Washington Senate Bill Report SHB 1967 (Feb. 21, 2022)

Summary

A Senate Bill Report on SHB 1967, an act relating to property tax exemptions for nonprofits, prepared by non-partisan legislative staff and dated as of February 21, 2022. It records that the bill passed the House on 2/12/22, 98-0, with committee activity before Business, Financial Services & Trade on 2/22/22. The background section describes property tax exemptions for churches and nonprofit public assembly halls and notes that a provision letting them host farmers markets up to 53 days a year expired on December 31, 2020. The summary of a proposed striking amendment extends the exemptions to qualifying farmers markets for up to 53 days each assessment year, applies to taxes levied for collection in 2021 and thereafter, and exempts the change from the automatic ten-year expiration and JLARC review.

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                            SENATE BILL REPORT
                                 SHB 1967

                                     As of February 21, 2022

Title: An act relating to property tax exemptions for nonprofits.

Brief Description: Concerning property tax exemptions for nonprofits.

Sponsors: House Committee on Appropriations (originally sponsored by Representatives
    Steele, Riccelli, Berry, Lekanoff, Santos and Duerr).

Brief History: Passed House: 2/12/22, 98-0.
     Committee Activity: Business, Financial Services & Trade: 2/22/22.


                                     Brief Summary of Bill
           • Allows public meeting halls and churches that are property tax exempt to
             host qualifying farmers markets for up to 53 days per year without losing
             property tax exemption.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: Property Tax Exemptions for Nonprofits. All real and personal property is
     subject to a tax each year based on the highest and best use, unless a specific exemption is
     provided by law. Nonprofit organizations, though exempt from federal taxes, are not
     generally exempt from property taxes in Washington. Typically, organizations must
     exclusively use their property to conduct an activity specifically exempted by the
     Legislature to qualify. Schools, churches, cemeteries, hospitals, social service agencies,
     character building organizations, nursing homes, homes for the aging, museums, performing
     arts facilities, and public meeting halls are examples of organizations that may receive a
     property tax exemption.

     Use of Certain Tax-exempt Properties for Nonexempt Activities. Churches. Churches'



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                        SHB 1967
     personal property and grounds, not exceeding five acres, are exempt from property tax. The
     exemption is maintained if rental income or donations are reasonable and do not exceed the
     maintenance and operation expenses attributable to the property being rented or loaned for a
     qualifying activity. Qualifying activities include those associated with a school or nonprofit
     organization's charitable activity.

     The property may be shared, and the property tax exemption maintained, for nonexempt
     activities for up to 50 days a year. Within those 50 days, 15 may be used for commercial or
     business activities. Nonexempt activities include Chamber of Commerce meetings, social
     events hosted by a fraternal organization, or a for-profit organization conducting an
     employee seminar. Commercial or business activities may include music lessons or
     festivals and fairs hosted by the church where individuals sell goods and services, as
     examples.

     Nonprofit Organizations With a Public Assembly Hall. Real and personal property owned
     by a nonprofit organization, association, or corporation in connection with the operation of
     a public assembly hall or meeting place is exempt from taxation. Real and personal
     property must not exceed one acre except for property under 29 acres with only restroom
     facilities and structures that is primarily used for community celebration events. To
     maintain this exemption, the property must be used exclusively for public gatherings and be
     available to all desiring to use it.

     Use by Farmers Markets. For property taxes levied for collection from 2011 through 2020,
     a provision existed to allow churches and public assembly halls to host farmers markets up
     to 53 days a year without losing a property tax exemption. That provision expired on
     December 31, 2020.

     Qualifying Farmers Markets. Qualifying farmers markets are entities that sponsor a regular
     assembly of vendors at a defined location for the purpose of promoting the sale of
     agricultural goods grown or produced in this state directly to the consumer. These markets
     must meet certain criteria, such as a minimum number of vendors, a certain total of annual
     combined gross sales of farmers to gross sales of processors or resellers depending on the
     combined gross sales of the market, and not sell imported and secondhand items or host
     franchisees.

     Tax Preferences. Legislation that creates or expands a tax preference, such as a tax
     exemption, deduction, or preferential rate, must include a tax performance statement that
     identifies the public policy objective of the tax preference, as well as certain metrics that the
     Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the
     effectiveness of the preference. A new tax reference automatically expires after ten years
     unless an alternative expiration date is provided or the tax preference is exempt through the
     legislation.

     Summary of Bill: The bill as referred to committee not considered.


Senate Bill Report                              -2-                                         SHB 1967
     Summary of Bill (Proposed Striking Amendment): The loan or rental of church property
     to a nonprofit organization, association, corporation, or school conducting a charitable
     activity is extended to qualifying farmers markets. Activities related to a farmers market
     may not occur on the tax-exempt property for more than 53 days each assessment year.

     A qualifying farmer's market may use a nonprofit's public assembly hall or meeting place
     property or a church property up to 53 days each assessment year and remain property tax
     exempt if the rental income or donations do not exceed the maintenance and operation
     expenses attributable to the property's use.

     This act applies both retroactively and prospectively to taxes levied for collection in 2021
     and thereafter.

     These expanded exemptions are not subject to the automatic ten-year expiration date or
     JLARC review.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.




Senate Bill Report                            -3-                                        SHB 1967


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