Title of Rule and Other Identifying Information: WAC 458-16A-100 Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Definitions, 458-16A-120 Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Determining combined disposable income, 458-16A-135 Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Application procedures, 458-16A-140 Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Exemption described -- Exemption granted -- Exemption denied -- Freezing property values, and 458-16A-150 Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Requirements for keeping the exemption.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department of revenue is proposing to amend these rules to incorporate recent legislation:

•	2012 - SHB 2056 (WAC 458-16A-100, 458-16A-120, and 458-16A-135). This legislation changed the term "boarding home" to "assisted living facility" throughout the Revised Code of Washington;
•	2012 - E2SHB 6239 (WAC 458-16A-100 only). This legislation redefined "domestic partner" and "domestic partnership" as a union between two persons of legal age where one is at least sixty-two years of age. (See RCW 26.60.030);
•	2012 - ESSB 6470 (WAC 458-16A-140 only). This updated the types of fire benefit charges that are reduced by twenty-five percent, fifty percent, or seventy-five percent depending upon the combined disposable income of the claimant. See also RCW 52.26.270 (HB 2519, 2004).
•	2011 - SSB 5167 (WAC 458-16A-100, 458-16A-120, 458-16A-135, 458-16A-150). This made two changes to the property tax relief program for low-income seniors and disabled persons: (1) Eligibility requirements for disabled veterans are modified to reflect federal definitions of service-connected disability; and (2) a section requiring notice to taxpayers is changed to reflect the 2010 legislative changes to renewal filings.
•	2010 - E2SHB 1597 (WAC 458-16A-100, 458-16A-120, 458-16A-135, 458-16A-150). This made various technical corrections, including making two reference dates to federal law the same within the senior property tax relief law, and DOR is allowed to update the reference by rule in a way that is consistent with the purpose. Also, the time period for exemption renewal is extended under the senior property tax relief program from four to six years, and recovery of back taxes is also allowed for up to five years if an exemption was based on erroneous information.
•	2009 - E2SHB 1208 (WAC 458-16A-135, 458-16A-140, 458-16A-150). This amended RCW 84.69.030 to change one of the requirements for administrative refunds of property taxes. The county treasurer now only refunds property taxes that were due within the three years prior to the refund request. Various clarifications are made throughout chapter 458-16A WAC, including the definition of "annuity" in WAC 458-16A-100(2).

     Copies of draft rules are available for viewing and printing on our web site at http://dor.wa.gov/content/FindALawOrRule/RuleMaking/agenda.aspx.

     Reasons Supporting Proposal: To update these rules consistent with current law.

     Statutory Authority for Adoption: RCW 84.36.389 and 84.36.865.

     Statute Being Implemented: RCW 84.36.381, 84.36.383, 84.36.385, 84.69.030.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: DOR, governmental.

     Name of Agency Personnel Responsible for Drafting: Jay M. Jetter, 1025 Union Avenue S.E., Suite #200, Olympia, WA, (360) 534-1405; Implementation: Alan Lynn, 1025 Union Avenue S.E., Suite #200, Olympia, WA, (360) 534-1599; and Enforcement: Kathy Beith, 1025 Union Avenue S.E., Suite #200, Olympia, WA, (360) 534-1403.

December 31, 2012

Alan R. Lynn

Rules Coordinator

OTS-5070.2

AMENDATORY SECTION(Amending WSR 08-16-075, filed 7/31/08, effective 8/31/08)

WAC 458-16A-100   Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Definitions.   (1) Introduction. This rule contains definitions of the terms used for the senior citizen, disabled person, and one hundred percent disabled veteran exemption from property taxes. The definitions apply to the senior citizen, disabled person, and one hundred percent disabled veteran exemption contained in sections RCW 84.36.381 through 84.36.389 unless the context clearly requires otherwise.

     (2) Annuity. "Annuity" means a series of payments, fixed or variable, under a contract or agreement. ((Annuity contracts pay a fixed sum of money at regular intervals for more than one full year.)) An annuity may be paid as the proceeds of a life insurance contract (other than as a lump sum payment), unemployment compensation, disability payments, or ((even)) welfare receipts. It does not include payments for the care of dependent children.

     (a) Annuity distributions must be included in "disposable income," as that term is defined in subsection (12) of this section, whether or not they are taxable under federal law. A one-time, lump sum, total distribution is not an "annuity" for purposes of this section, and only the taxable portion that would be included in federal adjusted gross income should be included in disposable income.

     (b) Disability payments include, but are not limited to, payments made by such agencies as the federal Department of Veterans Affairs for service-connected disabilities, the federal Social Security Administration, and the Washington state department of labor and industries.

     (c) A "series of payments" means at least one payment per period over more than one period, where a period can be a week, month, or year. Payment amounts do not have to be equal. Annuity distributions may fluctuate based on the age of the individual, the performance of the investment options, etc. Payment periods do not have to be consecutive. For example, if a distribution is made one year and four years pass before another distribution is made, this can still qualify as an "annuity" for purposes of this section.

     (3) Assessment year. "Assessment year" means the year when the assessor lists and values the principal residence for property taxes. The assessment year is the calendar year prior to the year the taxes become due and payable. It is always the year before the claimant receives a reduction in his or her property taxes because of the senior citizen, disabled person, and one hundred percent disabled veteran exemption.

     (4) Capital gain. "Capital gain" means the amount the seller receives for property (other than inventory) over that seller's adjusted basis in the property. The seller's initial basis in the property is the property's cost plus taxes, freight charges, and installation fees. In determining the capital gain, the seller's costs of transferring the property to a new owner are also added onto the adjusted basis of the property. If the property is acquired in some other manner than by purchase, the seller's initial basis in the property is determined by the way the seller received the property (e.g., property exchange, payment for services, gift, or inheritance). The seller adjusts (increases and decreases) the initial basis of the property for events occurring between the time the property is acquired and when it is sold (e.g., increased by the cost of improvements made later to the property).

     (5) Claimant. "Claimant" means a person claiming the senior citizen, disabled person, and one hundred percent disabled veteran exemption by filing an application with the county assessor in the county where the property is located.

     (6) Combined disposable income. "Combined disposable income" means the annual disposable income of the claimant, the claimant's spouse or domestic partner, and any cotenant reduced by amounts paid by the claimant or the claimant's spouse or domestic partner for their:

     (a) Legally prescribed drugs;

     (b) Home health care;

     (c) Nursing home, boarding home, or adult family home expenses; and

     (d) Health care insurance premiums for medicare under Title XVIII of the Social Security Act.

     Disposable income is not reduced by these amounts if payments are reimbursed by insurance or a government program (e.g., medicare or medicaid). When the application is made, the combined disposable income is calculated for the assessment year.

     (7) Cotenant. "Cotenant" means a person who resides with the claimant and who has an ownership interest in the residence.

     (8) Department. "Department" means the state department of revenue.

     (9) Depreciation. "Depreciation" means the annual deduction allowed to recover the cost of business or investment property having a useful life of more than one year. In limited circumstances, this cost, or a part of this cost, may be taken as a section 179 expense on the federal income tax return in the year business property is purchased.

     (10) Disability. "Disability" means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. (RCW 84.36.383(7); 42 U.S.C. Sec. 423 (d)(1)(A).)

     (11) Disabled veteran. "Disabled veteran" means a veteran of the armed forces of the United States ((with a one hundred percent disability rating that is)) entitled to and receiving compensation from the United States Department of Veterans Affairs at a total disability rating for a service-connected disability. (RCW 84.36.381 (3)(b).)((.))

     (12) Disposable income. "Disposable income" means the adjusted gross income as defined in the Federal Internal Revenue Code of 2001, and as amended after that date, plus all the other items described below to the extent they are not included in or have been deducted from adjusted gross income. (RCW 84.36.383)

     (a) Capital gains, other than gain excluded from the sale of a principal residence that is reinvested prior to the sale or within the same calendar year in a different principal residence;

     (b) Losses. Amounts deducted for loss;

     (c) Depreciation. Amounts deducted for depreciation;

     (d) Pension and annuity receipts;

     (e) Military pay and benefits other than attendant-care and medical-aid payments. Attendant-care and medical-aid payments are any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the military;

     (f) Veterans benefits other than:

     (i) Attendant-care payments and medical-aid payments, defined as any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the Department of Veterans Affairs (VA);

     (ii) Disability compensation, defined as payments made by the VA to a veteran because of service-connected disability;

     (iii) Dependency and indemnity compensation, defined as payments made by the VA to a surviving spouse, child, or parent because of a service-connected death.

     (g) Federal Social Security Act and railroad retirement benefits;

     (h) Dividend receipts;

     (i) Interest received on state and municipal bonds.

     (13) Domestic partner. "Domestic partner" means a person registered under chapter 26.60 RCW or a partner in a legal union of two persons ((of the same sex)), other than a marriage, that was validly formed in another jurisdiction, and that is substantially equivalent to a domestic partnership under chapter 26.60 RCW.

     (14) Domestic partnership. "Domestic partnership" means a partnership registered under chapter 26.60 RCW or a legal union of two persons ((of the same sex)), other than a marriage, that was validly formed in another jurisdiction, and that is substantially equivalent to a domestic partnership under chapter 26.60 RCW.

     (15) Excess levies. "Excess levies" means voter-approved levies by taxing districts, other than port or public utility districts, of additional taxes in excess of the statutory aggregate dollar rate limit, the statutory dollar rate limit, or the constitutional one percent levy limit. It does not include regular levies allowed to exceed a statutory limit with voter approval or voted regular levies.

     (16) Excluded military pay or benefits. "Excluded military pay or benefits" means military pay or benefits excluded from a person's federal gross income, other than those amounts excluded from that person's federal gross income for attendant-care and medical-aid payments. Members of the armed forces receive many different types of pay and allowances. Some payments or allowances are included in their gross income for the federal income tax while others are excluded from their gross income. Excluded military pay or benefits include:

     (a) Compensation for active service while in a combat zone or a qualified hazardous duty area;

     (b) Death allowances for burial services, gratuity payment to a survivor, or travel of dependents to the burial site;

     (c) Moving allowances;

     (d) Travel allowances;

     (e) Uniform allowances;

     (f) Group term life insurance payments made by the military on behalf of the claimant, the claimant's spouse or domestic partner, or the cotenant; and

     (g) Survivor and retirement protection plan premiums paid by the military on behalf of the claimant, the claimant's spouse or domestic partner, or the cotenant.

     (17) Family dwelling unit. "Family dwelling unit" means the dwelling unit occupied by a single person, any number of related persons, or a group not exceeding a total of eight related and unrelated nontransient persons living as a single noncommercial housekeeping unit. The term does not include a boarding or rooming house.

     (18) Home health care. "Home health care" means the treatment or care of either the claimant or the claimant's spouse or domestic partner received in the home. It must be similar to the type of care provided in the normal course of treatment or care in a nursing home, although the person providing the home health care services need not be specially licensed. The treatment and care must meet at least one of the following criteria. It must be for:

     (a) Medical treatment or care received in the home;

     (b) Physical therapy received in the home;

     (c) Food, oxygen, lawful substances taken internally or applied externally, necessary medical supplies, or special needs furniture or equipment (such as wheel chairs, hospital beds, or therapy equipment), brought into the home as part of a necessary or appropriate in-home service that is being rendered (such as a meals on wheels type program); or

     (d) Attendant care to assist the claimant, or the claimant's spouse or domestic partner, with household tasks, and such personal care tasks as meal preparation, eating, dressing, personal hygiene, specialized body care, transfer, positioning, ambulation, bathing, toileting, self-medication a person provides for himself or herself, or such other tasks as may be necessary to maintain a person in his or her own home, but shall not include improvements or repair of the home itself.

     (19) Lease for life. "Lease for life" means a lease that terminates upon the demise of the lessee.

     (20) Legally prescribed drugs. "Legally prescribed drugs" means drugs supplied by prescription of a medical practitioner authorized to issue prescriptions by the laws of this state or another jurisdiction.

     (21) Life estate. "Life estate" means an estate whose duration is limited to the life of the party holding it or of some other person.

     (a) Reservation of a life estate upon a principal residence placed in trust or transferred to another is a life estate.

     (b) Beneficial interest in a trust is considered a life estate for the settlor of a revocable or irrevocable trust who grants to himself or herself the beneficial interest directly in his or her principal residence, or the part of the trust containing his or her personal residence, for at least the period of his or her life.

     (c) Beneficial interest in an irrevocable trust is considered a life estate, or a lease for life, for the beneficiary who is granted the beneficial interest representing his or her principal residence held in an irrevocable trust, if the beneficial interest is granted under the trust instrument for a period that is not less than the beneficiary's life.

     (22) Owned. "Owned" includes "contract purchase" as well as "in fee," a "life estate," and any "lease for life." A residence owned by a marital community or domestic partnership or owned by cotenants is deemed to be owned by each spouse or each domestic partner or each cotenant.

     (23) Ownership by a marital community or domestic partnership. "Ownership by a marital community or domestic partnership" means property owned in common by both spouses or domestic partners. Property held in separate ownership by one spouse or domestic partner is not owned by the marital community or domestic partnership. The person claiming the exemption must own the property for which the exemption is claimed. Example: A person qualifying for the exemption by virtue of age, disability, or one hundred percent disabled veteran status cannot claim exemption on a residence owned by the person's spouse or domestic partner as a separate estate outside the marital community or domestic partnership unless the claimant has a life estate therein.

     (24) Pension. "Pension" means an agreement to provide for payments, not wages, to a person (or to that person's family) who has fulfilled certain conditions of service or reached a certain age. A pension may allow payment of all or a part of the entire pension benefit, in lieu of regular periodic payments.

     (25) Principal residence. "Principal residence" means the claimant owns and occupies the residence as his or her principal or main residence. It does not include a residence used merely as a vacation home. For purposes of this exemption:

     (a) Principal or main residence means the claimant occupies the residence for more than six months each year.

     (b) Confinement of the claimant to a hospital or nursing home does not disqualify the claim for exemption if:

     (i) The residence is temporarily unoccupied;

     (ii) The residence is occupied by the claimant's spouse or domestic partner or a person financially dependent on the claimant for support;

     (iii) The residence is occupied by a caretaker who is not paid for watching the house;

     (iv) The residence is rented for the purpose of paying nursing home, hospital, boarding home or adult family home costs.

     (26) Regular gainful employment. "Regular gainful employment" means consistent or habitual labor or service which results in an increase in wealth or earnings.

     (27) Replacement residence. "Replacement residence" means a residence that qualifies for the senior citizen, disabled person, and one hundred percent disabled veteran exemption and replaces the prior residence of the person receiving the exemption.

     (28) Residence. "Residence" means a single-family dwelling unit whether such unit be separate or part of a multiunit dwelling and includes up to one acre of the parcel of land on which the dwelling stands, and it includes any additional property up to a total of five acres that comprises the residential parcel if land use regulations require this larger parcel size. The term also includes:

     (a) A share ownership in a cooperative housing association, corporation, or partnership if the person claiming exemption can establish that his or her share represents the specific unit or portion of such structure in which he or she resides.

     (b) A single-family dwelling situated upon leased lands and upon lands the fee of which is vested in the United States, any instrumentality thereof including an Indian tribe, the state of Washington, or its political subdivisions.

     (c) A mobile home which has substantially lost its identity as a mobile unit by being fixed in location upon land owned or rented by the owner of said mobile home and placed on a foundation, posts, or blocks with fixed pipe connections for sewer, water or other utilities even though it may be listed and assessed by the county assessor as personal property. It includes up to one acre of the parcel of land on which a mobile home is located if both the land and mobile home are owned by the same qualified claimant and it includes any additional property up to a total of five acres that comprises the residential parcel if land use regulations require this larger parcel size.

     (29) Veteran. "Veteran" means a veteran of the armed forces of the United States.

     (30) Veterans benefits. "Veterans benefits" means benefits paid or provided under any law, regulation, or administrative practice administered by the VA. Federal law excludes from gross income any veterans' benefits payments, paid under any law, regulation, or administrative practice administered by the VA.

[Statutory Authority: RCW 84.36.383, 84.36.389, and 84.36.865. 08-16-075, § 458-16A-100, filed 7/31/08, effective 8/31/08; 03-09-002, § 458-16A-100, filed 4/2/03, effective 5/3/03.]

OTS-5071.1

AMENDATORY SECTION(Amending WSR 08-16-078, filed 7/31/08, effective 8/31/08)

WAC 458-16A-120   Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Determining combined disposable income.   (1) Introduction. This rule describes how an assessor determines a claimant's combined disposable income.

     (2) Begin by calculating disposable income. The assessor must determine the disposable income of the claimant, the claimant's spouse or domestic partner, and all cotenants. The assessor begins by obtaining a copy of the claimant's, the claimant's spouse's or domestic partner's, and any cotenant's federal income tax return. If the claimant, the claimant's spouse or domestic partner, or a cotenant does not provide a federal income tax return, the assessor must calculate disposable income from copies of other income documents (e.g., W-2, 1099-R, 1099-INT, etc.). The assessor may want to review the definitions of gross income, WAC 458-16A-110, and adjusted gross income, WAC 458-16A-115, to help calculate the combined disposable income for a claimant. These rules provide some guidance on how to determine adjusted gross income without copies of a federal income tax return. On the federal income tax return, the adjusted gross income is found on the front pages of Form 1040, Form 1040A, and Form 1040EZ. Even when a return is provided, an assessor may request copies of supporting documents to verify the amount of the claimant's combined disposable income.

     (a) Absent spouse or domestic partner. When a spouse or domestic partner has been absent for over a year and the claimant has no knowledge of his/her spouse's or domestic partner's whereabouts or whether the spouse or domestic partner has any income or not, and the claimant has not received anything of value from the spouse or domestic partner or anyone acting on behalf of the spouse or domestic partner, the disposable income of the spouse or domestic partner is deemed to be zero for purposes of this exemption. The claimant must submit with the application a dated statement signed by the applicant under the penalty of perjury. This statement must state that more than one year prior to filing this application:

     (i) The claimant's spouse or domestic partner has been absent;

     (ii) The claimant has not and does not know the whereabouts of the claimant's spouse or domestic partner;

     (iii) The claimant has not had any communication with the claimant's spouse or domestic partner;

     (iv) The claimant has not received anything of value from the claimant's spouse or domestic partner or anyone acting on behalf of the claimant's spouse or domestic partner.

     The statement must also agree to provide this income information if the claimant is able to obtain it anytime in the next ((four)) six years.

     (b) Form 1040EZ. Generally, the adjusted gross income on Form 1040EZ represents the disposable income for the person or couple filing the return. However, that person's or couple's adjusted gross income as shown on the Form 1040EZ must be increased by the following amounts that are excluded from their adjusted gross income.

     (i) Gain from a sold residence. Under certain circumstances, gain from a sold residence is added onto the seller's adjusted gross income. Since there is no federal form used for reporting the exclusion of capital gains from the sale of a principal residence, the exemption application asks if a home has been sold, whether the sale proceeds were reinvested in new principal residence, and the amount of capital gain from the sale.

     (A) If the proceeds were reinvested in a new principal residence, the excluded capital gain reinvested in the new residence is ignored. The adjusted gross income on Form 1040EZ is not adjusted for any part of the excluded capital gain reinvested in the new residence.

     (B) If the proceeds were not reinvested in a new principal residence or only a part of the proceeds were reinvested in a new principal residence, the amount of excluded capital gain that is not reinvested in a new principal residence is added onto the seller's adjusted gross income to determine the seller's disposable income. The assessor may accept the excluded capital gain amount claimed upon the application or request a copy of documents demonstrating the seller's basis in the property and the capital gain earned upon the sale.

     (ii) Interest received on state and municipal bonds. Interest received on state or local government bonds is generally not subject to federal income tax. This tax exempt interest is marked "TEI" and reported on the Form 1040EZ. The tax-exempt interest is added onto the bond owner's federal adjusted gross income to determine the bond owner's disposable income.

     (A) The assessor may ask a claimant whether the claimant, the claimant's spouse or domestic partner, or any cotenants own state or local government bonds. If the return does not show the tax exempt amount from the bond, the assessor may ask to see a copy of the Form 1099-INT (Interest Income).

     (B) If the claimant does not have this form, the bond issuer should be able to tell the owner whether the interest is taxable. The issuer should also give the owner a periodic (or year-end) statement showing the tax treatment of the bond. If the income recipient invested in the bond through a trust, a fund, or other organization, that organization should give the recipient this information.

     (iii) Excluded military pay and benefits. Military pay and benefits excluded from federal adjusted gross income, other than attendant-care and medical-aid payments, are added onto the adjusted gross income of the military personnel receiving the excluded military pay or benefits to determine that person's disposable income. Excluded military pay and benefits are discussed in more detail ((below)) in ((paragraph (c))) (d)(vii) of this subsection.

     (iv) Veterans benefits. Veterans benefits are added onto the veteran's adjusted gross income to determine the veteran's disposable income, except for:

     (A) Attendant-care payments and medical-aid payments, defined as any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the Department of Veterans Affairs (VA);

     (B) Disability compensation, defined as payments made by the Department of Veterans Affairs (VA) to a veteran because of service-connected disability. (RCW 84.36.383 (5)(f)(iii).)

     (C) Dependency and indemnity compensation, defined as payments made by the Department of Veterans Affairs (VA) to a surviving spouse, child, or parent. (RCW 84.36.383 (5)(f)(iv).)

     Veterans benefits are discussed in more detail ((below)) in ((paragraph (c))) (d)(viii) of this subsection.

     (c) Form 1040A. If a claimant provides a copy of a Form 1040A, the assessor calculates the disposable income for the person or couple filing the return by adding onto the adjusted gross income reported the items described below to the extent these items were excluded or deducted from gross income:

     (i) Gain from a sold residence. The excluded capital gain from selling a principal residence to the extent that excluded gain was not reinvested in a new principal residence is added onto the seller's adjusted gross income to determine the seller's disposable income. The amount is reported on the exemption application. Refer to ((paragraph (a))) (b)(i) ((above)) of this subsection for a more complete discussion of excluded capital gain upon a sold residence.

     (ii) Interest received on state and municipal bonds. Interest received on state or local government bonds is generally not subject to federal income tax. The tax-exempt interest reported on Form 1040A is added back onto the bond owner's adjusted gross income to determine the bond owner's disposable income. Refer to ((paragraph (a))) (b)(ii) ((above)) of this subsection for a more complete discussion of tax-exempt interest on state and municipal bonds.

     (iii) Pension and annuity receipts. Any nontaxable pension and annuity amounts are added onto the recipient's adjusted gross income amount to determine the recipient's disposable income. The nontaxable pension and annuity amounts are the difference in the total pension and annuity amounts reported from the taxable amounts reported. If the total amount of the pension and annuity amounts are not reported on the return, the assessor may use a copy of the Form 1099-R (Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.) issued to the claimant, the claimant's spouse or domestic partner, or the cotenant to determine the total amount of pension and annuity amounts received. Pension and annuity amounts do not include distributions made from a traditional individual retirement account; and

     (iv) Federal Social Security Act and railroad retirement benefits. Any nontaxable Social Security benefit or equivalent railroad retirement amount reported on Form 1040A is added onto the adjusted gross income of the person receiving these benefits to determine that person's disposable income. The nontaxable Social Security benefit or equivalent railroad retirement amount is the difference in the total Social Security benefits or equivalent railroad retirement amounts reported from the taxable amount reported. If the total amount of the Social Security benefit or equivalent railroad retirement amount is not reported on the return, the assessor may use a copy of the Form SSA-1099 or Form RRB-1099 issued to the claimant, the claimant's spouse or domestic partner, or the cotenant to determine the Social Security benefits or the railroad retirement benefits received.

     (v) Excluded military pay and benefits. Military pay and benefits excluded from federal adjusted gross income, other than attendant-care and medical-aid payments, are added onto adjusted gross income of the military personnel receiving the excluded military pay or benefits to determine that person's disposable income. Excluded military pay and benefits are discussed ((below)) in ((paragraph (c))) (d)(vii) of this subsection.

     (vi) Veterans benefits. Veterans benefits are added back onto the veteran's adjusted gross income to determine the veteran's disposable income, except for:

     (A) Attendant-care payments and medical-aid payments, defined as any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the Department of Veterans Affairs (VA);

     (B) Disability compensation, defined as payments made by the Department of Veterans Affairs (VA) to a veteran because of service-connected disability. (RCW 84.36.383 (5)(f)(iii).)

     (C) Dependency and indemnity compensation, defined as payments made by the Department of Veterans Affairs (VA) to a surviving spouse, child, or parent. (RCW 84.36.383 (5)(f)(iv).)

     Veterans benefits are discussed ((below)) in ((paragraph (c))) (d)(viii) of this subsection.

     (d) Form 1040. If a claimant provides a copy of a Form 1040, the assessor calculates the disposable income for the person or couple filing the return by adding onto the reported adjusted gross income all the items described below to the extent these items were excluded or deducted from gross income:

     (i) Gain from a sold residence. The excluded capital gain from selling a principal residence to the extent that excluded gain was not reinvested in a new principal residence is added onto the seller's adjusted gross income to determine the seller's disposable income. The excluded capital gain amount is reported on the exemption application.

     (ii) Capital gains. If the return shows capital gains or losses, the assessor examines a copy of the following schedule or forms, if any, that were filed with the return. The assessor should examine the capital gains reported on Schedule D (Capital Gains and Losses) and on Forms 4684 (Casualty and Thefts), 4797 (Sales of Business Property), and 8829 (Business Use of Home).

     The assessor adds onto the adjusted gross income any amount of capital gains reduced by losses or deductions on the schedules or forms listed above to determine the total capital gains. The amount of capital gains that were excluded or deducted from adjusted gross income must be added onto that adjusted gross income to determine disposable income.

     (iii) Losses. Amounts deducted for loss are added onto the adjusted gross income to determine the disposable income. Most losses are reported on the return in parentheses to reflect that these loss amounts are to be deducted. The net losses are reported on Form 1040 as business losses, as capital losses, as other losses, as rental or partnership-type losses, and as farm losses. Add these amounts in parentheses onto the adjusted gross income. In addition, the assessor adds to adjusted gross income the amount reported as a penalty on early withdrawal of savings because the amount represents a loss under section 62 of the Internal Revenue Code.

     (A) The taxpayer only reports the net amount of losses on the front page of the Form 1040 federal income tax return. A loss may be used on other schedules or forms to reduce income before being transferred to the front page of the return to calculate adjusted gross income. The assessor adds onto the adjusted gross income the amount of losses used to reduce income on these other schedules and forms. ((If the assessor has already added capital gains reduced by losses, the assessor does not add this amount onto adjusted gross income as it has already been accounted for.)) The amount of losses that were used to reduce adjusted gross income must be added onto that adjusted gross income to determine disposable income. For example, the claimant reports on the front page of the 1040 a capital loss of (five thousand dollars). The assessor examines the Schedule D. On the Schedule D, the claimant reports two thousand dollars in long-term capital gains from the sale of Company X stock and seven thousand dollars in long-term capital losses from the sale of an interest in the Y limited partnership. The assessor has already ((reduced the claimant's adjusted gross income by)) added the five thousand dollars from the net capital loss reported on the front page of the return. The assessor would add onto adjusted gross income only the additional two thousand dollars in losses from this Schedule D that was used to offset the capital gain the claimant earned from the sale of Company X stock.

     (B) The assessor should examine losses reported on Schedules C (Profit or Loss from Business), D (Capital Gains and Losses), E (Supplemental Income and Loss), F (Profit or Loss from Farming), and K-1 (Shareholder's Share of Income, Credits, Deductions, etc.), and on Forms 4684 (Casualty and Thefts), 4797 (Sales of Business Property), 8582 (Passive Activity Loss Limitations), and 8829 (Business Use of Home) to determine the total amount of losses claimed.

     (iv) Depreciation. Amounts deducted for the depreciation, depletion, or amortization of an asset's costs are added onto the adjusted gross income to determine the disposable income. This includes section 179 expenses, as an expense in lieu of depreciation. Amounts deducted for depreciation, depletion, amortization, and 179 expenses may be found on Schedules C, C-EZ, E, F, K and K-1, and on Form 4835 (Farm Rental Income and Expenses). If the schedule or form results in a loss transferred to the front of the Form 1040 federal income tax return, the depreciation deduction to the extent it is represented in that loss amount should not be added onto the adjusted gross income (as this would result in it being added back twice);

     (v) Pension and annuity receipts. Any nontaxable pension and annuity amounts are added onto the recipient's adjusted gross income amount to determine the recipient's disposable income. The nontaxable pension and annuity amounts are the difference ((in)) between the total pension and annuity amounts reported ((from)) and the taxable amounts reported. If the total ((amount of the)) pension and annuity amounts are not reported on the return, the assessor may use a copy of the Form 1099-R (Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.) issued to the claimant, the claimant's spouse or domestic partner, or the cotenant to determine the total ((amount of)) pension and annuity amounts received. Pension and annuity amounts do not include distributions made from a traditional individual retirement account.

     (vi) Federal Social Security Act and railroad retirement benefits. Any nontaxable Social Security benefit or equivalent railroad retirement amount reported on the Form 1040 federal income tax return is added onto the adjusted gross income of the person receiving these benefits to determine that person's disposable income. The nontaxable Social Security benefit or equivalent railroad retirement amount is the difference ((in)) between the total Social Security benefits or equivalent railroad retirement amounts reported ((from)) and the taxable amounts reported. If the total amount of the Social Security benefit or equivalent railroad retirement amount is not reported on the return, the assessor may use a copy of the Form SSA-1099 or Form RRB-1099 issued to the claimant, the claimant's spouse or domestic partner, or the cotenant to determine the Social Security benefits or the railroad retirement benefits received.

     (vii) Excluded military pay and benefits. Military pay and benefits excluded from federal adjusted gross income, other than pay or benefits for attendant care or medical aid, are added onto the adjusted gross income of the military personnel receiving the military pay or benefits to determine that person's disposable income. Excluded military pay and benefits are not reported on the Form 1040. Excluded military pay and benefits such as pay earned in a combat zone, basic allowance for subsistence (BAS), basic allowance for housing (BAH), and certain in-kind allowances, are reported in box 12 of the Form W-2. The claimant should disclose when excluded military pay and benefits were received and provide copies of the Form W-2 or other documents that verify the amounts received.

     (viii) Veterans benefits. Federal law excludes from gross income any veterans benefits payments, paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). To determine disposable income, allowances or payments made from the VA must be added on the veteran's adjusted gross income, except for:

     (A) Attendant-care payments and medical-aid payments, defined as any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the Department of Veterans Affairs (VA);

     (B) Disability compensation, defined as payments made by the Department of Veterans Affairs (VA) to a veteran because of service-connected disability. (RCW 84.36.383 (5)(f)(iii).)

     (C) Dependency and indemnity compensation, defined as payments made by the Department of Veterans Affairs (VA) to a surviving spouse, child, or parent. (RCW 84.36.383 (5)(f)(iv).)

     VA benefits are not reported on the Form 1040. The claimant should disclose when excluded veterans benefits were received and provide copies of documents that verify the amount received. ((Attendant-care and medical-aid payments are any payments for medical care, home health care, health insurance coverage, hospital benefits, or nursing home benefits provided by the VA;))

     (ix) Dividend receipts. Exempt-interest dividends received from a regulated investment company (mutual fund) are reported on the tax-exempt interest line of the Form 1040 and added onto the recipient's adjusted gross income to determine that recipient's disposable income.

     (A) The assessor may ask a claimant whether the claimant, the claimant's spouse or domestic partner, or any cotenants have received exempt-interest dividends.

     (B) Generally, the mutual fund owner will receive a notice from the mutual fund telling him or her the amount of the exempt-interest dividends received. These exempt-interest dividends are not shown on Form 1099-DIV or Form 1099-INT. Although exempt-interest dividends are not taxable, the owner must report them on the Form 1040 tax return if he or she has to file; and

     (x) Interest received on state and municipal bonds. Interest received on state or local government bonds is generally not subject to federal income tax. This tax-exempt interest is reported on the Form 1040 and added onto the bond owner's adjusted gross income to determine the bond owner's disposable income.

     (3) Calculate the combined disposable income. When the assessor has calculated the disposable income for the claimant, the claimant's spouse or domestic partner, and any cotenants, the assessor combines the disposable income of these people together. The assessor reduces this combined income by the amount paid by the claimant or the claimant's spouse or domestic partner during that calendar year for their legally prescribed drugs, home health care; nursing home, ((boarding home)) assisted living facility, or adult family home expenses; and health care insurance premiums for medicare under Title XVIII of the Social Security Act to calculate the claimant's combined disposable income.

[Statutory Authority: RCW 84.36.383, 84.36.389, and 84.36.865. 08-16-078, § 458-16A-120, filed 7/31/08, effective 8/31/08; 03-09-002, § 458-16A-120, filed 4/2/03, effective 5/3/03.]

OTS-5072.1

AMENDATORY SECTION(Amending WSR 08-16-079, filed 7/31/08, effective 8/31/08)

WAC 458-16A-135   Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Application procedures.   (1) Introduction. This rule explains when and how a senior citizen, disabled person, or one hundred percent disabled veteran may apply for a property tax exemption on that person's principal residence. RCW 84.36.381 through 84.36.389.

     (2) When to apply for the exemption. A claimant may first apply for the exemption in the calendar year that he or she meets the age, disability, or disabled veteran requirements for exemption of taxes due in the following year. If the claimant does not apply when he or she meets the age, disability, or disabled veteran requirements, then he or she may apply for the exemption in any subsequent year. The exemption may be claimed on his or her principal residence for previous years by applying with separate applications for each year. However, refunds based upon an exemption made in previous years may be refunded only for up to three years after the taxes were ((paid)) due as provided in chapter 84.69 RCW.

     (3) Application required. A claimant must submit to the county assessor's office an application for exemption with supporting documents. If the claimant applies for more than one year when the application is first made, an application must be made for each year the claimant seeks the exemption.

     (4) Where to obtain the application form. A claimant may obtain the application form and the list of required supporting documents from the county assessor's office where his or her principal residence is located.

     (5) How to apply for the exemption. Applications and supporting documents are filed in person or by mail at the county assessor's office where the principal residence is located.

     (a) The application form. The county assessor designs the application form or adapts a master form obtained from the department. The county must obtain approval of the final form from the department before it may be distributed and used. The claimant must use an application form from the county where the principal residence is located and provide true and accurate information in the application.

     (b) Signatures. The signature must certify that under penalty of perjury under the laws of Washington the application is true and correct. The application must be signed, dated, and state the place (city, county, or address) where it was signed. The application must be signed by:

     (i) The claimant;

     (ii) The claimant's designated agent;

     (iii) The legal guardian for the claimant (if applicable); or

     (iv) If the property is subject to a deed of trust, mortgage, or purchase contract requiring an accumulation of reserves to pay property taxes, the lien holder; and

     (v) If the claimant resides in a cooperative housing unit or portion of a cooperative structure representing the claimant's ownership share in that cooperative, the authorized agent of the cooperative must also sign the application.

     (c) Perjury statement. The perjury statement certifying under the penalty of perjury that the application is true and correct must be placed upon the application immediately above a line for the signature. Any person signing a false claim with the intent to defraud or evade the payment of any tax is guilty of perjury under chapter 9A.72 RCW. If a person receives an exemption based on erroneous information, the assessor assesses any unpaid taxes with interest for up to ((three)) five years. If a person receives an exemption based on erroneous information, and the person either provided that information with the intent to defraud or intentionally failed to correct that information, the assessor assesses any unpaid taxes with interest, for up to ((three)) five years, with the one hundred percent penalty provided in RCW 84.40.130. RCW 84.36.385(5).

     (d) Cooperative agreement to reduce rent. A cooperative must also agree, in a statement attached to the application, to reduce amounts owed by the claimant to the cooperative by the amount of the tax exemption. The agreement must also state that when the exemption exceeds the amount owed to the cooperative, the cooperative must pay to the claimant any amount of the tax exemption remaining after this offsetting reduction. RCW 84.36.387(5).

     (e) Supporting documents. Unless the assessor determines that all or some of the supporting documents are not necessary, a claimant must present the documents listed below with his or her application. Except for affidavits, the assessor's office should not accept original documents from the claimant. If the assessor's office is presented with original documents (other than affidavits), they must make copies or note the information provided in the documents on a separate sheet and return these original documents to the claimant. The claimant submits the following documents with the application:

     (i) If the county records do not reflect the claimant as the property owner, copies of any legal instruments demonstrating the claimant's interest held in the property;

     (ii) Documents demonstrating that the property is the claimant's principal residence (i.e., copy of a driver's license and voter's registration card);

     (iii) Copies of legal identification showing the claimant's age (i.e., copy of a driver's license or birth certificate);

     (iv) If the claim is based upon a physical disability, either:

     (A) An affidavit from a licensed physician or certified physician's assistant (medical or osteopath doctor), a licensed or certified psychologist for disabling mental impairments, or a licensed podiatrist for disabling impairments of the foot, that states the claimant is unable to enter into regular gainful employment because of his or her disability and the expected term of the disability; or

     (B) Copies of a written acknowledgment or decision by the Social Security Administration or Veterans Administration that the claimant is permanently disabled;

     (v) If the claim is based upon the claimant's veteran status, copies of legal documents showing that the claimant is a veteran of the armed forces of the United States ((with one hundred percent)) entitled to and receiving compensation from the United States Department of Veterans Affairs at a total disability rating for a service-connected disability ((as provided in 42 U.S.C. Sec. 423 (d)(1)(A) as amended prior to January 1, 2005));

     (vi) Copies of documents showing income earned or reported by the claimant, the claimant's spouse or domestic partner and any cotenants, even when the income is estimated (income information should be provided to the degree possible and then confirmed with supporting documents in the follow-up period), such proof shall include to the extent it is relevant:

     (A) If the claimant, the claimant's spouse or domestic partner, or any cotenants receive Social Security payments, a federal statement showing Social Security paid (generally, Form SSA-1099);

     (B) If the claimant, the claimant's spouse or domestic partner, or any cotenants receive railroad retirement benefits, a federal statement showing railroad retirement benefits paid (generally, Forms RRC-1099 and RRC 1099-R);

     (C) If the claimant, the claimant's spouse or domestic partner, or any cotenants file federal income tax returns, those returns with supporting forms, schedules, and, if specifically requested, worksheets for the deductions taken from gross income (generally, Form 1040 with its supporting forms and schedules);

     (D) If the claimant or the claimant's spouse or domestic partner has been in a nursing home, ((boarding home)) assisted living facility, or adult family home or has been receiving in-home care, copies of invoices (or an equivalent billing statement or payment statement) for nonreimbursed nursing home and in-home care;

     (E) If the claimant indicates that the nonreimbursed prescription drug expenses for the claimant and the claimant's spouse or domestic partner for the period under review exceeds five hundred dollars, copies of checks or other payment statements (i.e., pharmacy printout of payments for purchases) showing amounts paid for nonreimbursed prescription drug expenses;

     (F) Copies of documents showing premiums paid if the claimant or the claimant's spouse or domestic partner pays health care insurance premiums for medicare under Title XVIII of the Social Security Act (i.e., 1099, or medicare plan policy declaration);

     (G) If no federal returns were filed or received, the claimant must still provide copies of documents to demonstrate his or her income and the income of his or her spouse or domestic partner and any cotenants (i.e., federal income statements such as Form W-2 (wages), Form 1099-INT (interest), Form 1099-DIV (dividends), Form 1099-R (pension amounts), Form 1099-G (unemployment), or Form 1099-Misc. (contract income)). Even claimants who claim they have no federal income (or an inordinately small amount of federal income) must have income to maintain themselves and their residences. In these situations, the claimant must produce copies of documents demonstrating the source of the funds they are living on (i.e., checking account registers and bank statements) and the bills for maintaining the claimant and the residence (i.e., public assistance check stubs, utility invoices, cable TV invoices, check registers, bank statements, etc.); and

     (vii) Any other copies of documents the assessor requires in his or her discretion for the claimant to produce in order to demonstrate the claimant qualifies for the exemption.

     (f) Public disclosure of the application. The application form may not be disclosed. A copy of the application may be disclosed only if all income information on the form is obliterated so that it cannot be read. Except as required by law, no public disclosure may be made of the checklist of supporting documents or any supporting documents retained that concern the income of the claimant, the claimant's spouse or domestic partner, or any cotenant.

[Statutory Authority: RCW 84.36.383, 84.36.389, and 84.36.865. 08-16-079, § 458-16A-135, filed 7/31/08, effective 8/31/08; 03-09-002, § 458-16A-135, filed 4/2/03, effective 5/3/03.]

OTS-5073.1

AMENDATORY SECTION(Amending WSR 08-16-079, filed 7/31/08, effective 8/31/08)

WAC 458-16A-140   Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Exemption described -- Exemption granted -- Exemption denied -- Freezing property values.   (1) Introduction. This rule explains how county assessors process a claimant's application form for the senior citizen, disabled person, or one hundred percent disabled veteran property tax exemption. The rule describes the exemption and what happens when the exemption is granted or denied by the assessor.

     (2) The exemption described. This property tax exemption reduces or eliminates property taxes on a senior citizen's, disabled person's, or one hundred percent disabled veteran's principal residence. Except for benefit charges made by a fire protection district, this exemption does not reduce or exempt an owner's payments for special assessments against the property. Local governments impose special assessments on real property because the real property is specially benefitted by improvements made in that area (e.g., local improvement district assessments for roads or curbs, surface water management fees, diking/drainage fees, weed control fees, etc.). All the property owners in that area share in paying for these improvements. The only exceptions related to this program is for benefit charges made by a fire protection district, a regional fire protection service authority, or by a city or town for enhancement of fire protection services. Fire protection ((district)) benefit charges are reduced twenty-five, fifty, or seventy-five percent depending upon the combined disposable income of the claimant. RCW 52.18.090, 52.26.270, and 35.13.256.

     (a) Excess levies. A qualifying claimant receives an exemption from excess levies on his or her principal residence.

     (b) Regular levies. Depending upon the claimant's combined disposable income, the exemption may also apply to all or a portion of the regular levies on the claimant's principal residence. Both the level of the claimant's combined disposable income and the assessed value of the home determine the amount of the regular levy exempted from property taxes. The exemption applies to all the regular and excess levies when the assessed value of the claimant's principal residence falls below the amount of exempt assessed value identified in RCW 84.36.381 (5)(b) and the claimant's combined disposable income is also below the levels set in that section.

     (c) Property taxes due. Generally the owner pays the property taxes on the principal residence and obtains directly the benefit of this exemption. If the claimant is not the property's owner, or is not otherwise obligated to pay the property taxes on the principal residence, but "owned" the principal residence for purposes of this exemption, the property owner that owes the tax must reduce any amounts owed to them by the claimant up to the amount of the tax exemption. If the amounts owed by the claimant to this property owner are less than the tax exemption, the owner must pay to the claimant in cash any amount of the tax exemption remaining after this offsetting reduction. RCW 84.36.387(6).

     (3) Processing exemption applications. County assessors process applications for the senior citizen, disabled person, or one hundred percent disabled veteran exemption. The assessors grant or deny the exemption based upon these completed applications.

     (a) Application review. The county assessor reviews a completed application and its supporting documents.

     The assessor:

     (i) Notes on a checklist for the claimant's file the supporting documents received;

     (ii) Reviews the supporting documents;

     (iii) Records relevant information from the supporting documents into the claimant's file. In particular, the assessor records into the file the claimant's age and a summary of the income information received; and

     (iv) After reviewing the supporting documents, must either destroy or return the supporting documents used to verify the claimant's age and income.

     (b) Incomplete applications. A county assessor may return an incomplete application or a duplicate application. An incomplete application may be missing:

     (i) Signatures;

     (ii) Information upon the form; or

     (iii) Supporting documents.

     Upon returning an incomplete application, the assessor should provide the claimant with a dated denial form listing the signatures, information, or documents needed to complete the application. The denial of an incomplete application may be appealed in the same manner as a denial of the exemption.

     (c) The assessor may accept any late filings for the exemption even after the taxes have been levied, paid, or become delinquent. An application filed for the exemption in previous years constitutes a claim for a refund under WAC 458-18-210.

     (4) Exemption timing if approved. Property taxes are reduced or eliminated on the claimant's principal residence for the year following the year the claimant became eligible for the program. When a late application is filed, the exemption may only result in:

     (a) A ((property tax)) refund for any paid property taxes ((paid)) that were due within the previous three years ((of the payment date)); and

     (b) Relief from unpaid property taxes for any previous years.

     (5) Exemption procedure when claim granted. When the exemption is granted, the county assessor:

     (a) Freezes the assessed value of the principal residence upon the assessment roll;

     (b) Determines the level of exemption the claimant qualifies for;

     (c) Notifies the claimant that the exemption has been granted;

     (d) Notifies the claimant of his or her duty to file timely renewal applications;

     (e) Notifies the claimant of his or her duty to file change of status forms when necessary;

     (f) Notifies the claimant of the need to reapply for the exemption if the claimant moves to a replacement residence;

     (g) Notifies the claimant that has supplied estimated income information whether or not follow-up income information is needed;

     (h) Places the claimant on a notification list for renewal of the exemption;

     (i) Places the claimant on a notification list if supporting documents are needed to confirm estimated income information prior to May 31st of the following year;

     (j) Exempts the residence from all or part of its property taxes; and

     (k) Provides the department with a recomputation of the assessed values for the immediately preceding year as a part of the annual recomputation process.

     (6) Exemption procedure when claim denied. The assessor denies the exemption when the claimant does not qualify. The assessor provides a dated denial form listing his or her reasons for this denial. A claimant may appeal the exemption's denial to the county board of equalization as provided for in WAC 458-14-056.

     (7) Freezing the property value. The assessor freezes the assessed value of the principal residence either on the latter of January 1, 1995, or January 1st of the year when a claimant first qualifies for the exemption. The assessor then tracks both the market value of the principal residence and its frozen value. The assessor provides both the principal residence's market value and its frozen value in the valuation notices sent to the owner.

     (a) Frozen values in counties using a cyclical revaluation plan. In counties using a cyclical revaluation plan, the assessor:

     (i) Revalues the principal residence, for property revalued in that assessment year, before the assessed value is frozen; or

     (ii) Freezes the principal residence's value at the most recent assessed value for property that is not revalued in that assessment year.

     The assessor continues to revalue the principal residence during the regular revaluation cycles to track the market value for the property.

     (b) Adding on improvement costs. The assessor adds onto the frozen assessed value the cost of any improvements made to the principal residence.

     (c) One-year gaps in qualification. If a claimant receiving the exemption fails to qualify for only one year because of high income, the previous frozen property value must be reinstated on January 1st of the following year when the claimant again qualifies for the program.

     (d) Moving to a new residence. If an eligible claimant moves, the county assessor freezes the assessed value of the new principal residence on January 1st of the assessment year in which the claimant transfers the exemption to the replacement residence.

[Statutory Authority: RCW 84.36.383, 84.36.389, and 84.36.865. 08-16-079, § 458-16A-140, filed 7/31/08, effective 8/31/08; 03-09-002, § 458-16A-140, filed 4/2/03, effective 5/3/03.]

OTS-5074.1

AMENDATORY SECTION(Amending WSR 08-16-076, filed 7/31/08, effective 8/31/08)

WAC 458-16A-150   Senior citizen, disabled person, and one hundred percent disabled veteran exemption -- Requirements for keeping the exemption.   (1) Introduction. This rule explains how and when a senior citizen, disabled person, or one hundred percent disabled veteran must file additional reports with the county assessor to keep the senior citizen, disabled person, or one hundred percent disabled veteran property tax exemption. The rule also explains what happens when the claimant or the property no longer qualifies for the full exemption.

     (2) Continuing the exemption. The claimant must keep the assessor up to date on the claimant's continued qualification for the senior citizen, disabled person, or one hundred percent disabled veteran property tax exemption. The claimant keeps the assessor up to date in three ways. First, the claimant submits a change in status form when any change affects his or her exemption. In some circumstances, the change in status form may be submitted by an executor, a surviving spouse, a surviving domestic partner, or a purchaser to notify the county of a change in status affecting the exemption. Second, the claimant submits a renewal application for the exemption either upon the assessor's request following an amendment of the income requirement, or every ((four)) six years. Third, the claimant applies to transfer the exemption when moving to a new principal residence.

     (3) Change in status. When a claimant's circumstances change in a way that affects his or her qualification for the senior citizen, disabled person, or one hundred percent disabled veteran property tax exemption, the claimant must submit a completed change in status form to notify the county of this change.

     (a) When to submit form. The claimant must submit a change in status form to the county assessor for any change affecting that person's qualification for the exemption within thirty days of such change in status. If the claimant is unable or fails to submit a change in status form, any subsequent property owner, including a claimant's estate or surviving spouse or surviving domestic partner, should submit a change in status form to avoid interest and in some cases the penalty for willfully claiming the exemption based upon erroneous information.

     (b) Changes in status described. Changes in status include:

     (i) Changes that affect the property (i.e., changes in land use regulations, new construction, boundary line changes, rentals, ownership changes, etc.);

     (ii) Changes to the property owner's annual income that increase or decrease property taxes due under the program; or

     (iii) Changes that affect the property owner's eligibility for the exemption (i.e., death, moving to a replacement residence, moving to another residence the claimant does not own, moving into a hospice, a nursing home, or any other long-term care facility, marriage, registration in a state registered domestic partnership, improvement of a disability for a disabled person's claim, or a disabled person entering into gainful employment).

     (c) Change in status form. The county assessor designs the change in status form or adapts a master form obtained from the department. The county must obtain approval of the final form from the department before it may be distributed. The claimant, the claimant's agent, or a subsequent owner of the residence must use a change in status form from the county where the principal residence is located. The person filing the form must provide true and accurate information on the change in status form.

     (d) Obtaining the form. The claimant or subsequent property owner may obtain the form from the county assessor where his or her principal residence is located.

     (e) Failure to submit the form after a change in status occurs. If the claimant fails to submit the change in status form, the application information relied upon becomes erroneous for the period following the change in status. Upon discovery of the erroneous information, the assessor determines the status of the exemption, and notifies the county treasurer to collect any unpaid property taxes and interest from the claimant, the claimant's estate, or if the property has been transferred, from the subsequent property owner. The treasurer may collect any unpaid property taxes, interest, and penalties for a period not to exceed ((three)) five years as provided for under RCW 84.40.380. In addition, if a person willfully fails to submit the form or provides erroneous information, that person is liable for an additional penalty equal to one hundred percent of the unpaid taxes. RCW 84.36.385. If the change in status results in a refund of property taxes, the treasurer may refund property taxes and interest for up to the most recent three years after the taxes were ((paid)) due as provided in chapter 84.69 RCW.

     (f) Loss of the exemption. If the change in status disqualifies the applicant for the exemption, property taxes must be recalculated based upon the current full assessed value of the property and paid from the date the change in status occurred. RCW 84.40.360. For example, the exemption is lost when the claimant dies (unless the spouse or domestic partner is also qualified). The property taxes are recalculated to the full assessed amount of the principal residence on a pro rata basis beginning the day following the date of the claimant's death for the remainder of the year.

     (g) Loss of exemption on part of the property. If the change in status removes a portion of the property from the exemption, property taxes in their full amount on that portion of the property that is no longer exempt must be recalculated based upon the current full assessed value of that portion of the property and paid from the date the change in status occurred. For example, a property owner subdivides his or her one-acre lot into two parcels. The parcel that does not have the principal residence built upon it no longer qualifies for the exemption. The property taxes are recalculated to the full assessed amount of that parcel on a pro rata basis for the remainder of the year beginning the day following the date the subdivision was given final approval.

     (h) Exemption reduced. If the change in status reduces the exemption amount, the increased property taxes are due in the year following the change in income. For example, a claimant's income rises so that only excess levies on ((her)) the principal residence are exempt. The claimant's income is based upon the assessment year. The following year when the taxes are collected, the property taxes due are calculated with only an exemption for excess levies.

     (4) Renewal application. The county assessor must notify claimants when to file a renewal application with updated supporting documentation.

     (a) Notice to renew. Written notice must be sent by the assessor ((in the year the renewal application is requested. Notice must be sent no later than December 10th, three weeks before the December 31st filing requirement)) and must be mailed at least three weeks in advance of the expected taxpayer response date.

     (b) When to renew. The assessor must request a renewal application at least once every ((four)) six years. The assessor may request a renewal application for any year the income requirements are amended in the statute after the exemption is granted. ((Once notified, the claimant must file the renewal application by December 31st of that year.))

     (c) Processing renewal applications. Renewal applications are processed in the same manner as the initial application.

     (d) The renewal application form. The county assessor may design the renewal application form or adapt either its own application form or the application master form obtained from the department. The county must obtain approval of the final renewal application form from the department before it may be distributed. The property owner must use a renewal form from the county where the principal residence is located. The claimant must provide true and accurate information on the renewal application form.

     (e) Obtaining the form. The assessor provides this form to senior citizens, disabled persons, or one hundred percent disabled veterans claiming the exemption when requesting renewal.

     (f) Failure to submit the renewal application. If the property owner fails to submit the renewal application form, the exemption is discontinued until the claimant reapplies for the program. The assessor may postpone collection activities and continue to work with an eligible claimant to complete an application for a missed period.

     (5) Transfer of the exemption. When a claimant moves to a replacement residence, the claimant must file a change in status form with the county where his or her former principal residence was located. No claimant may receive an exemption on more than the equivalent of one residence in any year.

     (a) Exemption on the former residence. The exemption on the former residence applies to the closing date on the sale of the former residence, provided the claimant lived in the residence for most of the portion of that year prior to the date of closing. Property taxes in their full amount must be recalculated based upon the current full assessed value of the property and paid from the day following the date the sale closed. The taxes are paid for the remaining portion of the year. RCW 84.40.360.

     (b) Exemption upon the replacement residence. Upon moving, the claimant must reapply for the exemption in the county where the replacement residence is located if the claimant wants to continue in the exemption program. The same application, supporting documents, and application process is used for the exemption on the replacement residence as when a claimant first applies. See WAC 458-16A-135. The exemption on the replacement residence applies on a pro rata basis in the year he or she moves, but only from the latter of the date the claimant moves into the new principal residence or the day following the date the sale closes on his or her previous residence.

[Statutory Authority: RCW 84.36.383, 84.36.389, and 84.36.865. 08-16-076, § 458-16A-150, filed 7/31/08, effective 8/31/08; 03-16-029, § 458-16A-150, filed 7/29/03, effective 8/29/03; 03-09-002, § 458-16A-150, filed 4/2/03, effective 5/3/03.]