Affordable housing/REET

AN ACT Relating to providing a real estate excise tax exemption 1
for the sale of qualified affordable housing; amending RCW 82.45.010; 2
amending 2019 c 385 s 1 (uncodified); and providing an expiration 3
date. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
Sec. 1. RCW 82.45.010 and 2025 c 159 s 1 are each amended to 6
read as follows: 7
(1) As used in this chapter, the term "sale" has its ordinary 8
meaning and includes any conveyance, grant, assignment, quitclaim, or 9
transfer of the ownership of or title to real property, including 10
standing timber, or any estate or interest therein for a valuable 11
consideration, and any contract for such conveyance, grant, 12
assignment, quitclaim, or transfer, and any lease with an option to 13
purchase real property, including standing timber, or any estate or 14
interest therein or other contract under which possession of the 15
property is given to the purchaser, or any other person at the 16
purchaser's direction, and title to the property is retained by the 17
vendor as security for the payment of the purchase price. The term 18
also includes the grant, assignment, quitclaim, sale, or transfer of 19
improvements constructed upon leased land. 20
H-2479.1
HOUSE BILL 2227
State of Washington 69th Legislature 2026 Regular Session
By Representatives Ramel, Macri, Ryu, Berry, Taylor, Parshley, Reed,
Obras, Santos, Nance, Duerr, Kloba, Thomas, Shavers, Farivar, Hill,
and Pollet
Prefiled 12/31/25. Read first time 01/12/26. Referred to Committee
on Finance.
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(2)(a) The term "sale" also includes the transfer or acquisition 1
within any 36 month period of a controlling interest in any entity 2
with an interest in real property located in this state for a 3
valuable consideration. 4
(b) For the sole purpose of determining whether, pursuant to the 5
exercise of an option, a controlling interest was transferred or 6
acquired within a 36 month period, the date that the option agreement 7
was executed is the date on which the transfer or acquisition of the 8
controlling interest is deemed to occur. For all other purposes under 9
this chapter, the date upon which the option is exercised is the date 10
of the transfer or acquisition of the controlling interest.11
(c) For purposes of this subsection, all acquisitions of persons 12
acting in concert must be aggregated for purposes of determining 13
whether a transfer or acquisition of a controlling interest has taken 14
place. The department must adopt standards by rule to determine when 15
persons are acting in concert. In adopting a rule for this purpose, 16
the department must consider the following: 17
(i) Persons must be treated as acting in concert when they have a 18
relationship with each other such that one person influences or 19
controls the actions of another through common ownership; and20
(ii) When persons are not commonly owned or controlled, they must 21
be treated as acting in concert only when the unity with which the 22
purchasers have negotiated and will consummate the transfer of 23
ownership interests supports a finding that they are acting as a 24
single entity. If the acquisitions are completely independent, with 25
each purchaser buying without regard to the identity of the other 26
purchasers, then the acquisitions are considered separate 27
acquisitions. 28
(3) The term "sale" does not include: 29
(a) A transfer by gift, devise, or inheritance.30
(b) A transfer by transfer on death deed, to the extent that it 31
is not in satisfaction of a contractual obligation of the decedent 32
owed to the recipient of the property. 33
(c) A transfer of any leasehold interest other than of the type 34
mentioned above. 35
(d) A cancellation or forfeiture of a vendee's interest in a 36
contract for the sale of real property, whether or not such contract 37
contains a forfeiture clause, or deed in lieu of foreclosure of a 38
mortgage. 39
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(e) The partition of property by tenants in common by agreement 1
or as the result of a court decree. 2
(f) The assignment of property or interest in property from one 3
spouse or one domestic partner to the other spouse or other domestic 4
partner in accordance with the terms of a decree of dissolution of 5
marriage or state registered domestic partnership or in fulfillment 6
of a property settlement agreement. 7
(g) The assignment or other transfer of a vendor's interest in a 8
contract for the sale of real property, even though accompanied by a 9
conveyance of the vendor's interest in the real property involved.10
(h) Transfers by appropriation or decree in condemnation 11
proceedings brought by the United States, the state or any political 12
subdivision thereof, or a municipal corporation. 13
(i) A mortgage or other transfer of an interest in real property 14
merely to secure a debt, or the assignment thereof.15
(j) Any transfer or conveyance made pursuant to a deed of trust 16
or an order of sale by the court in any mortgage, deed of trust, or 17
lien foreclosure proceeding or upon execution of a judgment, or deed 18
in lieu of foreclosure to satisfy a mortgage or deed of trust.19
(k) A conveyance to the federal housing administration or 20
veterans administration by an authorized mortgagee made pursuant to a 21
contract of insurance or guaranty with the federal housing 22
administration or veterans administration. 23
(l) A transfer in compliance with the terms of any lease or 24
contract upon which the tax as imposed by this chapter has been paid 25
or where the lease or contract was entered into prior to the date 26
this tax was first imposed. 27
(m) The sale of any grave or lot in an established cemetery.28
(n) A sale by the United States, this state or any political 29
subdivision thereof, or a municipal corporation of this state.30
(o) A sale to a regional transit authority or public corporation 31
under RCW 81.112.320 under a sale/leaseback agreement under RCW 32
81.112.300. 33
(p) A transfer of real property, however effected, if it consists 34
of a mere change in identity or form of ownership of an entity where 35
there is no change in the beneficial ownership. These include 36
transfers to a corporation or partnership which is wholly owned by 37
the transferor and/or the transferor's spouse or domestic partner or 38
children of the transferor or the transferor's spouse or domestic 39
partner. However, if thereafter such transferee corporation or 40
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partnership voluntarily transfers such real property, or such 1
transferor, spouse or domestic partner, or children of the transferor 2
or the transferor's spouse or domestic partner voluntarily transfer 3
stock in the transferee corporation or interest in the transferee 4
partnership capital, as the case may be, to other than (i) the 5
transferor and/or the transferor's spouse or domestic partner or 6
children of the transferor or the transferor's spouse or domestic 7
partner, (ii) a trust having the transferor and/or the transferor's 8
spouse or domestic partner or children of the transferor or the 9
transferor's spouse or domestic partner as the only beneficiaries at 10
the time of the transfer to the trust, or (iii) a corporation or 11
partnership wholly owned by the original transferor and/or the 12
transferor's spouse or domestic partner or children of the transferor 13
or the transferor's spouse or domestic partner, within three years of 14
the original transfer to which this exemption applies, and the tax on 15
the subsequent transfer has not been paid within 60 days of becoming 16
due, excise taxes become due and payable on the original transfer as 17
otherwise provided by law. 18
(q)(i) A transfer that for federal income tax purposes does not 19
involve the recognition of gain or loss for entity formation, 20
liquidation or dissolution, and reorganization, including but not 21
limited to nonrecognition of gain or loss because of application of 22
26 U.S.C. Sec. 332, 337, 351, 368 (a)(1), 721, or 731 of the internal 23
revenue code of 1986, as amended. 24
(ii) However, the transfer described in (q)(i) of this subsection 25
cannot be preceded or followed within a 36 month period by another 26
transfer or series of transfers, that, when combined with the 27
otherwise exempt transfer or transfers described in (q)(i) of this 28
subsection, results in the transfer of a controlling interest in the 29
entity for valuable consideration, and in which one or more persons 30
previously holding a controlling interest in the entity receive cash 31
or property in exchange for any interest the person or persons acting 32
in concert hold in the entity. This subsection (3)(q)(ii) does not 33
apply to that part of the transfer involving property received that 34
is the real property interest that the person or persons originally 35
contributed to the entity or when one or more persons who did not 36
contribute real property or belong to the entity at a time when real 37
property was purchased receive cash or personal property in exchange 38
for that person or persons' interest in the entity. The real estate 39
excise tax under this subsection (3)(q)(ii) is imposed upon the 40
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person or persons who previously held a controlling interest in the 1
entity. 2
(r) A qualified sale of a manufactured/mobile home community, as 3
defined in RCW 59.20.030. 4
(s)(i) A transfer of a qualified low-income housing development 5
or controlling interest in a qualified low-income housing 6
development, unless, due to noncompliance with federal statutory 7
requirements, the seller is subject to recapture, in whole or in 8
part, of its allocated federal low-income housing tax credits within 9
the four years prior to the date of transfer. 10
(ii) For purposes of this subsection (3)(s), "qualified low-11
income housing development" means real property and improvements in 12
respect to which the seller or, in the case of a transfer of a 13
controlling interest, the owner or beneficial owner, was allocated 14
federal low-income housing tax credits authorized under 26 U.S.C. 15
Sec. 42 or successor statute, by the Washington state housing finance 16
commission or successor state-authorized tax credit allocating 17
agency. 18
(iii) This subsection (3)(s) does not apply to transfers of a 19
qualified low-income housing development or controlling interest in a 20
qualified low-income housing development occurring on or after July 21
1, 2035. 22
(iv) The Washington state housing finance commission, in 23
consultation with the department, must gather data on: (A) The fiscal 24
savings, if any, accruing to transferees as a result of the exemption 25
provided in this subsection (3)(s); (B) the extent to which 26
transferors of qualified low-income housing developments receive 27
consideration, including any assumption of debt, as part of a 28
transfer subject to the exemption provided in this subsection (3)(s); 29
and (C) the continued use of the property for low-income housing. The 30
Washington state housing finance commission must provide this 31
information to the joint legislative audit and review committee. The 32
committee must conduct a review of the tax preference created under 33
this subsection (3)(s) in calendar year 2033, as required under 34
chapter 43.136 RCW. 35
(t)(i) A qualified transfer of residential property by a legal 36
representative of a person with developmental disabilities to a 37
qualified entity subject to the following conditions:38
(A) The adult child with developmental disabilities of the 39
transferor of the residential property must be allowed to reside in 40
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the residence or successor property so long as the placement is safe 1
and appropriate as determined by the department of social and health 2
services; 3
(B) The title to the residential property is conveyed without the 4
receipt of consideration by the legal representative of a person with 5
developmental disabilities to a qualified entity; 6
(C) The residential property must have no more than four living 7
units located on it; and 8
(D) The residential property transferred must remain in continued 9
use for 50 years by the qualified entity as supported living for 10
persons with developmental disabilities by the qualified entity or 11
successor entity. If the qualified entity sells or otherwise conveys 12
ownership of the residential property the proceeds of the sale or 13
conveyance must be used to acquire similar residential property and 14
such similar residential property must be considered the successor 15
for continued use. The property will not be considered in continued 16
use if the department of social and health services finds that the 17
property has failed, after a reasonable time to remedy, to meet any 18
health and safety statutory or regulatory requirements. If the 19
department of social and health services determines that the property 20
fails to meet the requirements for continued use, the department of 21
social and health services must notify the department and the real 22
estate excise tax based on the value of the property at the time of 23
the transfer into use as residential property for persons with 24
developmental disabilities becomes immediately due and payable by the 25
qualified entity. The tax due is not subject to penalties, fees, or 26
interest under this title. 27
(ii) For the purposes of this subsection (3)(t) the definitions 28
in RCW 71A.10.020 apply. 29
(iii) A "qualified entity" is: 30
(A) A nonprofit organization under Title 26 U.S.C. Sec. 501 (c)(3) 31
of the federal internal revenue code of 1986, as amended, as of June 32
7, 2018, or a subsidiary under the same taxpayer identification 33
number that provides residential supported living for persons with 34
developmental disabilities; or 35
(B) A nonprofit adult family home, as defined in RCW 70.128.010, 36
that exclusively serves persons with developmental disabilities.37
(iv) In order to receive an exemption under this subsection 38
(3)(t) an affidavit must be submitted by the transferor of the 39
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residential property and must include a copy of the transfer 1
agreement and any other documentation as required by the department.2
(u)(i) The sale by an affordable homeownership facilitator of 3
((self-help)) ownership housing to a low-income household.4
(ii) The definitions in this subsection (3)(u) apply to this 5
subsection (3)(u) unless the context clearly requires otherwise.6
(A) "Affordable homeownership facilitator" means a nonprofit 7
community or neighborhood-based organization that is exempt from 8
income tax under Title 26 U.S.C. Sec. 501 (c) of the internal revenue 9
code of 1986, as amended, as of October 1, 2019, and that is the 10
developer of ((self-help)) ownership housing. 11
(B) "Low-income" means household income as defined by the 12
department, provided that the definition may not exceed 80 percent of 13
median household income, adjusted for household size, for the county 14
in which the dwelling is located. 15
(C) "((Self-help)) Ownership housing" means dwelling residences 16
provided for ownership by low-income individuals and families ((whose 17
ownership requirement includes labor participation. "Self-help 18
housing")) and does not include residential rental housing provided 19
on a commercial basis to the general public. 20
(v)(i) A sale or transfer of real property to a qualifying 21
grantee that uses the property for housing for low-income persons and 22
receives or otherwise qualifies the property for an exemption from 23
real and personal property taxes under RCW 84.36.560, 84.36.049, 24
35.82.210, 35.21.755, or 84.36.010. For purposes of this subsection 25
(3)(v), "qualifying grantee" means a nonprofit entity as defined in 26
RCW 84.36.560, a nonprofit entity or qualified cooperative 27
association as defined in RCW 84.36.049, a housing authority created 28
under RCW 35.82.030 or 35.82.300, a public corporation established 29
under RCW 35.21.660 or 35.21.730, or a county or municipal 30
corporation. A qualifying grantee that is a county or municipal 31
corporation must record a covenant at the time of transfer that 32
prohibits using the property for any purpose other than for low-33
income housing for a period of at least 10 years. At a minimum, the 34
covenant must address price restrictions and household income limits 35
for the low-income housing. A qualifying grantee must comply with the 36
requirements described in (v)(i)(A), (B), or (C) of this subsection 37
and must also certify, by affidavit at the time of sale or transfer, 38
that it intends to comply with those requirements.39
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(A) If the qualifying grantee intends to operate existing housing 1
on the property, within one year of the sale or transfer:2
(I) The qualifying grantee must receive or qualify the property 3
for a tax exemption under RCW 84.36.560, 84.36.049, 4
35.82.210, 35.21.755, or 84.36.010; and 5
(II) The property must be used as housing for low-income persons.6
(B) If the qualifying grantee intends to develop new housing on 7
the site, within five years of the sale or transfer:8
(I) The qualifying grantee must receive or qualify the property 9
for a tax exemption under RCW 84.36.560, 84.36.049, 10
35.82.210, 35.21.755, or 84.36.010; and 11
(II) The property must be used as housing for low-income persons.12
(C) If the qualifying grantee intends to substantially 13
rehabilitate the premises as defined in RCW 59.18.200, within three 14
years: 15
(I) The qualifying grantee must receive or qualify the property 16
for a tax exemption under RCW 84.36.560, 84.36.049, 17
35.82.210, 35.21.755, or 84.36.010; and 18
(II) The property must be used as housing for low-income persons.19
(ii) If the qualifying grantee fails to satisfy the requirements 20
described in (v)(i)(A), (B), or (C) of this subsection, within the 21
timelines described in (v)(i)(A), (B), or (C) of this subsection, the 22
qualifying grantee must pay the tax that would have otherwise been 23
due at the time of initial transfer, plus interest calculated from 24
the date of initial transfer pursuant to RCW 82.32.050.25
(iii) If a qualifying grantee transfers the property to a 26
different qualifying grantee within the original timelines described 27
in (v)(i)(A), (B), or (C) of this subsection, neither the original 28
qualifying grantee nor the new qualifying grantee is required to pay 29
the tax, so long as the new qualifying grantee satisfies the 30
requirements as described in (v)(i)(A), (B), or (C) of this 31
subsection within the exemption period of the initial transfer. If 32
the new qualifying grantee fails to satisfy the requirements 33
described in (v)(i)(A), (B), or (C) of this subsection, only the new 34
qualifying grantee is liable for the payment of taxes required by 35
(v)(ii) of this subsection. There is no limit on the number of 36
transfers between qualifying grantees within the original timelines.37
(iv) Each affidavit must be filed with the department upon 38
completion of the sale or transfer of property, including transfers 39
from a qualifying grantee to a different qualifying grantee. The 40
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qualifying grantee must provide proof to the department as required 1
by the department once the requirements as described in (v)(i)(A), 2
(B), or (C) of this subsection have been satisfied.3
(v) For the purposes of this subsection (3)(v), "low-income" has 4
the same meaning as in (u) of this subsection. 5
(w)(i) Beginning January 1, 2026, the sale of qualified space in 6
a development that qualifies for a property tax exemption under RCW 7
84.36.560, 84.36.049, 35.82.210, 35.21.755, or 84.36.010 to a 8
nonprofit organization, a housing authority, or public corporation 9
for use for an exempt community purpose. 10
(ii) For the purposes of this subsection (3)(w), the following 11
definitions apply: 12
(A) "Affordable housing development" means a development with 13
housing provided to households with a household income that does not 14
exceed 80 percent of median household income at initial occupancy, 15
adjusted for household size, for the county in which the dwelling is 16
located. 17
(B) "Exempt community purpose" means any use to provide a service 18
that benefits affordable housing development tenants or the public 19
including, but not limited to, health clinics, senior day care, food 20
banks, community centers, and early learning facilities.21
(C) "Nonprofit organization" means an organization exempt from 22
taxation under section 501 (c)(3) of the internal revenue code of 1986 23
(26 U.S.C. Sec. 501(c)(3)), as amended. 24
(D) "Qualified space" means any portion of an affordable housing 25
development that is accessible to tenants or the public that 26
constitutes a separate legal parcel of property under chapter 64.32, 27
64.34, or 64.90 RCW. 28
Sec. 2. 2019 c 385 s 1 (uncodified) is amended to read as 29
follows: 30
(1) This section is the tax preference performance statement for 31
chapter 385, Laws of 2019, and section 1, chapter . . ., Laws of 2026 32
(section 1 of this act) . This performance statement is only intended 33
to be used for subsequent evaluation of the tax preference. It is not 34
intended to create a private right of action by any ((part)) party or 35
be used to determine eligibility for a preferential tax treatment.36
(2) The legislature categorizes the tax preference as one 37
intended to induce certain designated behavior by taxpayers, as 38
indicated in RCW 82.32.808(2)(a). 39
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(3) It is the legislature's specific public policy objective to 1
provide real estate excise tax relief to developers of ((self-help)) 2
ownership housing to encourage continued development of ((self-help)) 3
ownership housing. 4
(4) The joint legislative audit and review committee is directed 5
to review: 6
(a) The total number of taxpayers that claimed the tax 7
preference; and 8
(b) The total amount of real estate excise tax revenue that was 9
exempt under chapter 385, Laws of 2019 , and section 1, chapter . . ., 10
Laws of 2026 (section 1 of this act), annually. 11
(5) In order to obtain ((this section )) the data necessary to 12
measure the effectiveness of this tax preference , the joint 13
legislative audit and review committee may refer to department of 14
revenue data, as well as any other available data source.15
NEW SECTION. Sec. 3. Section 1 of this act expires January 1, 16
2030.17
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