HB 1107 — Concerning nonprofit homeownership development.

H-1047.3SUBSTITUTEH-0640.1HOUSE HOUSE BILL 1107State of Washington66th Legislature2019 Regular SessionByHouseSessionByRepresentatives Finance (originally sponsored by Representatives Slatter, Ryu, Macri, Wylie, Bergquist, and Santos)READSantosPrefiled FIRST01/10/19.Read TIMEfirst 02/19/19.ANtime 01/14/19.Referred to Committee on Finance.AN ACT Relating to nonprofit homeownership development;

amendingand 2018creating cnew 103sections.BE sIT 1ENACTED (uncodified);BY THE LEGISLATURE OF THE STATE OF WASHINGTON:Sec.

and creating a new section.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:Sec.

RCW 84.36.049 and 2018 c 103 s 2 are each amended to read as follows:(1) All real property owned by a nonprofit entity or by a qualified cooperative association for the purpose of developing or redeveloping on the real property one or more residences to((to be sold to low-income households including land to be leased as provided in subsection (8)(((d)))(e)(ii)(8)(d)(ii) of this section, is exempt from state and local property taxes.(2)taxes)), Theto exemptionbe providedsold into thisany sectionof expires on or at the earlierfollowing, of:(a)including Theland dateto onbe whichleased the nonprofit entity transfers title to theany single-familyof dwelling unit or the datefollowing onas whichprovided thein qualifiedsubsection cooperative(8)(e)(ii) association first conveys, directly or indirectly through the transfer of anthis ownershipsection, interestis inexempt thefrom association,state anyand single-familylocal dwelling unit on the property ortaxes:(a) anyLow-income parthouseholds;(b) ofA theseparate property.nonprofit entity;

Theor(c) exemptionA willlimited notequity expirecooperative ashousing acorporation.(2) consequenceThe ofexemption theprovided realin propertythis beingsection transferredexpires byon one nonprofit entity to another nonprofit entity or toat a qualified cooperative association so long as the transfereeearlier timelyof:(a) applies to the department for a continuation of the exemption;(b) The date on which the nonprofit entity or((transfers qualifiedtitle cooperativeto associationthe executessingle-family adwelling leaseunit))or ofqualified landcooperative describedassociation intransfers subsectiontitle (8)(((d)))(e)(ii)to of this section;(c) The end of the seventhsingle-family consecutivedwelling propertyunit taxexcept yearthat for which the property is granted an exemption underwill thisnot sectionexpire or,as ifa theconsequence nonprofit entity or qualified cooperative association has claimed an extension under subsection (3) of this section, the endreal ofproperty thebeing tenthtransferred consecutiveby propertyone taxnonprofit yearentity forto whichanother thenonprofit propertyentity isor grantedto ana exemptionqualified undercooperative thisassociation. section;

or(d)For Thepurposes of property isowned noby longera heldqualified forcooperative association, the purposeexemption forwill whichexpire on the exemptiondate wason granted.(3)which If the nonprofitcooperative entityassociation believesfirst thatconveys, titledirectly toor indirectly through the single-familytransfer dwellingof unitan willinterest notin bethe transferredassociation, byany thesingle-family enddwelling ofunit on the sixthproperty;(b) consecutiveThe propertydate taxon yearwhich orthe ifnonprofit aentity or qualified cooperative association believesexecutes thata neitherlease aof single-familyland dwellingdescribed unitin norsubsection any(8)(((d)))(e)(ii) otherof partthis section;(c) The end of the seventh consecutive property willtax beyear transferredfor bywhich the endproperty ofis thegranted sixthan consecutiveexemption propertyunder taxthis year,section or, if the nonprofit entity or qualified cooperative association mayhas claimclaimed aan three-year extension ofunder thesubsection exemption(3) periodof by:(a)this Filingsection, athe noticeend of extension with the departmenttenth onconsecutive orproperty beforetax Marchyear 31stfor ofwhich the sixthproperty consecutiveis propertygranted taxan year;exemption under this section;

or(d) The property is no longer held for the purpose for which the exemption was granted.(3) If the nonprofit entity or qualified cooperative association believes that title to the single-family dwelling unit will not be transferred by the end of the sixth consecutive property tax year, the nonprofit entity or qualified cooperative association may claim a three-year extension of the exemption period by:(a) Filing a notice of extension with the department on or before March 31st of the sixth consecutive property tax year;

The filing fee must be deposited into the state general fund.(4)(a) If the nonprofit entity has not transferred title to the single-family dwelling unit to a low-income household, or if a qualified cooperative association has not transferred eithertitle ato the single-family dwelling unit orto anya otherlow-income property,household within the applicable period described in subsection (2)(c) of this section, or if the nonprofit entity or qualified cooperative association has converted the property to a purpose other than the purpose for which the exemption was granted, the property is disqualified from the exemption.(b) Upon disqualification, the county treasurer must collect an additional tax equal to all taxes that would have been paid on the property but for the existence of the exemption, plus interest at the same rate and computed in the same way as that upon delinquent property taxes.(c) The additional tax must be distributed by the county treasurer in the same manner in which current property taxes applicable to the subject property are distributed.

The nonprofit entity, qualified cooperative association, or the new owner may appeal the assessed values upon which the additional tax is based to the county board of equalization in accordance with the provisions of RCW 84.40.038.(5)(a)84.40.038.(5) Nonprofit entities and qualified cooperative associations receiving an exemption under this section must immediately notify the department when the exempt real property becomes occupied.

The notice of occupancy made to the department must include a certification by the nonprofit entity or qualified cooperative association that the occupants are a low-income household and a date when the title to the single-family dwelling unit was or is anticipated to be transferred.(b)transferred. Qualified cooperative associations receiving an exemption under this section must immediately notify the department when any portion of the exempt real property becomes occupied as well as when all of the exempt real property becomes occupied.

The notice provided when all the exempt real property becomes occupied must be filed within one year of all exempt real property becoming occupied and demonstrate that the qualified cooperative association does, in fact, meet the requirements for being a qualified cooperative association.(c) The department of revenue must make the notices of occupancy available to the joint legislative audit and review committee, upon request by the committee, in order for the committee to complete its review of the tax preference in this section.(6) Upon cessation of the exemption, the value of new construction and improvements to the property, not previously considered as new construction, must be considered as new construction for purposes of calculating levies under chapter 84.55 RCW.

The nonprofit entity or qualified cooperative associationsassociation must identify the line or lines on the financial statements that comprise the percentage of revenues dedicated to the development of affordable housing.(8) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.(a) "Financial statements" means an audited annual financial statement and a completed United States treasury internal revenue service return form 990 for organizations exempt from income tax.(b) "Low-income household" means a single person, family, or unrelated persons living together whose adjusted income is less than eighty percent of the median family income, adjusted for family size as most recently determined by the federal department of housing and urban development for the county in which the property is located.(c) "Nonprofit entity" means a nonprofit as defined in RCW 84.36.800 that is exempt from federal income taxation under 26 U.S.C.

and(ii)((and))(ii) The land on which a dwelling unit described in (((d)))(e)(i) of this subsection (8) stands, whether to be sold, or to be leased for life or ninety-nine years, to the low-income household owning such dwelling unit.(9)unit; The department may not accept applications for the initial exemption in this section after December 31, 2027.

Theand(iii) exemptionShares in thisa sectionlimited mayequity notcooperative behousing approvedcorporation.(9) forThe anddepartment doesmay not applyaccept toapplications taxesfor duethe ininitial 2038exemption andin thereafter.(10)this This section expiresafter JanuaryDecember 1,31, 2038.Sec.2027.

The exemption in this section may not be approved for and does not apply to taxes due in 2038 and thereafter.(10) This section expires January 1, 2038.NEW SECTION.  Sec.

2018This cact 103applies s 1 (uncodified) is amended to readtaxes aslevied follows:(1) This section is the tax preference performance statement for thecollection tax preference contained in ((this act [chapter 103, Laws of 2018 and chapterthereafter.NEW 217,SECTION.  Sec. Laws of 2016]))chapter .

., Laws of 2019 (this act), chapter 103, Laws of 2018, and chapter 217, Laws of 2016.

This performance statement is only intended to be used for subsequent evaluation of the tax preference.

It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.(2) The legislature categorizes this tax preference as one intended to provide tax relief for certain businesses or individuals, as indicated in RCW 82.32.808(2)(e).(3) It is the legislature's specific public policy objective to encourage and expand the ability of nonprofit low-income housing developers to provide homeownership opportunities for low-income households.

It is the legislature's intent to exempt from taxation real property owned by a nonprofit entity for the purpose of building residences to be sold, or, in the case of land, to be leased for life or ninety-nine years, to low-income households in order to enhance the ability of nonprofit low-income housing developers to purchase and hold land for future affordable housing development.(4)(a) To measure the effectiveness of the tax preference provided in section 2 of this act in achieving the specific public policy objectives described in subsection (3) of this section, the joint legislative audit and review committee must evaluate, two years prior to the expiration of the tax preference:

(i) The annual growth in the percentage of revenues dedicated to the development of affordable housing, for each nonprofit and qualified cooperative association claiming the preference, for the period that the preference has been claimed;

and (ii) the annual changes in both the total number of parcels qualifying for the exemption and the total number of parcels for which owner occupancy notifications have been submitted to the department of revenue, from June 9, 2016, through the most recent year of available data prior to the committee's review.(b) If the review by the joint legislative audit and review committee finds that for most of the nonprofits and qualified cooperative associations claiming the exemption, program spending, program expenses, or another ratio representing the percentage of the nonprofit entity's and qualified cooperative association's revenues dedicated to the development of affordable housing has increased for the period during which the exemption was claimed, then the legislature intends to extend the expiration date of the tax preference.(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to:(a) Initial applications for the preference as approved by the department of revenue under RCW 84.36.815;(b) Owner occupancy notices reported to the department of revenue under section 2 of this act;(c) Annual financial statements for a nonprofit entity or qualified cooperative association claiming this tax preference, as defined in section 2 of this act, and provided by nonprofit entities or qualified cooperative associations claiming this preference;

and(d) Any other data necessary for the evaluation under subsection (4) of this section.NEW SECTION.  Sec.

ThisThe actprovisions appliesof toRCW taxes82.32.805 leviedand for82.32.808 collectiondo innot 2020apply andto thereafter.---this act.--- END ---