BILL REQ. #:  Z-1130.1 

Read first time 01/16/2006.   Referred to Committee on Ways & Means.

     AN ACT Relating to the property tax exemption for nonprofit schools and colleges; amending RCW 84.36.050 and 84.36.805; and creating new sections.

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

NEW SECTION.  Sec. 1   The legislature finds that independent nonprofit schools, colleges, and universities are vital educational resources to the state of Washington. For the state to be competitive in a global economy, all educational resources must be competitive and provide high-quality programs and services for students.
     The legislature recognizes that independent nonprofit schools, colleges, and universities are important economic drivers in their communities, and encourages institutions to support local communities, to provide public benefit, and to respond to community expectations that they share facilities, offer programs, and attract students on par with Washington's publicly owned institutions and out-of-state schools and colleges. Further, the legislature encourages innovative programs and educational opportunities, sustainable practices, and increased use of facilities so that operations of institutions can be more cost-effective.
     The legislature wishes to remove barriers that discourage institutions from being more collaborative, that make it more difficult to provide high-quality services and necessities to their students, and that discourage appropriate and beneficial use of institutional facilities by the broader community. To this end, the legislature seeks to provide consistent, predictable, and easily administrable rules for reference by the state department of revenue and schools and colleges.

Sec. 2   RCW 84.36.050 and 2001 c 126 s 2 are each amended to read as follows:
     The following property is exempt from taxation:
     (1) Property owned or used by or for any nonprofit school or college in this state for educational purposes or cultural or art educational programs as defined in RCW 82.04.4328. Real property so exempt shall not exceed four hundred acres in extent and, except as provided in RCW 84.36.805, shall be used exclusively for college or campus purposes ((including but not limited to, buildings and grounds designed for the educational, athletic, or social programs of the institution, the housing of students, the housing of religious faculty, the housing of the chief administrator, athletic buildings and all other school or college facilities)), the need for which would be nonexistent but for the presence of the school or college and which are principally designed to further the educational functions of the college or schools. If the property is leased to the nonprofit school or college by another person or entity, the benefit of the exemption must inure to the user;
     (2) Real or personal property owned by a not-for-profit foundation that is established for the exclusive support of an institution of higher education, as defined in RCW 28B.10.016. The property is exempt if it is leased to and used by the institution exclusively for college or campus purposes and is principally designed to further the educational functions of the institution. The exemption is only available for property actively utilized by currently enrolled students. The benefit of the exemption must inure to the user.
     (3) For the purposes of this section, "used exclusively for college or campus purposes" includes the use of real or personal property in a manner that is in furtherance of or consistent with school or college purposes, including, but not limited to, all school or college property used for any of the following:
     (a) The educational, athletic, recreational, social, employee and other similar programs of the school or college, including the support or administration of such programs and including, but not limited to, programs for reputation enhancing, alumni relations, relations with community members and community organizations, student services, and employee compensation and benefits;
     (b) Residential facilities for students, religious faculty, or the president or chief administrator;
     (c) Any activity by any person using the exempt property without charge, that is consistent with the educational, athletic, or social programs of the school or college;
     (d) The loan or rental by the school or college to students, staff, or alumni, of exempt property for educational, athletic, or social activities that are consistent with school or college programs;
     (e) The loan or rental by the school or college to third parties, of exempt property for educational or athletic activities conducted by the third parties that are consistent with school or college programs;
     (f) Any use of school or college property by third parties for pecuniary gain or to promote business, for not more than a total of seven days for all such activities by third parties, where such third party use is measured separately with respect to each specific venue or location located on such property, in one calendar year. However, any use of school or college property described in (a) through (e) of this subsection is not subject to the limitation of this subsection (3)(f), whether or not a third party uses such property for pecuniary gain or to promote business.
     (4) The amount of any rent or donations received by the school or college with respect to loans or rentals under subsection (3)(d) or (e) of this section must be reasonable and not exceed maintenance and operation expenses attributable to the portion of the property loaned or rented. The requirements set forth in RCW 84.36.805(2)(a)(ii) shall not apply for purposes of determining eligibility for the exemption provided under this section with respect to uses of the property set forth in subsection (3)(a) through (f) of this section.
     (5) The exemption under this section is not nullified by an inadvertent use of the property in a manner inconsistent with the purpose for which exemption is granted, if the inadvertent use is not part of a pattern of use. A pattern of use is presumed when an inadvertent use is repeated in the same assessment year or in two or more successive assessment years.

Sec. 3   RCW 84.36.805 and 2003 c 121 s 2 are each amended to read as follows:
     (1) In order to qualify for an exemption under this chapter, 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) 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), 84.36.037, 84.36.050, and 84.36.060(1) (a) and (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.
     (8) This section does not apply to exemptions granted under RCW 84.36.020, 84.36.032, 84.36.250, and 84.36.260.

NEW SECTION.  Sec. 4   This act applies to taxes levied for collection in 2007 and thereafter.