SENATE BILL REPORT
SHB 1323
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
As Reported By Senate Committee On:
Ways & Means, March 30, 2007
Title: An act relating to excise tax relief for certain limited purpose public corporations, commissions, and authorities.
Brief Description: Providing excise tax relief for certain limited purpose public corporations, commissions, and authorities.
Sponsors: House Committee on Finance (originally sponsored by Representatives McIntire, Pettigrew, Pedersen and Dunn).
Brief History: Passed House: 2/21/07, 95-1.
Committee Activity: Ways & Means: 3/30/07 [DP].
SENATE COMMITTEE ON WAYS & MEANS
Majority Report: Do pass.Signed by Senators Prentice, Chair; Fraser, Vice Chair, Capital Budget Chair; Pridemore, Vice Chair, Operating Budget; Zarelli, Ranking Minority Member; Brandland, Carrell, Fairley, Hatfield, Hewitt, Hobbs, Honeyford, Keiser, Kohl-Welles, Oemig, Parlette, Rasmussen, Regala, Roach, Rockefeller, Schoesler and Tom.
Staff: Dean Carlson (786-7305)
Background: Washington's major business tax is the business and occupation (B&O) tax. The
B&O tax is imposed on the gross receipts of business activities conducted within the state,
without any deduction for the costs of doing business. The tax is imposed on the gross receipts
from all business activities conducted within the state. A business may have more than one B&O
tax rate, depending on the types of activities conducted. The tax rate for most types of businesses
that provide services is 1.5 percent.
Retail sales and use taxes are imposed by the state, most cities, and all counties. Retail sales taxes
are imposed on retail sales of most articles of tangible personal property and some services. Use
taxes apply to the value of most tangible personal property and some services when used in this
state, if retail sales taxes were not collected when the property or services were acquired by the
user.
Public development authorities (PDAs) are authorized to improve the administration of
authorized federal grants or programs, to improve governmental efficiency and services, and to
improve the general living conditions in the urban areas of the state. The PDA legislation was
initially enacted to authorize counties, cities, and towns a mechanism to participate in and
implement federally-assisted programs, including revenue sharing, without creating potential
conflict with respect to constitutional restrictions regarding the lending of credit.
Many local governments have established public corporations for a variety of public purposes,
such as the implementation of community and affordable housing programs.
PDAs are provided immunity from property taxation, but in general are subject to leasehold
excise taxes on leases of property to private entities. Amounts received by PDAs from
non-governmental entities for the provision of services, depending on how the PDA is organized,
may be taxable under the B&O tax..
Summary of Substitute Bill: An exemption from the B&O tax is provided for amounts received
by a PDA for providing services to a limited liability company, if the PDA is the managing
member; a limited partnership, if the PDA is the general partner; or a single asset entity required
under a governmental housing assistance program, if the entity is controlled by the PDA.
An exemption from sales and use tax for amounts received by a PDA for the provision of services
subject to sales and use tax if the amounts received are exempt from B&O tax under this act..
Appropriation: None.
Fiscal Note: Available.
Committee/Commission/Task Force Created: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Staff Summary of Public Testimony (on companion SB 5572): PRO: We improve housing stock in capital hill for low and moderate income people. Public Development Authorities do things that cities and counties can't do. This bill is needed because Federal Housing Administration and the low income housing credit require the borrower to set up an affiliated corporation. This would provide an exemption for us for services provided to our own affiliated corporation. If it is not passed we would have to make up the revenue through higher rents, fundraisers, or look for local government assistance.
Persons Testifying: PRO: Senator Murray, prime sponsor; Chuck Weinstock, Capital Hill Housing.