BILL REQ. #:  H-1382.1 

Read first time 02/14/2003.   Referred to Committee on Finance.

     AN ACT Relating to the property taxation of organizations operated exclusively for art, scientific, or historical purposes or engaged in the production and performance of musical, dance, artistic, dramatic, or literary works; amending RCW 84.36.060 and 84.36.805; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that artistic, scientific, and historical organizations and associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works provide many public benefits to the people of the state of Washington. Therefore, the legislature finds that it is in the best interest of the state of Washington to provide a limited property tax exemption for the use of these facilities by certain organizations for pecuniary gain to better raise additional revenues from the public in order to be self-sustaining for their exempt purposes.

Sec. 2   RCW 84.36.060 and 1995 c 306 s 1 are each amended to read as follows:
     The following property shall be exempt from taxation:
     (1) All art, scientific, or historical collections of associations maintaining and exhibiting such collections for the benefit of the general public and not for profit, together with all real and personal property of such associations used exclusively for the safekeeping, maintaining and exhibiting of such collections; and all the real and personal property owned by or leased to associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works for the benefit of the general public and not for profit, which real and personal property is used exclusively for this production or performance.
     (a) To receive this exemption an organization must be organized and operated exclusively for artistic, scientific, historical, literary, musical, dance, dramatic, or educational purposes and receive a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its purpose or function) from the United States or any state or any political subdivision thereof or from direct or indirect contributions from the general public.
     (b) The lease or rental of the property to entities not eligible for a property tax exemption under this chapter is subject to the following conditions:
     (i) The property may be used for the production and performance of musical, dance, artistic, dramatic, or literary works or for community gatherings or assembly, or meetings; and
     (ii) The use of the property for these purposes does not exceed forty-five days in the calendar year. The property may not be used for pecuniary gain or to promote business activities more than seven of the forty-five days in the calendar year.
     (c) If the property is not currently being used for an exempt purpose but will be used for an exempt purpose within a reasonable period of time, the nonprofit organization, association, or corporation claiming the exemption must submit proof that a reasonably specific and active program is being carried out to construct, remodel, or otherwise enable the property to be used for an exempt purpose. The property does not qualify for an exemption during this interim period if the property is used by, loaned to, or rented to a for-profit organization or business enterprise. Proof of a specific and active program to build or remodel the property so it may be used for an exempt purpose may include, but is not limited to:
     (i) Affirmative action by the board of directors, trustees, or governing body of the nonprofit organization, association, or corporation toward an active program of construction or remodeling;
     (ii) Itemized reasons for the proposed construction or remodeling;
     (iii) Clearly established plans for financing the construction or remodeling; or
     (iv) Building permits.
     (((c) Notwithstanding (b) of this subsection, a for-profit limited partnership created to provide facilities for the use of nonprofit art, scientific, or historical organizations qualifies for the exemption under (b) of this subsection through 1997 if the for-profit limited partnership otherwise qualifies under (b) of this subsection.))
     (2) All fire engines and other implements used for the extinguishment of fire, with the buildings used exclusively for the safekeeping thereof, and for meetings of fire companies, provided such properties belong to any city or town or to a fire company therein.
     (3) Property owned by humane societies in this state in actual use by such societies.

Sec. 3   RCW 84.36.805 and 2001 1st sp.s. c 7 s 2 are each amended to read as follows:
     (1) In order to qualify for an exemption under this chapter ((and RCW 84.36.560)), the nonprofit organizations, associations, or corporations must satisfy the conditions in this section.
     (2) The property must be used exclusively for the actual operation of the activity for which exemption is granted, unless otherwise provided, and does not exceed an amount reasonably necessary for that purpose, except:
     (a) The loan or rental of the property does not subject the property to tax if:
     (i) Except for the exemption under RCW 84.36.060(1)(b), the rents and donations received for the use of the portion of the property are reasonable and do not exceed the maintenance and operation expenses attributable to the portion of the property loaned or rented; and
     (ii) Except for the exemptions under RCW 84.36.030(4) ((and)), 84.36.037, and 84.36.060(1)(b), the property would be exempt from tax if owned by the organization to which it is loaned or rented;
     (b) The use of the property for fund-raising activities does not subject the property to tax if the fund-raising activities are consistent with the purposes for which the exemption is granted.
     (3) The property must be irrevocably dedicated to the purpose for which exemption has been granted, and on the liquidation, dissolution, or abandonment by said organization, association, or corporation, said property will not inure directly or indirectly to the benefit of any shareholder or individual, except a nonprofit organization, association, or corporation which too would be entitled to property tax exemption. This property need not be irrevocably dedicated if it is leased or rented to those qualified for exemption under this chapter or RCW 84.36.560 for leased property, but only if under the terms of the lease or rental agreement the nonprofit organization, association, or corporation receives the benefit of the exemption.
     (4) The facilities and services must be available to all regardless of race, color, national origin or ancestry.
     (5) The organization, association, or corporation must be duly licensed or certified where such licensing or certification is required by law or regulation.
     (6) Property sold to organizations, associations, or corporations with an option to be repurchased by the seller shall not qualify for exempt status. This subsection does not apply to property sold to a nonprofit entity, as defined in RCW 84.36.560(7), by:
     (a) A nonprofit as defined in RCW 84.36.800 that is exempt from income tax under section 501(c) of the federal internal revenue code;
     (b) A governmental entity established under RCW 35.21.660, 35.21.670, or 35.21.730;
     (c) A housing authority created under RCW 35.82.030;
     (d) A housing authority meeting the definition in RCW 35.82.210(2)(a); or
     (e) A housing authority established under RCW 35.82.300.
     (7) The department shall have access to its books in order to determine whether the nonprofit organization, association, or corporation is exempt from taxes under this chapter ((and RCW 84.36.560)).
     (8) This section does not apply to exemptions granted under RCW 84.36.020, 84.36.032, 84.36.250, and 84.36.260.