SENATE BILL REPORT

                   SB 5230

              As Reported By Senate Committee On:

                 Ways & Means, March 10, 1997

Title:  An act relating to current use taxation provisions.

Brief Description:  Revising current use taxation provisions.

Sponsors:  Senators Rossi, Haugen, McCaslin, McDonald and Hale.

Brief History:

Committee Activity:  Ways & Means:  3/5/97, 3/10/97 [DPS].

SENATE COMMITTEE ON WAYS & MEANS

Majority Report:  That Substitute Senate Bill No. 5230 be substituted therefor, and the substitute bill do pass.

  Signed by Senators West, Chair; Deccio, Vice Chair; Strannigan, Vice Chair; Bauer, Brown, Fraser, Hochstatter, Kohl, Long, Loveland, McDonald, Roach, Rossi, Schow, Sheldon, Snyder, Spanel, Swecker, Winsley and Zarelli.

Staff:  Terry Wilson (786-7433)

Background:  Property meeting certain conditions may have property taxes determined on current use values rather than market values.  There are five categories of lands that may be classified and assessed on current use.  Three categories are covered in the open space law: open space lands, farm and agriculture lands, and timber lands; and two are in the timber tax law:  classified and designated forest land.

The land remains in current use classification as long as it continues to be used for the purpose it was placed in the current use program.  Land is removed from the program:  at the request of the owner; by sale or transfer to an ownership making the land exempt from property tax; or by sale or transfer of the land to a new owner, unless the new owner signs a notice of classification continuance.  The assessor may also remove land from the program if the land no longer meets the criteria for classification.

Back Taxes.  When property is removed from current use classification, back taxes plus interest must be paid.

For open space categories, back taxes represent the tax benefit received over the most recent seven years, plus interest at the rate of 12 percent from the time the taxes could have been paid.  In addition, a penalty equal to 20 percent of the back taxes and interest is applied.  The penalty may be avoided if the property remains in the program for at least 10 years and a two-year waiting period after notice of withdrawal is satisfied.

For classified and designated forest land, back taxes are equal to the tax benefit in the most recent year times the number of years in the program (but not more than ten).

There are some exceptions to the requirement for payment of back taxes.  For example, back taxes are not required on the transfer of the land to an entity using the power of eminent domain or in anticipation of the exercise of that power.

The back tax exceptions are slightly different for the open space program and the forest land program.  For example, an exception is allowed under the open space program if government action no longer permits the present use of the property.  The forest land program does not have this exception.  In the open space program, an exception to the payment of back taxes is allowed for a sale or transfer to a governmental entity or nonprofit historic preservation or nonprofit nature conservancy corporation for the purpose of conserving open space land.  However, in the forest land program, the similar exception is much more restrictive.  The forest land exception is restricted to a sale or transfer to a governmental entity or nonprofit nature conservancy corporation for conservation purposes of land recommended for state natural area preserve purposes by the Natural Heritage Council.

Summary of Substitute Bill:  Back taxes do not have to be paid for forest land that is removed from classification or designation if official action disallows the present use of the land.  In King County, an exception to the payment of back taxes is allowed for a sale or transfer to a governmental entity or nonprofit historic preservation or nonprofit nature conservancy corporation for the purpose of conserving open space land.

Substitute Bill Compared to Original Bill:  The original bill was not considered.

Appropriation:  None.

Fiscal Note:  Available.

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

Testimony For:  This is necessary to continue the mountains to Sound greenway.  It protects the I-90 corridor.  The compensating tax has been waived by King County until recently.  This removes a disincentive to donate land for conservation.  The property will continue to be used for conservation purposes.

Testimony Against:  None.

Testified:  PRO:  Senator Rossi, prime sponsor; Steve Gano, Plum Creek Timber; Maggie Coon, the Nature Conservancy; Mike Ryherd, W.W.R.C.; Bill Vogler, Washington State Association of Counties.