Notice of Introduction for Senate Bill 5845 - Update: 10 Year Analysis Complete

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UPDATE: The 10 year analysis for SB 5845, titled AN ACT Relating to taxation of military housing, has been completed. The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Fiscal Year		Property tax
2024		$0
2025		$367,000
2026		$705,000
2027		$713,000
2028		$720,000
2029		$727,000
2030		$734,000
2031		$742,000
2032		$750,000
2033		$758,000
Total:		$6,216,000

Department of Revenue:

CURRENT LAW:

Qualifying privately owned military housing is exempt from property tax and leasehold excise tax (LET).

Privately owned military housing may be exempt from property tax if all housing is:

- Located on land owned by the United States.

- Used for military personnel and their families.

- A project awarded development under the Military Housing Privatization Initiative.

Current law also provides a limit factor of up to 1% (often referred to as the “101% levy limit”) for year-over-year growth in a taxing district’s regular property tax levy. All taxing districts, both state and local, may also increase the levy by an additional amount based on the increase in assessed value due to the following add-ons:

- new construction

- construction of wind turbine, solar, biomass, and geothermal facilities

- improvements to property

- increases value of state-assessed property

- increases in real property value within a designated local tax increment finance area.

All leasehold interests in real property used for military housing meeting the military housing property tax exemption requirements are also exempt from LET.

PROPOSAL:

This bill eliminates the military housing property tax exemption beginning with property taxes due for the calendar year 2025.

This bill also allows an add-on to the 101% levy limit for property taxes due for calendar year 2025 based on the taxable value added to the assessment roll from eliminating the military housing exemption.

Beginning January 1, 2025, this bill also eliminates the corresponding military housing LET exemption.

EFFECTIVE DATE:

The bill takes effect 90 days after the final adjournment of the session.

ASSUMPTIONS:

- This repeal will only affect military housing in Island and Spokane counties.  

- This proposal applies to both state and local property taxes.

- Assessors will add a total estimated value of $350 million to the assessment roll for property taxes due for collection in calendar year 2025.

- Based on five years of state property tax collections, 52.52% of state property tax collections occur in April and 47.48% occur in October.  When converting from calendar year to fiscal year, this estimate assumes revenues shifts and gains follow this trend.

- The revenue impacts shown above and below are for the repeal of the property tax exemption only.

- The elimination of the property tax exemption begins with property taxes due for collection in calendar year 2025.

- The elimination of the LET exemption begins January 1, 2025. 

DATA SOURCES:

- County Assessor, Property tax data

- Office of the Secretary of Defense, Military housing data

- Economic and Revenue Forecast Council, November 2023 forecast

- Department of Revenue, State property tax levy model

REVENUE ESTIMATES: 

This bill increases state property tax revenues by an estimated $367,000 in the six months of impacted collections in fiscal year 2025, and by $705,000 in fiscal year 2026, the first full year of impacted collections. 

This bill also increases local property tax revenues by an estimated $1.1 million in the six months of impacted collections in fiscal year 2025, and by $2.2 million in fiscal year 2026, the first full year of impacted collections.

Public entities collect and pay leasehold excise tax to the department. This bill would impact fewer than three public entities; therefore, any LET impacts are confidential but minimally positive.

PROPERTY TAX SHIFTS:

This bill results in no state or local property tax levy shifts because of the value added to the assessment roll.

TOTAL REVENUE IMPACT: 

      State Government (cash basis, $000):

           FY 2024 -      $     0

           FY 2025 -      $ 367

           FY 2026 -      $ 705

           FY 2027 -      $ 713

           FY 2028 -      $ 720

           FY 2029 -      $ 727

      Local Government, if applicable (cash basis, $000):

           FY 2024 -      $        0

           FY 2025 -      $ 1,100

           FY 2026 -      $ 2,200

           FY 2027 -      $ 2,300

           FY 2028 -      $ 2,500

           FY 2029 -      $ 2,600

DETAIL OF REVENUE IMPACT FOR PROPERTY TAX BILLS, Calendar Year Basis

      State Government, Impact on Revenues ($000)

           CY 2024 -      $     0

           CY 2025 -      $ 700

           CY 2026 -      $ 708

           CY 2027 -      $ 716

           CY 2028 -      $ 723

           CY 2029 -      $ 730

      State Government, ($000), Shift of Tax Burden: None

      Local Government, Impact on Revenues ($000)

           CY 2024 -      $        0

           CY 2025 -      $ 2,200

           CY 2026 -      $ 2,300

           CY 2027 -      $ 2,400

           CY 2028 -      $ 2,500

           CY 2029 -      $ 2,600

      Local Government, ($000), Shift of Tax Burden: None

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue


Bill sponsors and contact information:




Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp