A Legislative Guide to Washington State

Property Taxes

2012

TABLE OF CONTENTS

Subject Page

Introduction ...................................................................................... 1

How Much Money Does the Property Tax Generate and

How is it Spent? ................................................................................ 2

What Property is Taxable? .............................................................. 4

What are the Major Exemptions from Property Tax? ................. 4

When Were These Exemptions Granted? ...................................... 5

What Types of Property Tax Relief are Available to Retired

Persons? ............................................................................................. 5

Exemption Program ............................................................... 6

Deferral Program ................................................................... 6

What Types of Property Tax Relief are Available to Low-

Income Persons? ............................................................................... 6

What are “Current Use” Valuations and “Open Space”? ............ 7

What Types of Restrictions and Limitations are there on

Property Tax Collections? ............................................................... 7

Uniformity in Taxation .......................................................... 7

One Percent Limit ................................................................. 8

The Limit (Inflation) Factor ................................................ 12

How is Assessed Value Determined? ............................................ 13

How is the Amount of Tax Levied by a Taxing District

Determined? .................................................................................... 14

How are Individual Property Taxes Determined? ...................... 14

Does Higher Assessed Value Necessarily Mean Higher

Property Taxes? .............................................................................. 15

How is Property Assessed and the Tax Collected? ...................... 16

What Does Equalization of Assessments Mean? ......................... 16

Are Public Schools Funded From Property Tax? ....................... 17

How do Washington State Property Taxes Compare? ............... 18

What are Some of the Recent Legislative Changes to the

Property Tax? ................................................................................. 20

Glossary ........................................................................................... 25

Introduction

A Legislative Guide to Washington State Property Taxes is offered as

a resource to members of the Senate, their staff, and other interested

persons to provide an overview of the property tax system in this state. It

describes the evolution and characteristics of our property tax structure

and provides comparative and historical analyses.

The Legislative Guide to Washington State Property Taxes was

prepared by the Senate Ways and Means Committee staff (within Senate

Committee Services) and the Legislative Evaluation and Accountability

Program (LEAP) to provide answers to many of the typical questions

regarding property taxes. This Legislative Guide to Washington State

Property Taxes is a summary of our property tax system intended to

assist its readers in understanding basic terminology and gaining a

historical and analytical perspective with which to evaluate potential

reforms.

Questions concerning this report or requests for other documentation

should be directed to:

Senate Ways and Means Committee

311 John A. Cherberg Building

Olympia, Washington 98504-0482

Telephone: 360-786-7715

Fax: 360-786-7615

http://www.leg.wa.gov/senate/scs/wm/default.htm

How Much Money Does the Property Tax Generate

and How is it Spent?

In 2011, Washington State taxpayers paid a total of $8.9 billion in

property taxes to local governments, state government and school

districts. $5.03 billion, 54.2 percent, of all property tax revenues

collected both by the state and local governments are collected in support

of K-12 education, with the state’s share being distributed entirely to

public schools. Of this $5.03 billion, $1.86 billion was collected by the

state, $1.92 billion was collected via maintenance and operations levies,

and $1.24 billion was collected via levies for capital expenses and bonds.

The proportions displayed in the following chart represent the

distribution of taxes collected from the “average” individual taxpayer in

the state.

Source: Property Tax Statistics 2011, Department of Revenue

Property taxes are the largest source of tax revenue for local

governments, generating about $4.13 billion in 2011 (excluding local

school levies). The state property tax, plus in-lieu taxes, are the third

largest source of revenue to the state General Fund, generating

approximately $1.94 billion in the 2011 fiscal year, or about 12 percent

of state tax revenues.

The following chart shows the breakdown of state tax revenues.

Source: Tax Statistics 2011, Department of Revenue

Local government consists of hundreds of separate taxing districts

across the state. In addition to the state (a single taxing district for

purposes of collecting the state levy), there are 1806 other local taxing

districts, including 39 counties, 281 cities and towns, 379 fire districts,

187 emergency medical service (EMS) districts, 77 ports, 33 library

districts.

What Property is Taxable?

Article 7, section 1 of the State Constitution defines property as

everything that can be owned, whether tangible or intangible. The

property tax is applied annually to the assessed value of all property

unless it is specifically exempt by law.

The Constitution requires that taxes be uniform within a class of

property. For property tax purposes, there are two broad classes of

property, real and personal. Real property consists of land and

buildings, structures, or improvements that are affixed to the land.

In general, everything else is referred to as personal property.

Because the Legislature has exempted motor vehicles, household goods,

and personal effects from the property tax, only personal property used in

business is subject to the property tax.

What are the Major Exemptions from Property Tax?

The text of the original State Constitution declares, “Such property

as the legislature may by general laws provide shall be exempt.” It is

this provision of the Constitution that allows the Legislature to grant

property tax exemptions. Note that it allows the Legislature to exempt

types of property; it does not allow the Legislature to exempt property

based on its owner.

Any property tax exemption has the effect of slightly increasing the

tax rate that owners of all other taxable property must pay by reducing

the overall base of taxable property. This circumstance of causing one

segment of taxpayers’ taxes to increase as a result of exempting the value

of property of another segment of taxpayers is commonly referred to as a

“tax shift.”

There are numerous exemptions from property tax, established either

by statute or constitutionally. The largest exemption is for intangible

property. This includes money, mortgages, notes, accounts, stocks and

shares of corporations, trademarks, trade names, patents, copyrights,

trade secrets, franchise agreements, licenses, etc.

Other exemptions include business inventories, household goods,

most personal property, retired persons, churches, nonprofit hospitals,

private schools and colleges, and agricultural products.

When Were These Exemptions Granted?

The exemption for intangible property was originally granted by the

Legislature in 1925 and has been amended several times, most recently

in 1997. The exemption for business inventories was passed by the

Legislature and phased in over ten years, beginning in 1974. Motor

vehicles were exempted from property tax in 1937, when the current

motor vehicle excise tax was enacted. As early as 1871, there were

exemptions for household and personal effects, but the expanded

exemption that individuals have today was granted in 1935. Churches

and hospitals have exemptions that were granted prior to statehood, in

1854 and 1886 respectively. Computer software was exempted in 1991.

Exemptions for agricultural products were subject to legislative changes

in 1973 through 1984 when the current exemption for all such products

was enacted. Private schools and colleges were exempted by the

Legislature in 1925.

It is important to note that many of these exemptions were granted in

statute by the Legislature. The State Constitution authorized other

exemptions, such as exemptions for governmental entities, a $15,000

exemption from tax on personal property for sole proprietors, and

property tax exemptions for retired persons.

What Types of Property Tax Relief are Available to

Retired Persons?

Property tax exemptions for retired persons (defined as seniors,

disabled persons, and 100% disabled veterans) originated with a

constitutional amendment in 1966 and have been modified by the

Legislature many times since. A constitutional amendment was required

because exemptions for retired persons are based on the owner of the

property, not on the type of property.

Property tax exemptions are available to retired persons who meet

income requirements and are retired. Exemptions include total

exemptions for excess levies (voter-approved property taxes) or partial

exemptions from regular levies.

Exemption Program

Homeowners 61 years of age and older may apply for an exemption

from paying excess levies if their household income is $35,000 or less.

The property tax relief is available for taxes payable in the year after the

application is made and every year thereafter. They are also exempt

from regular levies on a portion of their home value if their income is

$30,000 or less. A further benefit for these homeowners with incomes of

$35,000 or less is that the taxable value of the property is frozen when

the homeowners becomes eligible for the program.

Deferral Program

A related program allows homeowners at least 60 years of age with

household incomes of $40,000 or less to defer payment of all property

taxes. These taxes may be deferred until the sale of the property or until

the property ceases to be the permanent residence of the homeowner or

surviving spouse.

Even though the eligibility requirements are broader for the deferral

program than for the exemptions, only 950 people took advantage of the

available tax deferral for 2007, compared to113,948 receiving

exemptions.

What Types of Property Tax Relief are Available to

Low-Income Persons?

Deferral Program

During the November 2007 special session, the Legislature

created a new property tax deferral program for households with a

combined disposable income of $57,000 or less. This program is similar

to the existing property tax deferral program for retired persons, but the

new program has no age or retirement due to disability requirement.

Under this new deferral program, eligible homeowners of any

age may defer one-half of the property taxes and special assessments

imposed on the homeowner’s primary residence, if the first half taxes

and assessments are paid by the April 30 due date. To qualify, the

homeowner must have owned the residence for at least five years. The

total amount of taxes deferred under this program may not exceed 40

percent of the homeowner’s equity value in the property.

What are “Current Use” Valuations and “Open

Space?”

A Constitutional amendment in 1968 established a current use

assessment for open space, timber, and agricultural lands. Although not

a tax exemption in the strict sense of the term, current use valuations

reduce the tax burden on certain properties. As a result, the reduction

“shifts” the tax burden to other taxpayers just as an exemption does.

The taxable value is based on how the property is currently used,

rather than the market value (or the “highest and best use”) of the

property. For example, the 2010 market value for all current use

properties in the state is $18.07 billion; in contrast, the 2010 current use

value for these properties is $4.76 billion. In 2010, there were

11,469,581 acres in current use classifications.

The open space program allows agricultural lands, timberlands, and

other “open space” lands to be assessed according to their value as they

are currently being used, rather than the market value. This “current use”

value is typically much lower than market value and is, therefore, a tax

benefit for the property owner.

“Open space” lands are lands which conserve natural resources,

promote conservation, enhance public value and recreation, preserve

visual quality, or have other legislatively identified attributes which are

of public benefit. Agricultural and timber lands are subject to various

requirements regarding size, use, and income.

When property is removed from the current use valuation program,

either by the owner or the assessor due to a change in use, back taxes

must be paid.

What Types of Restrictions and Limitations are there

on Property Taxes?

The myriad of constitutional and statutory provisions regarding

property taxes have served to create an interconnected system of property

tax administration and collection. In order to understand the overall

system and the rationale for its evolution, it is important to review the

restrictions and limitations governing property taxes.

Uniformity in Taxation

Perhaps the most important principle of property taxation in our state

is the uniformity of taxation. In the 1853 Organic Act establishing the

government of the Washington Territory, the U.S. Congress imposed a

strong requirement for uniformity in taxation in order to prevent the

territory’s residents from imposing a disproportionate share of taxes on

nonresidents. Uniformity of taxation continued as a fundamental

principle in the State Constitution adopted in 1889.

The State Constitution includes a uniformity clause, which provides

that “taxes shall be uniform upon the same class of property within the

territorial limits of the authority levying the tax…All real estate shall

constitute one class.” This means that taxes must be the same on real

property of the same market value. Uniformity requires both an equal

rate of tax and equality in valuing the property taxed. Many other states

have differential tax rates or different value standards that depend upon

the separate classifications of property. Such a system would not be

constitutional in Washington.

One Percent Limit (Ten Dollar Limit)

Beyond the principle of uniformity, the Washington State property

tax system as we know it today really took shape in the early 1970s. In

1972, Washington State voters amended the Constitution to limit the

annual amount of property taxes that may be imposed on an individual

parcel of property to one percent of its true and fair value. By law, tax

rates are stated in terms of dollars per $1,000 of value. Therefore, the 1

percent limit is the same as $10 per $1,000. Under the constitutional

amendment, the one percent limit ($10 limit) may be exceeded only with

the approval of 60 percent of the district’s voters.

Taxes imposed under this limit are termed “regular” levies, while

those outside the limit are “excess” or “special” levies.

For statewide taxes due in 2011, 62.9 percent were regular levies and

37.1 percent were excess voter-approved levies. The majority of excess

levies are school district levies. The following chart breaks down the

statewide average regular and excess levies by type of taxing district.

Source: Property Tax Statistics 2011, Department of Revenue

The one percent maximum rate for regular property taxes is limited

further by a complex series of statutes. The $10 limit is broken down as

follows:

$3.60

$5.90

$0.50

State

Other

Available for six additional purposes:

 Preservation of open space

 Emergency medical services

 Affordable housing

 Metropolitan parks

 Criminal justice

 Ferry services

Counties, cities, and road districts are known as “senior

districts” and get first priority in levying the $5.90.

 Counties receive $1.80.

 Cities receive $3.60 or less if library or fire

protection services are provided by separate

districts.

 In unincorporated areas, there is no city levy but a

county road levy of $2.25 is authorized.

 The remainder is allocated to “junior districts”

which include fire districts, water districts, park

and recreation districts, cemetery districts,

hospital districts, stadium districts, flood control

districts

air

ort districts

and numerous others.

Local

Districts

The Limit (Inflation) Factor

Local government taxing districts generally determine their property

tax levy based on the revenue required to fund their budget for the

following year. However, in 1971, the Legislature imposed a statutory

limit on annual increases in local governments’ revenues from property

taxes. Under this limit, revenues from any district’s regular property tax

levy may not exceed 106 percent of the highest amount of revenue

received from any levy in the preceding three years. Added to this is an

amount to account for new construction and improvements. The 1979

Legislature extended this limit to the state property tax as well.

In 1997, voters passed Referendum 47, which imposed additional

requirements on the 106 percent limit. Under this provision, taxing

districts with a population over 10,000 were only allowed to increase the

regular levy by the rate of inflation or six percent, whichever was

smaller. For a district to increase the levy by the full six percent, a super

majority vote of the governing body in each district was required. In

addition, Referendum 47 limited the growth of assessed values, by

averaging large valuation increases over time. This averaging provision

was subsequently thrown out by the Supreme Court in 1998 for being

unconstitutional because of the requirement for "uniform" valuation of

properties.

In 2000, voters passed Initiative 722, which limited future increases

of taxable value to the lesser of inflation, or 2 percent per year. It also

limited taxing district increases to 2 percent and rolled back certain

property tax increases levied in the year 2000. However, the Supreme

Court in 2001 ruled this initiative unconstitutional because it violated the

constitution’s requirement that initiatives only involve a single subject.

In 2001, voters passed Initiative 747 (effective in 2002), which

restricted taxing districts to a property tax increase of the lesser of

inflation, or one percent. This limit is on the taxes collected and not on

the growing value of the property. Thus, under Initiative 747, a taxing

district could collect only one percent more than the previous year’s

cumulative total of property taxes assessed within its jurisdiction.

Initiative 747 was drafted as a change to the 2 percent limit adopted in

Initiative 722. In November 2007, the Supreme Court held that since

Initiative 747 amended the two percent limit in Initiative 722 (which had

previously been invalidated by the court), Initiative 747 did not set forth

in full the law it amended as the constitution requires. However, that

same month, the Legislature met in special session and passed HB 2416,

reinstating the 1 percent levy limit established by Initiative 747.

How is Assessed Value Determined?

There are three criteria used to value real property: comparable

sales, cost, and income potential.

 Comparable sales: value is determined or estimated based on

multiple sales of similar properties. Most residential property is

valued using this method.

 Cost: value is determined based on the cost of replacing an

existing structure with a similar one that serves the same

purpose. This method is used to value new construction.

 Income: value is determined based on the income producing

potential of the property. This method is often used to value

business property.

For many years, assessment practices varied widely across the state,

resulting in both constitutional and statutory changes intended to

improve adherence to requirements for uniformity. In the early 1950s,

with the imposition of the real estate excise tax, the state received more

accurate data on actual sales prices of real property. This data revealed

significant inequities between the assessed value and the actual market

value among taxpayers living in different areas of the state. In 1955, the

Legislature adopted a property revaluation cycle, requiring that

revaluation occur a minimum of every four years.

Frequent revaluation of property during a time when property values

are rapidly increasing improves uniformity, because property

assessments more closely reflect the current value. Otherwise, recently

revalued property is closer to current market values while property that

has not been revalued lags far behind the market value. In addition, less

frequent revaluation cycles can create rapid increases in property tax

assessments. For example, if a property in a rapidly increasing market is

revalued every four years, the assessed value will more dramatically

jump after revaluation. Of the 39 counties today, 19 revalue on a four-

year cycle and 18 revalue annually, with only two counties on two or

three year cycles. Since several counties with large property bases

revalue annually, the large majority of property in the state is revalued

annually.

How is the Amount of Tax Levied by a Taxing

District Determined?

A taxing district levies a property tax in the amount needed to fund

its budget for the following year. By November 30th of each year, the

amount of taxes to be levied by taxing districts are certified to the

County Assessor who computes the tax rate necessary to raise that

amount of revenue. The County Assessor calculates the tax rate

necessary by dividing the total levy amount by the amount of taxable

property in the district. This number is expressed in terms of a dollar

rate per $1,000 of valuation. For example, a rate of $0.00025 is

expressed as 25¢ per $1,000 of assessed value. For the state levy (which

is dedicated to the support of the common schools), the state Department

of Revenue determines the amount of tax to be levied, apportions the tax

to the various counties, and certifies the tax to the county assessors.

There are three main components to the property tax; the levy,

assessed value, and levy rate.

 The levy is the total amount collected from the taxpayers by a

taxing district. Currently, the taxing districts are only able to

increase their levies by 1% per year.

 The assessed value and the levy rate are the tools that are used to

distribute the property tax burden equally to all taxpayers.

 Assessed Value x Levy Rate = levy

Since levies are capped at one percent actual property taxes received

by a taxing district can only increase that much. The levy rates actually

decrease so that the levy itself is limited to a one percent increase.

How are Individual Property Taxes Determined?

The tax on a particular property is calculated by multiplying its

assessed value by the tax rate. Once the maximum allowable regular

property tax levy amount is determined for a district under the one

percent limit factor, the county assessor then calculates the necessary tax

rate by dividing the total levy amount by the amount of taxable property

(total assessed value) in the district. The rate is expressed in terms of

dollars per $1,000 of assessed value. The rate is multiplied by each

$1,000 in value for each parcel to determine the tax. An individual tax

bill is the total of all such calculations for all of the individual districts

levying tax on the particular property.

For example, for a parcel of property assessed at $100,000, the tax

would be determined as follows, assuming a tax rate of $11.87:

Tax Rate (per $1,000)

Assessed Value

1,000

Tax Due

$11.87

$100,000

1,000

$1,187

The Constitution stipulates that property tax is to be levied against

the “true and fair” value of property. Property assessment, or valuation,

is the process by which the “true and fair” value is determined. In order

to comply with the provisions of the Constitution, all taxable property

must be assessed at 100 percent of its true and fair value unless the law

specifically provides otherwise, such as with low-income retired persons.

A county assessor makes these assessments for about 97 percent of the

property in the state. The Department of Revenue makes the remaining

three percent of the assessments.

Does Higher Assessed Value Necessarily Mean Higher

Property Taxes?

No. Many individuals have seen rapid growth in their assessed

values, but this does not necessarily equate to a rapid increase in their

property tax bill. The amount that a local taxing jurisdiction may levy is

limited to an increase of one percent per year.

With the levy only rising one percent per year, the effect of rapidly

growing assessed values is a reduction in the levy rate. For example, if

each and every parcel of property in a taxing district increased by exactly

30 percent, the actual tax rate due on each parcel of property would still

only increase by one percent.

A property that does not increase in value as much as the other

properties in a district may even see a reduction in taxes or will bear less

of the burden of the levy. On the other hand, a property whose value

increases at a greater rate than other properties in the district will bear a

greater burden of the tax. It is how values grow in relation to other

properties in the same district.

In a district where values average 30 percent growth, a home with 10

percent value growth would actually see a reduction in taxes.

Alternatively, in a district where values average five percent growth, a

home with 10 percent value growth would likely see a significant

increase.

How is Property Assessed and the Tax Collected?

All property, except new construction, is assessed on its value as of

January 1 of the assessment year and is listed on the tax rolls by May 31.

For new construction, the value as of July 31 of the tax year is listed on

the rolls. Notices of valuation changes are mailed to the owner of the

property. If taxpayers disagree, they can appeal the valuation. Appeals

of assessed values must be filed with the county Board of Equalization

by July 1 or 30 days following the mailing of the notice of revaluation,

whichever is later. However, the county legislative authority may

authorize up to 60 days.

The treasurer in the county where the property is located collects

property taxes. The treasurer is required to send each taxpayer a notice

which must include the amount of tax owed, the value of both real and

personal property, and the name and amount for each taxing district

levying a tax. The notice must also separately state the amount of excess

(voter-approved) levies. The county treasurer mails the tax bill to the

“taxpayer” listed on the tax rolls, which may be a lending institution in

cases where the property owner has provided that taxes are to be paid

from a reserve account administered by the lending institution. The

treasurers mail tax bills in early to mid-February. The first half of the tax

is due by April 30; the second half by October 31. Given the timelines

required for revaluation and billing, the taxes due in any particular year

are based upon the assessed value from the preceding year.

What Does Equalization of Assessments Mean?

In the 39 counties in Washington State, there are differences in

revaluation cycles and assessment practices. The state Constitution

requires taxes on real estate to be uniform within a district. For the

purpose of collecting the state property tax, the state is one district.

Since differences in county assessment practices would result in the state

property tax being applied non-uniformly across the state, the

Department of Revenue estimates, in each county, the relationship

between the assessed value and the actual market value.

The Department of Revenue then adjusts the state property tax rate

according to the average appraised value for that entire county, but does

not adjust assessed values for each property. As a result, the effective

state property tax rate is different in each county. However, this rate

multiplied by the assessed value results in a uniform tax across the entire

state. This process is called “equalization.”

For example, if a parcel of property sold for $100,000 (after

deducting an amount for any personal property that may have been

included in the sale) and its assessed value is $90,000, the ratio of

assessed value to market value would be 90 percent, determined as

follows:

Assessed Value

Market Value = Assessment Ratio

$90,000

$100,000 = 90%

Are Public Schools Funded from the Property Tax?

The Washington State Constitution established basic education as the

state’s paramount duty. This duty has been reaffirmed in subsequent

statutes and court decisions, which acknowledge that the state must

provide sufficient aid to local school districts to fund basic education.

Currently, almost one-half of the state General Fund budget is spent for

public schools.

As mentioned earlier, the state property tax levy is dedicated for

public schools and is frequently called the state school levy. The

revenues are paid directly into the General Fund, along with all the other

tax revenues that go to the General Fund. Initiative 728 (I-728),

approved by state voters in November 2000, transfers a portion of the

state property tax from the state general fund to the Student Achievement

Fund (SAF). The SAF is distributed to school districts to use for class

size reduction, extended learning opportunities for students, professional

development for educators, early childhood programs, and necessary

building improvements to support class size reductions or extended

learning opportunities.

The state school levy provides about a quarter of the money in the

General Fund that the state spends on public schools. In addition,

revenues from the sales tax, business and occupation tax, real estate

excise tax, and other sources support public schools (see the chart on

page 4).

The state school levy as we know it today was enacted in 1975.

Prior to 1975, property owners paid a local regular school levy of $3.60

per $1,000. The local regular levy was replaced by the regular state levy

and state aid was increased to replace the lost local revenue. Over the

following few years, the state moved to fully fund basic education from

the state General Fund.

How do Washington State Property Taxes Compare?

This section examines a number of comparative statistics regarding

property taxes in Washington State, including comparisons with other

states and historical comparisons to examine how property taxes have

changed over time. The analysis is accomplished largely through the use

of a series of graphic presentations.

The following chart shows the recent trends of the state property

tax rate. The rate is statutorily limited to $3.60 per $1,000 of assessed

value, however, it does fluctuate from year to year due to the interaction

between property values and levy limitations. The rate in 2011 was

$2.03.

Source: Economic and Revenue Forecast, September 2011 Forecast

The chart on the following page is a comparison among all states

of property taxes relative to income. When compared to the other 49

states, state and local property taxes in Washington appear to be about in

the middle. The most recent national information is from fiscal year

2008, at which time Washington ranked 34

in property taxes at $28.82

per $1,000 of personal income, below the national average of $34.49.

Source: Department of Revenue, "Comparative State and Local Taxes 2008"

What are Some of the Recent Legislative Changes to

the Property Tax?

Appeal Protections for Value Changes (ESHB 1826 -- Chapter 84,

Laws of 2011)

A county board of equalization must waive the deadline for appealing the

assessed value of property for property tax purposes under the following

circumstances: the taxpayer’s property was in a revaluation area; the

property value did not change; the taxpayer was not sent a revaluation

notice; and the appeal is filed within a reasonable time after the July 1

filing deadline.

Annexation by Regional Fire Protection Service Authorities (SHB

1854 -- Chapter 271, Laws of 2011)

Fire protection jurisdictions may annex into an adjacent regional fire

protection service authority if the annexation is approved by a simple

majority vote of the voters in the fire protection jurisdiction.

County and City Real Estate Excise Taxes (HB 1953 -- Chapter 354,

Laws of 2011)

Each year through calendar year 2016, a city, town, and county may use

the greater of $100,000 or 35% of real estate excise tax revenues, but not

exceeding $1 million, to pay for the operations and maintenance

expenditures of existing capital facilities.

Exempting Flood Control Districts (EHB 1969 -- Chapter 275, Laws of

2011)

For taxes levied for collection in 2012 through 2017, a flood control zone

district in a county with a population of 775,000 or more with boundaries

coextensive with a county may place up to $0.25 cents of the district's

$0.50 cent levy outside the $5.90 limit to avoid pro-rationing.

Contiguous Land under Current Use Open Space PropertyTtax

Programs (SSB 5359 -- Chapter 101, Laws of 2011)

Contiguous parcels held by the same ownership may be combined to

determine what size category and criteria apply to qualify for current use

valuation as agricultural or forest land under the Open Spaces Taxation

Act. To satisfy the same ownership requirement, the contiguous parcels

may be owned by members of the same family, legal entities wholly

owned by the members of the same family, or a combination of

individuals and entities that are wholly owned by members of the same

family.

Property Tax Exemption from Emergency Medical Services Levy (SB

5628 -- Chapter 365, Laws of 2011)

The portions of the City of Milton which are located in King County are

exempt from the King County EMS levy in order to address

complications from overlapping property tax jurisdictions. This is

accomplished by exempting all real and personal property from a county

EMS levy if the following requirements are met: (1) the property is

located in a county with a population of more than 1.5 million; (2) the

property is located in a city included within two counties; and (3) the

locally assessed value of the property in the portion of the city included

is less than $125 million.

Property Tax Exemption for Nonprofit Organizations (SHB 2402 --

Chapter 186, Laws of 2010)

Until 2020, tax exempt property belonging to churches and nonprofit

public assembly halls or meeting places may be used for farmers markets

for up to 53 days each year.

Allowing County Treasurers to Use Electronic Bill Presentment and

Payment (SHB 2962 -- Chapter 200, Laws of 2010)

County treasurers are authorized (but not required) to collect taxes,

assessments, fees, rates and charges by electronic bill presentation and

payment.

Disposition of Existing Indebtedness at the Time of an Annexation

(ESB 6287 -- Chapter 63, Laws of 2010)

This bill creates an express exemption from any pre-existing fire district

levy for fire protection facilities, if a city is annexed to a fire district and

property in the city is already subject to a pre-existing city levy for fire

protection facilities. Under current law, if a city is annexed to a fire

district, property owners in the city continue to pay any pre-existing city

levy for fire protection facilities, along with any such pre-existing fire

district levy. The bill takes effect March 15, 2010.

Cities and Towns Annexed to Fire Protection Districts (SB 6418 --

Chapter 136, Laws of 2010)

This bill provides that a city or town with a population of no more than

300,000 may be annexed into an adjacent fire protection district.

Currently, only those cities or towns with a population of no more than

100,000 may be annexed into an adjacent fire district.

Exemption for Aircraft Used as Air Ambulance Services (ESSB 6737 --

Chapter 12, Laws of 2010 1st Special Session)

Until 2020, aircraft that are owned by a nonprofit organization exempt

from federal income tax under 26 U.S.C Sec. 501(c)(3) and are used

exclusively to provide emergency medical transportation services are

exempt from aircraft excise tax and property tax.

Exemption for Community Centers (SB 6855 -- Chapter 281, Laws of

2010)

A 40-year property tax exemption was created for surplus school district

properties acquired by a tax-exempt nonprofit organization and used as a

community center.

Property Tax Administration (E2SHB 1208 -- Chapter 350, Laws of

2009)

County treasurer are allowed begin collection of specified taxes and

assessments once the yearly tax roll is completed; makes payment dates

for diking, drainage, or sewerage improvement district assessments the

same as for property taxes; requires that property tax refund claims be

made within three years of the due date for payment; and allows local

taxing districts to levy additional property taxes to fund tax refunds and

specified tax abatement reimbursements, including destroyed property

abatements.

Property Tax Current Use Valuation Programs (SHB 1733 -- Chapter

255, Laws of 2009)

The farm and agricultural current use classification was amended to

include land used for equestrian activities. Also allows an exception from

the requirement to pay additional tax upon removal of property from a

current use classification when the classification was originally granted

in error through no fault of the owner.

Current Use Valuation Under Open Space Program (EHB 1815 --

Chapter 513, Laws of 2009)

The income requirements for the current use farm and agriculture

category for parcels of land between five and 20 was modified to include

income from standing crops that have an expectation of harvest within 7

years, or 15 years in the case of short-rotation hardwoods. Also, county

assessors are required to provide information regarding the process to

appeal the county assessor’s decision to remove property from the

current use program.

Value Real Property Annually for Property Tax Purposes (SSB 5368 --

Chapter 308, Laws of 2009)

All counties are required value property on an annual basis for property

tax purposes by 2014.

Modifying Provisions of Local Option Taxes (2SSB 5433 -- Chapter

551, Laws of 2009)

Multi-year local property tax lid lifts may be used to supplant existing

funds; however, in King County, this is allowed only for lid lifts

approved in 2009, 2010, and 2011. The ferry district property tax rate in

King County is lowered to 7.5 cents per $1,000 of assessed value. An

additional property tax in King County is authorized to fund transit

projects at a rate of 7.5 cents per $1,000 assessed value.

Property Tax Exemption for Nonprofit Organizations (SB 5680 --

Chapter 58, Laws of 2009)

The number of days that exempt property can be used for non-exempt

purposes is increased from 25 to 50 days per year. The number of days

the property may be used for profit-making business activities is

increased from 7 days to 15 days. This provision applies for property

that is used for historical, scientific, or artistic collection, as well as

performing arts.

Excluding veterans’ benefits from the income calculation for certain

property tax relief programs (SSB 5256 -- Chapter 182, Laws of 2008)

For the retired persons property tax relief programs, which base

eligibility on income, veterans’ benefits received in the form of

“disability compensation” and “dependency and indemnity

compensation” will be excluded from the calculation of disposable

income.

Limitation on increase in regular property tax levies

(HB 2416 -- Chapter 1, Laws of 2007, 1st Special Session)

HB 2416 reinstated the limitation (from Initiative 747) on increases in

regular (non-voter-approved) levies to the rate of inflation or 1 percent,

whichever is less.

Deferral of property tax for certain homeowners

(SSB 6178 -- Chapter 2, Laws of 2007, 1st Special Session)

Households with a combined disposable income of $57,000 or less are

eligible for a new property tax deferral program. Under the new deferral

program, eligible homeowners of any age may defer one-half of the

property taxes and special assessments.

Constitutional amendment -- EHJR 4204

Voters at the fall 2007 general election approved a constitutional

amendment which eliminated the super-majority approval and validation

requirement for school district maintenance and operation levies.

Early payment of property taxes (SB 5732 -- Chapter 105, Laws of

2007)

County treasurers are authorized to accept property tax payments or issue

tax receipts before February 15 of the year in which the taxes are due.

Glossary

Class of Property – The term is used in the State Constitution to describe a

broad type of property. There are only two classes of property – real property

(real estate) and personal property (everything else).

Comparable Sales Approach – A criterion which assessors use in determining

the value of a parcel of property. In fact, it is the primary criterion that assessors

are required to use in determining value. Assessors look at the dollar value of

sales of comparable parcels of property.

Cost Approach – Cost (or replacement cost) is a criterion which assessors may

use in determining the value of a parcel of property. In the absence of definitive

data on comparable sales, assessors examine the cost, or replacement cost, of the

parcel of property.

Current Use Valuation – A method of establishing the assessed value of a

parcel of property which allows the assessor to determine value based on the use

for which the property is currently utilized rather than the market value. Current

use valuation allows an owner to reduce the tax burden on agricultural lands,

timberlands, and open space lands. For example, agricultural lands may be

valued based on their production, even though the property has a higher market

value as commercial property or a housing development.

Equalization – A process by which the state Department of Revenue adjusts the

state property tax rate within each county to account for differences in

assessment practices between the 39 counties in which the state property tax is

levied. Equalization is necessary to ensure that the state property tax is levied

uniformly on taxpayers across the state.

Excess (or Special) Levy – Property taxes imposed in excess of the 1 percent

constitutional limit which must be voter approved.

Income Approach – Income is a criterion which assessors may use in

determining the value of a parcel of property. In the absence of definitive data

on comparable sales, assessors estimate the income potential of a parcel of

property and its effect on market value.

Indicated Ratio – The statistical ratio between the average assessed value of

property within a county and the actual market value of property within the

county. The indicated ratio for each county is determined by the state

Department of Revenue on the basis of averages derived from sampling

individual parcels within the county. Indicated ratios are used in equalizing the

state property tax levy across the state to ensure uniform taxation.

Junior Districts – Taxing districts which can levy property taxes but which

have a lower priority in levying property taxes than counties, cities, and road

districts. Junior districts include fire districts, library districts, water districts,

park and recreation districts, hospital districts, cemetery districts, flood control

districts, and numerous others.

Limit factor - A statutory limit approved by the voters in Referendum 47

defined as 100 percent plus the percentage change in the implicit price deflator

for personal consumption (inflation).

One Percent Limit - A constitutional provisions limiting the annual amount of

property taxes that may be imposed on an individual parcel of property, without

voter approval, to 1 percent of its true and fair value.

Open Space – Open space lands are lands which conserve natural resources,

promote conservation, enhance public value and recreation, preserve visual

quality, or have other attributes which are of public value. Such lands are

eligible for valuation based on current use rather than market value.

Personal Property – All property, tangible and intangible, which is not real

property (real estate) is personal property.

Real Property – Real property consists of land and the buildings, structures, or

improvements that are affixed to the land. Real property and real estate are used

synonymously.

Regular Levy – Property taxes imposed under the constitutional 1 percent limit

on levies are termed regular levies. Regular levies do not require voter

approval.

Split Roll – Taxing one type of property differently than another type. The

example most often cited is taxing commercial property differently than

residential property.

Tax Shift – Causing one segment of taxpayers’ taxes to increase as a result of

exempting the value of property of another segment of taxpayers. For example,

exempting a portion of residential property may cause taxes on commercial

property to increase.

Uniformity Clause – Article 7, Section 1 of the State Constitution requires “All

taxes shall be uniform upon the same class of property within the territorial

limits of the authority levying the tax…” Uniformity requires both an equal rate

of tax and equality in valuing the property to be taxed. The Constitution also

stipulates that real estate is one class of property.

Valuation – The process used by the assessor to determine the true and fair

value, or the assessed value, of property. Another term for valuation is property

assessment.

106 Percent Limit – A statutory limit imposed by the Legislature in 1971 (in

1979 for the state levy) that limits annual increases in property tax revenues for

a taxing district from regular levies to no more than 106 percent of the highest

amount of revenue from any levy in the past three years. (see also Limit Factor

above).