AN ACT Relating to establishing housing affordability zones; adding a new section to chapter 36.70A RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.04 RCW; and providing an expiration date.

(1) A city or county required or choosing to plan under RCW 36.70A.040 may designate housing affordability zones within a designated urban growth area in which to permit development of residential housing for low-income households. A city or county may only permit single-family residential housing within these housing affordability zones.

(2) A new housing affordability zone may be approved in a city or county planning under RCW 36.70A.040 if the following criteria are met:

(a) Any permits granted within the zone are limited to the development of owner occupied single-family residential detached dwellings serving low-income households;

(c) The city or county does not charge cumulative permitting fees for each dwelling within the zone that equal more than one thousand two hundred fifty dollars;

(d) Provisions are included to ensure that each dwelling developed within the zone remains reserved for low-income households; and

(e) In selecting potential zones, the city or county coordinates with the Washington state department of ecology and the department of commerce to identify possible sites for healthy housing remediation.

(3) "Low-income household," as used in this section, means a single person, family, or unrelated persons living together whose adjusted income is less than eighty percent of the median family income adjusted for household size, for the city or county where the project is located.

(1) A city or county may receive a distribution equal to the state portion of the tax levied by RCW 82.08.020 in respect to:

(a) Charges for labor and services rendered in respect to the constructing of dwellings in designated housing affordability zones, as provided in section 1 of this act;

(b) Sales of tangible personal property that will be incorporated as an ingredient or component of such dwellings during the course of the constructing; or

(c) Charges made for labor and services rendered in respect to installing, during the course of constructing such dwellings, fixtures not otherwise eligible for the exemption under RCW 82.08.02565.

(2)(a) The department must at least once annually remit to the city or county an estimated amount, as determined by the department, of state taxes collected during the prior calendar year with respect to section 1 of this act.

(b) The department must determine eligibility under this section based on information provided by the city or county and through audit and other administrative records.

(c) The city or county must, on an annual basis, submit an application, in a form and manner as required by the department by rule, containing any information the department deems necessary in determining remittance amounts under this section.

(a) Tangible personal property that will be incorporated as an ingredient or component in constructing of dwellings in designated housing affordability zones, as provided in section 1 of this act; or

(b) Labor and services rendered in respect to installing, during the course of constructing such dwellings, fixtures not otherwise eligible for the exemption under RCW 82.08.02565.

(2) The definitions and eligibility requirements and conditions in section 2 of this act apply to this section.

(1) A person is allowed an annual credit against the tax due under this chapter for ten years as provided in this section. The credit equals four percent of the taxable amount on the sale of an eligible single-family home sold under section 1 of this act.

(2) The credit may be used against any tax due under this chapter, and may be carried over until used, except as provided in subsection (4) of this section. No refund may be granted for credits under this section.

(3) Credits earned under this section may be claimed only on returns filed electronically with the department using the department's online tax filing service or other method of electronic reporting as the department may authorize. No application is required to claim the credit, but the taxpayer must keep records necessary for the department to determine eligibility under this section including records establishing the sale of an eligible single-family home as provided in section 1 of this act.

(4) Credits allowed under this section can be earned for tax reporting periods through June 30, 2029. No credits can be claimed after June 30, 2030.