Excise tax administration

AN ACT Relating to notifications and effective dates for 1
department of revenue administration of certain excise taxes; 2
amending RCW 82.92.010, 82.92.070, 82.92.090, and 82.46.080; and 3
adding a new section to chapter 82.32 RCW. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
PART I6
THE TARGETED UNDERDEVELOPED URBAN AREAS DEFERRAL7
Sec. 1. RCW 82.92.010 and 2022 c 241 s 3 are each amended to 8
read as follows: 9
The definitions in this section apply throughout this chapter 10
unless the context clearly requires otherwise. 11
(1) "Affordable homeownership housing" means housing intended for 12
owner occupancy to low or moderate-income households whose monthly 13
housing costs, including utilities other than telephone, do not 14
exceed 30 percent of the household's monthly income.15
(2) "Affordable rental housing" means housing for very low or 16
low-income households whose monthly housing costs, including 17
utilities other than telephone, do not exceed 30 percent of the 18
household's monthly income. 19
(3) "Applicant" means an owner of underdeveloped property.20
Z-0398.1
HOUSE BILL 2650
State of Washington 69th Legislature 2026 Regular Session
By Representative Parshley; by request of Department of Revenue
Read first time 01/23/26. Referred to Committee on Finance.
p. 1 HB 2650
(4) "City" means a city with a population of at least 135,000 and 1
not more than 250,000 at the time the city initially establishes the 2
program under this section. 3
(5) "Conditional recipient" means an owner of underdeveloped land 4
granted a conditional certificate of program approval under this 5
chapter, which includes any successor owner of the property.6
(6) "County median price" means the most recently published 7
quarterly data of median home prices by the Washington center for 8
real estate research. 9
(7) "Eligible investment project" means an investment project 10
that is located in a city and receiving a conditional certificate of 11
program approval. 12
(8) "Fair market rent" means the estimates of 40th percentile 13
gross rents for standard quality units within counties as published 14
by the ((federal)) United States department of housing and urban 15
development. 16
(9) "Governing authority" means the local legislative authority 17
of a city having jurisdiction over the property for which a deferral 18
may be granted under this chapter. 19
(10) "Household" means a single person, family, or unrelated 20
persons living together. 21
(11)(a) "Initiation of construction" means the date that a 22
building permit is issued under the building code adopted under RCW 23
19.27.031 for construction of the qualified building, if the 24
underlying ownership of the building vests exclusively with the 25
person receiving the economic benefit of the deferral.26
(b) "Initiation of construction" does not include soil testing, 27
site clearing and grading, site preparation, or any other related 28
activities that are initiated before the issuance of a building 29
permit for the construction of the foundation of the building.30
(c) If the investment project is a phased project, "initiation of 31
construction" applies separately to each phase. 32
(12) "Investment project" means an investment in multifamily 33
housing, including labor, services, and materials incorporated in the 34
planning, installation, and construction of the project. "Investment 35
project" includes investment in related facilities such as 36
playgrounds and sidewalks as well as facilities used for business use 37
for mixed-use development. 38
(13) "Low-income household" means a single person, family, or 39
unrelated persons living together whose adjusted income is more than 40
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50 percent but is at or below 80 percent of the median family income 1
adjusted for family size, for the county, city, or metropolitan 2
statistical area, where the project is located, as reported by the 3
United States department of housing and urban development.4
(14) "Moderate-income household" means a single person, family, 5
or unrelated persons living together whose adjusted income is more 6
than 80 percent but is at or below 115 percent of the median family 7
income adjusted for family size, for the county, city, or 8
metropolitan statistical area, where the project is located, as 9
reported by the United States department of housing and urban 10
development. 11
(15) "Multifamily housing" means a building or a group of 12
buildings having two or more dwelling units not designed or used as 13
transient accommodations and not including hotels and motels. 14
Multifamily units may result from new construction or rehabilitation 15
or conversion of vacant, underutilized, or substandard buildings to 16
multifamily housing. 17
(16) "Owner" means the property owner of record.18
(17) "Underdeveloped property" means land used as a surface 19
parking lot for parking of motor vehicles off the street or highway, 20
that is open to public use with or without charge ((, as of June 9, 21
2022)). 22
(18) "Very low-income household" means a single person, family, 23
or unrelated persons living together whose adjusted income is at or 24
below 50 percent of the median family income adjusted for family 25
size, for the county, city, or metropolitan statistical area, where 26
the project is located, as reported by the United States department 27
of housing and urban development. 28
Sec. 2. RCW 82.92.070 and 2022 c 241 s 9 are each amended to 29
read as follows: 30
(1) Within 30 days of the issuance of a certificate of occupancy 31
for an eligible investment project, the conditional recipient must 32
file with the city the following: 33
(a) A description of the work that has been completed and a 34
statement that the eligible investment project qualifies the property 35
for a sales and use tax deferral under this chapter;36
(b) A statement of the new affordable housing to be offered as a 37
result of the new construction; and 38
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(c) A statement that the work has been completed within three 1
years of the issuance of the conditional certificate of program 2
approval. 3
(2) Within 30 days after receipt of the statements required under 4
subsection (1) of this section, the city must determine and notify 5
the conditional recipient as to whether the work completed and the 6
affordable housing to be offered are consistent with the application 7
and the contract approved by the city, and the investment project 8
continues to qualify for a tax deferral under this chapter. The 9
conditional recipient must ((notify)) provide the department with a 10
copy of the city's determination within 30 days from receiving the 11
city's determination to schedule an audit of the deferred taxes. The 12
department must determine the amount of sales and use taxes 13
qualifying for the deferral. If the department determines that 14
purchases were not eligible for deferral it must assess interest, but 15
not penalties, on the nonqualifying amounts. 16
(3) The city must notify the conditional recipient within 30 days 17
that a tax deferral under this chapter is denied if the city 18
determines that: 19
(a) The work was not completed within three years of the 20
application date; 21
(b) The work was not constructed consistent with the application 22
or other applicable requirements; 23
(c) The affordable housing units to be offered are not consistent 24
with the application and criteria of this chapter; or25
(d) The owner's property is otherwise not qualified for a sales 26
and use tax deferral under this chapter. 27
(4) If the city finds that the work was not completed within the 28
required time period due to circumstances beyond the control of the 29
conditional recipient and that the conditional recipient has been 30
acting and could reasonably be expected to act in good faith and with 31
due diligence, the governing authority may extend the deadline for 32
completion of the work for a period not to exceed 24 consecutive 33
months. 34
(5) The city's governing authority may enact an ordinance to 35
provide a process for a conditional recipient to appeal a decision by 36
the city that the conditional recipient is not entitled to a deferral 37
of sales and use taxes. The conditional recipient may appeal a 38
decision by the city to deny a deferral of sales and use taxes in 39
superior court under RCW 34.05.510 through 34.05.598, if the appeal 40
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is filed within 30 days of notification by the city to the 1
conditional recipient. 2
(6) A city denying a conditional recipient of a sales and use tax 3
deferral under subsection (3) of this section must notify the 4
department and taxes deferred under this chapter are immediately due 5
and payable, subject to any appeal by the conditional recipient. The 6
department must assess interest at the rate provided for delinquent 7
taxes and penalties retroactively to the date of deferral. A debt for 8
deferred taxes will not be extinguished by insolvency or other 9
failure of the recipient. 10
Sec. 3. RCW 82.92.090 and 2022 c 241 s 11 are each amended to 11
read as follows: 12
(1) A ((conditional)) recipient of a conditional certificate of 13
program approval issued by the city must submit an application for a 14
sales and use tax deferral certificate to the department before 15
initiation of the construction of the investment project. In the case 16
of an investment project involving multiple qualified buildings, 17
applications must be made for, and before the initiation of 18
construction of, each qualified building. The application must be 19
made to the department in a form and manner prescribed by the 20
department. The application must include a copy of the conditional 21
certificate of program approval issued by the city detailing 22
specifics of the investment project conditionally approved and 23
clarifying any portions of the project not approved for a tax 24
deferral, estimated construction costs, time schedules for completion 25
and operation, and any other information required by the department. 26
The department must ((rule on )) review the application for 27
completeness and provide a tax deferral certificate within 60 days of 28
receiving a complete application. 29
(2) The department must provide information to the conditional 30
recipient regarding documentation that must be retained by the 31
conditional recipient in order to substantiate the amount of sales 32
and use tax actually deferred under this chapter. 33
(3) The department may not accept applications for the deferral 34
under this chapter after June 30, 2032. 35
(4) The application must include a waiver by the conditional 36
recipient of the four-year limitation under RCW 82.32.100.37
(5) This section expires July 1, 2032. 38
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PART II1
LOCAL REAL ESTATE EXCISE TAX CHANGES2
Sec. 4. RCW 82.46.080 and 1998 c 106 s 10 are each amended to 3
read as follows: 4
((A county, city, or town that imposes an excise tax under this 5
chapter must provide the county treasurer with a copy of the 6
ordinance or other action initially authorizing the tax or altering 7
the rate of the tax that is imposed at least sixty days before change 8
becomes effective. )) (1) A local real estate excise tax change may 9
take effect (a) no sooner than 75 days after the department is 10
notified in writing of the tax change and (b) only on the first day 11
of January, April, or July.12
(2) A county or city making a real estate excise tax change must 13
notify the department and the county treasurer in writing of the tax 14
change and provide a copy of the signed ordinance, resolution, or 15
other action authorizing the tax change. If the tax change results 16
from an annexation, the written notification must also include a copy 17
of the complete ordinance containing a legal description, a map 18
specifying the boundaries of the annexed territory, and a list of all 19
included parcel numbers in the annexed territory.20
(3) For purposes of this section, "tax change" means enactment or 21
revision of local real estate excise taxes under this chapter or any 22
other statute, including changes resulting from referendum or 23
annexation.24
PART III25
LODGING TAX CHANGES26
NEW SECTION. Sec. 5. A new section is added to chapter 82.32 27
RCW to read as follows: 28
(1) A lodging tax change may take effect (a) no sooner than 75 29
days after the department is notified in writing of the tax change 30
and (b) only on the first day of January, April, or July.31
(2) A city, county, public facility district, or other authorized 32
taxing authority making a lodging tax change must notify the 33
department in writing of the tax change and provide a copy of the 34
signed ordinance, resolution, or other action authorizing the tax 35
change. If the lodging tax change results from an annexation, the 36
written notification must also include a copy of the complete 37
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ordinance containing a legal description, a map specifying the 1
boundaries of the annexed territory, and a list of all included 2
parcel numbers in the annexed territory. 3
(3) For purposes of this section, "lodging tax change" means 4
enactment or revision of a tax or charge on the furnishing of lodging 5
under chapter 36.100, 35.101, or 67.28 RCW, or any other statute, 6
including changes resulting from referendum or annexation.7
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