WSR 00-04-055

PROPOSED RULES

DEPARTMENT OF REVENUE


[ Filed January 28, 2000, 11:14 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 99-24-102.

Title of Rule: WAC 458-61-230 Bankruptcy.

Purpose: Informs taxpayers and counties of federal preemption for confirmed chapter 11 and chapter 12 bankruptcy plans that prohibits real estate excise tax from applying to transfers made under these confirmed plans.

Statutory Authority for Adoption: RCW 82.32.300 and 84.45.150.

Statute Being Implemented: RCW 82.45.060 as preempted by 11 U.S.C. sec. 1146(c) and 11 U.S.C. sec. 1231(c).

Summary: The rule provides that real state excise tax does not apply to real property transfers made under either a chapter 11 or chapter 12 bankruptcy plan after the plan is confirmed. The rule is amended to clarify that under federal law the bankruptcy plan must be confirmed before the preemption of the real estate excise tax takes effect. The rule also describes the information needed on the affidavit for claiming the exemption from real estate excise tax.

Reasons Supporting Proposal: Taxpayers and counties have been confused by the current rule when the preemption becomes effective because the current rule does not discuss the need for a confirmed plan as required under federal law. This confusion has led to taxpayers requesting the exemption when it was not available and litigation by the department to confirm the authority and timing of this rule.

Name of Agency Personnel Responsible for Drafting: Ed Ratcliffe, 711 Capitol Way South, #303, Olympia, WA, (360) 586-3505; Implementation and Enforcement: Gary O'Neil, 2735 Harrison N.W., Building 4, Olympia, WA, (360) 753-2871.

Name of Proponent: Department of Revenue, governmental.

Rule is necessary because of federal law, 11 U.S.C. sec. 1146(c) and 11 U.S.C. sec. 1231(c).

Explanation of Rule, its Purpose, and Anticipated Effects: Federal law preempts the imposition of real estate excise tax on "a plan confirmed under" chapter 11 or chapter 12 of the Bankruptcy Code. A bankruptcy rule summarizing this preemption was adopted to inform the counties and taxpayers of this federal law. The current rule does not discuss the federal requirement that the bankruptcy plan be confirmed. This failure to state that the plan must be confirmed has misled some taxpayers and counties about how and when the tax is preempted by federal law. The amendment of WAC 458-61-230 is intended to eliminate this confusion by clarifying that the real estate excise tax is preempted only for chapter 11 and chapter 12 bankruptcy plans after these plans are confirmed. The amendment also details the information needed upon the real estate excise affidavit in order to claim this exemption from the real estate excise tax.

Proposal Changes the Following Existing Rules: See explanation above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. A small business economic impact statement is not required because the rule and the proposed amendments do not impose any requirements or burdens upon small businesses that are not already specifically required by statute.

RCW 34.05.328 does not apply to this rule adoption. Rule interprets application of preemption of real estate excise tax by federal bankruptcy statutes cited above consistent with the most recent federal circuit court ruling. See RCW 34.05.328 [(5)](c)(ii).

Hearing Location: Department of Revenue, Evergreen Plaza Building, 2nd Floor Conference Room, 711 Capitol Way, Olympia, WA 98501, on March 15, 2000, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Ginny Dale no later than ten days before the hearing date, TDD 1-800-451-7985, or (360) 586-0721.

Submit Written Comments to: Ed Ratcliffe, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail edr@dor.wa.gov, by March 15, 2000.

Date of Intended Adoption: April 5, 2000.

January 28, 2000

Claire Hesselholt

Rules Manager

Legislation and Policy Division

OTS-3701.1


AMENDATORY SECTION(Amending WSR 94-04-088, filed 2/1/94, effective 3/4/94)

WAC 458-61-230
Bankruptcy.

(1) The real estate excise tax ((applies)) does not apply to conveyances of real property by a trustee in bankruptcy ((when)) or debtor in possession made under either a ((chapter 7 plan or chapter 13 plan, but not when made under a)) chapter 11 plan or chapter 12 plan after the bankruptcy plan is confirmed.

(2) The date when the bankruptcy plan was confirmed, the court case cause number, and the bankruptcy chapter number must be cited on the affidavit when claiming this exemption.

[Statutory Authority: RCW 82.32.300 and 1993 sp.s. c 25. 94-04-088, 458-61-230, filed 2/1/94, effective 3/4/94. Statutory Authority: RCW 82.45.120 and 82.45.150. 90-01-003, 458-61-230, filed 12/7/89, effective 1/7/90; 86-16-080 (Order PT 86-3), 458-61-230, filed 8/6/86; 84-17-002 (Order PT 84-3), 458-61-230, filed 8/2/84; 82-15-070 (Order PT 82-5), 458-61-230, filed 7/21/82.]

Washington State Code Reviser's Office