HOUSE BILL REPORT

SB 6717

BYSenator Lee

Revising provisions on the housing trust fund.

House Committe on Housing

Majority Report:  Do pass with amendment.  (9)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Armstrong, Barnes, Padden, Sanders, Todd, J. Williams and Wineberry.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON HOUSING FEBRUARY 23, 1988

BACKGROUND:

The Housing Trust Fund was created in 1985.  Last year the legislature provided a renewable source of funds consisting of nominal or short term interest earned from deposits realtors hold for clients who are purchasing a home.  Previously no interest was earned on these deposits because they were required to be kept in non-interest bearing accounts.

Generally a nominal or short term deposit is a deposit that would not produce positive net income (after expenses) if the deposit were placed in an individual or separate account. As in IOLTA, when these individual deposits are combined into one account, they can produce a significant amount of revenue.

The revenue from the pooled real estate deposit accounts is divided between the Housing Trust Fund (75%) and the Real Estate Commission Account (25%).  The Broker's Trust Account Board assists the Department of Community Development in administering the trust fund, and assists the Real Estate Commission regarding education programs.

An excise tax is assessed on the sale of real property.  The tax must be paid within 30 days of the sale, or interest is charged at the rate of one percent of the tax owed per month.  The seller is generally responsible for paying the excise tax, although the tax owed and the one percent per month interest become a lien on the property sold.

SUMMARY:

BILL AS AMENDED:  Nominal or short term deposits are referred to as nominal deposits and are defined as any deposit that is not more than $5,000.

Transaction costs which can be deducted from interest earned on the deposits are defined more specifically as appropriate bank service charges and fees.

If the parties to the transaction agree, the deposit may be included in the pooled deposit for the Housing Trust Fund even though the deposit is not required to be included.

Penalties for the late payment of real estate excise taxes are added and the revenue will go to the Housing Trust Fund.  In addition to the interest of one percent per month on excise tax due and not paid within thirty days of the sale of real property, if the tax is not paid within thirty days of the sale, a penalty of five percent of the tax owed is assessed; if not paid within sixty days, the total penalty is ten percent; if not paid within ninety days, the total penalty is twenty percent.  The additional penalties must be collected from the seller

AMENDED BILL COMPARED TO ORIGINAL:  Technical changes are made to clarify the language regarding appropriate bank charges and fees. An emergency clause is added.

Additional funding for the Housing Trust Fund is provided by new penalties for late payment of real estate excise taxes.

Fiscal Note:      Requested February 24, 1988.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Dick Barret, Washington Association of Realtors.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    In order for the interest from realtor deposit accounts to be effectively collected and deposited in the Housing Trust Fund, nominal deposit must be defined and technical changes made to last year's law.  The five thousand dollar threshold determining whether the deposit is nominal would cover most deposits on residential property in the state.  An emergency clause is necessary to make the changes effective as soon as possible to get money into the Housing Trust Fund.

House Committee - Testimony Against:      None Presented.