Washington State House of Representatives Office of Program Research	BILL ANALYSIS
Finance

HB 1467

Brief Description:  Improving property tax administration by correcting terminology and deleting obsolete provisions.

Sponsors:  Representatives Reardon, Cairnes and Santos; by request of Department of Revenue.

Brief Summary of Bill

$Allows the Department of Natural Resources to release a performance bond by a purchaser of timber with proof of payment of property taxes rather than all taxes.

$Repeals the value‑averaging provisions of Referendum 47.

$Integrates two 1999 session laws that amended the homes for the aging property tax exemption statute.

$Consolidates property tax provisions related to business inventory exemptions.

$Repeals the property tax exemption for real property beneath air space dedicated to a public body for a stadium or related parking facility.

$Repeals the property tax exemption for alcohol fuel manufacturing facilities.

Hearing Date:  2/6/01

Staff:  Rick Peterson (786‑7150).

Background: 

Section 1:  When timber is purchased at public auction from the Department of Natural Resources, the purchaser must deliver a performance bond or sureties acceptable to the Department of Natural Resources.  After the timber is cut, the state releases the sureties or the bond.  In order to secure release of the bond, the purchaser of timber must pay all taxes including the excise and personal property taxes that are due or that become due as a result of a timber contract.

Sections  2‑13, 16 ‑ 19, 21‑26, and 27:  Referendum 47, approved by the voters in November 1997, placed a limitation on adding to the tax rolls large valuation increases in real property, beginning with taxes payable in 1999.  Each year, the current appraised (market) value was to be compared to the assessed (taxable) value of the property for the previous year.  The new assessed value was limited to the greater of (1) the previous assessed value plus an increase of 15 percent or (2) the previous assessed value plus 25 percent of the difference between the previous assessed value and the appraised value.  This limitation was known as value averaging.

On July 30, 1998, the state Supreme Court in Belas v. Kiga, 135 Wn.2d 913 (1998), held that the value‑averaging provisions of Referendum 47 violated the constitutional requirement that taxes on real property be uniform.

Section 14:  In 1999, the Legislature twice amended a section of law relating to the property tax exemption for homes for the aging. 

Sections 15, 20, and 27:  In 1973, the Legislature provided for the exemption of business inventories from property taxation.  The exemption was phased in by allowing a business and occupation (B&O) tax credit equal to 10 percent of the property taxes paid on business inventories in 1974 increasing to 100 percent in 1983.  In 1984, the credit expired and business inventories were exempt from the property tax.  However, there exists several other property tax exemptions for items that could also be considered business inventories.  This results in multiple exemptions for the same property.

Section 27:  All property is subject to property tax unless specifically exempted by statute.  In 1967, the Legislature enacted an exemption for real property where the owner dedicates the perpetual use of the air space above the property to a political subdivision for a stadium or parking facility used in connection with the stadium.  This exemption was enacted at the time the King County stadium was being planned but it has never been used. 

In 1980, the Legislature enacted a six year property tax exemption for manufacturers of alcohol for use as motor vehicle fuel.  The original 1986 sunset date was extended to 1992 during the 1985 legislative session.  Only one firm used the exemption.  No exemptions have been taken since 1990.

Summary of Bill: 

Section 1:  In order to secure release of a performance bond a purchaser of  Department of Natural Resources timber need only present proof of payment of property taxes rather than all taxes.

Sections  2‑13, 16 ‑ 19, 21‑26, and 27:  The value‑averaging provisions of Referendum 47 that were invalidated by the court are removed from the statutes.

Section 14:  The two 1999 session laws that amended the homes for the aging property tax exemption statute without reference to each other are integrated.

Section 15 and 20:  Property tax provisions related to the business inventory exemption are consolidated.

Section 27:  The statutes related to business inventories that are consolidated under section 15 are repealed.  The property tax exemption for real property beneath air space dedicated to a public body for a stadium or related parking facility is repealed.  The property tax exemption for alcohol fuel manufacturers is repealed.

All sections apply for property taxes due in 2002.

Appropriation:  None.

Fiscal Note:  Available.

Effective Date:  Ninety days after adjournment of session in which bill is passed.