AN
ACT Relating to leasehold excise tax clarification and administrative
simplification; and amending RCW 82.29A.010 and 82.29A.020.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
82.29A.010 and 1975-'76 2nd ex.s. c 61 s 1 are each amended to read as follows:
(1)(a)
The legislature hereby recognizes that properties of the state of Washington,
counties, school districts, and other municipal corporations are exempted by
Article 7, section 1 of the state Constitution from property tax obligations,
but that private lessees of such public properties receive substantial benefits
from governmental services provided by units of government.
(b)
The legislature further recognizes that a uniform method of taxation should
apply to such leasehold interests in publicly owned property.
(c)
The legislature finds that lessees of publicly owned property are entitled to
those same governmental services and does hereby provide for a leasehold excise
tax to fairly compensate governmental units for services rendered to such
lessees of publicly owned property.
(2)
The legislature further finds that experience gained by lessors, lessees, and
the department of revenue since enactment of the leasehold excise tax under
this chapter has shed light on areas in the leasehold excise statutes that need
explanation and clarification. The purpose of chapter . . ., Laws of
1999 (this act) is to make those changes.
Sec.
2. RCW
82.29A.020 and 1991 c 272 s 23 are each amended to read as follows:
As
used in this chapter the following terms shall be defined as follows, unless
the context otherwise requires:
(1)
"Leasehold interest" shall mean an interest in publicly owned real or
personal property which exists by virtue of any lease, permit, license, or any
other agreement, written or verbal, between the public owner of the property
and a person who would not be exempt from property taxes if that person owned
the property in fee, granting possession and use, to a degree less than fee
simple ownership: PROVIDED, That no interest in personal property (excluding
land or buildings) which is owned by the United States, whether or not as
trustee, or by any foreign government shall constitute a leasehold interest hereunder
when the right to use such property is granted pursuant to a contract solely
for the manufacture or production of articles for sale to the United States or
any foreign government. The term "leasehold interest" shall include
the rights of use or occupancy by others of property which is owned in fee or
held in trust by a public corporation, commission, or authority created under
RCW 35.21.730 or 35.21.660 if the property is listed on or is within a district
listed on any federal or state register of historical sites. The term
"leasehold interest" shall not include road or utility easements ((or)),
rights of access, occupancy, or use granted solely for the purpose of
removing materials or products purchased from a public owner or the lessee of a
public owner, or rights of access, occupancy, or use granted solely for the
purpose of natural energy resource exploration.
(2)
"Taxable rent" shall mean contract rent as defined in subsection (a)
of this subsection in all cases where the lease or agreement has been
established or renegotiated through competitive bidding, or negotiated or
renegotiated in accordance with statutory requirements regarding the rent
payable, or negotiated or renegotiated under circumstances, established by
public record, clearly showing that the contract rent was the maximum
attainable by the lessor: PROVIDED, That after January 1, 1986, with respect
to any lease which has been in effect for ten years or more without
renegotiation, taxable rent may be established by procedures set forth in
subsection (b) of this subsection. All other leasehold interests shall be
subject to the determination of taxable rent under the terms of subsection (b)
of this subsection.
For
purposes of determining leasehold excise tax on any lands on the Hanford
reservation subleased to a private or public entity by the department of
ecology, taxable rent shall include only the annual cash rental payment made by
such entity to the department of ecology as specifically referred to as rent in
the sublease agreement between the parties and shall not include any other
fees, assessments, or charges imposed on or collected by such entity
irrespective of whether the private or public entity pays or collects such
other fees, assessments, or charges as specified in the sublease agreement.
(a)
"Contract rent" shall mean the amount of consideration due as payment
for a leasehold interest, including: The total of cash payments made to the
lessor or to another party for the benefit of the lessor according to the
requirements of the lease or agreement, including any rents paid by a
sublessee; expenditures for the protection of the lessor's interest when
required by the terms of the lease or agreement; and expenditures for
improvements to the property to the extent that such improvements become the
property of the lessor. Where the consideration conveyed for the leasehold
interest is made in combination with payment for concession or other rights
granted by the lessor, only that portion of such payment which represents
consideration for the leasehold interest shall be part of contract rent.
"Contract
rent" shall not include: (i) Expenditures made by the lessee, which under
the terms of the lease or agreement, are to be reimbursed by the lessor to the
lessee or expenditures for improvements and protection made pursuant to a lease
or an agreement which requires that the use of the improved property be open to
the general public and that no profit will inure to the lessee from the lease;
(ii) expenditures made by the lessee for the replacement or repair of
facilities due to fire or other casualty including payments for insurance to
provide reimbursement for losses or payments to a public or private entity for
protection of such property from damage or loss or for alterations or additions
made necessary by an action of government taken after the date of the execution
of the lease or agreement; (iii) improvements added to publicly owned property
by a sublessee under an agreement executed prior to January 1, 1976, which have
been taxed as personal property of the sublessee prior to January 1, 1976, or
improvements made by a sublessee of the same lessee under a similar agreement
executed prior to January 1, 1976, and such improvements shall be taxable to
the sublessee as personal property; (iv) improvements added to publicly owned
property if such improvements are being taxed as personal property to any
person.
Any
prepaid contract rent shall be considered to have been paid in the year due and
not in the year actually paid with respect to prepayment for a period of more
than one year. Expenditures for improvements with a useful life of more than
one year which are included as part of contract rent shall be treated as
prepaid contract rent and prorated over the useful life of the improvement or
the remaining term of the lease or agreement if the useful life is in excess of
the remaining term of the lease or agreement. Rent prepaid prior to January 1,
1976, shall be prorated from the date of prepayment.
With
respect to a "product lease", the value ((of agricultural products
received as rent shall be the value at the place of delivery as of the
fifteenth day of the month of delivery; with respect to all other products
received as contract rent, the value)) shall be that value determined at
the time of sale under terms of the lease.
(b)
If it shall be determined by the department of revenue, upon examination of a
lessee's accounts or those of a lessor of publicly owned property, that a
lessee is occupying or using publicly owned property in such a manner as to
create a leasehold interest and that such leasehold interest has not been
established through competitive bidding, or negotiated in accordance with
statutory requirements regarding the rent payable, or negotiated under
circumstances, established by public record, clearly showing that the contract
rent was the maximum attainable by the lessor, the department may establish a
taxable rent computation for use in determining the tax payable under authority
granted in this chapter based upon the following criteria: (i) Consideration
shall be given to rental being paid to other lessors by lessees of similar
property for similar purposes over similar periods of time; (ii) consideration
shall be given to what would be considered a fair rate of return on the market
value of the property leased less reasonable deductions for any restrictions on
use, special operating requirements or provisions for concurrent use by the
lessor, another person or the general public.
(3)
"Product lease" as used in this chapter shall mean a lease of
property for use in the production of agricultural or marine products to the
extent that such lease provides for the contract rent to be paid by the
delivery of a stated percentage of the production of such agricultural or
marine products to the credit of the lessor or the payment to the lessor of a
stated percentage of the proceeds from the sale of such products.
(4)
"Renegotiated" means a change in the lease agreement which changes
the agreed time of possession, restrictions on use, the rate of the cash rental
or of any other consideration payable by the lessee to or for the benefit of
the lessor, other than any such change required by the terms of the lease or
agreement. In addition "renegotiated" shall mean a continuation of
possession by the lessee beyond the date when, under the terms of the lease
agreement, the lessee had the right to vacate the premises without any further
liability to the lessor.
(5)
"City" means any city or town.
(6)
"Products" includes natural resource products such as cut or picked
evergreen foliage, Cascara bark, wild edible mushrooms, native ornamental trees
and shrubs, ore and minerals, natural gas, geothermal water and steam, and
forage removed through the grazing of livestock.
