SENATE BILL REPORT

SB 6512

BYSenators Hansen, Barr, Halsan, Bailey and Rinehart

Exempting land enrolled in the federal conservation reserve program from state property and excise taxes.

Senate Committee on Agriculture

Senate Hearing Date(s):January 28, 1988; February 2, 1988

Majority Report:  That Substitute Senate Bill No. 6512 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Barr, Chairman; Anderson, Vice Chairman; Bailey, Halsan, Hansen, Rinehart.

Senate Staff:John Stuhlmiller (786-7446)

                  February 2, 1988

AS REPORTED BY COMMITTEE ON AGRICULTURE, FEBRUARY 2, 1988

BACKGROUND:

With the inception of the federal conservation reserve program, specific questions have been raised over the Department's policy regarding CRP taxation in four areas:  open space, Business and Occupation, sales and use, and the previously repealed inheritance tax.

The Department of Revenue has confirmed that under its current policy:  (1)  the current use classification of open space lands and the value of property for tax purposes is not impacted by participation in the CRP program; (2) payments received from the federal government under the CRP are not subject to the state Business and Occupation tax; (3) expenditures for "vegetative cover" (such as seed, fertilizer and spray) for use on land enrolled in the CRP are exempt from the state sales and use tax; and (4)  the special use (agricultural use) valuation will continue on lands enrolled in the CRP eliminating retroactive impact from the repealed inheritance tax laws.

Concern was raised that while these areas are addressed in policy, they are not addressed in statute.

SUMMARY:

The sales of feed, seed, seedlings, fertilizer and spray materials to participants in the federal conservation reserve program administered by the United States Department of Agriculture, are exempt from the state sales and use tax.

The state Business and Occupation Tax shall not apply to payments received for lands enrolled in the federal Conservation Reserve Program.

The definition of farm and agricultural land under the open space program shall include land enrolled in the federal Conservation Reserve Program.

EFFECT OF PROPOSED SUBSTITUTE:

The exemption from taxation for the federal Conservation Reserve Program is expanded to include any successor programs.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: Randy Ray, WAWG (pro); Kris Backes, Washington Association of Conservation Districts (pro)