HOUSE BILL REPORT

                  SB 5743

             As Reported By House Committee On:

                      Higher Education

Title:  An act relating to the creation of a leasehold excise tax exemption for organizations qualified under section 501(c)(3) of the internal revenue code that provide student housing.

Brief Description:  Creating a leasehold excise tax exemption for organizations qualified under section 501(c)(3) of the internal revenue code that provide student housing.

Sponsors:  Senators Wood, Kohl, Hale and Kline; by request of Department of Revenue.

Brief History:

  Committee Activity:

Higher Education:  3/25/97, 3/28/97 [DP].

HOUSE COMMITTEE ON HIGHER EDUCATION

Majority Report:  Do pass.  Signed by 9 members:  Representatives Carlson, Chairman; Radcliff, Vice Chairman; Mason, Ranking Minority Member; Kenney, Assistant Ranking Minority Member; Butler; Dunn; O'Brien; Sheahan and Van Luven.

Staff:  Marilee Scarbrough (786-7196).

Background:  The leasehold excise tax is imposed on publicly-owned property used for private purposes.  The tax is collected by public entities that lease property to private parties.  The tax rate of 12.84 percent is imposed on the amount paid in rent for the public property.

Generally, private use of publicly-owned property is subject to leasehold excise taxes.  However, there are some exemptions.  Some examples of leasehold excise tax exemptions include

!A private organization that uses publicly-owned property to provide subsidized housing, if tenants of the subsidized housing must meet income qualification criteria.

!A home on publicly-owned property used as a residence for an employee, if the employee=s work requires him or her to live on the property.  An example would be housing for state park employees located within a park.

Summary of Bill:  A new leasehold excise tax exemption is created.  Non-profit organizations that rent buildings from public colleges or universities for the purposes of providing student housing are exempt if

(1)the purpose of the rental agreement is to permit the non-profit organization to construct or renovate student housing;

     (2)the non-profit organization pays the university or college a nominal rent, determined without reference to market value, for the buildings; and

     (3)the non-profit organization is qualified for exemption under section 501(c)(3) of the federal Internal Revenue Code.

Appropriation:  None.

Fiscal Note:  Not requested.

Effective Date:  The bill takes effect on January 1, 1998.

Testimony For:  There is an increased demand for student housing.  There is also an increased demand for public colleges and universities to enter into private housing partnerships.  This allows us to create affordable housing for students.  This legislation is a new, innovative way to fund higher education needs.  The tax exemption helps provide stable funding for student housing. 

Testimony Against:  None.

Testified:  Senator Jeanette Wood, prime sponsor; Paul Brown, University of Washington Director of Housing; and Doug Breckel, University of Washington Associated Treasurer.