Title: An act relating to real estate excise tax fees and electronic processing of affidavits.

Brief Description: Funding the development of an automated system to process real estate excise taxes.

Sponsors: Representatives Kessler and DeBolt.

Brief History:

Local Government: 2/3/05, 2/14/05 [DPS].

HOUSE COMMITTEE ON LOCAL GOVERNMENT

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 4 members: Representatives Simpson, Chair; Clibborn, Vice Chair; B. Sullivan and Takko.

Minority Report: Do not pass. Signed by 3 members: Representatives Schindler, Ranking Minority Member; Ahern, Assistant Ranking Minority Member; and Woods.

Staff: Thamas Osborn (786-7129).

Background:

The state imposes an excise tax of 1.28 percent on each sale of real property. The tax is usually collected by the treasurer of the county within which the property is located, or in some circumstances by the Department of Revenue. Both the buyer and the seller are required to sign a real estate excise tax (REET) affidavit when a taxable transaction occurs. The affidavit must contain the names and addresses of the buyer and seller, a legal description of the property, a parcel number, and the property selling price.

A fee of $2 is collected by the county treasurer on all state-imposed REET transactions. The fee is used to defray costs associated with collecting the REET and processing REET affidavits.

Summary of Substitute Bill:

The fee a county treasurer collects on state-imposed REET transactions is changed to $10. Of the $10 fee, $5 must be deposited in the county treasurer's REET electronic technology account. The remaining $5 must be remitted to the State Treasurer for deposit in a newly created, statewide REET technology account. An appropriation is not required for expenditure from the REET technology account.

The State Treasurer must distribute the moneys in the state account to county treasurers each month. Three-quarters of the money must be equally distributed among all counties, and the rest must be distributed to each county on a pro rata basis based on a county's population.

The money received by the county treasurer must be used exclusively for the development and implementation of an electronic processing and reporting system for REET affidavits. The two $5 technology fees going into the local and state REET technology accounts expire as of June 30, 2010. Any money remaining in the account on July 1, 2015, reverts to the county capital improvements fund.

Substitute Bill Compared to Original Bill:

The amendment has the following effects on the original bill:

• deletes a provision requiring that in the event of a dispute over a transfer of property involving the filing of a real estate excise tax affidavit, the person delivering the documents to the county treasurer is responsible for producing the original signature of the grantor and grantee;
• changes the state treasurer's fund distribution formula for the real estate excise tax electronic technology account so as to require that "three-quarters" of such funds are equally distributed among the 39 counties. The original bill requires that "one-half" of the funds be so distributed;
• adds a provision stating that the two $5 technology fees going into the local and state REET technology accounts expire as of June 30, 2010; and
• changes the effective date of the act from August 1, 2005 to July 1, 2005.

Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: This bill contains an emergency clause and takes effect on July 1, 2005.

Testimony For: This is a bipartisan bill that is proposed by the Association of County Treasurers. The bill proposes fee increases for REET transactions that are large, but are necessary in order to defray the substantial costs incurred by counties in processing tax transactions. More importantly, the bulk of the fee increase will go to a fund for the creation of an automated system for the processing of tax information that will enable counties to better cope with the enormous amount of data that must be processed. This system will be able to interface with the automated system used by the Department of Revenue. An automated system will be more efficient, since it will be much faster than the current system and will greatly decrease the amount of paperwork. Also, an automated system will eliminate many redundancies and will therefore streamline the current system for processing tax information. Both the public and private sectors will see cost savings. Some amendments will be introduced regarding the expiration date for the fee and regarding signature requirements on REET affidavits.

(With concerns) There should be no fee increases with respect to the processing of REET transactions. However, it would be a very good idea to implement the automated system proposed in the bill. The bill suggests some unanswered questions: (1) How much would an automated system actually cost?; and (2) Will the smaller counties actually be able to raise enough money to create such a system? Changes should be made to the bill, including an early expiration date, provisions for reviewing the program, and changes in the way the proceeds from the account are distributed to small counties.

Persons Testifying: (In support) Representative Kessler, prime sponsor; Lisa Frazier and Rose Bowman, Washington State Association of County Treasurers; Doug Lasher, Clark County Treasurer; and Dave Cook, Yakima County Assessor.

(With concerns) Bryan Wahl, Washington Association of Realtors.

Persons Signed In To Testify But Not Testifying: None.