|State of Washington||63rd Legislature||2014 Regular Session|
READ FIRST TIME 01/27/14.
AN ACT Relating to subjecting federally recognized Indian tribes to the same conditions as state and local governments for property owned exclusively by the tribe; amending RCW 82.29A.010, 82.29A.020, 82.29A.050, 84.36.010, 84.36.451, and 84.40.230; adding a new section to chapter 82.29A RCW; adding a new section to chapter 52.30 RCW; adding a new section to chapter 43.136 RCW; creating a new section; providing an effective date; and providing an expiration date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 This section is the tax preference
performance statement for the tax preference contained in section 5 of
this act. This performance statement is only intended to be used for
subsequent evaluation of the tax preference. It is not intended to
create a private right of action by any party or be used to determine
eligibility for preferential tax treatment.
(1) The legislature categorizes this tax preference as one intended to create jobs and improve the economic health of tribal communities as indicated in RCW 82.32.808(2) (c) and (f).
(2) It is the legislature's specific public policy objective to create jobs and improve the economic health of tribal communities. It is the legislature's intent to exempt property used by federally recognized Indian tribes for economic development purposes, in order to achieve these policy objectives.
(3) The joint legislative audit and review committee must perform an economic impact report to the legislature as required in section 10 of this act to provide the information necessary to measure the effectiveness of this act.
Sec. 2 RCW 82.29A.010 and 2010 c 281 s 2 are each amended to read
(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 or community centers 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 or community centers. For the purposes of this subsection, "community center" has the same meaning as provided in RCW 84.36.010.
(d) The legislature also finds that eliminating the property tax on property owned exclusively by federally recognized Indian tribes within the state requires that the leasehold excise tax also be applied to leasehold interests on tribally 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 220, Laws of 1999 is to make those changes.
Sec. 3 RCW 82.29A.020 and 2012 2nd sp.s. c 6 s 501 are each
amended to read as follows:
The definitions in this section apply throughout this chapter unless the context requires otherwise.
(1)(a) "Leasehold interest" means 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. However, 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 may 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" includes 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.
(b) The term "leasehold interest" does not include:
(i) Road or utility easements, 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((
. "Leasehold interest" does not
(ii) The preferential use of publicly owned cargo cranes and docks and associated areas used in the loading and discharging of cargo located at a port district marine facility. "Preferential use" means that publicly owned real or personal property is used by a private party under a written agreement with the public owner, but the public owner or any third party maintains a right to use the property when not being used by the private party.
(c) "Publicly owned real or personal property" includes real or personal property owned by a federally recognized Indian tribe in the state and exempt from tax under RCW 84.36.010.
(2)(a) "Taxable rent" means contract rent as defined in (c) 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. However, 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 (g) of this subsection. All other leasehold interests are subject to the determination of taxable rent under the terms of (g) of this subsection.
(b) 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 includes 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 does 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.
(c) "Contract rent" means 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 is part of contract rent.
(d) "Contract rent" does 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 are 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.
(e) Any prepaid contract rent is 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 must 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, must be prorated from the date of prepayment.
(f) With respect to a "product lease", the value is that value determined at the time of sale under terms of the lease.
(g) If it is 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 must be given to rental being paid to other lessors by lessees of similar property for similar purposes over similar periods of time; (ii) consideration must 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 means 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" means 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.
Sec. 4 RCW 82.29A.050 and 1992 c 206 s 6 are each amended to read
(1) The leasehold excise taxes provided for in RCW 82.29A.030 and 82.29A.040 ((
shall)) must be paid by the lessee to the lessor and the
lessor (( shall)) must collect such tax and remit the same to the
department (( of revenue)). The tax (( shall)) must be payable at the
same time as payments are due to the lessor for use of the property
from which the leasehold interest arises, and in the case of payment of
contract rent to a person other than the lessor, at the time of
payment. The tax payment (( shall)) must be accompanied by such
information as the department (( of revenue)) may require. In the case
of prepaid contract rent the payment may be prorated in accordance with
instructions of the department (( of revenue)) and the prorated portion
of the tax (( shall be)) is due, one-half not later than May 31st and
the other half not later than November 30th each year.
(2) The lessor receiving taxes payable under the provisions of this chapter ((
shall)) must remit the same together with a return provided
by the department, to the department of revenue on or before the last
day of the month following the month in which the tax is collected.
The department may relieve any taxpayer or class of taxpayers from the
obligation of filing monthly returns and may require the return to
cover other reporting periods, but in no event (( shall)) may returns be
filed for a period greater than one year. The lessor (( shall be)) is
fully liable for collection and remittance of the tax. The amount of
tax until paid by the lessee to the lessor (( shall)) constitutes a debt
from the lessee to the lessor. The tax required by this chapter
(( shall)) must be stated separately from contract rent, and if not so
separately stated for purposes of determining the tax due from the
lessee to the lessor and from the lessor to the department, the
contract rent does not include the tax imposed by this chapter. Where
a lessee has failed to pay to the lessor the tax imposed by this
chapter and the lessor has not paid the amount of the tax to the
department, the department may, in its discretion, proceed directly
against the lessee for collection of the tax(( : PROVIDED, That)).
However, taxes due where contract rent has not been paid (( shall)) must
be reported by the lessor to the department and the lessee alone
(( shall be)) is liable for payment of the tax to the department.
(3) Each person having a leasehold interest subject to the tax provided for in this chapter arising out of a lease of federally owned or federal trust lands ((
shall)), or property owned by a federally
recognized Indian tribe in the state and exempt from tax under RCW
84.36.010, must report and remit the tax due directly to the department
of revenue in the same manner and at the same time as the lessor would
be required to report and remit the tax if such lessor were a state
Sec. 5 RCW 84.36.010 and 2010 c 281 s 1 are each amended to read
(1) All property belonging exclusively to the United States, the state, or any county or municipal corporation; all property belonging exclusively to any federally recognized Indian tribe, if (a) the tribe is located in the state, ((
if that)) and (b) the property is used
exclusively for essential government services; all state route number
16 corridor transportation systems and facilities constructed under
chapter 47.46 RCW; all property under a financing contract pursuant to
chapter 39.94 RCW or recorded agreement granting immediate possession
and use to the public bodies listed in this section or under an order
of immediate possession and use pursuant to RCW 8.04.090; and, for a
period of forty years from acquisition, all property of a community
center; is exempt from taxation. All property belonging exclusively to
a foreign national government is exempt from taxation if that property
is used exclusively as an office or residence for a consul or other
official representative of the foreign national government, and if the
consul or other official representative is a citizen of that foreign
(2) For the purposes of this section the following definitions apply unless the context clearly requires otherwise.
(a) "Community center" means property, including a building or buildings, determined to be surplus to the needs of a district by a local school board, and purchased or acquired by a nonprofit organization for the purposes of converting them into community facilities for the delivery of nonresidential coordinated services for community members. The community center may make space available to businesses, individuals, or other parties through the loan or rental of space in or on the property.
(b) "Essential government services" means services such as tribal administration, public facilities, fire, police, public health, education, sewer, water, environmental and land use, transportation, ((
and)) utility services, and economic development.
(c) "Economic development" means commercial activities, including those that facilitate the creation or retention of businesses or jobs, or that improve the standard of living or economic health of tribal communities.
Sec. 6 RCW 84.36.451 and 2001 c 26 s 2 are each amended to read
(1) The following property ((
shall be)) is exempt from taxation:
Any and all rights to occupy or use any real or personal property owned
in fee or held in trust by:
(a) The United States, the state of Washington, or any political subdivision or municipal corporation of the state of Washington, or a federally recognized Indian tribe for property exempt under RCW 84.36.010; or
(b) 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; and
Including)) Any leasehold interest arising from the property
identified in (a) and (b) of this subsection as defined in RCW
(2) The exemption under this section ((
shall)) does not apply to:
(a) Any such leasehold interests which are a part of operating properties of public utilities subject to assessment under chapter 84.12 RCW; or
(b) Any such leasehold interest consisting of three thousand or more residential and recreational lots that are or may be subleased for residential and recreational purposes.
(3) The exemption under this section ((
shall)) may not be construed
to modify the provisions of RCW 84.40.230.
Sec. 7 RCW 84.40.230 and 1994 c 124 s 25 are each amended to read
When any real property is sold on contract by the United States of America, the state, ((
or)) any county or municipality, or any federally
recognized Indian tribe, and the contract expresses or implies that the
vendee is entitled to the possession, use, benefits and profits thereof
and therefrom so long as the vendee complies with the terms of the
contract, it (( shall be)) is deemed that the vendor retains title
merely as security for the fulfillment of the contract, and the
property (( shall)) must be assessed and taxed in the same manner as
other similar property in private ownership is taxed, and the tax roll
(( shall)) must contain, opposite the description of the property so
assessed the following notation: "Subject to title remaining in the
vendor" or other notation of similar significance. No foreclosure for
delinquent taxes nor any deed issued pursuant thereto (( shall)) may
extinguish or otherwise affect the title of the vendor. In any case
under former law where the contract and not the property was taxed no
deed of the property described in such contract (( shall)) may ever be
executed and delivered by the state or any county or municipality until
all taxes assessed against such contract and local assessments assessed
against the land described thereon are fully paid.
NEW SECTION. Sec. 8 A new section is added to chapter 82.29A RCW
to read as follows:
(1) Property owned exclusively by a federally recognized Indian tribe that is exempt from property tax under RCW 84.36.010 is subject to payment in lieu of leasehold excise taxes, if:
(a) The tax exempt property is used exclusively for economic development, as defined in RCW 84.36.010;
(b) There is no taxable leasehold interest in the tax exempt property;
(c) The property is located outside of the tribe's reservation; and
(d) The property is not otherwise exempt from taxation by federal law.
(2) The amount of the payment in lieu of leasehold excise taxes must be determined jointly and in good faith negotiation between the tribe that owns the property and the county in which the property is located. However, the amount may not exceed the leasehold excise tax amount that would otherwise be owed by a taxable leasehold interest in the property.
(3) Payment must be made by the tribe to the county. The county treasurer must distribute all such money collected solely to the local taxing districts, including cities, in the same proportion that each local taxing district would have shared if a leasehold excise tax had been levied.
NEW SECTION. Sec. 9 A new section is added to chapter 52.30 RCW
to read as follows:
(1) When exempt tribal property is located within the boundaries of a fire protection district or a regional fire protection service authority, the fire protection district or authority is authorized to contract with the tribe for compensation for providing fire protection services in an amount and under such terms as are mutually agreed upon by the fire protection district or authority and the tribe.
(2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Exempt tribal property" means property that is owned exclusively by a federally recognized Indian tribe and that is exempt from taxation under RCW 84.36.010.
(b) "Regional fire protection service authority" or "authority" has the same meaning as provided in RCW 52.26.020.
NEW SECTION. Sec. 10 A new section is added to chapter 43.136
RCW to read as follows:
By December 1, 2020, and in compliance with RCW 43.01.036, the joint legislative audit and review committee must provide an economic impact report to the legislature evaluating the impacts of changes made in this act regarding the leasehold tax and property tax treatment of property owned by a federally recognized Indian tribe. The economic impact report must indicate: The number of parcels and uses of land involved; the economic impacts to tribal governments; state and local government revenue reductions, increases, and shifts from all tax sources affected; impacts on public infrastructure and public services; impacts on business investment and business competition; a description of the types of business activities affected; impacts on the number of jobs created or lost; and any other data the joint legislative audit and review committee deems necessary in determining the economic impacts of this act.
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 takes effect January 1, 2015.
NEW SECTION. Sec. 13 This act expires July 1, 2022.