Department of Revenue Fiscal Note — 5802 SB, Property Tax Exemptions
Summary
Department of Revenue fiscal note on Bill Number 5802 SB, titled Property tax exemptions, with agency preparation by Erikka Ferrara dated 01/24/2022. The current-law section describes a property tax exemption on the primary residence of qualifying persons, such as senior citizens (aged 61 or older), disabled persons, and disabled veterans. It lists three income thresholds, the first being the greater of $30,000 or 45% of the median household income for the county, and a deferral threshold of $45,000 or 75% of the median household income for the county, whichever is greater. It states that liens on deferred property accrue interest at 5% per year, and that the Department will use the expedited process to amend WAC 458-16A-100.
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“Department of Revenue Fiscal Note — 5802 SB, Property Tax Exemptions.”
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Department of Revenue Fiscal Note
Bill Number: 5802 SB Title: Property tax exemptions Agency: 140-Department of
Revenue
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Expenditures from:
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.8 0.4 0.7 0.7
Account
GF-STATE-State 001-1 914,900 914,900 1,812,400 1,812,400
Total $ 914,900 914,900 1,812,400 1,812,400
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact . Factors impacting the precision of these estimates ,
and alternate ranges (if appropriate ), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50 ,000 per fiscal year in the current biennium or in subsequent biennia , complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia , complete this page only (Part I).
X Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Clinton McCarthy Phone: 360-786-7319 Date: 01/11/2022
Agency Preparation: Erikka Ferrara Phone: 360-534-1517 Date: 01/24/2022
Agency Approval: Valerie Torres Phone: 360-534-1521 Date: 01/24/2022
OFM Review: Cheri Keller Phone: (360) 584-2207 Date: 01/24/2022
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 1 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Briefly describe, by section number, the significant provisions of the bill , and any related workload or policy assumptions , that have revenue or
expenditure impact on the responding agency .
CURRENT LAW:
The law provides a property tax exemption (exemption program) on the primary residence of qualifying persons, such as senior
citizens (aged 61 or older), disabled persons, and disabled veterans. The level of exemption varies based on the participant’s
income threshold.
Beginning with taxes collected in 2020, and thereafter, the income thresholds necessary to qualify in the exemption program are
as follows:
- Income Threshold 1 is the greater of $30,000, or 45% of the median household income for the county.
- Income Threshold 2 is the greater of $35,000, or 55% of the median household income for the county.
- Income Threshold 3 is the greater of $40,000, or 65% of the median household income for the county.
Each threshold is adjusted every five years, with the next adjustment taking place on March 1, 2024, for taxes levied for
collection in 2025.
Beginning with taxes collected in 2020, and thereafter, the income threshold necessary to qualify in the deferral program is as
follows:
- $45,000 or 75% of the median household income for the county, whichever is greater.
Liens on deferred property accrue interest at 5% per year.
Requires the Department of Revenue (Department) to update the income thresholds beginning August 1, 2019, and by March 1st
every five years thereafter.
Beginning with the March 1, 2024, adjustment and every second adjustment thereafter, if the income threshold in a county is not
adjusted based on percentage of county median income, then the income threshold must be adjusted based on the growth of the
consumer price index for all urban consumers (CPI-U) for the prior 12 month period as published by the United States Bureau
of Labor Statistics. In no case may the adjustment be greater than one percent.
Requires the “principal place of residence” claimed in the exemption program must be occupied for more than nine months each
calendar year by the applicant.
The Department must authorize an option for electronic filing of applications and renewal applications.
Definition of relative to be "any individual related to the claimant by blood, marriage, or adoption," for purposes of :
- A participant's ability to continue in the exemption program when confined to a "home of a relative for the purpose of long-term
care," similar to existing provisions when confined to a hospital, nursing home, assisted living, etc.
Heirs and devisees to those individuals eligible to continue in the deferral program upon death.
PROPOSED LAW:
Beginning with taxes collected in 2023, the income thresholds are as follows :
- Income threshold 1 is $60,000.
- Income threshold 2 is $65,000.
- Income threshold 3 is $70,000.
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 2 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
Beginning with taxes collected in 2024, and thereafter, the income thresholds necessary to qualify in the exemption program are
as follows:
- Income threshold 1 is the greater of $60,000, or 45% of the median household income for the county.
- Income threshold 2 is the greater of $65,000, or 55% of the median household income for the county.
- Income threshold 3 is the greater of $70,000, or 65% of the median household income for the county.
Income thresholds cannot be less than any previous year's set threshold.
Beginning with taxes collected in 2023, the income threshold necessary to qualify in the deferral program is $75,000.
Beginning with taxes collected in 2024, and thereafter, the income threshold necessary to qualify in the deferral program is as
follows:
- $75,000, or 75% of the median household income for the county, whichever is greater.
Liens on deferred property accrue interest at 2% per year.
Changes the Department's requirement to update the income thresholds beginning August 1, 2022, and by March 1st every five
years thereafter.
EFFECTIVE DATE:
This bill takes effect beginning with property taxes collected in Calendar Year 2023.
II. B - Cash receipts Impact
Briefly describe and quantify the cash receipts impact of the legislation on the responding agency , identifying the cash receipts provisions by section
number and when appropriate the detail of the revenue sources . Briefly describe the factual basis of the assumptions and the method by which the
cash receipts impact is derived . Explain how workload assumptions translate into estimates . Distinguish between one time and ongoing functions .
ASSUMPTIONS
- Each year the Department analyzes local regular levies and how close each district is to their statutory tax rate maximum.
Based on that analysis a new property tax exemption would result in 89 percent of local property taxes impacted by the
exemption to be shifted to non-exempt property owners. Local taxing districts would experience a loss equal to 11 percent
of local property taxes impacted by the exemption.
- Based on five years of state property tax collections, 52.38 percent of state property tax collections occur in April and
47.62 percent occur in October. When converting from calendar year to fiscal year, this estimate assumes revenues shifts
and losses follow this trend.
- Median household income by county, as obtained from Office of Financial Management website and income growth over
the forecasted period were obtained from the Economic Forecast Council, 2021 forecast of income growth. These income
estimates calculate the income threshold changes in accordance with the bill.
- Approximately 86,600 additional households will receive the senior, veteran, and disabled property tax exemption beginning
in tax year 2023.
DATA SOURCES
- Census Bureau, American Community Survey 2015-2019
- Department of Revenue, State Property Tax Model
- Economic Forecast Council, 2021 forecast of income growth
- Office of Financial Management (OFM) - Median Household Income Estimates by County: 1989 to 2019 and Projection
for 2020
- US Department of Veteran Affairs
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 3 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
REVENUE ESTIMATES
The Economic and Revenue Forecast Council predicts the state property tax levy remains below the $3.60 limit throughout
the 2023-25 Biennium. Therefore, a new exemption beginning in 2022 or after results in a shift and no loss to the state levy.
PROPERTY TAX SHIFTS
This legislation results in a state levy shift to other taxpayers who are currently exempt of an estimated $31.5 million for
Fiscal Year 2023 and $58.7 million in Fiscal Year 2024, the first full fiscal year.
TOTAL REVENUE IMPACT:
State Government (cash basis, $000): None
Local Government, if applicable (cash basis, $000):
FY 2022 - $ 0
FY 2023 - ($ 4,700 )
FY 2024 - ($ 8,700 )
FY 2025 - ($ 8,600 )
FY 2026 - ($ 8,100 )
FY 2027 - ($ 7,800 )
DETAIL OF REVENUE IMPACT FOR PROPERTY TAX BILLS, Calendar Year Basis
State Government, Impact on Revenues ($000) : None
State Government, ($000), Shift of Tax Burden
CY 2022 - $ 0
CY 2023 - $ 60,000
CY 2024 - $ 57,300
CY 2025 - $ 55,700
CY 2026 - $ 48,600
CY 2027 - $ 49,500
Local Government, Impact on Revenues ($000)
CY 2022 - $ 0
CY 2023 - ($ 9,000 )
CY 2024 - ($ 8,600 )
CY 2025 - ($ 8,600 )
CY 2026 - ($ 7,700 )
CY 2027 - ($ 8,000 )
Local Government, ($000), Shift of Tax Burden
CY 2022 - $ 0
CY 2023 - $ 176,000
CY 2024 - $ 174,000
CY 2025 - $ 174,000
CY 2026 - $ 157,000
CY 2027 - $ 165,000
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 4 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
II. C - Expenditures
Briefly describe the agency expenditures necessary to implement this legislation (or savings resulting from this legislation ), identifying by section
number the provisions of the legislation that result in the expenditures (or savings ). Briefly describe the factual basis of the assumptions and the method
by which the expenditure impact is derived . Explain how workload assumptions translate into cost estimates . Distinguish between one time and ongoing
FIRST YEAR COSTS:
The Department will not incur any costs in Fiscal Year 2022.
SECOND YEAR COSTS:
The Department will incur total costs of $914,900 in Fiscal Year 2023. These costs include :
Labor Costs - Time and effort equates to 0.73 FTEs.
- Amend one administrative rule.
- Process deferral applications.
Object Costs - $859,000.
- Reimbursement to counties for the cost of the deferrals and benefits for additional qualified recipients.
ONGOING COSTS:
Ongoing costs for the 2023-25 Biennium equal $1,812,400 and include similar activities described in the second-year costs.
Time and effort equates to 0.7 FTE.
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.8 0.4 0.7 0.7
A-Salaries and Wages 29,300 29,300 54,000 54,000
B-Employee Benefits 10,500 10,500 19,400 19,400
E-Goods and Other Services 8,900 8,900 15,200 15,200
G-Travel 2,100 2,100 4,200 4,200
J-Capital Outlays 5,100 5,100 1,600 1,600
N-Grants, Benefits & Client Services 859,000 859,000 1,718,000 1,718,000
Total $ $914,900 $914,900 $1,812,400 $1,812,400
III. B - Detail: List FTEs by classification and corresponding annual compensation . Totals need to agree with total FTEs in Part I
and Part IIIA
Job Classification Salary FY 2022 FY 2023 2021-23 2023-25 2025-27
EMS BAND 4 122,633 0.0 0.0
MGMT ANALYST4 70,956 0.0 0.0
TAX POLICY SP 2 72,756 0.0 0.0
TAX POLICY SP 3 82,344 0.0 0.0
TAX POLICY SP 4 88,644 0.0 0.0
TAX SERV REP 1 38,592 0.7 0.4 0.7 0.7
WMS BAND 3 104,295 0.0 0.0
Total FTEs 0.8 0.4 0.7 0.7
III. C - Expenditures By Program (optional)
NONE
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 5 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Identify acquisition and construction costs not reflected elsewhere on the fiscal note and dexcribe potential financing methods
NONE
None.
Part V: New Rule Making Required
Identify provisions of the measure that require the agency to adopt new administrative rules or repeal/revise existing rules .
Should this legislation become law, the Department will use the expedited process to amend WAC 458-16A-100 Rule, titled: "
Senior citizen, disabled person, and disabled veteran exemption - Definitions." Persons affected by this rulemaking would
include owners of real property who are eligible for the property tax exemption, or may become eligible based on the change
to the income thresholds.
Request # 5802-1-1
Form FN (Rev 1/00) 173,216.00 6 Bill # 5802 SB
FNS062 Department of Revenue Fiscal Note
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