HOUSE BILL REPORT

HB 2493

As Reported by House Committee On:

Agriculture & Natural Resources

Title: An act relating to current use valuation for land primarily used for commercial horticultural purposes.

Brief Description: Concerning current use valuation for land primarily used for commercial horticultural purposes.

Sponsors: Representatives Wilcox, Tharinger, Buys, Lytton, Vick, Orcutt, Reykdal, Springer and Haigh.

Brief History:

Committee Activity:

Agriculture & Natural Resources: 1/31/14, 2/5/14 [DPS].

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 15 members: Representatives Blake, Chair; Lytton, Vice Chair; Buys, Ranking Minority Member; MacEwen, Assistant Ranking Minority Member; Chandler, Dunshee, Haigh, Hurst, Kretz, Orcutt, Pettigrew, Schmick, Stanford, Van De Wege and Warnick.

Staff: Jacob Lipson (786-7196).

Background:

All property is subject to a property tax each year based on the property's highest and best use, unless a specific exemption is provided by law. The Washington State Constitution authorizes agricultural, timber, and open space lands to be valued on the basis of their current use rather than fair market value.

The Open Space Taxation Act (Act) allows for current use valuations of qualifying farm and agricultural land, which includes:

• parcels 20 acres and larger devoted primarily to agricultural production;

• parcels five to 20 acres that generate gross income from the sale of agricultural products $200 or more per acre in three of each five-year period;

• parcels that are less than five acres that generate a gross income of at least $1,500 per year in three of each five-year period; and

• lands whose use is compatible with agricultural purposes, so long as the compatible use lands do not exceed 20 percent of the land classified for farm and agricultural use, and the compatible use is necessary to the production, preparation or sale of an agricultural product.

In 2013 the Legislature passed Engrossed Substitute Senate Bill 5882, which established certain conditions on the creation of new tax preferences. A default expiration date of 10 years for new tax preferences is required, unless the legislation specifies an alternate date. All new tax preference legislation must include a tax preference performance or legislative intent statement. Legislation that clarifies or makes technical amendments to existing tax preferences is not subject to the tax preference performance or legislative intent statement requirements.

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Summary of Substitute Bill:

Land used primarily for commercial horticulture is included within the definition of the farm and agricultural land use classification. Commercial horticulture practices which qualify for farm and agricultural use classification include the indoor or outdoor growing of trees, fruits, vegetables, and other plants in containers.

Certain limitations are placed on commercial horticulture lands that can qualify for the farm and agricultural use classification:

• Parcels that are smaller than 20 acres must meet the same income qualifications that apply to other lands that are classified for farm and agricultural uses.

• Qualifying commercial horticulture lands may not exceed a reasonably necessary area.

• Lands used for the storage, care, or selling of plants purchased from other growers for resale do not qualify for the farm and agricultural use classification.

The inclusion of commercial horticulture within the definition of farm and agricultural land is declared to not constitute a new tax preference that would require a performance statement or be subject to the default 10 year expiration date.

Substitute Bill Compared to Original Bill:

The substitute bill adds seedlings to the list of agricultural products grown for commercial horticulture which qualify as farm and agricultural land for current use tax classification purposes.

The substitute bill removes the definition of agricultural product which had been added to the Act.

The substitute bill adds language to clarify that the reason the bill is not subject to tax preference review, expiration date, and intent statement requirements is because the bill is intended to clarify an existing tax preference.

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Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) This bill addresses an emerging problem where some counties are throwing nursery owners out of the farm and agricultural land use classification. This bill ensures that nursery owners are treated in a more uniform way from county to county, and clarifies a commonly-held understanding of what the law currently says. Landowners who unexpectedly have their land use classification change are subject to a big tax increase. It is already hard to get into agriculture, and excluding nurseries from the farm land use classification would make it even harder for some people. This bill was written with extensive input from the Department of Revenue and is narrowly tailored so that only nurseries that are truly growing plants like other agricultural crops will be allowed under the current use tax classification. It does not make sense to exclude crops grown in containers from the farm use classification, especially since container-grown plants are responding to a market need and sell better than rooted nursery plants grown directly in the ground. This bill could use a few refinements to reduce confusion, which the Senate has already adopted in their companion bill.

(Opposed) None.

Persons Testifying: Representative Wilcox, prime sponsor; Heather Hanson, Washington State Nursery and Landscape Association; Ingrid Wachiller, Woodbrook Native Plant Nursery; Dave Schactler, Eatonville Nursery; Megan Pulkkinen, Washington State Nursery and Landscape Association; Mary Schactler, King-Pierce County Farm Bureau; and Evan Sheffels, Washington Farm Bureau.

Persons Signed In To Testify But Not Testifying: None.