HOUSE BILL REPORT
SHB 1510
As Passed House:
January 18, 2006
Title: An act relating to the property taxation of nonprofit entities.
Brief Description: Modifying the property taxation of nonprofit entities.
Sponsors: By House Committee on Finance (originally sponsored by Representatives Morris, Quall, B. Sullivan and Chase).
Brief History:
Finance: 2/16/05, 3/7/05 [DPS].
Floor Activity:
Passed House: 3/16/05, 96-0.
Floor Activity:
Passed House: 1/18/06, 96-0.
Brief Summary of Substitute Bill |
|
|
HOUSE COMMITTEE ON FINANCE
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 8 members: Representatives McIntire, Chair; Hunter, Vice Chair; Orcutt, Ranking Minority Member; Roach, Assistant Ranking Minority Member; Conway, Ericksen, Hasegawa and Santos.
Staff: Bob Longman (786-7139).
Background:
All property in this state is subject to the property tax each year based on the property's value,
unless a specific exemption is provided by law.
Several property tax exemptions exist for nonprofit organizations. Examples of nonprofit
property tax exemptions are: character building, benevolent, protective or rehabilitative
social service organizations providing services for all ages; churches and church camps;
youth character-building organizations; war veterans organizations; national and international
relief organizations; federal guaranteed student loan organizations; blood, bone and tissue
banks; public assembly halls and meeting places; medical research or training facilities; art,
scientific, and historical collections; sheltered workshops; fair associations; humane
societies; water distribution property; schools and colleges; radio/television rebroadcast
facilities; fire company property; day-care centers; free public libraries; orphanages; nursing
homes; hospitals; outpatient dialysis facilities; homes for the aging; performing arts
properties; and homeless shelters.
Property that is exempt from tax must be used exclusively for the actual operation of the
activity for which exemption was granted, with a few exceptions. Most nonprofit property
may be used for fund-raising activities without jeopardizing its exempt status if the
fund-raising activities are consistent with the purposes for which the exemption was granted.
Public assembly halls, meeting places, and war veterans' organization property may be used
for fund-raising activities by any nonprofit organization. Except for public assembly halls,
public meeting places, and war veterans' organizations, the property may be loaned or rented
only if, (a) the rent received for the use of the property is reasonable and does not exceed
maintenance and operation expenses, and (b) the organization renting the property would be
exempt from tax if they owned the property. For public assembly halls, the exempt property
may be used for pecuniary gain or to promote business activities for up to seven days each
year and also can be used for dance lessons, art classes, or music lessons in counties under
10,000 in population. The property of veterans associations may be used for pecuniary gain
or to promote business activities for three days or less each year.
If nonprofit exempt property is no longer used for the purposes for which the exemption is
granted, back taxes are due. For an institution of higher education, taxes which would have
been paid during the previous seven years must be repaid. For all other nonprofit
organizations, taxes which would have paid during the previous three years must be repaid.
Interest is due on repayments of back taxes.
Summary of Substitute Bill:
The number of days a public assembly hall or meeting place may loan or rent its property for
private use is increased from 7 to15 days per year. A public assembly hall or meeting place
may be used for dance lessons, art classes, or music lessons for any number of days in
counties under 20,000 in population. Nonprofit nonsectarian character-building, benevolent,
protective, and rehabilitative social service organizations in counties with less than 20,000
population may loan or rent their property for private business use for up to15 days per year.
These organizations may also loan or rent their property to a nonprofit community group or
other nonprofit organization that might not qualify for exemption, for up to 15 days per year,
if the property is used for the general public good. For all of these loans or rentals of
property, any rents received must be used for capital improvements to the exempt property,
maintenance and operation of the exempt property, or for exempt purposes. The number of
days a veterans' organization may loan or rent its property for private use is increased from 3
to 15 days per year.
If nonprofit exempt property is transferred to a state or local government agency, no taxes
are due.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.
Testimony For: This bill is the result of working with several organizations that expressed problems with administration of their property tax exemptions. In small communities, nonprofit organizations often provide the only available public meeting space. If they rent out the property, the exemption is lost. These organizations are mainly staffed with volunteers. The volunteers often don't know the risk of losing the exemption until the Department of Revenue audits the organization. The existing penalties for occasional non-exempt use of these properties are too severe.
Testimony Against: None.
Persons Testifying: Representative Morris, prime sponsor.