Substitute House Bill 1163 — Relating to exempting certain leasehold interests (State of Washington, 68th Legislature)

Summary

Substitute House Bill 1163 of the 68th Legislature, 2023 Regular Session, State of Washington, by House Finance (originally sponsored by Representative Fey), read first time January 30, 2023. The bill relates to exempting certain leasehold interests in arenas with a seating capacity of more than 2,000 from the leasehold excise tax and amends RCW 82.29A.130. Its closing sections state that Section 1 takes effect on a stated date and expires on a stated date, that Section 2 takes effect on a later stated date, and that RCW 82.32.805 and 82.32.808 do not apply to the act.

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Full text

     H-0686.1

                           SUBSTITUTE HOUSE BILL 1163


     State of Washington         68th Legislature       2023 Regular Session

     By House Finance (originally sponsored by Representative Fey)

     READ FIRST TIME 01/30/23.




1        AN ACT Relating to exempting certain leasehold interests in
2    arenas with a seating capacity of more than 2,000 from the leasehold
3    excise tax; amending RCW 82.29A.130 and 82.29A.130; creating a new
4    section; providing effective dates; and providing an expiration date.


 5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:


 6       Sec. 1.   RCW 82.29A.130 and 2022 c 147 s 1 are each amended to
 7   read as follows:
 8       The following leasehold interests are exempt from taxes imposed
 9   pursuant to RCW 82.29A.030 and 82.29A.040:
10       (1) All leasehold interests constituting a part of the operating
11   properties of any public utility that is assessed and taxed as a
12   public utility pursuant to chapter 84.12 RCW.
13       (2) All leasehold interests in facilities owned or used by a
14   school, college or university which leasehold provides housing for
15   students and which is otherwise exempt from taxation under provisions
16   of RCW 84.36.010 and 84.36.050.
17       (3) All leasehold interests of subsidized housing where the fee
18   ownership of such property is vested in the government of the United
19   States, or the state of Washington or any political subdivision
20   thereof but only if income qualification exists for such housing.


                                       p. 1                          SHB 1163
 1       (4) All leasehold interests used for fair purposes of a nonprofit
 2   fair association that sponsors or conducts a fair or fairs which
 3   receive support from revenues collected pursuant to RCW 67.16.100 and
 4   allocated by the director of the department of agriculture where the
 5   fee ownership of such property is vested in the government of the
 6   United States, the state of Washington or any of its political
 7   subdivisions. However, this exemption does not apply to the leasehold
 8   interest of any sublessee of such nonprofit fair association if such
 9   leasehold interest would be taxable if it were the primary lease.
10       (5) All leasehold interests in any property of any public entity
11   used as a residence by an employee of that public entity who is
12   required as a condition of employment to live in the publicly owned
13   property.
14       (6) All leasehold interests held by enrolled Indians of lands
15   owned or held by any Indian or Indian tribe where the fee ownership
16   of such property is vested in or held in trust by the United States
17   and which are not subleased to other than to a lessee which would
18   qualify pursuant to this chapter, RCW 84.36.451 and 84.40.175.
19       (7) All leasehold interests in any real property of any Indian or
20   Indian tribe, band, or community that is held in trust by the United
21   States or is subject to a restriction against alienation imposed by
22   the United States. However, this exemption applies only where it is
23   determined that contract rent paid is greater than or equal to
24   ((ninety)) 90 percent of fair market rental, to be determined by the
25   department of revenue using the same criteria used to establish
26   taxable rent in RCW 82.29A.020(2)(g).
27       (8) All leasehold interests for which annual taxable rent is less
28   than ((two hundred fifty dollars)) $250 per year. For purposes of
29   this subsection leasehold interests held by the same lessee in
30   contiguous properties owned by the same lessor are deemed a single
31   leasehold interest.
32       (9) All leasehold interests which give use or possession of the
33   leased property for a continuous period of less than ((thirty)) 30
34   days: PROVIDED, That for purposes of this subsection, successive
35   leases or lease renewals giving substantially continuous use of
36   possession of the same property to the same lessee are deemed a
37   single leasehold interest: PROVIDED FURTHER, That no leasehold
38   interest is deemed to give use or possession for a period of less
39   than ((thirty)) 30 days solely by virtue of the reservation by the


                                     p. 2                         SHB 1163
 1   public lessor of the right to use the property or to allow third
 2   parties to use the property on an occasional, temporary basis.
 3       (10) All leasehold interests under month-to-month leases in
 4   residential units rented for residential purposes of the lessee
 5   pending destruction or removal for the purpose of constructing a
 6   public highway or building.
 7       (11) All leasehold interests in any publicly owned real or
 8   personal property to the extent such leasehold interests arises
 9   solely by virtue of a contract for public improvements or work
10   executed under the public works statutes of this state or of the
11   United States between the public owner of the property and a
12   contractor.
13       (12) All leasehold interests that give use or possession of state
14   adult   correctional  facilities   for  the   purposes  of   operating
15   correctional industries under RCW 72.09.100.
16       (13) All leasehold interests used to provide organized and
17   supervised recreational activities for persons with disabilities of
18   all ages in a camp facility and for public recreational purposes by a
19   nonprofit organization, association, or corporation that would be
20   exempt from property tax under RCW 84.36.030(1) if it owned the
21   property. If the publicly owned property is used for any taxable
22   purpose, the leasehold excise taxes set forth in RCW 82.29A.030 and
23   82.29A.040 must be imposed and must be apportioned accordingly.
24       (14) All leasehold interests in the public or entertainment areas
25   of a baseball stadium with natural turf and a retractable roof or
26   canopy that is in a county with a population of over ((one million))
27   1,000,000, that has a seating capacity of over ((forty thousand))
28   40,000, and that is constructed on or after January 1, 1995. "Public
29   or entertainment areas" include ticket sales areas, ramps and stairs,
30   lobbies and concourses, parking areas, concession areas, restaurants,
31   hospitality and stadium club areas, kitchens or other work areas
32   primarily servicing other public or entertainment areas, public rest
33   room areas, press and media areas, control booths, broadcast and
34   production areas, retail sales areas, museum and exhibit areas,
35   scoreboards or other public displays, storage areas, loading,
36   staging, and servicing areas, seating areas and suites, the playing
37   field, and any other areas to which the public has access or which
38   are used for the production of the entertainment event or other
39   public usage, and any other personal property used for these


                                     p. 3                         SHB 1163
 1   purposes. "Public or entertainment areas" does not include locker
 2   rooms or private offices exclusively used by the lessee.
 3       (15) All leasehold interests in the public or entertainment areas
 4   of a stadium and exhibition center, as defined in RCW 36.102.010,
 5   that is constructed on or after January 1, 1998. For the purposes of
 6   this subsection, "public or entertainment areas" has the same meaning
 7   as in subsection (14) of this section, and includes exhibition areas.
 8       (16) All leasehold interests in public facilities districts, as
 9   provided in chapter 36.100 or 35.57 RCW.
10       (17) All leasehold interests in property that is: (a) Owned by
11   the United States government or a municipal corporation; (b) listed
12   on any federal or state register of historical sites; and (c) wholly
13   contained within a designated national historic reserve under 16
14   U.S.C. Sec. 461.
15       (18) All leasehold interests in the public or entertainment areas
16   of an amphitheater if a private entity is responsible for ((one
17   hundred)) 100 percent of the cost of constructing the amphitheater
18   which is not reimbursed by the public owner, both the public owner
19   and the private lessee sponsor events at the facility on a regular
20   basis, the lessee is responsible under the lease or agreement to
21   operate and maintain the facility, and the amphitheater has a seating
22   capacity of over ((seventeen thousand)) 17,000 reserved and general
23   admission seats and is in a county that had a population of over
24   ((three hundred fifty thousand)) 350,000, but less than ((four
25   hundred twenty-five thousand)) 425,000 when the amphitheater first
26   opened to the public.
27       For the purposes of this subsection, "public or entertainment
28   areas" include box offices or other ticket sales areas, entrance
29   gates, ramps and stairs, lobbies and concourses, parking areas,
30   concession areas, restaurants, hospitality areas, kitchens or other
31   work areas primarily servicing other public or entertainment areas,
32   public rest room areas, press and media areas, control booths,
33   broadcast and production areas, retail sales areas, museum and
34   exhibit areas, scoreboards or other public displays, storage areas,
35   loading, staging, and servicing areas, seating areas including lawn
36   seating areas and suites, stages, and any other areas to which the
37   public has access or which are used for the production of the
38   entertainment event or other public usage, and any other personal
39   property used for these purposes. "Public or entertainment areas"
40   does not include office areas used predominately by the lessee.
                                     p. 4                         SHB 1163
 1       (19) All leasehold interests in real property used for the
 2   placement of military housing meeting the requirements of RCW
 3   84.36.665.
 4       (20) All leasehold interests in facilities owned or used by a
 5   community college or technical college, which leasehold interest
 6   provides:
 7       (a) Food services for students, faculty, and staff;
 8       (b) The operation of a bookstore on campus; or
 9       (c) Maintenance, operational, or administrative services to the
10   community college or technical college.
11       (21)(a) All leasehold interests in the public or entertainment
12   areas of an arena if it:
13       (i) Has a seating capacity of more than ((two thousand)) 2,000;
14       (ii) Is located on city-owned land; and
15       (iii) Is owned by a city with a population over ((two hundred
16   thousand)) 200,000 within a county with a population of less than
17   ((one million five hundred thousand)) 1,500,000.
18       (b) For the purposes of this subsection (21), "public or
19   entertainment areas" has the same meaning as provided in subsection
20   (18) of this section.
21       (22) All leasehold interests in facilities owned by the state
22   parks and recreation commission that are listed on the national
23   register of historic places or the Washington heritage register.
24       (23)(a) All leasehold interests in the public or entertainment
25   areas of an arena if:
26       (i) The arena has a seating capacity of more than 2,000;
27       (ii) The arena is located on city-owned land;
28       (iii) The arena is located within a city with a population over
29   100,000;
30       (iv) The arena is a multipurpose sports and entertainment
31   facility that was redeveloped to attract a professional ice hockey
32   franchise; and
33       (v) Private entities were responsible for 100 percent of the cost
34   of constructing improvements to the arena, which were not reimbursed
35   by the public owner.
36       (b) For the purposes of this subsection (23), "public or
37   entertainment areas" has the same meaning as provided in subsection
38   (18) of this section; except that it also includes office areas used
39   predominately by the lessee.


                                     p. 5                         SHB 1163
 1       (c) This subsection (23) does not apply to leasehold interests
 2   arising on or after October 1, 2033.


 3       Sec. 2.   RCW 82.29A.130 and 2019 c 335 s 1 are each amended to
 4   read as follows:
 5       The following leasehold interests are exempt from taxes imposed
 6   pursuant to RCW 82.29A.030 and 82.29A.040:
 7       (1) All leasehold interests constituting a part of the operating
 8   properties of any public utility that is assessed and taxed as a
 9   public utility pursuant to chapter 84.12 RCW.
10       (2) All leasehold interests in facilities owned or used by a
11   school, college or university which leasehold provides housing for
12   students and which is otherwise exempt from taxation under provisions
13   of RCW 84.36.010 and 84.36.050.
14       (3) All leasehold interests of subsidized housing where the fee
15   ownership of such property is vested in the government of the United
16   States, or the state of Washington or any political subdivision
17   thereof but only if income qualification exists for such housing.
18       (4) All leasehold interests used for fair purposes of a nonprofit
19   fair association that sponsors or conducts a fair or fairs which
20   receive support from revenues collected pursuant to RCW 67.16.100 and
21   allocated by the director of the department of agriculture where the
22   fee ownership of such property is vested in the government of the
23   United States, the state of Washington or any of its political
24   subdivisions. However, this exemption does not apply to the leasehold
25   interest of any sublessee of such nonprofit fair association if such
26   leasehold interest would be taxable if it were the primary lease.
27       (5) All leasehold interests in any property of any public entity
28   used as a residence by an employee of that public entity who is
29   required as a condition of employment to live in the publicly owned
30   property.
31       (6) All leasehold interests held by enrolled Indians of lands
32   owned or held by any Indian or Indian tribe where the fee ownership
33   of such property is vested in or held in trust by the United States
34   and which are not subleased to other than to a lessee which would
35   qualify pursuant to this chapter, RCW 84.36.451 and 84.40.175.
36       (7) All leasehold interests in any real property of any Indian or
37   Indian tribe, band, or community that is held in trust by the United
38   States or is subject to a restriction against alienation imposed by
39   the United States. However, this exemption applies only where it is
                                     p. 6                         SHB 1163
 1   determined that contract rent paid is greater than or equal to
 2   ((ninety)) 90 percent of fair market rental, to be determined by the
 3   department of revenue using the same criteria used to establish
 4   taxable rent in RCW 82.29A.020(2)(g).
 5       (8) All leasehold interests for which annual taxable rent is less
 6   than ((two hundred fifty dollars)) $250 per year. For purposes of
 7   this subsection leasehold interests held by the same lessee in
 8   contiguous properties owned by the same lessor are deemed a single
 9   leasehold interest.
10       (9) All leasehold interests which give use or possession of the
11   leased property for a continuous period of less than ((thirty)) 30
12   days: PROVIDED, That for purposes of this subsection, successive
13   leases or lease renewals giving substantially continuous use of
14   possession of the same property to the same lessee are deemed a
15   single leasehold interest: PROVIDED FURTHER, That no leasehold
16   interest is deemed to give use or possession for a period of less
17   than ((thirty)) 30 days solely by virtue of the reservation by the
18   public lessor of the right to use the property or to allow third
19   parties to use the property on an occasional, temporary basis.
20       (10) All leasehold interests under month-to-month leases in
21   residential units rented for residential purposes of the lessee
22   pending destruction or removal for the purpose of constructing a
23   public highway or building.
24       (11) All leasehold interests in any publicly owned real or
25   personal property to the extent such leasehold interests arises
26   solely by virtue of a contract for public improvements or work
27   executed under the public works statutes of this state or of the
28   United States between the public owner of the property and a
29   contractor.
30       (12) All leasehold interests that give use or possession of state
31   adult   correctional  facilities   for  the   purposes  of   operating
32   correctional industries under RCW 72.09.100.
33       (13) All leasehold interests used to provide organized and
34   supervised recreational activities for persons with disabilities of
35   all ages in a camp facility and for public recreational purposes by a
36   nonprofit organization, association, or corporation that would be
37   exempt from property tax under RCW 84.36.030(1) if it owned the
38   property. If the publicly owned property is used for any taxable
39   purpose, the leasehold excise taxes set forth in RCW 82.29A.030 and
40   82.29A.040 must be imposed and must be apportioned accordingly.
                                     p. 7                         SHB 1163
 1       (14) All leasehold interests in the public or entertainment areas
 2   of a baseball stadium with natural turf and a retractable roof or
 3   canopy that is in a county with a population of over ((one million))
 4   1,000,000, that has a seating capacity of over ((forty thousand))
 5   40,000, and that is constructed on or after January 1, 1995. "Public
 6   or entertainment areas" include ticket sales areas, ramps and stairs,
 7   lobbies and concourses, parking areas, concession areas, restaurants,
 8   hospitality and stadium club areas, kitchens or other work areas
 9   primarily servicing other public or entertainment areas, public rest
10   room areas, press and media areas, control booths, broadcast and
11   production areas, retail sales areas, museum and exhibit areas,
12   scoreboards or other public displays, storage areas, loading,
13   staging, and servicing areas, seating areas and suites, the playing
14   field, and any other areas to which the public has access or which
15   are used for the production of the entertainment event or other
16   public usage, and any other personal property used for these
17   purposes. "Public or entertainment areas" does not include locker
18   rooms or private offices exclusively used by the lessee.
19       (15) All leasehold interests in the public or entertainment areas
20   of a stadium and exhibition center, as defined in RCW 36.102.010,
21   that is constructed on or after January 1, 1998. For the purposes of
22   this subsection, "public or entertainment areas" has the same meaning
23   as in subsection (14) of this section, and includes exhibition areas.
24       (16) All leasehold interests in public facilities districts, as
25   provided in chapter 36.100 or 35.57 RCW.
26       (17) All leasehold interests in property that is: (a) Owned by
27   the United States government or a municipal corporation; (b) listed
28   on any federal or state register of historical sites; and (c) wholly
29   contained within a designated national historic reserve under 16
30   U.S.C. Sec. 461.
31       (18) All leasehold interests in the public or entertainment areas
32   of an amphitheater if a private entity is responsible for ((one
33   hundred)) 100 percent of the cost of constructing the amphitheater
34   which is not reimbursed by the public owner, both the public owner
35   and the private lessee sponsor events at the facility on a regular
36   basis, the lessee is responsible under the lease or agreement to
37   operate and maintain the facility, and the amphitheater has a seating
38   capacity of over ((seventeen thousand)) 17,000 reserved and general
39   admission seats and is in a county that had a population of over
40   ((three hundred fifty thousand)) 350,000, but less than ((four
                                     p. 8                         SHB 1163
 1   hundred twenty-five thousand)) 425,000 when the amphitheater first
 2   opened to the public.
 3       For the purposes of this subsection, "public or entertainment
 4   areas" include box offices or other ticket sales areas, entrance
 5   gates, ramps and stairs, lobbies and concourses, parking areas,
 6   concession areas, restaurants, hospitality areas, kitchens or other
 7   work areas primarily servicing other public or entertainment areas,
 8   public rest room areas, press and media areas, control booths,
 9   broadcast and production areas, retail sales areas, museum and
10   exhibit areas, scoreboards or other public displays, storage areas,
11   loading, staging, and servicing areas, seating areas including lawn
12   seating areas and suites, stages, and any other areas to which the
13   public has access or which are used for the production of the
14   entertainment event or other public usage, and any other personal
15   property used for these purposes. "Public or entertainment areas"
16   does not include office areas used predominately by the lessee.
17       (19) All leasehold interests in real property used for the
18   placement of military housing meeting the requirements of RCW
19   84.36.665.
20       (20) All leasehold interests in facilities owned or used by a
21   community college or technical college, which leasehold interest
22   provides:
23       (a) Food services for students, faculty, and staff;
24       (b) The operation of a bookstore on campus; or
25       (c) Maintenance, operational, or administrative services to the
26   community college or technical college.
27       (21)(a) All leasehold interests in the public or entertainment
28   areas of an arena if it:
29       (i) Has a seating capacity of more than ((two thousand)) 2,000;
30       (ii) Is located on city-owned land; and
31       (iii) Is owned by a city with a population over ((two hundred
32   thousand)) 200,000 within a county with a population of less than
33   ((one million five hundred thousand)) 1,500,000.
34       (b) For the purposes of this subsection (21), "public or
35   entertainment areas" has the same meaning as provided in subsection
36   (18) of this section.
37       (22)(a) All leasehold interests in the public or entertainment
38   areas of an arena if:
39       (i) The arena has a seating capacity of more than 2,000;
40       (ii) The arena is located on city-owned land;
                                    p. 9                        SHB 1163
 1       (iii) The arena is located within a city with a population over
 2   100,000;
 3       (iv) The arena is a multipurpose sports and entertainment
 4   facility that was redeveloped to attract a professional ice hockey
 5   franchise; and
 6       (v) Private entities were responsible for 100 percent of the cost
 7   of constructing improvements to the arena, which were not reimbursed
 8   by the public owner.
 9       (b) For the purposes of this subsection (22), "public or
10   entertainment areas" has the same meaning as provided in subsection
11   (18) of this section; except that it also includes office areas used
12   predominately by the lessee.
13       (c) This subsection (22) does not apply to leasehold interests
14   arising on or after October 1, 2033.


15       NEW SECTION.   Sec. 3.    RCW 82.32.805 and 82.32.808 do not apply
16   to this act.


17       NEW SECTION.   Sec. 4.   Section 1 of this act takes effect October
18   1, 2023.


19       NEW SECTION.   Sec. 5.   Section 1 of this act expires January 1,
20   2034.


21       NEW SECTION.   Sec. 6.   Section 2 of this act takes effect January
22   1, 2034.

                                    --- END ---




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