Property Tax—Regular Levies.
All real and personal property is subject to a tax each year based on the highest and best use, unless a specific exemption is provided by law. The annual growth of all regular property tax levy revenue is limited as follows:
An additional amount is added on based on the increase in assessed value in a district from:
The state collects two regular property tax levies for common schools. The revenue growth limit applies to both levies. Participants in the senior citizens, individuals with disabilities, and qualifying veterans property tax exemption program receive a partial exemption from the original state levy and a full exemption from the additional state levy.
The Washington Constitution also limits regular levies to a maximum of 1 percent of the property's value, or $10 per $1,000 of assessed value. There are individual district rate maximums and aggregate rate maximums to keep the total tax rate for regular property taxes within the constitutional limit, for example:
For property tax purposes, the state, counties, and cities are collectively referred to as senior taxing districts. Junior taxing districts—a term that includes fire, hospital, flood control zones, and most other special purpose districts—each have specific rate limits as well.
Prorationing and "The Gap."
The tax rates for senior and junior taxing districts, excluding the state, must fit within an overall rate limit of $5.90 per $1,000 of assessed value. If the statutory $5.90 or constitutional $10 limit are exceeded, statute establishes the sequential order in which the levies must be proportionally reduced or eliminated, a process referred to as prorationing, to conform to the statutory and constitutional limits.
Some regular property tax levies—including levies for criminal justice purposes, port districts, and emergency medical services—are subject to the $10 constitutional limit but not the $5.90 aggregate rate limit. These levies have protections from general prorationing requirements and exist within the "gap" that remains after subtracting the state levy and the $5.90 in local regular levies from the constitutional $10 limit per $1,000 of assessed value.
Property Tax—Excess Levies.
Excess levies are imposed in addition to regular levies and are not subject to the constitutional $10 limit. Taxing jurisdictions with excess levy authority include local school districts, public facilities districts, and transportation benefit districts. Most excess levies require a 60 percent voter approval. Local school district levies for operation, transportation, and capital projects require simple majority voter approval.
Levy Lid Lift.
Voters may approve regular property tax increases above the revenue growth limit. This voter-approved increase is referred to as a levy lid lift. A levy lid lift may be authorized for a single year or for multiple years, not to exceed six years. A multiyear lid lift must be for a specific purpose.
Personal Property Tax Exemption and Production Excise Tax.
Beginning with tax levied for collection in calendar year 2025, all qualified personal property owned by an eligible taxpayer and used for the generation of renewable energy is exempt from the state property tax levy.
The term "qualified personal property" means personal property that is used exclusively for the generation or storage of renewable energy in a facility, the construction of which began on or after July 1, 2023.
The term "renewable energy" means energy produced by a solar or wind facility with nameplate capacity sufficient to generate at least one megawatt of nameplate capacity of alternating current power.
For eligible taxpayers who are not assessed as a public utility, the taxpayers must apply for the personal property exemption with the applicable county assessor. If an eligible taxpayer is assessed as a public utility, the application for an exemption must be filed with the Department of Revenue (DOR). In either case, applications are due by March 31 in order to claim the exemption for property taxes due and payable in the upcoming calendar year.
The application must include an attestation that the eligible taxpayer has registered with the DOR to pay the production excise tax and designate if the claimed personal property exemption is for 10 or 15 years. After the initial application, only an annual attestation by the eligible taxpayer is required to continue the personal property tax exemption.
Eligible taxpayers granted a personal property tax exemption are subject to a production excise tax for the privilege of using qualified renewable energy generating systems as an electric power source in Washington. The production excise tax rates are:
Energy Facility Siting.
The Energy Facility Site Evaluation Council (EFSEC) was established in 1970 to provide a single siting process for major energy facilities. The EFSEC coordinates all evaluation and licensing steps for siting certain energy facilities, and specifies the conditions of construction and operation. After evaluating an application, the EFSEC submits a recommendation either approving or rejecting an application to the Governor, who makes the final decision on site certification. If approved by the Governor, a site certification agreement is issued in lieu of any other individual state or local agency permits.
The laws that require or allow a facility to seek certification through the EFSEC process apply to the construction, reconstruction, and enlargement of energy facilities, biorefineries, and electrical transmission facilities, with many specifications. Energy facilities of any size that exclusively use alternative energy resources, such as wind or solar energy, may opt in to the EFSEC review and certification process. Energy facilities that exclusively use alternative energy resources and choose not to opt in to the EFSEC review and certification process must instead receive applicable state and local agency development and environmental permits for their projects directly from each agency.
Tribal Capacity Grants.
In the 2023-2025 biennium, the Legislature appropriated $21 million for a grant program, administered by the Department of Ecology (Ecology), to support consultation involving federally recognized Indian tribes related to funding decisions for projects and activities funded with Climate Commitment Act (CCA) revenues, and related clean energy siting activities. Money to fund this program was appropriated from the Climate Investment Account, one of the seven accounts created to receive CCA revenues.
Tax Preference Performance Statement.
Tax preferences confer reduced tax liability upon a designated class of taxpayers. These include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. There are over 700 tax preferences. Legislation that establishes or expands a tax preference must include a tax preference performance statement (TPPS) that identifies the public policy objective of the preference, as well as specific metrics that the Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the effectiveness of the preference. All new tax preferences automatically expire after 10 years unless an alternative expiration date is provided.
Renewable Energy Excise Tax.
Personal Property Tax Exemption.
All personal property used exclusively for the generation of renewable energy in a qualified energy facility that becomes operational on or after January 1, 2028, or is repowered on or after January 1, 2028, is exempt from property tax beginning in calendar year 2028. In addition, all personal property used exclusively for a battery electric storage system is exempt from property tax beginning in calendar year 2029.
A qualified renewable energy facility is a solar or wind facility with nameplate capacity sufficient to generate at least 10 MW of alternating current power. It does not include renewable energy facilities owned or operated by centrally assessed utilities or by joint operating agencies that make payments in lieu of taxes.
"Battery electric storage systems" means commercially available technology that is capable of retaining electricity, storing the energy for a period of time, and delivering the electricity after storage by chemical, thermal, mechanical, or other means that has at least 10 megawatt-hours of storage. It does not include any form of hydroelectric power. "Battery electric storage systems" does not include systems owned or operated by centrally assessed utilities or by joint operating agencies that make payments in lieu of taxes.
Repowered means the cumulative rebuild or refurbishment of a majority, or more than half the nameplate capacity of the wind or solar energy facility due to the facility reaching the end of its useful life or useful reasonable economic life. The rebuild or refurbishment does not constitute repowering if it is part of routine major maintenance or the maintenance of or replacement of equipment that does not materially affect the expected physical or economic life of the facility. Repowering, rebuilds, and refurbishments must be reported to the county assessor as they occur. If a facility or system has undertaken repowering, rebuilds, or refurbishment prior to the enactment of this bill, then this must be reported to the county assessor within 90 days of the effective date of the act.
Beginning January 1, 2028, the property tax levy calculation for all taxing districts will not include an increase in assessed value due to the construction of wind turbine and solar facilities.
Each qualified renewable energy facility must file an annual report with the DOR by March 15 that provides the location by tax code area and nameplate capacity of the exempt personal property. The DOR must provide a copy of the report to the appropriate county treasurers and county assessors. An exemption to prohibitions on disclosure of taxpayer information is provided to allow the DOR to share with local taxing officials, including county treasurers and assessors, the identity and tax information of taxpayers subject to the renewable energy (RE) tax.
New Renewable Energy Tax Rates.
Beginning January 1, 2028, a state RE tax is imposed on qualified renewable energy systems that become operational on or after January 1, 2028, or are repowered on or after January 1, 2028, or a battery electric storage system that is operational or repowered on or after January 1, 2028. These rates apply for the life of the facility or system. In addition, the legislative body of a county may impose a local RE tax on these systems:
The local RE taxes must be paid in two equal payments due April 30 and October 31 each year. The county treasurer must apportion and distribute the revenues from the local RE tax to each local taxing district in a manner that reflects the pro rata share of the property tax rate in the prior tax year.
The state RE tax is due monthly and must be deposited into the newly created Local Investment Distribution Account.
Renewable energy facilities and electric battery storage systems that are under construction prior to January 1, 2028, and not on the county property tax rolls may opt into the RE tax by notifying the DOR and the appropriate county assessor of their intent to opt in. In addition, facilities or systems in operation prior to January 1, 2028, may opt into the RE tax after the facility or system has been in operation for 25 years. If the facility or system repowered prior to the effective date of the act, opt-in cannot occur until after 25 years since repowering. Facilities and systems in operation prior to January 1, 2028, that do not otherwise opt in or repower will automatically opt into the RE tax after 35 years in operation.
Special Local Renewable Energy Tax.
The legislative authority of a county may impose a special local RE tax if a local taxing district within the county imposes an excess levy and the excess levy meets certain requirements. The rate is calculated by multiplying the application local RE tax rate by the excess levy increment. The excess levy increment is calculated by dividing the amount of the applicable excessive levy amount in dollars by the applicable county and junior taxing district property levy amounts in dollars. However, if there is a single excess levy, the levy increment cannot exceed 5 percent or if there are multiple excess levies, the total levy increment cannot exceed 10 percent. There are also adjustments in the calculation if the junior taxing district is located in more than one county.
The proceeds of the special local RE tax will go to the taxing district or districts that have imposed the excess levy and will expire when the excess levy expires. If there are multiple excess levies and the levy increment is capped at the maximum rate, the distributions will go to the taxing districts in the order that the levies were authorized. If the excess levies were authorized at the same time, the county legislative authority will determine the distributions.
Joint Legislative Audit and Review Committee and Department of Revenue Report.
The JLARC must review the state and local RE tax rates in the bill, including a comparison of the economic and tax environments for these systems in other states, and make recommendations about adjusting rates for when new systems come online. This report is due to the Legislature by October 31, 2031.
Technical Provisions.
The production excise tax enacted in 2023 is repealed as is the accompanying personal property tax exemption.
The DOR will administer the new RE tax and any necessary rulemaking.
Proceeds of Renewable Energy Excise Tax.
The state portion of the RE tax revenue must be deposited into the newly created Local Investment Distribution Account.
The state portion of the RE tax revenue is distributed as follows:
Local Investment Distribution Grant Program.
Commerce must establish the Local Grant Program, through which it must provide funds to each county that qualifies for the Local Grant Program in a proportion equal to the amount of state excise tax attributable to the county during the previous tax reporting period. Counties must distribute funds to local taxing districts within the county in accordance with the taxing district's relative share of the local property tax levy, except for rural counties which may elect to retain the full amount.
In order for a county to be eligible to receive funds under the Local Grant Program, the county must:
Commerce's model ordinance that a local government must have adopted or substantially adopted to be eligible for the Local Grant Program, must be developed by July 1, 2028, and address the siting, decommissioning, and provision of financial assurance for qualifying energy projects. The model ordinance must be developed in consultation with qualifying energy project developers and owners, federally recognized tribes, and stakeholders. Within six months of Commerce's adoption of the model ordinance, in order for a county to be eligible for the Local Grant Program, the county's development regulations must not contain standards that are more restrictive or burdensome than the model ordinance. Commerce must review the model ordinance under the State Environmental Policy Act (SEPA); local governments that adopt the model ordinance are exempted from SEPA review in the adoption of the model ordinance. Commerce must also provide technical assistance and ongoing liaison support to local governments, including methods and best practices for siting qualifying energy projects.
The development regulations that must be adopted by a local government to qualify for the Local Grant Program must require a qualifying energy project developer to:
The development regulations must also allow the county to condition an application by a qualifying energy project developer in accordance with a plan agreement with the DAHP or a federally recognized tribe.
A qualifying energy project is not rendered ineligible for the Local Grant Program on the basis of being located in a jurisdiction that imposes requirements, standards, or restrictions on qualifying energy projects that are consistent with the permit requirements, guidelines, or best practices for the siting, development, or operation of qualifying energy facilities imposed by a state agency or state law. In addition, a qualifying energy project is not rendered ineligible for the Local Grant Program on the basis of mitigation being imposed as a result of an environmental review by the EFSEC or SEPA.
Capacity Grants to Federally Recognized Indian Tribes.
Ecology must implement a biennial Capacity Grant Program to federally recognized Indian tribes in Washington or with treaty-ceded lands in Washington. The grants under this program must be awarded equally among applicants.
The capacity grant may be used at the discretion of each tribe, in a manner that recognizes their sovereignty, for:
Participation in the Capacity Grant Program and the receipt of the grant moneys does not limit the authority of a tribe to administratively object to or legally appeal a qualifying energy project or component thereof. The eligibility of a tribe for capacity grants is not affected if they file an objection or appeal.
Technical Provisions.
The production excise tax enacted in 2023 is repealed, as is the accompanying personal property tax exemption.
The new personal property tax exemption for qualifying renewable energy facilities is exempt from the requirement of a TTPS, a JLARC review, and an automatic 10-year expiration.
The Senate amendment:
(In support) Renewable energy projects invest in the local communities and create a bump in the property tax levy that shifts to other taxpayers over time due to the depreciation of the personal property. In smaller counties this shift is felt more profoundly by many homeowners. This can also impact a school district's ability to qualify for local effort assistance. This bill is designed to provide stability to both renewable energy developers and local governments while keeping everyone whole. This bill reflects work and compromise over the past year. It will only apply to systems that become operational on or after January 1, 2028. Existing systems are not impacted. The formula for the tax is agreed upon; however, there may be some adjustments of the actual rates.
Although great progress has been made on this version, there are still a few outstanding issues that need resolution, including the timing of payments and some additional clarifications.
(Opposed) Although there is agreement on the problem statement that this legislation attempts to address, a major change in the tax structure is challenging. There is a need to protect ratepayers and ensure continued investment in renewable energy in Washington by ensuring the rates are set at the right level. This bill has improved greatly and we will continue to work on it.
There is concern about the inclusion of centrally assessed utilities. These taxpayers should be exempt from this legislation.
(Other) The DOR appreciates being included in the discussions on this legislation and have provided written technical feedback to the sponsor.
The rates still need additional work, but the stakeholders are committed to remaining in negotiations. The local investments in Part II of the bill are really important.
(In support) Local county taxpayers have experienced the inherent financial impacts of wind and solar farm projects depreciating over time and decreasing in overall taxable value. This bill ends this practice by requiring existing and new projects to switch to an excise tax system that does not penalize local property taxpayers. Kittitas School District has two major wind farms in it. At first it seemed like these facilities were an advantage for the schools and local taxpayers, as the wind farms took on enough of the property tax burden that other taxpayers saw a property tax decrease. However, this was temporary and, over time, as the projects aged, their assets depreciated, and the tax bills of the surrounding rural taxpayers increased significantly to offset the loss. This problem needs to be fixed for two reasons. First, communities are increasingly impacted unfairly by this tax every single year. Second, there is also a deadline to begin construction on a new project by June 30, 2026, to be eligible for federal tax incentives, which would exacerbate the problem. This bill is the product of tremendous stakeholder engagement over a two-year period and countless hours of discussion and negotiation. Language in the bill should be amended to clearly establish the repower definition, as well as remove references to having the assessor determine the reasonable economic shift that takes place under current personal property valuation. While the bill is not perfect and may never be, it is getting close to a solution.
(Opposed) The new excise tax rates put forward in Sections 105 and 107 of this bill represent an increase over what most developers are expecting to pay in personal property taxes over the course of their lifetimes. The rates included in the bill would put independent power producers at a competitive disadvantage if the investor-owned utility (IOU) corporations are exempt. If the rates were competitive, there would be greater support of the IOU exemption. The higher rates would likely be passed on to electricity bills. Utilities operations in multiple counties are unique in that they are centrally assessed by the Department of Revenue (DOR) and not by the individual county assessors where the properties reside. Essentially, assessed utilities should be exempt from the provisions of this bill. Also, the tax rates in this bill do have the likelihood of raising the cost of renewable energy projects and that cost would ultimately flow onto utility customer bills. This bill is a little overly complex and time should be invested in solving the problem. However, this is not the proper approach. Whatever solution it ends up being, it does need to be revenue neutral and match what the current costs are for current developers and other tax entities.
(Other) If state and local tax revenue collection for solar and wind farms are transitioned to the DOR, the county will lose over $100,000 in fees. Additionally, the transition from a property tax to an excise tax is very important. Thus, creating concise language is critical for the repower collection dates and integrating the state assessed facilities. Language should be added to clearly establish the repowered definition and ensure that it includes compounded repowering from January 1, 2028, up to the majority of the project.
(In support) Mike Hougardy, Kittitas County Assessor; Jackie Brunson, Washington State Association of County Treasurers; and Travis Dutton, Association of Washington Counties.
(In support) Commissioner Cory Wright, Kittitas County; Paul Jewell, Washington State Association of Counties; and Assessor Mike Hougardy, WSACA - Washington State Association of County Assessor.