SENATE BILL REPORT

SB 5753

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.

Background: The sale of real property in Washington is generally subject to real estate excise tax (REET). This tax is usually imposed on the seller of the property, and is generally paid to the county treasurer where the property is located at the time of sale. The state REET assessment is 1.28 percent of the selling price.

The local government in which the property is located may also assess REET. The rate varies from the assessment of an additional 1.50 percent in Friday Harbor to 0.00 percent in nine cities in eastern Washington and one city in western Washington, as of December 1, 2008.

The proceeds of the state REET go into the General Fund. The proceeds of the local REET are used for financing capital projects, to acquire and maintain conservation areas, or to develop affordable housing.

Summary of Bill: Sales of qualifying residential housing units by qualifying sellers to qualifying buyers are exempt from the state REET until $1,000,000 of tax is exempted in any fiscal year. At that time, the exemption ends until the start of the next fiscal year. No exemption may be claimed for sales occurring on or after January 1, 2013. The authority for the exemption expires on July 1, 2013.

A qualifying buyer has not owned a home for the three years preceding the intended purchase of a home. The family's combined disposable income must be 80 percent or less of the county median. The buyer must complete a financial education class.

A qualifying residential housing unit must be new or foreclosed and unoccupied.

A qualifying seller must be registered as required by the sales and use tax laws and be primarily engaged in the business of building or rehabilitating residential housing units.

A nonprofit organization registered as required by the sales and use tax laws and that is engaged primarily in the business of building or rehabilitating residential housing units is exempt from paying REET when the organization is exercising its option to repurchase property that is exempt from REET. This exemption also applies only to sales occurring on or before January 1, 2013. The authority for the exemption expires on July 1, 2013.

Staff Summary of Public Testimony: PRO: Empty homes destabilize communities and lower home values. This bill will help move houses more quickly. Consumer confidence is critical in helping stop the decline in home values. There are technical changes needed from the Department of Revenue and the county officials. The fiscal note of $4.1 million is hard to understand given that the total REET exemption is capped at $1 million.

CON: While in support of the bill's goals, there are technical changes that need to be made. The House substitute bill addresses those. There should be a requirement that a certificate be issued that is taken to the county treasurer so that it is clear who is, and who is not entitled to the exemption.