Z-0095.4  _______________________________________________

                         SENATE BILL 5529

          _______________________________________________

State of Washington      56th Legislature     1999 Regular Session

By Senators Loveland and Winsley; by request of Department of Revenue

Read first time 01/26/1999.  Referred to Committee on Ways & Means.

Clarifying the property tax exemption statutes.

    AN ACT Relating to clarifying the property tax exemption statutes; amending RCW 84.36.477 and 84.40.405; reenacting and amending RCW 84.36.805 and 84.36.810; creating new sections; and repealing RCW 84.36.140, 84.36.150, 84.36.160, 84.36.161, 84.36.162, 84.36.176, 84.36.181, 84.36.190, 84.36.191, 84.36.270, 84.36.280, 84.36.290, and 84.36.473.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.  (1) The purpose of this act is to clarify the property tax exemption statutes by:  (a) Repealing unnecessary and duplicative statutes in chapter 84.36 RCW; (b) consolidating the exemption statutes for business inventories; and (c) simplifying administrative statutes pertaining to nonprofit organizations.

    (2) Section 2, chapter . . ., Laws of 1999 (section 2 of this act) consolidates all exemptions for business inventories and their related definitions into one statute.

    (3) Section 3, chapter . . ., Laws of 1999 (section 3 of this act) clarifies and simplifies RCW 84.36.805 by substituting a general reference to chapter 84.36 RCW for specific references to exemption statutes for  nonprofit organizations.  RCW 84.36.805 applies to all new property tax exemptions for nonprofit organizations unless the new exemption is specifically exempted.

    (4) Section 4, chapter . . ., Laws of 1999 (section 4 of this act) substitutes a general reference for specific statutory references in RCW 84.36.810 to clarify that back taxes are not due on the loss of exemption on leased property if the lease is canceled and deletes an erroneous reference caused by section 20, chapter 311, Laws of 1998.

    (5) Section 5, chapter . . ., Laws of 1999 (section 5 of this act) deletes references to previously repealed statutes and to RCW 84.36.473 which is repealed by section 6, chapter . . ., Laws of 1999 (section 6 of this act).

    (6) Section 6 of this act repeals the statutes that have been incorporated into the definition of business inventories in RCW 84.36.477.  It also repeals unused statutes authorizing an exemption for the construction of the King county stadium on private property.

    Sec. 2.  RCW 84.36.477 and 1983 1st ex.s. c 62 s 6 are each amended to read as follows:

(1) Business inventories ((as defined in RCW 84.36.473)) are exempt from property taxation.

(2) As used in this section:

(a)(i) "Business inventories" means all livestock, inventories of finished goods and work in process, and personal property not under lease or rental, acquired or produced solely for the purpose of sale or lease or for the purpose of consuming the property in producing for sale or lease a new article of tangible personal property of which the property becomes an ingredient or component.

(ii) "Business inventories" also includes:

(A) All grains and flour, fruit and fruit products, unprocessed timber, vegetables and vegetable products, and fish and fish products, while being transported to or held in storage in a public or private warehouse or storage area if actually shipped to points outside the state on or before April 30th of the first year for which they would otherwise be taxable;

(B) All finished plywood, hardboard, and particle board panels shipped from outside this state to any processing plant within this state, if the panels are moving under a through freight rate to final destination outside this state and the carrier grants the shipper the privilege of stopping the shipment in transit for the purpose of storing, milling, manufacturing, or other processing, while the panels are in the process of being treated or shaped into flat component parts to be incorporated into finished products outside this state and for thirty days after completion of the processing or treatment;

(C) All ore or metal shipped from outside this state to any smelter or refining works within this state, while in process of reduction or refinement and for thirty days after completion of the reduction or refinement; and

(D)  All metals refined by electrolytic process into cathode or bar form while in this form and held under negotiable warehouse receipt in a public or private warehouse recognized by an established incorporated commodity exchange and for sale through the exchange.

(iii) "Business inventories" does not include personal property acquired or produced for the purpose of lease or rental if the property was leased or rented at any time during the calendar year immediately preceding the year of assessment and was not thereafter remanufactured, nor does it include property held within the normal course of business for lease or rental for periods of less than thirty days.

(iv) "Business inventories" does not include agricultural or horticultural property fully or partially exempt under RCW 84.36.470.

(v) "Business inventories" does not include timber that is standing on public land and that is sold under a contract entered into after August 1, 1982;

(b) "Fish and fish products" means all fish and fish products suitable and designed for human consumption, excluding all others;

(c) "Fruit and fruit products" means all raw edible fruits, berries, and hops and all processed products of fruits, berries, or hops, suitable and designed for human consumption, while in the hands of the first processor;

(d) "Processed" means canning, barreling, bottling, preserving, refining, freezing, packing, milling, or any other method employed to keep any grain, fruit, vegetable, or fish in an edible condition or to put it into more suitable or convenient form for consuming, storing, shipping, or marketing;

(e) "Remanufactured" means the restoration of property to essentially its original condition, but does not mean normal maintenance or repairs; and

(f) "Vegetables and vegetable products" means all raw edible vegetables such as peas, beans, beets, sugar beets, and other vegetables, and all processed products of vegetables, suitable and designed for human consumption, while in the hands of the first processor.

    Sec. 3.  RCW 84.36.805 and 1998 c 311 s 25, 1998 c 202 s 3, and 1998 c 184 s 2 are each reenacted and amended to read as follows:

(1) In order to ((be exempt pursuant to RCW 84.36.030, 84.36.035, 84.36.037, 84.36.040, 84.36.041, 84.36.043, 84.36.045, 84.36.046, 84.36.047, 84.36.050, 84.36.060, 84.36.350, 84.36.480, 84.36.550, and 84.36.042)) qualify for an exemption under this chapter, the nonprofit organizations, associations or corporations ((shall)) must satisfy the ((following)) conditions((:)) in this section.

    (((1))) (2) The property ((is)) must be used exclusively for the actual operation of the activity for which exemption is granted, unless otherwise provided, and does not exceed an amount reasonably necessary for that purpose, except:

    (a) The loan or rental of the property does not subject the property to tax if:

    (i) The rents and donations received for the use of the portion of the property are reasonable and do not exceed the maintenance and operation expenses attributable to the portion of the property loaned or rented; and

    (ii) Except for the exemptions under RCW 84.36.030(4) and 84.36.037, the property would be exempt from tax if owned by the organization to which it is loaned or rented;

    (b) The use of the property for fund-raising activities does not subject the property to tax if the fund-raising activities are consistent with the purposes for which the exemption is granted((;)).

    (((2))) (3) The property ((is)) must be irrevocably dedicated to the purpose for which exemption has been granted, and on the liquidation, dissolution, or abandonment by said organization, association, or corporation, said property will not inure directly or indirectly to the benefit of any shareholder or individual, except a nonprofit organization, association, or corporation which too would be entitled to property tax exemption.  This property need not be irrevocably dedicated if it is leased or rented to those qualified for exemption ((pursuant to RCW 84.36.035, 84.36.040, 84.36.041, 84.36.043, 84.36.045, 84.36.046, or 84.36.042 or those qualified for exemption as an association engaged in the production or performance of musical, dance, artistic, dramatic, or literary works pursuant to RCW 84.36.060)) under this chapter for leased property, but only if under the terms of the lease or rental agreement the nonprofit organization, association, or corporation receives the benefit of the exemption((;)).

    (((3))) (4) The facilities and services ((are)) must be available to all regardless of race, color, national origin or ancestry((;)).

    (((4))) (5) The organization, association, or corporation ((is)) must be duly licensed or certified where such licensing or certification is required by law or regulation((;)).

    (((5))) (6) Property sold to organizations, associations, or corporations with an option to be repurchased by the seller shall not qualify for exempt status((;)).

    (((6))) (7) The ((director of the)) department ((of revenue)) shall have access to its books in order to determine whether ((such)) the nonprofit organization, association, or corporation is exempt from ((taxes within the intent of RCW 84.36.030, 84.36.035, 84.36.037, 84.36.040, 84.36.041, 84.36.043, 84.36.045, 84.36.046, 84.36.047, 84.36.050, 84.36.060, 84.36.350, 84.36.480, and 84.36.042)) taxes under this chapter.

(8) This section does not apply to exemptions granted under RCW 84.36.020, 84.36.032, 84.36.250, and 84.36.260.

    Sec. 4.  RCW 84.36.810 and 1998 c 311 s 26 and 1998 c 202 s 4 are each reenacted and amended to read as follows:

    (1) Upon cessation of a use under which an exemption has been granted pursuant to RCW 84.36.030, 84.36.037, 84.36.040, 84.36.041, 84.36.042, 84.36.043, 84.36.046, 84.36.050, 84.36.060, and 84.36.550((, and 84.36.042)), the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the three years preceding, or the life of such exemption, if such be less, together with the interest at the same rate and computed in the same way as that upon delinquent property taxes.  ((Where)) When the property has been granted an exemption for more than ten consecutive years, taxes and interest shall not be assessed under this section.

    (2) Subsection (1) of this section applies only when ownership of the property is transferred or when fifty-one percent or more of the area of the property ((has lost)) loses its exempt status.  The additional tax under subsection (1) of this section shall not be imposed if the cessation of use resulted solely from:

    (a) Transfer to a nonprofit organization, association, or corporation for a use which also qualifies and is granted exemption under ((the provisions of)) this chapter ((84.36 RCW));

    (b) A taking through the exercise of the power of eminent domain, or sale or transfer to an entity having the power of eminent domain in anticipation of the exercise of such power;

    (c) Official action by an agency of the state of Washington or by the county or city within which the property is located which disallows the present use of such property;

    (d) A natural disaster such as a flood, windstorm, earthquake, or other such calamity rather than by virtue of the act of the organization, association, or corporation changing the use of such property;

    (e) Relocation of the activity and use of another location or site except for undeveloped properties of camp facilities exempted under RCW 84.36.030;

    (f) Cancellation of a lease on leased property that had been exempt under ((RCW 84.36.040, 84.36.041, 84.36.043, 84.36.046, 84.36.060, or 84.36.042)) this chapter; or

    (g) A change in the exempt portion of a home for the aging under RCW 84.36.041(3), as long as some portion of the home remains exempt((;

    (h) The conversion of a full exemption of a home for the aging to a partial exemption or taxable status or the conversion of a partial exemption to taxable status under RCW 84.36.041(8))).

    Sec. 5.  RCW 84.40.405 and 1985 c 7 s 156 are each amended to read as follows:

    The department of revenue shall promulgate such rules and regulations, and prescribe such procedures as it deems necessary to carry out RCW ((82.04.444, 82.04.445,)) 84.36.470((, 84.36.473, 84.36.475,)) and 84.36.477((, 84.09.080, and 84.52.015, and this section)).

NEW SECTION. Sec. 6.  The following acts or parts of acts are each repealed:

(1) RCW 84.36.140 and 1972 ex.s. c 30 s 2 & 1961 c 15 s 84.36.140;

(2) RCW 84.36.150 and 1967 ex.s. c 149 s 32 & 1961 c 15 s 84.36.150;

(3) RCW 84.36.160 and 1972 ex.s. c 30 s 1, 1971 ex.s. c 137 s 1, & 1961 c 15 s 84.36.160;

(4) RCW 84.36.161 and 1998 c 311 s 21 & 1961 c 15 s 84.36.161;

(5) RCW 84.36.162 and 1961 c 15 s 84.36.162;

(6) RCW 84.36.176 and 1967 ex.s. c 149 s 34;

(7) RCW 84.36.181 and 1961 c 168 s 2;

(8) RCW 84.36.190 and 1961 c 15 s 84.36.190;

(9) RCW 84.36.191 and 1961 c 15 s 84.36.191;

(10) RCW 84.36.270 and 1973 1st ex.s. c 195 s 95 & 1967 ex.s. c 117 s 1;

(11) RCW 84.36.280 and 1967 ex.s. c 117 s 2;

(12) RCW 84.36.290 and 1967 ex.s. c 117 s 3; and

(13) RCW 84.36.473 and 1998 c 311 s 23, 1983 1st ex.s. c 62 s 2, 1982 c 174 s 1, 1975 1st ex.s. c 291 s 8, & 1974 ex.s. c 169 s 4.

NEW SECTION. Sec. 7.  The repeals in section 6 of this act do not affect any existing right acquired or liability or obligation incurred under the sections repealed or under any rule or order adopted under those sections, nor do they affect any proceeding instituted under those sections.

                            --- END ---