SENATE BILL REPORT

SSB 6232

BYSenate Committee on Ways & Means (originally sponsored by Senators Lee, Bailey and Craswell)

Providing a tax credit for certain real property.

Senate Committee on Ways & Means

Senate Hearing Date(s):January 24, 1990; January 29, 1990

Majority Report:  That Substitute Senate Bill No. 6232 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Amondson, Bailey, Bluechel, Cantu, Fleming, Gaspard, Hayner, Lee, Matson, Moore, Newhouse, Owen, Saling, Smith, Warnke.

Senate Staff:Terry Wilson (786-7715)

                  February 12, 1990

AS PASSED SENATE, FEBRUARY 10, 1990

BACKGROUND:

Generally, current law requires all property to be valued at 100 percent of its true and fair value in money and assessed for property tax purposes on the same basis.  "True and fair value" has been construed by the courts to mean fair market value.  Due to four-year revaluation cycles for real property and assessment practices that vary among counties, actual assessment levels in the counties are generally somewhat less than 100 percent.

Because the state Constitution requires the state property tax to be uniform throughout the state, the Department of Revenue equalizes the values in the various counties to 100 percent of true and fair value by calculating an indicated real property ratio and applying that ratio to the total assessed value of the county.  The indicated real property ratio is calculated by comparing each county's assessed values to actual market values.  In determining market value, the department uses the selling price stated in the real estate excise tax affidavit.  Because the sales price could include some personal property, until last year the department arbitrarily deducted 5 percent from the sales price to account for undeclared personal property, such as refrigerators and window coverings, on sales of residential property.

The Efficiency Commission recommended that the adjustment factor for personal property be lowered to a more accurate figure determined through a survey.  A survey conducted by the department showed that less than 1 percent of the selling price constituted undeclared personal property.  The department changed the adjustment factor to 1 percent effective for taxes collected in 1990.  This change had the effect of increasing the amount of taxes raised by the state levy.

SUMMARY:

In determining the indicated real property ratio for each county, the department is required to assume that 5 percent of the sales price on every sale of real property in the county is attributable to personal property.

Appropriation:    none

Revenue:    yes

Fiscal Note:      available

Senate Committee - Testified: Will Rice, Department of Revenue (con)