Affordable housing/sales tax

AN ACT Relating to a sales and use tax remittance program for 1
affordable housing; adding a new section to chapter 82.08 RCW; adding 2
a new section to chapter 82.12 RCW; adding a new chapter to Title 82 3
RCW; creating a new section; providing an effective date; and 4
providing an expiration date. 5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
NEW SECTION. Sec. 1. The definitions in this section apply 7
throughout this chapter unless the context clearly requires 8
otherwise.9
(1) "Affordable housing" means: 10
(a) Homeownership housing intended for owner occupancy by low-11
income households whose monthly housing costs, including utilities 12
other than telephone, do not exceed 38 percent of the household's 13
monthly income; and 14
(b) Rental housing for low-income households whose monthly 15
housing costs, including utilities other than telephone, do not 16
exceed 30 percent of the household's monthly income.17
(2) "City" means any city or town, including a code city.18
(3) "County" means any county of the state. 19
(4) "Eligible organization" means nonprofit developers, for-20
profit developers, public housing authorities, public development 21
H-0840.2
HOUSE BILL 1717
State of Washington 69th Legislature 2025 Regular Session
By Representatives Leavitt, Low, Richards, Shavers, Walen, Parshley,
Reed, and Nance
Read first time 01/29/25. Referred to Committee on Finance.
p. 1 HB 1717
authorities, or other applicants eligible under rules established by 1
the Washington state housing finance commission. 2
(5) "Governing authority" means the local legislative authority 3
of a city or county. 4
(6)(a) "Initiation of construction" means the date that a 5
building permit is issued under the building code adopted under RCW 6
19.27.031 for construction of the qualified building, if the 7
underlying ownership of the building vests exclusively with the 8
person receiving the economic benefit of the exemption.9
(b) "Initiation of construction" does not include soil testing, 10
site clearing and grading, site preparation, or any other related 11
activities that are initiated before the issuance of a building 12
permit of the construction of the foundation of a building.13
(c) If the qualifying project is a phased project, "initiation of 14
construction" applies separately to each phase. 15
(7) "Low-income household" means: 16
(a) For nonrural counties, a single person, family, or unrelated 17
persons living together whose adjusted income is at or below 80 18
percent of the median family income adjusted for family size, for the 19
county in which the property is located, as reported by the United 20
States department of housing and urban development; and21
(b) For rural counties, a single person, family, or unrelated 22
persons living together whose adjusted income is at or below 100 23
percent of the median family income adjusted for family size, for the 24
county in which the property is located, as reported by the United 25
States department of housing and urban development.26
(8) "Nonprofit developer" means: 27
(a) A nonprofit defined in RCW 84.36.800 that is exempt from 28
income tax under section 501 (c)(3) of the federal internal revenue 29
code; 30
(b) A limited partnership or limited liability company, 31
consisting of any of the following: 32
(i) A nonprofit defined in RCW 84.36.800 that is exempt from 33
income tax under section 501 (c)(3) of the federal internal revenue 34
code; 35
(ii) A public corporation established under RCW 35.21.660, 36
35.21.670, or 35.21.730; 37
(iii) A housing authority created under RCW 35.82.030 or 38
35.82.300; and 39
p. 2 HB 1717
(iv) A housing authority that meets the qualifications in RCW 1
35.82.210(2)(a) and is a managing member. 2
(c) A mobile home park cooperative or a manufactured housing 3
cooperative as defined in RCW 59.20.030. 4
(9) "Owner" means the property owner of record.5
(10) "Qualifying project" means an affordable housing or mixed-6
use affordable housing development with a minimum of 50 percent of 7
residential units dedicated to housing for low-income households and 8
those units that are affordable to such households for a minimum of 9
40 years. "Qualifying project" includes related facilities such as 10
playgrounds, sidewalks, and project-related infrastructure 11
improvements, as well as facilities used for commercial use for 12
mixed-use development. 13
(11) "Rural county" means a county with a population density of 14
less than 100 persons per square mile or a county smaller than 225 15
square miles as determined by the office of financial management 16
pursuant to RCW 43.62.035. 17
NEW SECTION. Sec. 2. (1) For the purpose of creating a sales 18
and use tax remittance program for the development of affordable 19
housing under this chapter, the governing authority must adopt a 20
resolution of intention to create the remittance program generally 21
described in the resolution. The resolution must state the time and 22
place of a hearing to be held by the governing authority to consider 23
the creation of the tax remittance program and may include such other 24
as the governing authority deems appropriate to apprise the public of 25
the action intended. However, the resolution must provide information 26
pertaining to:27
(a) The application process; 28
(b) The approval process; 29
(c) The appeals process for applications denied approval; and30
(d) Additional requirements, conditions, and obligations that 31
must be followed after the approval of an application.32
(2) The governing authority must give notice of a hearing held 33
under this chapter by publication of the notice once each week for 34
two consecutive weeks, not less than seven days, nor more than 30 35
days, before the date of the hearing in a paper having a general 36
circulation in the city or county. The notice must state the time, 37
date, place, and purpose of the hearing. 38
p. 3 HB 1717
(3) Following the hearing or a continuance of the hearing, the 1
governing authority may authorize the creation of the program.2
(4) A county may not adopt the remittance program authorized 3
under this section within the limits of a city that adopts such a 4
program. 5
(5) The remittance authorized under this chapter applies to taxes 6
imposed by the city or county that has adopted a resolution as 7
provided in subsection (1) of this section. 8
NEW SECTION. Sec. 3. An eligible organization seeking a sales 9
and use tax remittance for a qualifying project under this chapter 10
must complete the following procedures:11
(1) The eligible organization must apply to the city or county on 12
forms adopted by the governing authority. The application must 13
contain the following: 14
(a) Information setting forth the grounds supporting the 15
requested exemption including information indicated on the 16
application form or in the guidelines; 17
(b) A description of the qualifying project and site plan, and 18
other information requested; 19
(c) A statement of the expected total number of housing units and 20
affordable housing units to be created; 21
(d) A statement that the applicant is aware of the potential tax 22
liability involved if the qualifying project ceases to be used for 23
eligible uses under this chapter; 24
(e) A statement that the applicant is aware the qualifying 25
project must be completed within three years from the date of 26
approval of the application; and 27
(f) A statement that the applicant is aware that the governing 28
authority of the city or county official authorized by the governing 29
authority may extend the deadline for completion of construction for 30
a period not to exceed 24 consecutive months; 31
(2) The applicant must verify the application by oath or 32
affirmation; and 33
(3) The application must be accompanied by the application fee, 34
if any, required under this chapter. The duly authorized 35
administrative official or committee of the city or county may permit 36
the applicant to revise an application before final action by the 37
duly authorized administrative official or committee of the city or 38
county. 39
p. 4 HB 1717
NEW SECTION. Sec. 4. The duly authorized administrative 1
official or committee of the city or county may approve the 2
application and grant a conditional certificate for program approval 3
if it finds that:4
(1) The qualifying project is set aside primarily for affordable 5
housing or mixed-use affordable housing development and the applicant 6
commits to renting or selling at least 50 percent of the residential 7
units to low-income households for a minimum of 40 years;8
(2) The applicant commits to any additional affordability 9
conditions adopted by the local government under this chapter not 10
otherwise inconsistent with this chapter; 11
(3) The qualifying project is, or will be, at the time of 12
completion, in conformance with all local plans and regulations that 13
apply at the time the application is approved; 14
(4) The area where the qualifying project will occur is located 15
within an area zoned for residential or mixed uses;16
(5) The terms and conditions of the implementation of the 17
qualifying project meets the requirements of this chapter and any 18
requirements of the city or county that are not otherwise 19
inconsistent with this chapter; and 20
(6) All other requirements of this chapter have been satisfied as 21
well as any other requirements of the city or county that are not 22
otherwise inconsistent with this chapter. 23
NEW SECTION. Sec. 5. (1) The duly authorized administrative 24
official or committee of the city or county must rule on an 25
application filed under this chapter within 90 days after receipt of 26
the application.27
(2) If the application is approved, the city or county must issue 28
the applicant a conditional certificate of program approval. The 29
certificate must contain a statement by a duly authorized 30
administrative official of the governing authority that the 31
qualifying project as described in the application will comply with 32
the required criteria of this chapter. 33
(3) If the application is denied by the city or county, the city 34
or county must state in writing the reasons for denial and send the 35
notice to the applicant at the applicant's last known address within 36
10 days of the denial. 37
(4) Upon denial by the city or county, an applicant may appeal 38
the denial to the city's or county's governing authority, or a city 39
p. 5 HB 1717
or county official designated by the city or county to hear such 1
appeals, within 30 days after receipt of the denial. The appeal 2
before the city's or county's governing authority or designated city 3
or county official must be based upon the record made before the city 4
or county with the burden of proof on the applicant to show that 5
there was no substantial evidence to support the city's or county's 6
decision. The decision of the city or county on the appeal is final.7
NEW SECTION. Sec. 6. The governing authority may establish an 8
application fee. This fee may not exceed an amount required to cover 9
the cost to be incurred by the governing authority in administering 10
the program under this chapter. The application fee must be paid at 11
the time the application for program approval is filed.12
NEW SECTION. Sec. 7. (1) Within 30 days of the issuance of a 13
certificate of occupancy for a qualifying project, the eligible 14
organization must file with the governing authority the following:15
(a) A description of the work that has been completed and a 16
statement that the qualifying project qualifies the property for a 17
sales and use tax remittance under this chapter; 18
(b) A statement of the new affordable housing to be offered; and19
(c) A statement that the work has been completed within three 20
years of the issuance of the conditional certificate of program 21
approval. 22
(2) Within 30 days after receipt of the statements required under 23
subsection (1) of this section, the governing authority must 24
determine and notify the eligible organization as to whether the work 25
completed and the affordable housing to be offered are consistent 26
with the application and the contract approved by the governing 27
authority, and the project qualifies for a remittance under this 28
chapter. 29
(3) The governing authority must issue a certificate of 30
completion of the qualifying project to the eligible organization if 31
the project has complied with the required criteria of this chapter.32
(4) The governing authority must notify the eligible organization 33
within 30 days that a project does not qualify for a remittance under 34
this chapter if it determines that: 35
(a) The work was not completed within three years of the 36
application date; 37
p. 6 HB 1717
(b) The work was not constructed consistent with the application 1
or other applicable requirements; 2
(c) The affordable housing units to be offered are not consistent 3
with the application and criteria of this chapter; or4
(d) The owner's property is otherwise not qualified for a 5
remittance under this chapter. 6
(5) If the governing authority finds that the work was not 7
completed within the required time period due to circumstances beyond 8
the control of the eligible organization and that the eligible 9
organization has been acting and could reasonably be expected to act 10
in good faith and with due diligence, the governing authority may 11
extend the deadline for completion of the work for a period not to 12
exceed 24 consecutive months, and must notify the department of the 13
extension. 14
(6) The governing authority may enact an ordinance to provide a 15
process for an eligible organization to appeal a decision by the 16
governing authority that the eligible organization is not entitled to 17
a remittance of sales and use taxes. The eligible organization may 18
appeal a decision by the governing authority to deny a remittance of 19
sales and use taxes in superior court under 20
RCW 34.05.510 through 34.05.598, if the appeal is filed within 30 21
days of notification by the governing authority to the eligible 22
organization. 23
(7) A governing authority denying an eligible organization a 24
sales and use tax remittance under section 3 of this act must notify 25
the department within 15 days of the denial. 26
NEW SECTION. Sec. 8. (1) An eligible organization must apply to 27
the department before initiation of the construction of the 28
qualifying project. In the case of a qualifying project involving 29
multiple qualifying buildings, applications must be made for, and 30
before the initiation of construction of, each qualifying building. 31
The application must be made to the department in a form and manner 32
prescribed by the department. The application must include a copy of 33
the conditional certificate of program approval issued by the city or 34
county, estimated construction costs, time schedules for completion 35
and operation, and any other information required by the department. 36
The department must rule on the application within 90 days except 37
that the department may extend the time of processing such 38
p. 7 HB 1717
application upon notice to the eligible organization that ruling on 1
the application cannot be completed within such time.2
(2) The department must provide information to the eligible 3
organization regarding documentation that must be retained by the 4
eligible organization to substantiate the amount of sales and use tax 5
exempted under this chapter. 6
(3) The application must include a waiver by the eligible 7
organization of the four-year limitation under RCW 82.32.100.8
(4) To qualify for the exemption in this chapter, the eligible 9
organization must be registered with the department under RCW 10
82.32.030. 11
NEW SECTION. Sec. 9. A new section is added to chapter 82.08 12
RCW to read as follows: 13
(1) Subject to the requirements of this section, the tax levied 14
by RCW 82.08.020 does not apply to sales of materials incorporated 15
into, and labor and services rendered in respect to, a qualifying 16
project. An eligible organization claiming a remittance under this 17
section must pay the state and local sales and use tax on such sales 18
and apply to the department for a remittance of the tax paid. 19
(2) Beginning January 1, 2026, the exemption under this section 20
is for taxes collected on a qualifying project under the program 21
established in section 2 of this act. The remittance is allocated to 22
the eligible organization and the city or county as follows:23
(a) 50 percent of state and local sales and use taxes paid must 24
be remitted to the eligible organization. The remittance of local 25
sales and use taxes is limited to taxes imposed by the city or county 26
that has authorized the remittance program under section 2 of this 27
act; 28
(b) 50 percent of state sales and use taxes paid must be 29
distributed to the city or county that has authorized the remittance 30
program under section 2 of this act. 31
(3) To receive a remittance under this section, the eligible 32
organization must submit the following to the department:33
(a) A remittance application in a form and manner as required by 34
the department; 35
(b) A certificate of occupancy from the permitting authority of 36
the city or county where the project is located; 37
(c) A certificate of completion from the city or county affirming 38
that the project meets the requirements of section 4 of this act;39
p. 8 HB 1717
(d) An information sheet, in a form and manner as required by the 1
department, specifying the amount of exempted tax claimed and the 2
qualifying purchases or acquisitions for which the remittance is 3
claimed; 4
(e) A signed affidavit from an authorized representative of the 5
city or county requesting or declining a remittance under this 6
chapter; and 7
(f) Any other documentation supporting the remittance 8
application. 9
(4) The department must rule on the application within 90 days, 10
except that the department may extend the time of processing such 11
application upon notice to the eligible organization that ruling on 12
the application cannot be completed within such time.13
(5) This section applies to eligible organizations receiving a 14
certificate of completion on or before December 31, 2035.15
(6) The definitions in section 1 of this act apply to this 16
section. 17
NEW SECTION. Sec. 10. A new section is added to chapter 82.12 18
RCW to read as follows: 19
(1) The provisions of this chapter do not apply with respect to 20
the use of materials incorporated into, and labor and services 21
rendered in respect to, a qualifying project. An eligible 22
organization claiming a remittance under this section must pay the 23
state and local use tax on such uses and apply to the department for 24
a remittance of the tax paid. 25
(2) The definitions, conditions, and requirements of section 9 of 26
this act apply to this section. 27
(3) This section applies to eligible projects receiving a 28
certificate of completion on or before December 31, 2035.29
NEW SECTION. Sec. 11. (1) Beginning January 1, 2026, a city or 30
county which has enacted a remittance program created under section 2 31
of this act must use the remittance moneys for the following 32
purposes:33
(a) Acquiring, rehabilitating, or constructing affordable 34
housing, which may include new units of affordable housing within an 35
existing structure or facilities providing supported housing services 36
under RCW 71.24.385; 37
p. 9 HB 1717
(b) Acquiring real property for future affordable housing 1
development; 2
(c) Funding the operation and maintenance costs of new units of 3
affordable or permanent supportive housing; 4
(d) The operation and delivery of behavioral health treatment 5
programs and services; 6
(e) If the city or county utilized general fund moneys to support 7
a qualifying project under a remittance program established under 8
section 2 of this act, the city or county may recompense itself.9
(2) Eligible cities and counties may enter into interlocal 10
agreements to combine funds from remittance programs created under 11
section 2 of this act. 12
(3) This section expires December 31, 2035. 13
NEW SECTION. Sec. 12. (1) Thirty days after the anniversary of 14
the date of issuance of the certificate of occupancy and each year 15
thereafter for 40 years, the eligible organization must file with a 16
designated authorized representative of the city an annual report 17
indicating the following:18
(a) A statement of the affordable housing units constructed on 19
the property as of the anniversary date; 20
(b) A certification by the eligible organization that the 21
property has not changed use; and 22
(c) Any additional information requested by the city or county.23
(2) A city or county that has issued a certificate of completion 24
under this chapter must report annually by December 31st of each 25
year, beginning in 2026, to the department. The report must include 26
the following information: 27
(a) Identifying information for each qualifying project that has 28
received a certificate of completion; and 29
(b)(i) Confirmation that the qualifying project continues to 30
qualify for the remittance; or 31
(ii) Notification that the qualifying project no longer meets the 32
qualifications for a remittance. 33
NEW SECTION. Sec. 13. (1) The taxes exempted under this chapter 34
are immediately due and payable if:35
(a) An eligible organization notifies the city or county and the 36
department that they voluntarily opt to discontinue compliance with 37
the requirements of this chapter; or 38
p. 10 HB 1717
(b) A city or county finds that a portion of a qualifying project 1
is changed or will be changed to disqualify the recipient for 2
remittance eligibility under this chapter. 3
(2) The department must assess interest at the rate provided for 4
delinquent taxes, but not penalties, retroactively to the date of 5
remittance. A debt for remitted taxes is not extinguished by 6
insolvency or other failure of the recipient. 7
(3) This section does not apply after 40 years from the date of 8
the certificate of completion. 9
NEW SECTION. Sec. 14. (1) Transfer of qualifying project 10
ownership does not terminate the exemption. The exemption is subject 11
to the successor meeting the eligibility requirements under this 12
chapter.13
(2) The transferor of a qualifying project must notify the 14
governing authority and the department of such transfer. The 15
governing authority must certify to the department that the successor 16
meets the requirements of the exemption. The transferor must provide 17
the information necessary for the department to transfer the 18
exemption. If the transferor fails to notify the city or county and 19
the department, all exempted sales and use taxes are immediately due 20
and payable. The department must assess interest at the rate provided 21
for delinquent taxes, but not penalties, retroactively to the date of 22
exemption. 23
NEW SECTION. Sec. 15. This section is the tax preference 24
performance statement for the tax preference contained in sections 9 25
and 10, chapter . . ., Laws of 2025 (sections 9 and 10 of this act). 26
This performance statement is only intended to be used for subsequent 27
evaluation of the tax preference. It is not intended to create a 28
private right of action by any party or be used to determine 29
eligibility for preferential tax treatment.30
(1) The legislature categorizes the tax preferences as those 31
intended to induce certain designated behavior by taxpayers, as 32
indicated in RCW 82.32.808(2)(a). 33
(2) It is the legislature's specific public policy objective to 34
expand affordable housing options for low-income households.35
(3)(a) To measure the effectiveness of the tax preferences in 36
this act, the joint legislative audit and review committee must 37
evaluate the number of housing units and affordable housing units 38
p. 11 HB 1717
created by qualifying projects receiving the exemptions under this 1
act and the number of housing units and affordable housing units 2
created in projects funded by remittance funds under this act. If a 3
review finds that the number of affordable housing units produced has 4
not increased, then the legislature intends to repeal this tax 5
preference. 6
(b) The review must be provided to the fiscal committees of the 7
legislature by December 31, 2033. 8
(4) In order to obtain the data necessary to perform the review 9
in subsection (3) of this section, the joint legislative audit and 10
review committee may refer any other data collected by the state, any 11
data source, and any data collected by the department under RCW 12
82.59.080. 13
NEW SECTION. Sec. 16. Sections 1 through 8, 11 through 14, and 14
16 of this act constitute a new chapter in Title 82 RCW.15
NEW SECTION. Sec. 17. This act takes effect January 1, 2026.16
--- END ---
p. 12 HB 1717