall also include, but not be limited to:

(i) Contracting to convey the title to or ownership of real property upon the fulfillment of one or more stated conditions where the right to possession of the property is transferred currently.

(ii) The creation, transfer, or termination of a joint tenancy interest.

(iii) The creation, transfer, or termination of a tenancy-in-common interest.

(iv) The vesting of a right of possession or enjoyment of a remainder or reversionary interest that occurs upon the termination of a life estate or other similar precedent property interest.

(v) An interest that vests in persons other than the trustor where a revocable trust becomes irrevocable.

(vi) The transfer of stock of a cooperative housing corporation, vested with legal title to real property, that conveys to the transferee the exclusive right to occupancy and possession of such property, or a portion of the property. The term "cooperative housing corporation" has the meaning as set forth in subsection (3) of this section.

(b) The term "change of ownership" does not include:

(i) A transfer between coowners that results in a change in the method of holding title to the real property transferred without changing the proportional interests of the coowners in the real property, such as a partition of a tenancy-in-common.

(ii) A transfer for the purpose of merely perfecting title to the real property.

(iii) The creation, assignment, termination, or reconveyance of a security interest in real property; or the substitution of a trustee under a security instrument.

(iv) A transfer of real property by the trustor, or by the trustor's spouse, or by both, into a trust for so long as the transferor is the sole present beneficiary of the trust, or the trust is revocable; or any transfer of real property by a trustee of such trust back to the trustor.

(v) A transfer of real property by an instrument whose terms reserve to the transferor an estate for years or an estate for life. However, the termination of such an estate for years or life estate shall constitute a change of ownership.

(vi) A transfer of real property between or among the same parties for the purpose of correcting or reforming a deed to express the true intention of the parties, if the original relationship between the grantor and grantee is not changed.

(c) The term "change of ownership" also does not include an interspousal transfer of real property, including, but not limited to:

(i) Transfers to a trustee for the beneficial use of a spouse, or the surviving spouse of a deceased transferor, or by a trustee of such trust to the spouse of the trustor;

(ii) Transfers that take effect upon the death of a spouse;

(iii) Transfers to a spouse or former spouse in connection with a property settlement agreement or decree of dissolution of marriage or legal separation; and

(iv) The creation, transfer, or termination, solely between spouses, of any coowner's interest.

(2) "Owner-occupied" means residential property occupied as a principal residence in this state by a natural person or persons having a present possessory ownership interest in the property. For this purpose, a principal residence is that residential property located in this state that is occupied by such person or persons the greatest amount of time during the calendar year. Owner-occupied includes residential property that is held in trust, provided that at least one of the current beneficiaries of the trust occupies the property as a principal residence, and residential real property occupied as a principal residence, the title to which is held by a housing cooperative as that term is defined in subsection (3) of this section. The confinement of a person to a hospital or nursing home will not cause the person to fail to satisfy the occupancy requirement imposed herein so long as the property is not rented during such period of confinement.

(3) "Residential property" means a single family dwelling unit, regardless of whether such unit shares a common wall with one or more other units, including the land upon which such dwelling stands, and that is owned in its entirety either by a natural person or persons, a housing cooperative, or a trust. For purposes of sections 3 through 9 of this act, the term "housing cooperative" means an association, corporation, or partnership that holds the title to residential property if the person claiming the benefits of sections 3 through 9 of this act can establish that his or her share represents the specific unit or portion of such structure in which he or she resides. The term also includes a single family dwelling situated upon lands the fee of which is vested in the United States or an instrumentality of the United States including an Indian tribe or in the state of Washington, and notwithstanding the provisions of RCW 84.04.080, 84.04.090 or 84.40.250, such a residence shall be deemed real property.

The term residential property also includes a mobile home that has substantially lost its identity as a mobile unit by virtue of its being fixed in location upon land owned or leased by the owner of the mobile home and placed upon a foundation (posts or blocks) with fixed pipe, connections with sewer, water, or other utilities; provided that a mobile home located on land leased by the owner of the mobile home shall be subject, for tax billing, payment, and collection purposes, only to the personal property provisions of chapter 84.56 RCW and RCW 84.60.040.

The term residential property does not include a dwelling unit primarily used in the conduct of a commercial enterprise or a dwelling unit located upon real property that is primarily used in the conduct of a commercial enterprise. Property will be considered primarily used in the conduct of a commercial enterprise if more than one-half of the total square footage of the property is devoted to commercial use.

(4) "Remodel" or "remodeling" means an improvement to owner-occupied residential property for which a building permit was issued, or should have been issued, under chapter 19.27, 19.27A, or 19.28 RCW or other law providing for building permits.

NEW SECTION. Sec. 3. (1) Subject to the provisions of sections 4, 5, 6, and 7 of this act, the value of owner-occupied residential property for purposes of property tax assessment shall be the lesser of the following values at the time of revaluation:

(a) True and fair market value as established by the county assessor in accordance with applicable law; or

(b) The most recent assessed value of the property increased on January 1 each year thereafter by six percent, compounded annually.

(2) The limitation contained in subsection (1)(b) of this section shall only apply for the purpose of the valuation for individual property tax assessments upon which individual tax payments are made. (3) All owner-occupied residential property that meets all the qualifications of sections 2 and 4 through 9 this act shall be listed on the county assessment rolls by the assessor at each of the values described in subsection (1) (a) and (b) of this section.

NEW SECTION. Sec. 4. (1) Owner-occupied residential property having an assessed value of two hundred thousand dollars or more on the effective date of this act, shall be valued and assessed at true and fair market value, provided, that the two hundred thousand dollar amount shall increase on January 1 each year thereafter at the rate of six percent compounded annually. In the event the property shall subsequently have an assessed value less than the limit established in this subsection, and provided the property otherwise meets all the qualifications of sections 2, 3, and 5 through 9 of this act, the property shall be valued and assessed as provided in section 3 of this act.

(2) All owner-occupied residential property that has an assessed value less than the limit established in subsection (1) of this section, and that otherwise meets all the qualifications of sections 2, 3, and 5 through 9 of this act, shall be valued and assessed as provided in section 3 of this act, unless and until the property is no longer owner-occupied residential property, or a change of ownership has occurred, or the property is remodeled so that the market value of the remodeling when added to the most recent assessed value exceeds the limit established in subsection (1) of this section.

NEW SECTION. Sec. 5. (1) Upon a change of ownership involving owner-occupied residential property, the property shall be revalued by the assessor with reference to its true and fair market value as of January 1 of the year following the date the change of ownership occurs.

(2) When an interest of fifty percent or more in owner-occupied residential property changes ownership, the entire property shall be revalued. Changes of ownership during an assessment year shall be cumulated for the purposes of determining the percentage interests transferred.

NEW SECTION. Sec. 6. (1) The value of all new construction or remodeling of owner-occupied residential property shall be added to the assessment rolls in accordance with RCW 36.21.080 and all new construction or the remodeled portion of the property shall be valued and assessed at true and fair market value. Except that the:

(a) Combined value of the market value of the remodeled portion of owner-occupied residential property added to the most recent assessed value for the property prior to the remodel shall be the new valuation base for applying the limit under section 3 of this act; and

(b) Property otherwise qualifies for the application of the limit under section 3 of this act and is less than the limit established in section 4 of this act.

(2) Notwithstanding subsection (1) of this section, the property tax exemption granted by RCW 84.36.400 shall continue to be effective. However, if, upon the expiration of the exemption period provided in that section, the combined value of the remodeled portion of the property and the assessed value for the property exceed the limit established in section 4 of this act, the property shall be valued and assessed at true and fair market value at that time. If the combined value at the time of expiration of the exemption period provided in RCW 84.36.400 does not exceed the limit established in section 4 of this act, the property shall be valued and assessed in accordance with subsection (1) of this section.

NEW SECTION. Sec. 7. (1) An owner-occupant of residential property may apply to the county assessor in the county where the property is located to have his or her real property assessed according to the provisions of sections 2 through 6, 8, and 9 of this act. Application shall be made on forms prepared by the department of revenue and available at the office of the county assessor. The application shall be submitted to the county assessor for determination of qualification under sections 2 through 6, 8, and 9 of this act. A taxpayer who submits an application shall certify that he or she is the owner and occupant of a qualifying residence. After the taxpayer submits the initial application, and the assessor determines that the taxpayer qualifies for the assessed value limitations of sections 2 through 6, 8, and 9 of this act, the assessor shall, at the time a notice of change of value is mailed to a taxpayer pursuant to RCW 84.40.045, require the taxpayer to recertify that he or she is an owner and occupant of a qualifying residence in order to continue to qualify for the assessed value limitation provisions of sections 2 through 6, 8, and 9 of this act.

(2) If, on the basis of the application submitted by the taxpayer, the assessor determines that the taxpayer does not qualify for the assessed value limitation provisions of sections 2 through 6, 8, and 9 of this act, the assessor shall so notify the taxpayer in writing. The notice shall inform the taxpayer of the reasons for the failure to qualify and of his or her right to appeal the assessor's determination to the county board of equalization within thirty days of the mailing of the notice to the taxpayer.

NEW SECTION. Sec. 8. (1) A loss of revenue to a local taxing district that results from the implementation of sections 2 through 7 and 9 of this act shall be reimbursed to the taxing district out of the state general fund.

(2) The method used to calculate the amount to be reimbursed to taxing districts shall be as follows, for each county:

(a) Determine the assessed value for all taxable property, including newly constructed and remodeled real property, without applying the six percent compounded value limit provided for in section 3 of this act.

(b) Determine the assessed value for all taxable property, including newly constructed and remodeled real property, applying the six percent compounded value limit provided for in section 3 of this act.

(c) Calculate the property tax levy rates and levies, in accordance with all regular property tax levy limitations provided by law, using the assessed value determined in accordance with (a) of this subsection.

(d) Recalculate the property tax levy rates and levies, in accordance with all regular property tax levy limitations provided by law, using the assessed value determined in accordance with (b) of this subsection.

(e) The difference between the levy amounts determined in accordance with (d) and (c) of this subsection is the amount to be reimbursed to taxing districts, provided that the reimbursement amount for each taxing district shall not, in any event, exceed the amount which could have been levied if the six percent compounded value limit provided for in section 3 of this act had not been applied.

(3) The county assessor of each county shall provide the department of revenue with all information necessary to make the calculations in subsection (2) of this section and the department shall determine the amount to be reimbursed to taxing districts.

(4) The reimbursement amount shall be distributed to taxing districts in two payments to be made on or before May 31 and November 30 of each year. Fifty-five percent of the reimbursement amount shall be distributed in the first payment, and forty-five percent of the reimbursement amount shall be distributed in the second payment.

NEW SECTION. Sec. 9. (1) In determining the amount of property taxes to be collected by each county for the purposes of the state levy, the department of revenue shall calculate the dollar amount owed by each county based upon the equalized true and fair value, as determined in accordance with RCW 84.48.075 and 84.48.080. The dollar amount owed shall be certified to each county assessor by the department.

(2) Each county assessor shall calculate the levy rate necessary to collect the dollar amount certified in accordance with subsection (1) of this section. The calculation shall be based upon the assessed value of all property in the county as such assessed value may be limited in accordance with section 3 of this act. After the proper levy rate is calculated, the collection process shall proceed as is otherwise required by law.

Sec. 10. RCW 84.36.381 and 1987 c 301 s 1 are each amended to read as follows:

A person shall be exempt from any legal obligation to pay all or a portion of the amount of excess and regular real property taxes due and payable in the year following the year in which a claim is filed, and thereafter, in accordance with the following:

(1) The property taxes must have been imposed upon a residence which was occupied by the person claiming the exemption as a principal place of residence as of January 1st of the year for which the exemption is claimed: PROVIDED, That any person who sells, transfers, or is displaced from his or her residence may transfer his or her exemption status to a replacement residence, but no claimant shall receive an exemption on more than one residence in any year: PROVIDED FURTHER, That confinement of the person to a hospital or nursing home shall not disqualify the claim of exemption if the residence is temporarily unoccupied or if the residence is occupied by a spouse and/or a person financially dependent on the claimant for support;

(2) The person claiming the exemption must have owned, at the time of filing, in fee, as a life estate, or by contract purchase, the residence on which the property taxes have been imposed or if the person claiming the exemption lives in a cooperative housing association, corporation, or partnership, such person must own a share therein representing the unit or portion of the structure in which he or she resides. For purposes of this subsection, a residence owned by a marital community or owned by cotenants shall be deemed to be owned by each spouse or cotenant, and any lease for life shall be deemed a life estate;

(3) The person claiming the exemption must have been sixty‑one years of age or older on January 1st of the year in which the exemption claim is filed, or must have been, at the time of filing, retired from regular gainful employment by reason of physical disability: PROVIDED, That any surviving spouse of a person who was receiving an exemption at the time of the person's death shall qualify if the surviving spouse is fifty‑seven years of age or older and otherwise meets the requirements of this section;

(4) The amount that the person shall be exempt from an obligation to pay shall be calculated on the basis of combined disposable income, as defined in RCW 84.36.383. If the person claiming the exemption was retired for two months or more of the preceding year, the combined disposable income of such person shall be calculated by multiplying the average monthly combined disposable income of such person during the months such person was retired by twelve.

(5) (a) A person who otherwise qualifies under this section and has a combined disposable income of ((~~eighteen~~)) twenty-two thousand dollars or less shall be exempt from all excess property taxes; and

(b) (i) A person who otherwise qualifies under this section and has a combined disposable income of ((~~fourteen~~)) eighteen thousand dollars or less but greater than ((~~twelve~~)) fifteen thousand dollars shall be exempt from all regular property taxes on the greater of ((~~twenty‑four~~)) thirty thousand dollars or thirty percent of the valuation of his or her residence, but not to exceed ((~~forty~~)) fifty thousand dollars of the valuation of his or her residence; or

(ii) A person who otherwise qualifies under this section and has a combined disposable income of ((~~twelve~~)) fifteen thousand dollars or less shall be exempt from all regular property taxes on the greater of ((~~twenty‑eight~~)) thirty-four thousand dollars or fifty percent of the valuation of his or her residence.

Sec. 11. RCW 84.36.383 and 1989 c 379 s 6 are each amended to read as follows:

As used in RCW 84.36.381 through 84.36.389, except where the context clearly indicates a different meaning:

(1) The term "residence" shall mean a single family dwelling unit whether such unit be separate or part of a multiunit dwelling, including the land on which such dwelling stands not to exceed one acre. The term shall also include a share ownership in a cooperative housing association, corporation, or partnership if the person claiming exemption can establish that his or her share represents the specific unit or portion of such structure in which he or she resides. The term shall also include a single family dwelling situated upon lands the fee of which is vested in the United States or any instrumentality thereof including an Indian tribe or in the state of Washington, and notwithstanding the provisions of RCW 84.04.080, 84.04.090 or 84.40.250, such a residence shall be deemed real property.

(2) The term "real property" shall also include a mobile home which has substantially lost its identity as a mobile unit by virtue of its being fixed in location upon land owned or leased by the owner of the mobile home and placed on a foundation (posts or blocks) with fixed pipe, connections with sewer, water, or other utilities: PROVIDED, That a mobile home located on land leased by the owner of the mobile home shall be subject, for tax billing, payment, and collection purposes, only to the personal property provisions of chapter 84.56 RCW and RCW 84.60.040.

(3) The term "preceding calendar year" shall mean the calendar year preceding the year in which the claim for exemption is to be made.

(4) "Department" shall mean the state department of revenue.

(5) "Combined disposable income" means the disposable income of the person claiming the exemption, plus the disposable income of his or her spouse, and the disposable income of each cotenant occupying the residence for the preceding calendar year, less amounts paid by the person claiming the exemption or his or her spouse during the previous year for the treatment or care of either person received in the home or in a nursing home.

(6) "Disposable income" means adjusted gross income as defined in the federal internal revenue code, as amended prior to January 1, 1989, or such subsequent date as the director may provide by rule consistent with the purpose of this section, plus all of the following items to the extent they are not included in or have been deducted from adjusted gross income:

(a) Capital gains;

(b) Amounts deducted for loss;

(d) Pension and annuity receipts;

(e) Military pay and benefits other than attendant‑care and medical‑aid payments;

(f) Veterans benefits other than attendant‑care and medical‑aid payments;

(g) Federal social security act and railroad retirement benefits;

(h) Dividend receipts; and

(i) Interest received on state and municipal bonds.

(7) "Cotenant" means a person who resides with the person claiming the exemption and who has an ownership interest in the residence.

NEW SECTION. Sec. 12. Sections 1 through 9 of this act shall take effect for taxes payable in 1992 and thereafter, if the proposed amendment to the state Constitution authorizing the limitations on taxation provided for in this act is approved and ratified by the voters at a general election held in November 1991. If the proposed amendment is not so approved and ratified, those sections of this act are void in their entirety.

NEW SECTION. Sec. 13. Sections 2 through 9 of this act are each added to chapter 84.36 RCW.

NEW SECTION. Sec. 14. Sections 10 and 11 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1991.