BILL REQ. #:  Z-0772.5 

Read first time 11/29/2007.   Referred to Committee on Finance.

     AN ACT Relating to providing a fifty percent property tax deferral for households with income of fifty-seven thousand dollars or less; adding a new chapter to Title 84 RCW; creating new sections; providing an expiration date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that there are an increasing number of economic and financial pressures causing hardships to many homeowners in the state of Washington. The legislature finds that the current housing crisis is a key barometer of the insecure economic situation facing working Washington families. The legislature finds that, among those hardships, increases in property taxes lead to undue stress on family budgets causing some homeowners to be at risk of losing their homes. The legislature finds that financial practices nationwide have led to an increasingly destabilized housing market across the country with impacts now being felt here in Washington. The legislature further finds that by establishing a property tax deferral program homeowners will be able to remain in their homes. The legislature further finds that acting now to stabilize the housing market is an important public purpose.
     (2) It is the intent of the legislature to: (a) Provide a property tax safe harbor for families in economic crisis; and (b) prevent existing homeowners from being driven from their homes because of overly burdensome property taxes.

NEW SECTION.  Sec. 2   A claimant may defer payment of fifty percent of special assessments or real property taxes, or both, in any year in which all of the following conditions are met:
     (1) The special assessments or property taxes must be imposed upon a residence that was occupied by the claimant as a principal place of residence as of January 1st of the year in which the assessments and taxes are due, subject to the exceptions allowed under RCW 84.36.381(1);
     (2) The claimant must have combined disposable income, as defined in RCW 84.36.383, of fifty-seven thousand dollars or less in the calendar year preceding the filing of the declaration;
     (3) The claimant must have paid one-half of the total amount of special assessments and property taxes listed on the tax statement for the year in which the deferral claim is made;
     (4) A deferral is not allowed for assessments or taxes levied in the first five calendar years in which the person owns the residence;
     (5) The claimant who defers payment of special assessments or real property taxes, or both, under this section must also meet the conditions of RCW 84.38.030 (4) and (5);
     (6) The total amount deferred by a claimant under this chapter must not exceed forty percent of the amount of the claimant's equity value in the claimant's residence;
     (7) The claimant may not defer taxes under both this chapter and chapter 84.38 RCW; and
     (8) In the case of deferred special assessments, the claimant must have opted for payment of the assessments on the installment method if this method was available.

NEW SECTION.  Sec. 3   The definitions in RCW 84.38.020 apply to this chapter. For purposes of this chapter, references to "this chapter" in any of the definitions in RCW 84.38.020 shall be interpreted to refer to chapter 84.-- RCW (this chapter), unless the context clearly requires otherwise.

NEW SECTION.  Sec. 4   (1) Each claimant electing to defer payment of special assessments or real property tax obligations, or both, under this chapter shall file with the county assessor, on forms prescribed by the department and supplied by the assessor, a written declaration thereof. The declaration to defer special assessments and/or real property taxes for any year shall be filed no later than the first day of September of the year for which the deferral is sought: PROVIDED, That for good cause shown, the department may waive this requirement.
     (2) The declaration shall designate the property to which the deferral applies, and shall include a statement setting forth (a) a list of all members of the claimant's household, (b) the claimant's equity value in his or her residence, (c) facts establishing the eligibility for the deferral under the provisions of this chapter, and (d) any other relevant information required by the rules of the department. Each copy shall be signed by the claimant subject to the penalties as provided in chapter 9A.72 RCW for false swearing.
     (3) The county assessor shall determine if each claimant shall be granted a deferral for each year but the claimant shall have the right to appeal this determination to the county board of equalization, in accordance with the provisions of RCW 84.40.038, whose decision shall be final as to the deferral of that year.

NEW SECTION.  Sec. 5   (1) The provisions of RCW 84.38.050(1)(b) apply to declarations to defer special assessments or property taxes, or both, for all years following the first year.
     (2) The provisions of RCW 84.38.070 apply to claimants ceasing to reside permanently on the property for which the declaration to defer is made between the date of filing the declaration and December 15th of that year.

NEW SECTION.  Sec. 6   (1) A person's right to defer special assessments or property tax obligations, or both, under this chapter may not be reduced by contract or agreement.
     (2) If any residence is under mortgage or purchase contract requiring accumulation of reserves out of which the holder of the mortgage or contract is required to pay real estate taxes, such holder shall cosign the declaration of deferral either before a notary public, the county assessor, or the county assessor's deputy in the county where the real property is located.

NEW SECTION.  Sec. 7   Whenever a person's special assessment or real property tax obligation, or both, is deferred under the provisions of this chapter, the amount deferred and required to be paid pursuant to RCW 84.38.120 shall become a lien in favor of the state upon his or her property and shall have priority as provided in chapters 35.50 and 84.60 RCW: PROVIDED, That the interest of a mortgage or purchase contract holder who is required to cosign a declaration of deferral under section 6 of this act shall have priority to said deferred lien. This lien may accumulate up to forty percent of the amount of the claimant's equity value in said property and the rate of interest shall be an average of the federal short-term rate as defined in 26 U.S.C. Sec. 1274(d) plus two percentage points. The rate set for each new year shall be computed by taking an arithmetical average to the nearest percentage point of the federal short-term rate, compounded annually. That average shall be calculated using the rates from four months: January, April, and July of the calendar year immediately preceding the new year, and October of the previous preceding year. The interest shall be calculated from the time it could have been paid before delinquency until said obligation is paid. In the case of a mobile home, the department of licensing shall show the state's lien on the certificate of ownership for the mobile home. In the case of all other property, the department of revenue shall file a notice of the deferral with the county recorder or auditor.

NEW SECTION.  Sec. 8   Special assessments or real property tax obligations, or both, deferred under this chapter shall become payable together with interest as provided in section 7 of this act:
     (1) Upon the sale of property which has a deferred special assessment lien or real property tax lien, or both, upon it;
     (2) Upon the death of the claimant with an outstanding deferred special assessment lien or real property tax lien, or both, except a surviving spouse who is qualified under this chapter may elect to incur the special assessment lien or real property tax lien, or both, which shall then be payable by that spouse as provided in this section;
     (3) Upon the condemnation of property with a deferred special assessment lien or real property tax lien, or both, upon it by a public or private body exercising eminent domain power, except as otherwise provided in RCW 84.60.070; or
     (4) At such time as the claimant ceases to reside permanently in the residence upon which the deferral has been granted.

NEW SECTION.  Sec. 9   The provisions of RCW 84.38.110, 84.38.120, 84.38.140, 84.38.150, 84.38.160, 84.38.170, and 84.38.180 apply to this chapter to the extent that they do not conflict with the provisions of this chapter. For purposes of this chapter, references to "this chapter" in any of the statutes listed in this section shall be interpreted to refer to chapter 84.-- RCW (this chapter) unless the context clearly requires otherwise.

NEW SECTION.  Sec. 10   Sections 1 through 9 of this act constitute a new chapter in Title 84 RCW.

NEW SECTION.  Sec. 11   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 12   This act applies to taxes due and payable after April 30, 2008, and thereafter.

NEW SECTION.  Sec. 13   (1) During calendar year 2011, the joint legislative audit and review committee shall review the property tax deferral program under chapter 84.-- RCW (sections 1 through 9 of this act). The department of revenue and county assessors shall provide the committee with any data within its purview that the committee considers necessary to conduct the review. By December 1, 2011, the joint legislative audit and review committee shall report to the legislature the results of its review.
     (2) As part of its review under subsection (1) of this section, the committee shall study and report on:
     (a) The effectiveness of the property tax deferral program in assisting families in economic distress in remaining in their homes;
     (b) The effectiveness of the property tax deferral program in decreasing the default rate on residential mortgages for the statewide population within the income threshold of the program;
     (c) The number of potential participants per thousand population by geographic region;
     (d) The ratio of actual deferral program participants to potential deferral program participants by geographic region;
     (e) The ratio of average annual household property taxes for deferral program participants and average annual income of deferral program participants by geographic region;
     (f) Economic conditions in the housing and lending markets for the prior three years and the forecasted economic conditions for the current biennium and the next succeeding biennium;
     (g) Annual costs specific to the administration of the deferral program;
     (h) Total annual costs of the deferral program;
     (i) Recommended changes to the deferral program that would increase program participation;
     (j) Any other recommendations the committee may have to improve the deferral program; and
     (k) Any other factors that the committee considers necessary to properly evaluate the deferral program.
     (3) This section expires January 1, 2012.

NEW SECTION.  Sec. 14   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.