Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Finance Committee

SHB 1532

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.

Brief Summary of Bill

Clarifies the property tax exemption for nonprofit homeownership development by specifying that land that is to be leased for 99 years or life to a low-income household qualifies for the exemption.
Specifies that the lease of the exempted land to a low-income household terminates the property tax exemption.

Background:

Property Tax.

All property in Washington State is subject to property tax each year that is based on the highest and best use of the property, unless a specific exemption is provided by law. Property tax exemptions are currently made available to qualifying organizations, including schools, churches, nonprofit hospitals, nursing homes, museums, and public meeting halls.

Property Tax Exemption for Low-Income Housing Development.

Property that is owned by a nonprofit for the purposes of developing residences on the property for low-income households is exempt from state and local property taxes for a limited term. So long as the property remains held for the purpose of low-income housing development, the exemption lasts for seven consecutive tax years or until the nonprofit transfers title to the property. Should the nonprofit anticipate that it will be unable to sell the property within the seven-year term, the nonprofit may file for a three-year extension by filing a notice of extension with the Department of Revenue and paying a filing fee.

The property is disqualified from the exemption if:

the nonprofit fails to transfer title to the property to a low-income household within the applicable exemption period; or
the property is converted to a use other than low-income housing development.

In this case, an additional tax is due that is equal to all taxes that would have been due within the applicable exemption period, plus interest. This additional tax is considered a lien on the property.

Summary of Bill:

The exemption for real property owned by a nonprofit for the purposes of developing residences for low-income households is clarified to specify that the land upon which a dwelling unit stands, when it is to be leased for life or 99 years to the low-income household, qualifies for the exemption. An additional term is added to the exemption’s expiration conditions such that the exemption expires when the nonprofit entity leases the land on which the dwelling unit stands to the low-income household, if the lease is executed earlier than any of the other relevant conditions.