ADU tax exemptions

AN ACT Relating to amending the county population threshold for 1
counties that may exempt from taxation the value of accessory 2
dwelling units to incentivize rental to low-income households; 3
amending RCW 84.36.400; amending 2023 c 335 s 2 (uncodified); 4
creating a new section; and providing an expiration date.5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
Sec. 1. RCW 84.36.400 and 2023 c 335 s 1 are each amended to 7
read as follows: 8
(1) Any physical improvement to single-family dwellings upon real 9
property, including constructing an accessory dwelling unit, whether 10
attached to or within the single-family dwelling or as a detached 11
unit on the same real property, shall be exempt from taxation for the 12
three assessment years subsequent to the completion of the 13
improvement to the extent that the improvement represents 30 percent 14
or less of the value of the original structure. A taxpayer desiring 15
to obtain the exemption granted by this section must file notice of 16
his or her intention to construct the improvement prior to the 17
improvement being made on forms prescribed by the department of 18
revenue and furnished to the taxpayer by the county assessor. The 19
exemption in this subsection cannot be claimed more than once in a 20
five-year period. 21
S-0155.1
SENATE BILL 5529
State of Washington 69th Legislature 2025 Regular Session
By Senator Gildon
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The department of revenue shall promulgate such rules and 1
regulations as are necessary and convenient to properly administer 2
the provisions of this subsection (1). 3
(2)(a) A county legislative authority ((for a county with a 4
population of 1,500,000 or more )) may exempt from taxation the value 5
of an accessory dwelling unit if the following conditions are met:6
(i) The improvement represents 30 percent or less of the value of 7
the original structure; 8
(ii) The taxpayer demonstrates that the unit is maintained as a 9
rental property for low-income households. For the purposes of this 10
subsection, "low-income household" means a single person, family, or 11
unrelated persons living together whose adjusted income is at or 12
below 60 percent of the median household income adjusted for 13
household size, for the county where the household is located, as 14
reported by the United States department of housing and urban 15
development; 16
(iii) The taxpayer files notice of the taxpayer's intention to 17
participate in the exemption program on forms prescribed by and 18
furnished to the taxpayer by the county assessor; 19
(iv) Rent charged to a tenant does not exceed more than 30 20
percent of the tenant's monthly income; and 21
(v) The accessory dwelling unit is not occupied by an immediate 22
family member of the taxpayer. For purposes of this subsection 23
(2)(a), "immediate family" means any person under age sixty that is a 24
state registered domestic partner, spouse, parents, grandparents, 25
children, including foster children, siblings, and in-laws.26
(b) An exemption granted under this subsection (2) may continue 27
for as long as the exempted accessory dwelling unit is leased to a 28
low-income household. 29
(c) A county legislative authority that has opted to exempt 30
accessory dwelling units under this subsection (2) may:31
(i) Allow the exemption for dwelling units that are attached to 32
or within a single-family dwelling or are detached units on the same 33
real property, or both; 34
(ii) Collect a fee from the taxpayer to cover the costs of 35
administering this subsection (2); 36
(iii) Designate administrative officials or agents that will 37
verify that both the low-income household and the taxpayer are in 38
compliance with the requirements of this subsection (2). The 39
designated official or agent may not be the county assessor but may 40
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include housing authorities or other qualified organizations as 1
determined by the county legislative authority; and2
(iv) Determine what property tax and penalties will be due, if 3
any, in the case of a finding of noncompliance by a taxpayer.4
(d) A county legislative authority that has opted to exempt 5
accessory dwelling units under this subsection (2) shall establish 6
policies to assist and support tenants upon expiration of an 7
exemption granted under this subsection. 8
Sec. 2. 2023 c 335 s 2 (uncodified) is amended to read as 9
follows: 10
(1) This section is the tax preference performance statement for 11
the tax preferences contained in section 1, chapter 335, Laws of 2023 12
and section 1, chapter . . ., Laws of 2025 (section 1 of this act) . 13
This performance statement is only intended to be used for subsequent 14
evaluation of the tax preference s. It is not intended to create a 15
private right of action by any party or to be used to determine 16
eligibility for preferential tax treatment. 17
(2) The legislature categorizes ((this)) these tax preference s 18
as: 19
(a) Ones intended to induce certain designated behavior by 20
taxpayers as indicated in RCW 82.32.808(2)(a); and21
(b) ((A)) For a general purpose not identified in RCW 22
82.32.808(2) (a) through (e) as indicated in RCW 82.32.808(2)(f) and 23
further described in subsection (3) of this section.24
(3) It is the legislature's specific public policy objective to 25
encourage homeowners to rent accessory dwelling units to low-income 26
households and increase the overall availability of affordable 27
housing. 28
(4)(a) The joint legislative audit and review committee must 29
review the tax preference s under section 1, chapter 335, Laws of 30
2023, and section 1, chapter . . ., Laws of 2025 (section 1 of this 31
act) as ((it applies )) they apply specifically to the property tax 32
exemption for accessory dwelling units and complete a final report by 33
December 1, 2029. The review must include, at a minimum, the 34
following components: 35
(i) Costs and benefits associated with exempting from taxation 36
the value of an accessory dwelling unit. This component of the 37
analysis must, at a minimum, assess the costs and benefits of changes 38
in the following metrics since the start of the program:39
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(A) The number of taxpayers filing notice to participate in the 1
exemption program; 2
(B) The number of units exempt from property tax under the 3
program, including the extent to which those units are attached or 4
within a single-family dwelling or are detached units; and5
(C) A summary of any fees or costs to administer the program;6
(ii) An evaluation of the information calculated and provided by 7
the department under RCW 36.70A.070(2)(a); 8
(iii) A summary of the estimated total statewide costs and 9
benefits attributable to exempting from taxation the value of an 10
accessory dwelling unit, including administrative costs and costs to 11
monitor compliance; and 12
(iv) An evaluation of the impacts of the program on low-income 13
households. 14
(b) If the review finds that a county ((with a population greater 15
than 1,500,000 )) offers this exemption and the exemption increases 16
the amount of accessory dwelling units rented to low-income 17
households, then the legislature intends to extend the expiration 18
date of ((this)) these tax preferences. 19
(5) In order to obtain the data necessary to perform the review 20
in subsection (4) of this section, the joint legislative audit and 21
review committee may refer to any data collected by the state.22
NEW SECTION. Sec. 3. This act expires January 1, 2034.23
NEW SECTION. Sec. 4. Section 1 of this act applies to taxes 24
levied for collection in 2026 and thereafter.25
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