Transit-oriented development

AN ACT Relating to promoting transit-oriented development; 1
amending RCW 84.14.010, 84.14.030, 84.14.060, 84.14.070, 84.14.090, 2
84.14.100, 84.14.110, 82.02.060, 82.02.090, 82.45.060, 82.59.007, 3
82.59.010, 82.59.020, 82.59.030, 82.59.040, 82.59.070, 82.59.130, and 4
82.59.140; adding new sections to chapter 84.14 RCW; creating a new 5
section; and providing an effective date. 6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:7
NEW SECTION. Sec. 1. A new section is added to chapter 84.14 8
RCW to read as follows: 9
(1) The value of new housing construction, conversion, and 10
rehabilitation improvements qualifying under this chapter is exempt 11
from ad valorem property taxation for 20 successive years beginning 12
January 1st of the year immediately following the calendar year of 13
issuance of the certificate, if the property otherwise qualifies for 14
the exemption under this chapter and meets the conditions in this 15
section. 16
(2) The exemption in this section does not include the value of 17
nonhousing-related improvements not qualifying under this chapter. 18
The exemption in this section includes the value of the newly created 19
housing and that portion of the land value determined by multiplying 20
the overall land value by the percentage of square footage of 21
S-0892.1
SENATE BILL 5604
State of Washington 69th Legislature 2025 Regular Session
By Senators Liias, Gildon, Chapman, Cortes, Nobles, Salomon,
Shewmake, and C. Wilson
Read first time 01/30/25. Referred to Committee on Housing.
p. 1 SB 5604
affordable newly created housing in comparison to the total square 1
footage of housing for a qualifying project. 2
(3) For the property to qualify for the exemption provided in 3
this section, the project must be located within a station area.4
(4) To qualify for the exemption provided in this section, the 5
applicant must meet all required affordability and income eligibility 6
conditions adopted by the governing authority under this chapter and 7
commit to: 8
(a) Providing at least 20 percent of the dwelling units as 9
affordable to low-income households for a term of at least 50 years; 10
or 11
(b) Providing at least 20 percent of the dwelling units 12
affordable to low-income or moderate-income households for at least 13
50 years, if at least 10 percent of the dwelling units are family-14
sized units with two or more bedrooms. 15
(5) A city or county with a major transit station must adopt 16
regulations necessary for use of the exemption in this section that 17
applies to the full station area. 18
(6) A city with a major transit stop may adopt regulations 19
necessary for the use of the exemption in this section. Any adopted 20
program for a major transit stop must apply to the full station area.21
(7) A local jurisdiction must require the applicant to record a 22
covenant or deed restriction that ensures the continuing rental or 23
sale of units subject to the affordability requirements consistent 24
with the conditions in this section for a period of no less than 50 25
years. The covenant or deed restriction must also address criteria 26
and policies to maintain public benefit if the property is converted 27
to a use other than which continues to provide for permanently 28
affordable housing or low-income and moderate-income households 29
consistent with this section. 30
(8) A local jurisdiction may assign and collect a reasonable 31
administration fee at each point of sale to cover the administrative 32
costs for oversight of the exemption in this section to maintain 33
permanently affordable housing units consistent with this section.34
(9) A local jurisdiction may adopt and revise additional 35
affordability and income eligibility conditions pursuant to RCW 36
84.14.100(4). 37
(10) At the conclusion of the exemption period, the value of the 38
new housing construction, conversion, or rehabilitation improvements 39
must be considered as new construction for the purposes of chapters 40
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84.55 and 36.21 RCW as though the property was not exempt under this 1
chapter. 2
(11) For the purpose of this section, "low-income household" 3
means a single person, family, or unrelated persons living together 4
whose adjusted income is at or above 50 percent, but not exceeding 80 5
percent, of the median family income adjusted for family size, for 6
the county where the affordable housing is located, as reported by 7
the United States department of housing and urban development.8
(12) No new exemptions may be provided under this section 9
beginning on or after January 1, 2032. 10
NEW SECTION. Sec. 2. A new section is added to chapter 84.14 11
RCW to read as follows: 12
(1) A governing authority may designate a station area. The 13
following criteria must be met before an area may be designated as a 14
station area: 15
(a) The area must be fully within an urban growth area and fully 16
or partially within a one-half mile radius of a major transit stop, 17
except that the station area excludes any parcels without possible or 18
practicable pedestrian access to the applicable major transit stop 19
except by travel outside of the station area, such as the intervening 20
presence of a river or interstate highway that prevents direct 21
pedestrian access between the parcel in question and the applicable 22
major transit stop; and 23
(b) If the station area is designated by a county, the area must 24
be located in an unincorporated area of the county that is within an 25
urban growth area under RCW 36.70A.110. 26
(2) After designation of a station area, the governing authority 27
must adopt and implement standards and guidelines to be used in 28
considering applications and making the determinations required under 29
RCW 84.14.060. The standards and guidelines must establish basic 30
requirements for new construction, conversion, and rehabilitation, 31
which must include: 32
(a) Application process and procedures; 33
(b) Income standards for affordable units that are informed by 34
the inventory and analysis of existing and projected housing needs 35
required under RCW 36.70A.070(2)(a) included in the housing element 36
of their most recent comprehensive plan; and 37
(c) Rent standards for affordable units. 38
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Sec. 3. RCW 84.14.010 and 2024 c 332 s 17 are each amended to 1
read as follows: 2
The definitions in this section apply throughout this chapter 3
unless the context clearly requires otherwise. 4
(1) "Affordable housing" means residential housing that is rented 5
by a person or household whose monthly housing costs, including 6
utilities other than telephone, do not exceed ((thirty)) 30 percent 7
of the household's monthly income. For the purposes of housing 8
intended for owner occupancy, "affordable housing" means residential 9
housing that is within the means of low or moderate -income 10
households. 11
(2) "Campus facilities master plan" means the area that is 12
defined by the University of Washington as necessary for the future 13
growth and development of its campus facilities for campuses 14
authorized under RCW 28B.45.020. 15
(3) "City" means either (a) a city or town with a population of 16
at least ((fifteen thousand )) 15,000, (b) the largest city or town, 17
if there is no city or town with a population of at least ((fifteen 18
thousand)) 15,000, located in a county planning under the growth 19
management act, (c) a city or town with a population of at least 20
((five thousand)) 5,000 located in a county subject to the provisions 21
of RCW 36.70A.215, or (d) any city that otherwise does not meet the 22
qualifications under (a) through (c) of this subsection, until 23
December 31, 2031, that complies with RCW 84.14.020(1)(a)(iii) 24
((or)), 84.14.021(1)(b), or section 1 of this act.25
(4) "Conversion" means the conversion of a nonresidential 26
building, in whole or in part, to multiple-unit housing under this 27
chapter. 28
(5) "County" means a county with an unincorporated population of 29
at least 170,000. 30
(6) "Governing authority" means the local legislative authority 31
of a city or a county having jurisdiction over the property for which 32
an exemption may be applied for under this chapter.33
(7) "Growth management act" means chapter 36.70A RCW.34
(8) "Household" means a single person, family, or unrelated 35
persons living together. 36
(9) "Low-income household" means a single person, family, or 37
unrelated persons living together whose adjusted income is at or 38
below ((eighty)) 80 percent of the median family income adjusted for 39
family size, for the county, city, or metropolitan statistical area, 40
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where the project is located, as reported by the United States 1
department of housing and urban development. 2
(10) "Moderate-income household" means a single person, family, 3
or unrelated persons living together whose adjusted income is more 4
than ((eighty)) 80 percent but is at or below ((one hundred fifteen)) 5
115 percent of the median family income adjusted for family size, for 6
the county, city, or metropolitan statistical area, where the project 7
is located, as reported by the United States department of housing 8
and urban development. 9
(11) "Multiple-unit housing" means a building or a group of 10
buildings having four or more dwelling units not designed or used as 11
transient accommodations and not including hotels and motels. 12
Multifamily units may result from new construction or rehabilitated 13
or conversion of vacant, underutilized, or substandard buildings to 14
multifamily housing. 15
(12) "Owner" means the property owner of record.16
(13) "Permanent residential occupancy" means multiunit housing 17
that provides either rental or owner occupancy on a nontransient 18
basis. This includes owner-occupied or rental accommodation that is 19
leased for a period of at least one month. This excludes hotels and 20
motels that predominately offer rental accommodation on a daily or 21
weekly basis. 22
(14) "Rehabilitation improvements" means modifications to 23
existing structures, that are vacant for ((twelve)) 12 months or 24
longer, that are made to achieve a condition of substantial 25
compliance with existing building codes or modification to existing 26
occupied structures which increase the number of multifamily housing 27
units. 28
(15) "Residential targeted area" means an area within an urban 29
center or urban growth area that has been designated by the governing 30
authority as a residential targeted area in accordance with this 31
chapter. With respect to designations after July 1, 2007, 32
"residential targeted area" may not include a campus facilities 33
master plan. 34
(16) "Rural county" means a county with a population between 35
((fifty thousand )) 50,000 and ((seventy-one thousand )) 71,000 and 36
bordering Puget Sound. 37
(17) "Substantial compliance" means compliance with local 38
building or housing code requirements that are typically required for 39
rehabilitation as opposed to new construction. 40
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(18) "Urban center" means a compact identifiable district where 1
urban residents may obtain a variety of products and services. An 2
urban center must contain: 3
(a) Several existing or previous, or both, business 4
establishments that may include but are not limited to shops, 5
offices, banks, restaurants, governmental agencies;6
(b) Adequate public facilities including streets, sidewalks, 7
lighting, transit, domestic water, and sanitary sewer systems; and8
(c) A mixture of uses and activities that may include housing, 9
recreation, and cultural activities in association with either 10
commercial or office, or both, use. 11
(19) "Major transit station" means a site within an urban growth 12
area that is, or has been, funded for development as:13
(a) A stop on a high capacity transportation system funded or 14
expanded under chapter 81.104 RCW;15
(b) A commuter rail stop; or16
(c) A stop on rail fixed guideway systems under chapter 81.104 17
RCW, including transitways.18
(20) "Major transit stop" means a site within an urban growth 19
area that is, or has been, funded for development as:20
(a) A major transit station;21
(b) A stop on a bus rapid transit route or a route that runs on 22
high occupancy vehicle lanes as defined in RCW 81.100.020;23
(c) A stop for a bus or other transit mode providing a minimum of 24
seven days per week of actual fixed route service at intervals as 25
defined pursuant to planning documents of the applicable local 26
transit agency; or27
(d) A ferry terminal operated by Washington state or any county.28
(21) "Station area" is defined as any property fully or partially 29
within half a mile of a major transit station or major transit stop 30
that has been designated by the governing authority as a station area 31
in accordance with this chapter.32
Sec. 4. RCW 84.14.030 and 2021 c 187 s 9 are each amended to 33
read as follows: 34
An owner of property making application under this chapter must 35
meet the following requirements: 36
(1) The new or rehabilitated multiple-unit housing must be 37
located in a residential targeted area or station area as designated 38
by the city or county; 39
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(2) The multiple-unit housing must meet guidelines as adopted by 1
the governing authority that may include height, density, public 2
benefit features, number and size of proposed development, parking, 3
income limits for occupancy, limits on rents or sale prices, and 4
other adopted requirements indicated necessary by the city or county. 5
The required amenities should be relative to the size of the project 6
and tax benefit to be obtained; 7
(3) The new, converted, or rehabilitated multiple-unit housing 8
must provide for a minimum of ((fifty)) 50 percent of the space for 9
permanent residential occupancy. In the case of existing occupied 10
multifamily development, the multifamily housing must also provide 11
for a minimum of four additional multifamily units. Existing 12
multifamily vacant housing that has been vacant for ((twelve)) 12 13
months or more does not have to provide additional multifamily units;14
(4) New construction multifamily housing and rehabilitation 15
improvements must be completed within three years from the date of 16
approval of the application, plus any extension authorized under RCW 17
84.14.090(5); 18
(5) Property proposed to be rehabilitated must fail to comply 19
with one or more standards of the applicable state or local building 20
or housing codes on or after July 23, 1995. If the property proposed 21
to be rehabilitated is not vacant, an applicant must provide each 22
existing tenant housing of comparable size, quality, and price and a 23
reasonable opportunity to relocate; and 24
(6) The applicant must enter into a contract with the city or 25
county approved by the governing authority, or an administrative 26
official or commission authorized by the governing authority, under 27
which the applicant has agreed to the implementation of the 28
development on terms and conditions satisfactory to the governing 29
authority. 30
Sec. 5. RCW 84.14.060 and 2014 c 96 s 5 are each amended to read 31
as follows: 32
(1) The duly authorized administrative official or committee of 33
the city or county may approve the application if it finds that:34
(a) A minimum of four new units are being constructed or in the 35
case of occupied rehabilitation or conversion a minimum of four 36
additional multifamily units are being developed; 37
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(b) If applicable, the proposed multiunit housing project meets 1
the affordable housing requirements as described in ((RCW 84.14.020)) 2
this chapter; 3
(c) The proposed project is or will be, at the time of 4
completion, in conformance with all local plans and regulations that 5
apply at the time the application is approved; 6
(d) The owner has complied with all standards and guidelines 7
adopted by the city or county under this chapter; and8
(e) The site is located in a residential targeted area or station 9
area of an urban center or urban growth area that has been designated 10
by the governing authority in accordance with procedures and 11
guidelines indicated in ((RCW 84.14.040)) this chapter.12
(2) An application may not be approved after July 1, 2007, if any 13
part of the proposed project site is within a campus facilities 14
master plan, except as provided in RCW 84.14.040(1)(d).15
(3) An application may not be approved for a residential targeted 16
area in a rural county on or after January 1, 2020.17
Sec. 6. RCW 84.14.070 and 2012 c 194 s 7 are each amended to 18
read as follows: 19
(1) The governing authority or an administrative official or 20
commission authorized by the governing authority must approve or deny 21
an application filed under this chapter within ((ninety)) 90 days 22
after receipt of the application. 23
(2) If the application is approved, the city or county must issue 24
the owner of the property a conditional certificate of acceptance of 25
tax exemption. The certificate must contain a statement by a duly 26
authorized administrative official of the governing authority that 27
the property has complied with the required findings indicated in RCW 28
84.14.060. A copy of the certificate must be sent to the county 29
assessor within 30 days of issuance.30
(3) If the application is denied by the authorized administrative 31
official or commission authorized by the governing authority, the 32
deciding administrative official or commission must state in writing 33
the reasons for denial and send the notice to the applicant at the 34
applicant's last known address within ((ten)) 10 days of the denial.35
(4) Upon denial by a duly authorized administrative official or 36
commission, an applicant may appeal the denial to the governing 37
authority within ((thirty)) 30 days after receipt of the denial. The 38
appeal before the governing authority must be based upon the record 39
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made before the administrative official with the burden of proof on 1
the applicant to show that there was no substantial evidence to 2
support the administrative official's decision. The decision of the 3
governing body in denying or approving the application is final.4
Sec. 7. RCW 84.14.090 and 2021 c 187 s 10 are each amended to 5
read as follows: 6
(1) Upon completion of rehabilitation or new construction for 7
which an application for a limited tax exemption under this chapter 8
has been approved and after issuance of the certificate of occupancy, 9
the owner must file with the city or county the following:10
(a) A statement of the amount of rehabilitation or construction 11
expenditures made with respect to each housing unit and the composite 12
expenditures made in the rehabilitation or construction of the entire 13
property; 14
(b) A description of the work that has been completed and a 15
statement that the rehabilitation improvements or new construction on 16
the owner's property qualify the property for limited exemption under 17
this chapter; 18
(c) If applicable, a statement that the project meets the 19
affordable housing requirements as described in ((RCW 84.14.020)) 20
this chapter; and 21
(d) A statement that the work has been completed within three 22
years of the issuance of the conditional certificate of tax 23
exemption. 24
(2) Within ((thirty)) 30 days after receipt of the statements 25
required under subsection (1) of this section, the authorized 26
representative of the city or county must determine whether the work 27
completed, and the affordability of the units, is consistent with the 28
application and the contract approved by the city or county and is 29
qualified for a limited tax exemption under this chapter. The city or 30
county must also determine which specific improvements completed meet 31
the requirements and required findings. 32
(3) If the rehabilitation, conversion, or construction is 33
completed within three years of the date the application for a 34
limited tax exemption is filed under this chapter, or within an 35
authorized extension of this time limit, and the authorized 36
representative of the city or county determines that improvements 37
were constructed consistent with the application and other applicable 38
requirements, including if applicable, affordable housing 39
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requirements, and the owner's property is qualified for a limited tax 1
exemption under this chapter, the city or county must file the 2
certificate of tax exemption with the county assessor within ((ten)) 3
10 days of the expiration of the ((thirty)) 30-day period provided 4
under subsection (2) of this section. 5
(4) The authorized representative of the city or county must 6
notify the applicant that a certificate of tax exemption is not going 7
to be filed if the authorized representative determines that:8
(a) The rehabilitation or new construction was not completed 9
within three years of the application date, or within any authorized 10
extension of the time limit; 11
(b) The improvements were not constructed consistent with the 12
application or other applicable requirements; 13
(c) If applicable, the affordable housing requirements as 14
described in ((RCW 84.14.020)) this chapter were not met; or15
(d) The owner's property is otherwise not qualified for limited 16
exemption under this chapter. 17
(5) If the authorized representative of the city or county finds 18
that construction or rehabilitation of multiple-unit housing was not 19
completed within the required time period due to circumstances beyond 20
the control of the owner and that the owner has been acting and could 21
reasonably be expected to act in good faith and with due diligence, 22
the governing authority or the city or county official authorized by 23
the governing authority may extend the deadline for completion of 24
construction or rehabilitation for a period not to exceed ((twenty-25
four)) 24 consecutive months. For preliminary or final applications 26
submitted on or before February 15, 2020, with any outstanding 27
application requirements, such as obtaining a temporary certificate 28
of occupancy, the city or county may choose to extend the deadline 29
for completion for an additional five years. The five-year extension 30
begins immediately following the completion of any outstanding 31
applications or previously authorized extensions, whichever is later.32
(6) The governing authority may provide by ordinance for an 33
appeal of a decision by the deciding officer or authority that an 34
owner is not entitled to a certificate of tax exemption to the 35
governing authority, a hearing examiner, or other city or county 36
officer authorized by the governing authority to hear the appeal in 37
accordance with such reasonable procedures and time periods as 38
provided by ordinance of the governing authority. The owner may 39
appeal a decision by the deciding officer or authority that is not 40
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subject to local appeal or a decision by the local appeal authority 1
that the owner is not entitled to a certificate of tax exemption in 2
superior court under RCW 34.05.510 through 34.05.598, if the appeal 3
is filed within ((thirty)) 30 days of notification by the city or 4
county to the owner of the decision being challenged.5
Sec. 8. RCW 84.14.100 and 2021 c 187 s 5 are each amended to 6
read as follows: 7
(1) Thirty days after the anniversary of the date of the 8
certificate of tax exemption and each year for the tax exemption 9
period, the owner of the rehabilitated or newly constructed property, 10
or the qualified nonprofit or local government that will assure 11
permanent affordable homeownership for at least 25 percent of the 12
units for properties receiving an exemption under RCW 84.14.021, must 13
file with a designated authorized representative of the city or 14
county an annual report indicating the following: 15
(a) A statement of occupancy and vacancy of the rehabilitated or 16
newly constructed property during the ((twelve)) 12 months ending 17
with the anniversary date; 18
(b) A certification by the owner that the property has not 19
changed use and, if applicable, that the property has been in 20
compliance with the affordable housing requirements as described in 21
((RCW 84.14.020)) this chapter since the date of the certificate 22
approved by the city or county; 23
(c) A description of changes or improvements constructed after 24
issuance of the certificate of tax exemption; and 25
(d) Any additional information requested by the city or county in 26
regards to the units receiving a tax exemption. 27
(2) All cities or counties, which issue certificates of tax 28
exemption for multiunit housing that conform to the requirements of 29
this chapter, must report annually by April 1st of each year, 30
beginning in 2007, to the department of commerce. A city or county 31
must be in compliance with the reporting requirements of this section 32
to offer certificates of tax exemption for multiunit housing 33
authorized in this chapter. The report must include the following 34
information: 35
(a) The number of tax exemption certificates granted;36
(b) The total number and type of units produced or to be 37
produced; 38
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(c) The number, size, and type of units produced or to be 1
produced meeting affordable housing requirements; 2
(d) The actual development cost of each unit produced;3
(e) The total monthly rent or total sale amount of each unit 4
produced; 5
(f) The annual household income and household size for each of 6
the affordable units receiving a tax exemption and a summary of these 7
figures for the city or county; and 8
(g) The value of the tax exemption for each project receiving a 9
tax exemption and the total value of tax exemptions granted.10
(3)(a) The department of commerce must adopt and implement a 11
program to effectively audit or review that the owner or operator of 12
each property for which a certificate of tax exemption has been 13
issued, except for those properties receiving an exemption that are 14
owned or operated by a nonprofit or for those properties receiving an 15
exemption from a city or county that operates an independent audit or 16
review program, is offering the number of units at rents as committed 17
to in the approved application for an exemption and that the tenants 18
are being properly screened to be qualified for an income-restricted 19
unit. The audit or review program must be adopted in consultation 20
with local governments and other stakeholders and may be based on 21
auditing a percentage of income-restricted units or properties 22
annually. A private owner or operator of a property for which a 23
certificate of tax exemption has been issued under this chapter, must 24
be audited at least once every five years. 25
(b) If the review or audit required under (a) of this subsection 26
for a given property finds that the owner or operator is not offering 27
the number of units at rents as committed to in the approved 28
application or is not properly screening tenants for income-29
restricted units, the department of commerce must notify the city or 30
county and the city or county must impose and collect a sliding scale 31
penalty not to exceed an amount calculated by subtracting the amount 32
of rents that would have been collected had the owner or operator 33
complied with their commitment from the amount of rents collected by 34
the owner or operator for the income-restricted units, with 35
consideration of the severity of the noncompliance. If a subsequent 36
review or audit required under (a) of this subsection for a given 37
property finds continued substantial noncompliance with the program 38
requirements, the exemption certificate must be canceled pursuant to 39
RCW 84.14.110. 40
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(c) The department of commerce may impose and collect a fee, not 1
to exceed the costs of the audit or review, from the owner or 2
operator of any property subject to an audit or review required under 3
(a) of this subsection. 4
(4)(a) Beginning in calendar year 2027, the department of 5
commerce must review on a biennial basis the number of applications 6
filed in a local jurisdiction for the tax exemption program in 7
section 1 of this act. If a local jurisdiction reports two 8
consecutive years without any participation in the tax exemption 9
program, then the local jurisdiction must increase income eligibility 10
requirements adopted by the local jurisdiction for the tax exemption 11
program in section 1 of this act by 10 percent each calendar year 12
until:13
(i) The local jurisdiction issues a conditional certificate for 14
the tax exemption under section 1 of this act; or15
(ii) The additional income eligibility requirements adopted by 16
the local jurisdiction reaches the maximum household income allowed 17
under section 1(4) of this act.18
(b) A local jurisdiction may reduce its income eligibility 19
requirements in accordance with this chapter in the calendar year 20
immediately following the calendar year in which the local 21
jurisdiction meets the conditions under (a)(i) of this subsection.22
(c) Any adjustment to locally adopted household income 23
eligibility requirements, as provided in this section, must begin on 24
January 1st and remain in place for the entire calendar year.25
(d) A claimant must commit to meeting the household income 26
eligibility requirements as determined by the local jurisdiction for 27
the calendar year in which the claimant submitted an application for 28
the tax exemption under section 1 of this act. Any subsequent 29
adjustments to the income eligibility requirements may not 30
retroactively impact any claimant previously issued a conditional 31
certificate for exemption.32
(5) The department of commerce must provide guidance to cities 33
and counties, which issue certificates of tax exemption for multiunit 34
housing that conform to the requirements of this chapter, on best 35
practices in managing and reporting for the exemption programs 36
authorized under this chapter, including guidance for cities and 37
counties to collect and report demographic information for tenants of 38
units receiving a tax exemption under this chapter.39
(((5))) (6) This section expires January 1, 2058.40
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Sec. 9. RCW 84.14.110 and 2012 c 194 s 10 are each amended to 1
read as follows: 2
(1) If improvements have been exempted under this chapter, the 3
improvements continue to be exempted for the applicable period under 4
((RCW 84.14.020)) this chapter, so long as they are not converted to 5
another use and continue to satisfy all applicable conditions. If the 6
owner intends to convert the multifamily development to another use, 7
or if applicable, if the owner intends to discontinue compliance with 8
the affordable housing requirements as described in ((RCW 84.14.020)) 9
this chapter or any other condition to exemption, the owner must 10
notify the assessor within ((sixty)) 60 days of the change in use or 11
intended discontinuance. If, after a certificate of tax exemption has 12
been filed with the county assessor, the authorized representative of 13
the governing authority discovers that a portion of the property is 14
changed or will be changed to a use that is other than residential or 15
that housing or amenities no longer meet the requirements, including, 16
if applicable, affordable housing requirements, as previously 17
approved or agreed upon by contract between the city or county and 18
the owner and that the multifamily housing, or a portion of the 19
housing, no longer qualifies for the exemption, the tax exemption 20
must be canceled and the following must occur: 21
(a) Additional real property tax must be imposed upon the value 22
of the nonqualifying improvements in the amount that would normally 23
be imposed, plus a penalty must be imposed amounting to ((twenty)) 20 24
percent. This additional tax is calculated based upon the difference 25
between the property tax paid and the property tax that would have 26
been paid if it had included the value of the nonqualifying 27
improvements dated back to the date that the improvements were 28
converted to a nonmultifamily use; 29
(b) The tax must include interest upon the amounts of the 30
additional tax at the same statutory rate charged on delinquent 31
property taxes from the dates on which the additional tax could have 32
been paid without penalty if the improvements had been assessed at a 33
value without regard to this chapter; and 34
(c) The additional tax owed together with interest and penalty 35
must become a lien on the land and attach at the time the property or 36
portion of the property is removed from multifamily use or the 37
amenities no longer meet applicable requirements, and has priority to 38
and must be fully paid and satisfied before a recognizance, mortgage, 39
judgment, debt, obligation, or responsibility to or with which the 40
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land may become charged or liable. The lien may be foreclosed upon 1
expiration of the same period after delinquency and in the same 2
manner provided by law for foreclosure of liens for delinquent real 3
property taxes. An additional tax unpaid on its due date is 4
delinquent. From the date of delinquency until paid, interest must be 5
charged at the same rate applied by law to delinquent ad valorem 6
property taxes. 7
(2) Upon a determination that a tax exemption is to be canceled 8
for a reason stated in this section, the governing authority or 9
authorized representative must notify the record owner of the 10
property as shown by the tax rolls by mail, return receipt requested, 11
of the determination to cancel the exemption. The owner may appeal 12
the determination to the governing authority or authorized 13
representative, within ((thirty)) 30 days by filing a notice of 14
appeal with the clerk of the governing authority, which notice must 15
specify the factual and legal basis on which the determination of 16
cancellation is alleged to be erroneous. The governing authority or a 17
hearing examiner or other official authorized by the governing 18
authority may hear the appeal. At the hearing, all affected parties 19
may be heard and all competent evidence received. After the hearing, 20
the deciding body or officer must either affirm, modify, or repeal 21
the decision of cancellation of exemption based on the evidence 22
received. An aggrieved party may appeal the decision of the deciding 23
body or officer to the superior court under RCW 34.05.510 through 24
34.05.598. 25
(3) Upon determination by the governing authority or authorized 26
representative to terminate an exemption, the county officials having 27
possession of the assessment and tax rolls must correct the rolls in 28
the manner provided for omitted property under RCW 84.40.080. The 29
county assessor must make such a valuation of the property and 30
improvements as is necessary to permit the correction of the rolls. 31
The value of the new housing construction, conversion, and 32
rehabilitation improvements added to the rolls is considered as new 33
construction for the purposes of chapter 84.55 RCW. The owner may 34
appeal the valuation to the county board of equalization under 35
chapter 84.48 RCW and according to the provisions of RCW 84.40.038. 36
If there has been a failure to comply with this chapter, the property 37
must be listed as an omitted assessment for assessment years 38
beginning January 1st of the calendar year in which the noncompliance 39
first occurred, but the listing as an omitted assessment may not be 40
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for a period more than three calendar years preceding the year in 1
which the failure to comply was discovered. 2
Sec. 10. RCW 82.02.060 and 2023 c 337 s 10 are each amended to 3
read as follows: 4
The local ordinance by which impact fees are imposed:5
(1) Shall include a schedule of impact fees which shall be 6
adopted for each type of development activity that is subject to 7
impact fees, specifying the amount of the impact fee to be imposed 8
for each type of system improvement. The schedule shall be based upon 9
a formula or other method of calculating such impact fees. The 10
schedule shall reflect the proportionate impact of new housing units, 11
including multifamily and condominium units, based on the square 12
footage, number of bedrooms, or trips generated, in the housing unit 13
in order to produce a proportionally lower impact fee for smaller 14
housing units. In determining proportionate share, the formula or 15
other method of calculating impact fees shall incorporate, among 16
other things, the following: 17
(a) The cost of public facilities necessitated by new 18
development; 19
(b) An adjustment to the cost of the public facilities for past 20
or future payments made or reasonably anticipated to be made by new 21
development to pay for particular system improvements in the form of 22
user fees, debt service payments, taxes, or other payments earmarked 23
for or proratable to the particular system improvement;24
(c) The availability of other means of funding public facility 25
improvements; 26
(d) The cost of existing public facilities improvements; and27
(e) The methods by which public facilities improvements were 28
financed; 29
(2) May provide an exemption for low-income housing, and other 30
development activities with broad public purposes, including 31
development of an early learning facility, from these impact fees, 32
provided that the impact fees for such development activity shall be 33
paid from public funds other than impact fee accounts;34
(3)(a) May not impose an impact fee on development activities of 35
an early learning facility greater than that imposed on commercial 36
retail or commercial office development activities that generate a 37
similar number, volume, type, and duration of vehicle trips;38
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(b) When a facility or development has more than one use, the 1
limitations in this subsection (3) or the exemption applicable to an 2
early learning facility in subsections (2) and (4) of this section 3
only apply to that portion that is developed as an early learning 4
facility. The impact fee assessed on an early learning facility in 5
such a development or facility may not exceed the least of the impact 6
fees assessed on comparable businesses in the facility or 7
development; 8
(4) May provide an exemption from impact fees for low-income 9
housing or for early learning facilities. Local governments that 10
grant exemptions for low-income housing or for early learning 11
facilities under this subsection (4) may either: Grant a partial 12
exemption of not more than ((eighty)) 80 percent of impact fees, in 13
which case there is no explicit requirement to pay the exempted 14
portion of the fee from public funds other than impact fee accounts; 15
or provide a full waiver, in which case the remaining percentage of 16
the exempted fee must be paid from public funds other than impact fee 17
accounts, except as provided in (b) of this subsection. These 18
exemptions are subject to the following requirements:19
(a) An exemption for low-income housing granted under subsection 20
(2) of this section or this subsection (4) must be conditioned upon 21
requiring the developer to record a covenant that, except as provided 22
otherwise by this subsection, prohibits using the property for any 23
purpose other than for low-income housing. At a minimum, the covenant 24
must address price restrictions and household income limits for the 25
low-income housing, and that if the property is converted to a use 26
other than for low-income housing, the property owner must pay the 27
applicable impact fees in effect at the time of conversion;28
(b) An exemption for early learning facilities granted under 29
subsection (2) of this section or this subsection (4) may be a full 30
waiver without an explicit requirement to pay the exempted portion of 31
the fee from public funds other than impact fee accounts if the local 32
government requires the developer to record a covenant that requires 33
that at least 25 percent of the children and families using the early 34
learning facility qualify for state subsidized child care, including 35
early childhood education and assistance under chapter 43.216 RCW, 36
and that provides that if the property is converted to a use other 37
than for an early learning facility, the property owner must pay the 38
applicable impact fees in effect at the time of conversion, and that 39
also provides that if at no point during a calendar year does the 40
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early learning facility achieve the required percentage of children 1
and families qualified for state subsidized child care using the 2
early learning facility, the property owner must pay 20 percent of 3
the impact fee that would have been imposed on the development had 4
there not been an exemption within 90 days of the local government 5
notifying the property owner of the breach, and any balance remaining 6
thereafter shall be a lien on the property; and 7
(c) Covenants required by (a) and (b) of this subsection must be 8
recorded with the applicable county auditor or recording officer. A 9
local government granting an exemption under subsection (2) of this 10
section or this subsection (4) for low-income housing or an early 11
learning facility may not collect revenue lost through granting an 12
exemption by increasing impact fees unrelated to the exemption. A 13
school district who receives school impact fees must approve any 14
exemption under subsection (2) of this section or this subsection 15
(4); 16
(5) Shall provide a credit for the value of any dedication of 17
land for, improvement to, or new construction of any system 18
improvements provided by the developer, to facilities that are 19
identified in the capital facilities plan and that are required by 20
the county, city, or town as a condition of approving the development 21
activity; 22
(6) Shall allow the county, city, or town imposing the impact 23
fees to adjust the standard impact fee at the time the fee is imposed 24
to consider unusual circumstances in specific cases to ensure that 25
impact fees are imposed fairly; 26
(7) Shall include a provision for calculating the amount of the 27
fee to be imposed on a particular development that permits 28
consideration of studies and data submitted by the developer to 29
adjust the amount of the fee; 30
(8) Shall establish one or more reasonable service areas within 31
which it shall calculate and impose impact fees for various land use 32
categories per unit of development; 33
(9) May provide for the imposition of an impact fee for system 34
improvement costs previously incurred by a county, city, or town to 35
the extent that new growth and development will be served by the 36
previously constructed improvements provided such fee shall not be 37
imposed to make up for any system improvement deficiencies; ((and))38
(10) Shall provide a 50 percent reduction of the impact fees 39
specified in the schedule of impact fees for system improvements 40
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under RCW 82.02.090(7)(a) if the project is within a transit-oriented 1
development area and claiming a multiple-unit housing property tax 2
exemption under section 1 of this act; and 3
(11) Must adopt or amend by ordinance, and incorporate into their 4
development regulations, zoning regulations, and other official 5
controls the requirements of this section to take effect six months 6
after the jurisdiction's next periodic comprehensive plan update 7
required under RCW 36.70A.130. 8
For purposes of this section, "low-income housing" means housing 9
with a monthly housing expense, that is no greater than ((thirty)) 30 10
percent of ((eighty)) 80 percent of the median family income adjusted 11
for family size, for the county where the project is located, as 12
reported by the United States department of housing and urban 13
development. 14
For the purposes of this section, "early learning facility" has 15
the same meaning as in RCW 43.31.565. 16
Sec. 11. RCW 82.02.090 and 2023 c 121 s 2 are each amended to 17
read as follows: 18
The definitions in this section apply throughout this section and 19
RCW 82.02.050 through 82.02.080 unless the context clearly requires 20
otherwise. 21
(1) "Development activity" means any construction or expansion of 22
a building, structure, or use, any change in use of a building or 23
structure, or any changes in the use of land, that creates additional 24
demand and need for public facilities. "Development activity" does 25
not include: 26
(a) Buildings or structures constructed by a regional transit 27
authority; or 28
(b) Buildings or structures constructed as shelters that provide 29
emergency housing for people experiencing homelessness, or emergency 30
shelters for victims of domestic violence, as defined in RCW 31
70.123.020. 32
(2) "Development approval" means any written authorization from a 33
county, city, or town which authorizes the commencement of 34
development activity. 35
(3) "Impact fee" means a payment of money imposed upon 36
development as a condition of development approval to pay for public 37
facilities needed to serve new growth and development, and that is 38
reasonably related to the new development that creates additional 39
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demand and need for public facilities, that is a proportionate share 1
of the cost of the public facilities, and that is used for facilities 2
that reasonably benefit the new development. "Impact fee" does not 3
include a reasonable permit or application fee. 4
(4) "Owner" means the owner of record of real property, although 5
when real property is being purchased under a real estate contract, 6
the purchaser is considered the owner of the real property if the 7
contract is recorded. 8
(5) "Project improvements" mean site improvements and facilities 9
that are planned and designed to provide service for a particular 10
development project and that are necessary for the use and 11
convenience of the occupants or users of the project, and are not 12
system improvements. An improvement or facility included in a capital 13
facilities plan approved by the governing body of the county, city, 14
or town is not considered a project improvement. 15
(6) "Proportionate share" means that portion of the cost of 16
public facility improvements that are reasonably related to the 17
service demands and needs of new development. 18
(7) "Public facilities" means the following capital facilities 19
owned or operated by government entities: (a) Public streets, roads, 20
and bicycle and pedestrian facilities that were designed with 21
multimodal commuting as an intended use; (b) publicly owned parks, 22
open space, and recreation facilities; (c) school facilities; and (d) 23
fire protection facilities. 24
(8) "Service area" means a geographic area defined by a county, 25
city, town, or intergovernmental agreement in which a defined set of 26
public facilities provide service to development within the area. 27
Service areas must be designated on the basis of sound planning or 28
engineering principles. 29
(9) "System improvements" mean public facilities that are 30
included in the capital facilities plan and are designed to provide 31
service to service areas within the community at large, in contrast 32
to project improvements. 33
(10) "Transit-oriented development" means dense, walkable, and 34
mixed-use spaces fully or partially within one-half mile of a major 35
transit stop as defined in RCW 84.14.010.36
Sec. 12. RCW 82.45.060 and 2019 c 424 s 1 are each amended to 37
read as follows: 38
p. 20 SB 5604
(1) There is imposed an excise tax upon each sale of real 1
property. 2
(a) Through December 31, 2019, the rate of the tax imposed under 3
this section is 1.28 percent of the selling price. 4
(b) Beginning January 1, 2020, except as provided in (c) and (d) 5
of this subsection, the rate of the tax imposed under this section is 6
as follows: 7
(i) 1.1 percent of the portion of the selling price that is less 8
than or equal to ((five hundred thousand dollars)) $500,000;9
(ii) 1.28 percent of the portion of the selling price that is 10
greater than ((five hundred thousand dollars )) $500,000 and equal to 11
or less than ((one million five hundred thousand dollars )) 12
$1,500,000; 13
(iii) 2.75 percent of the portion of the selling price that is 14
greater than ((one million five hundred thousand dollars )) $1,500,000 15
and equal to or less than ((three million dollars)) $3,000,000;16
(iv) Three percent of the portion of the selling price that is 17
greater than ((three million dollars)) $3,000,000.18
(c) The sale of real property that is classified as timberland or 19
agricultural land is subject to the tax imposed under this section at 20
a rate of 1.28 percent of the selling price. 21
(d) The sale of real property receiving the multiple-unit housing 22
property tax exemption under section 1 of this act is subject to tax 23
imposed on the selling price at the rate under (b)(i) of this 24
subsection.25
(2) Beginning July 1, 2022, and every fourth year thereafter:26
(a) The department must adjust the selling price threshold in 27
subsection (1)(b)(i) of this section to reflect the lesser of the 28
growth of the consumer price index for shelter or five percent. If 29
the growth is equal to or less than zero percent, the current selling 30
price threshold continues to apply. 31
(b) The department must adjust the selling price thresholds in 32
subsection (1)(b)(ii) through (iv) of this section by the dollar 33
amount of any increase in the selling price threshold in subsection 34
(1)(b)(i) of this section. 35
(c) The department must publish updated selling price thresholds 36
by September 1, 2022, and September 1st of every fourth year 37
thereafter. Updated selling price thresholds will apply beginning 38
January 1, 2023, and January 1st every fourth year thereafter. 39
Adjusted selling price thresholds must be rounded to the nearest 40
p. 21 SB 5604
((one thousand dollars )) $1,000. No changes may be made to adjusted 1
selling price thresholds once such adjustments take effect.2
(d) The most recent selling price threshold becomes the base for 3
subsequent adjustments. 4
(e) The department must report adjustments to the selling price 5
thresholds to the fiscal committees of the legislature, beginning 6
December 1, 2022, and December 1st every fourth year thereafter.7
(3)(a) The department must publish guidance to assist sellers in 8
properly classifying real property on the real estate excise tax 9
affidavit for purposes of determining the proper amount of tax due 10
under this section. Real property with multiple uses must be 11
classified according to the property's predominant use. The 12
department's guidance must include factors for use in determining the 13
predominant use of real property. 14
(b) County treasurers are not responsible for verifying that the 15
seller has properly classified real property reported on a real 16
estate excise tax affidavit. The department is solely responsible for 17
such verification as part of its audit responsibilities under RCW 18
82.45.150. 19
(4)(a) Beginning July 1, 2013, and ending December 31, 2019, an 20
amount equal to two percent of the proceeds of this tax must be 21
deposited in the public works assistance account created in RCW 22
43.155.050, an amount equal to ((four and one-tenth )) 4.1 percent 23
must be deposited in the education legacy trust account created in 24
RCW 83.100.230, an amount equal to ((one and six-tenths)) 1.6 percent 25
must be deposited in the city-county assistance account created in 26
RCW 43.08.290, and the remainder must be deposited in the general 27
fund. 28
(b) Beginning January 1, 2020, amounts collected from the tax 29
imposed under this section must be deposited as provided in RCW 30
82.45.230. 31
(5) The definitions in this subsection apply throughout this 32
section unless the context clearly requires otherwise.33
(a) "Agricultural land" means farm and agricultural land and farm 34
and agricultural conservation land, as those terms are defined in RCW 35
84.34.020, including any structures on such land. 36
(b) "Consumer price index for shelter" means the most current 37
seasonally adjusted index for the shelter expenditure category of the 38
consumer price index for all urban consumers (CPI-U) as published by 39
p. 22 SB 5604
July 31st by the bureau of labor statistics of the United States 1
department of labor. 2
(c) "Growth of the consumer price index for shelter" means the 3
percentage increase in the consumer price index for shelter as 4
measured from data published by the bureau of labor statistics of the 5
United States department of labor by July 31st for the most recent 6
three-year period for the selling price threshold adjustment in 2022, 7
and the most recent four-year period for subsequent selling price 8
threshold adjustments. 9
(d) "Timberland" means land classified under chapter 84.34 RCW or 10
designated under chapter 84.33 RCW, including any structures and 11
standing timber on such land, and standing timber sold apart from the 12
land upon which it sits. 13
Sec. 13. RCW 82.59.007 and 2024 c 332 s 2 are each amended to 14
read as follows: 15
(1) It is the purpose of this chapter to encourage the 16
redevelopment of underutilized commercial property in targeted urban 17
areas, thereby increasing affordable housing, employment 18
opportunities, and helping accomplish the other planning goals of 19
Washington cities. The legislative authorities of cities to which 20
this chapter applies may authorize a sales and use tax deferral for 21
an investment project within the city if the legislative authority of 22
the city finds that there are significant areas of underutilized 23
commercial property and a lack of affordable housing in areas 24
proximate to the land. 25
(2) It is further the purpose of this chapter to stimulate the 26
construction of new multifamily housing in transit-oriented 27
development areas having insufficient housing thereby increasing 28
housing opportunities, including affordable housing opportunities, 29
and helping accomplish the planning goals of Washington cities. The 30
legislative authorities of cities to which this chapter applies may 31
authorize a sales and use tax deferral for an investment project 32
within the city if the legislative authority of the city finds that 33
there are significant housing needs in the transit-oriented 34
development area proximate to the land.35
(3) If a conditional recipient maintains the property for 36
qualifying purposes for at least 10 years, deferred sales and use 37
taxes need not be repaid. 38
p. 23 SB 5604
Sec. 14. RCW 82.59.010 and 2024 c 332 s 3 are each amended to 1
read as follows: 2
The definitions in this section apply throughout this chapter 3
unless the context clearly requires otherwise. 4
(1) "Affordable housing" means: 5
(a) Homeownership housing intended for owner occupancy to low-6
income households whose monthly housing costs, including utilities 7
other than telephone, do not exceed 30 percent of the household's 8
monthly income; 9
(b) "Rental housing" for low-income households whose monthly 10
housing costs, including utilities other than telephone, do not 11
exceed 30 percent of the household's monthly income.12
(2) "Applicant" means an owner of commercial property.13
(3) "City" means any city or town, including a code city.14
(4) "Conditional recipient" means an owner of commercial property 15
granted a conditional certificate of program approval under this 16
chapter, which includes any successor owner of the property.17
(5) "Eligible investment project" means an investment project 18
that is located in a city and receiving a conditional certificate of 19
program approval. 20
(6) "Governing authority" means the local legislative authority 21
of a city having jurisdiction over the property for which a deferral 22
may be granted under this chapter. 23
(7) "Household" means a single person, family, or unrelated 24
persons living together. 25
(8)(a) "Initiation of construction" means the date that a 26
building permit is issued under the building code adopted under RCW 27
19.27.031 for construction of the qualified building, if the 28
underlying ownership of the building vests exclusively with the 29
person receiving the economic benefit of the deferral.30
(b) "Initiation of construction" does not include soil testing, 31
site clearing and grading, site preparation, or any other related 32
activities that are initiated before the issuance of a building 33
permit for the construction of the foundation of the building.34
(c) If the investment project is a phased project, "initiation of 35
construction" applies separately to each phase. 36
(9) "Investment project" means an investment in multifamily 37
housing, including labor, services, and materials incorporated in the 38
planning, installation, and construction of the project. "Investment 39
project" includes investment in related facilities such as 40
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playgrounds and sidewalks as well as facilities used for business use 1
for mixed-use development. 2
(10) "Low-income household" means a single person, family, or 3
unrelated persons living together whose adjusted income is at or 4
below 80 percent of the median family income adjusted for family 5
size, for the county, city, or metropolitan statistical area, where 6
the project is located, as reported by the United States department 7
of housing and urban development. 8
(11) "Multifamily housing" means a building or a group of 9
buildings having four or more dwelling units not designed or used as 10
transient accommodations and not including hotels and motels. 11
Multifamily units may result from rehabilitation or conversion of 12
vacant, underutilized, or substandard buildings to multifamily 13
housing. 14
(12) "Owner" means the property owner of record.15
(13) "Transit-oriented development" means dense, walkable, and 16
mixed-use spaces fully or partially within one-half mile of a major 17
transit stop as defined in RCW 84.14.010.18
(14) "Underutilized commercial property" means an entire 19
property, or portion thereof, currently used or intended to be used 20
by a business for retailing or office-related or administrative 21
activities. If the property is used partly for a qualifying use and 22
partly for other purposes, the applicable tax deferral must be 23
determined by apportionment of the costs of construction under rules 24
adopted by the department. For the purposes of this subsection, 25
"qualifying use" means used or intended to be used by a business for 26
retailing or office-related or administrative activities.27
Sec. 15. RCW 82.59.020 and 2024 c 332 s 4 are each amended to 28
read as follows: 29
(1) For the purpose of creating a sales and use tax deferral 30
program for conversion of a commercial building or construction of 31
new multifamily housing in a transit-oriented development area to 32
provide affordable housing under this chapter, the governing 33
authority must adopt a resolution of intention to create a sales and 34
use tax deferral program as generally described in the resolution. 35
The resolution must state the time and place of a hearing to be held 36
by the governing authority to consider the creation of the tax 37
deferral program and may include such other information pertaining to 38
the creation of the deferral program as the governing authority 39
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determines to be appropriate to apprise the public of the action 1
intended. However, the resolution must provide information pertaining 2
to: 3
(a) The application process; 4
(b) The approval process; 5
(c) The appeals process for applications denied approval; and6
(d) Additional requirements, conditions, and obligations that 7
must be followed postapproval of an application. 8
(2) The governing authority must give notice of a hearing held 9
under this chapter by publication of the notice once each week for 10
two consecutive weeks, not less than seven days, nor more than 30 11
days before the date of the hearing in a paper having a general 12
circulation in the city. The notice must state the time, date, place, 13
and purpose of the hearing. 14
(3) Following the hearing or a continuance of the hearing, the 15
governing authority may authorize the creation of the program.16
Sec. 16. RCW 82.59.030 and 2024 c 332 s 5 are each amended to 17
read as follows: 18
((An)) A property owner ((of underutilized commercial property )) 19
seeking a sales and use tax deferral for conversion of ((a)) an 20
underutilized commercial building or construction of new multifamily 21
housing in a transit-oriented development area to provide affordable 22
housing under this chapter on an investment project must complete the 23
following procedures: 24
(1) The owner must apply to the city on forms adopted by the 25
governing authority. The application must contain the following:26
(a) Information setting forth the grounds supporting the 27
requested deferral including information indicated on the application 28
form or in the guidelines; 29
(b) A description of the investment project and site plan, and 30
other information requested; 31
(c) A statement of the expected number of affordable housing 32
units to be created; 33
(d) A statement that the applicant is aware of the potential tax 34
liability involved if the investment project ceases to be used for 35
eligible uses under this chapter; 36
(e) A statement that the applicant is aware that the investment 37
project must be completed within three years from the date of 38
approval of the application; 39
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(f) A statement that the applicant is aware that the governing 1
authority or the city official authorized by the governing authority 2
may extend the deadline for completion of construction or 3
rehabilitation for a period not to exceed 24 consecutive months; and4
(g) A statement that the applicant would not have built in this 5
location but for the availability of the tax deferral under this 6
chapter; 7
(2) The applicant must verify the application by oath or 8
affirmation; and 9
(3) The application must be accompanied by the application fee, 10
if any, required under this chapter. The duly authorized 11
administrative official or committee of the city may permit the 12
applicant to revise an application before final action by the duly 13
authorized administrative official or committee of the city.14
Sec. 17. RCW 82.59.040 and 2024 c 332 s 6 are each amended to 15
read as follows: 16
The duly authorized administrative official or committee of the 17
city may approve the application and grant a conditional certificate 18
of program approval if it finds that: 19
(1)(a) The investment project is set aside primarily for 20
multifamily housing units and the applicant commits to renting or 21
selling at least 10 percent of the units as affordable housing to 22
low-income households. In a mixed-use project, only the ground floor 23
of a building may be used for commercial purposes with the remainder 24
dedicated to multifamily housing units; and 25
(b) The applicant commits to any additional affordability and 26
income eligibility conditions adopted by the local government under 27
this chapter not otherwise inconsistent with this chapter;28
(2) The investment project is, or will be, at the time of 29
completion, in conformance with all local plans and regulations that 30
apply at the time the application is approved; 31
(3) ((The)) For conversion of an underutilized commercial 32
building, the investment project will occur on land that constitutes, 33
at the time of application, underutilized commercial property;34
(4) The area where the investment project will occur is located 35
within an area zoned for residential or mixed uses;36
(5) The terms and conditions of the implementation of the 37
development meets the requirements of this chapter and any 38
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requirements of the city that are not otherwise inconsistent with 1
this chapter; 2
(6) The land where the investment project will occur was not 3
acquired through a condemnation proceeding under Title 8 RCW; and4
(7) All other requirements of this chapter have been satisfied as 5
well as any other requirements of the city that are not otherwise 6
inconsistent with this chapter. 7
Sec. 18. RCW 82.59.070 and 2024 c 332 s 9 are each amended to 8
read as follows: 9
(1) Within 30 days of the issuance of a certificate of occupancy 10
for an eligible investment project, the conditional recipient must 11
file with the city the following: 12
(a) A description of the work that has been completed and a 13
statement that the eligible investment project qualifies the property 14
for a sales and use tax deferral under this chapter;15
(b) A statement of the new affordable housing to be offered as a 16
result of the conversion of underutilized commercial property to 17
multifamily housing or construction of new multifamily housing in a 18
transit-oriented development area; and 19
(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 city must determine and notify 24
the conditional recipient as to whether the work completed and the 25
affordable housing to be offered are consistent with the application 26
and the contract approved by the city, and the investment project 27
continues to qualify for a tax deferral under this chapter. The 28
conditional recipient must notify the department within 30 days from 29
receiving the city's determination to report the project is 30
operationally complete so the department can certify the project and 31
determine the qualifying deferred taxes. The department must 32
determine the amount of sales and use taxes qualifying for the 33
deferral. If the department determines that purchases were not 34
eligible for deferral it must assess interest, but not penalties, on 35
the nonqualifying amounts. 36
(3) The city must notify the conditional recipient within 30 days 37
that a tax deferral under this chapter is denied if the city 38
determines that: 39
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(a) The work was not completed within three years of the 1
application date; 2
(b) The work was not constructed consistent with the application 3
or other applicable requirements; 4
(c) The affordable housing units to be offered are not consistent 5
with the application and criteria of this chapter; or6
(d) The owner's property is otherwise not qualified for a sales 7
and use tax deferral under this chapter. 8
(4) If the city finds that the work was not completed within the 9
required time period due to circumstances beyond the control of the 10
conditional recipient and that the conditional recipient has been 11
acting and could reasonably be expected to act in good faith and with 12
due diligence, the governing authority may extend the deadline for 13
completion of the work for a period not to exceed 24 consecutive 14
months, and must notify the department of the extension.15
(5) The city's governing authority may enact an ordinance to 16
provide a process for a conditional recipient to appeal a decision by 17
the city that the conditional recipient is not entitled to a deferral 18
of sales and use taxes. The conditional recipient may appeal a 19
decision by the city to deny a deferral of sales and use taxes in 20
superior court under RCW 34.05.510 through 34.05.598, if the appeal 21
is filed within 30 days of notification by the city to the 22
conditional recipient. 23
(6) A city denying a conditional recipient of a sales and use tax 24
deferral under subsection (3) of this section must notify the 25
department and taxes deferred under this chapter are immediately due 26
and payable, subject to any appeal by the conditional recipient. The 27
department must assess interest at the rate provided for delinquent 28
taxes, but not penalties, retroactively to the date of deferral. A 29
debt for deferred taxes will not be extinguished by insolvency or 30
other failure of the recipient. 31
Sec. 19. RCW 82.59.130 and 2024 c 332 s 15 are each amended to 32
read as follows: 33
(1) This section is the tax preference performance statement for 34
the tax preference s contained in chapter 332, Laws of 2024 and 35
chapter . . ., Laws of 2025 (this act) . This performance statement is 36
only intended to be used for subsequent evaluation of the tax 37
preferences. It is not intended to create a private right of action 38
p. 29 SB 5604
by any party or to be used to determine eligibility for preferential 1
tax treatment. 2
(2) The legislature categorizes ((this)) these tax preferences as 3
ones intended to induce certain designated behavior by taxpayers, as 4
indicated in RCW 82.32.808(2)(a). 5
(3) It is the legislature's specific public policy objective to 6
expand affordable housing options for low-income households, 7
specifically in urban areas where there is underutilized commercial 8
property and in transit-oriented development areas having 9
insufficient housing supply. 10
(4)(a) To measure the effectiveness of the tax preference s in 11
chapter 332, Laws of 2024 and chapter . . ., Laws of 2025 (this act) , 12
the joint legislative audit and review committee must evaluate the 13
number of increased housing units on underutilized commercial 14
property and in transit-oriented development areas having 15
insufficient housing supply . If a review finds that the number of 16
affordable housing units has not increased, then the legislature 17
intends to repeal ((this)) these tax preferences. 18
(b) The review must be provided to the fiscal committees of the 19
legislature by December 31, 2032. 20
(5) In order to obtain the data necessary to perform the review 21
in subsection (4) of this section, the joint legislative audit and 22
review committee may refer to any available data source, including 23
data collected by the department under RCW 82.59.080.24
Sec. 20. RCW 82.59.140 and 2024 c 332 s 16 are each amended to 25
read as follows: 26
(1) An owner of underutilized commercial property claiming a 27
sales and use tax deferral under this chapter may also apply for the 28
multiple-unit housing property tax exemption program under chapter 29
84.14 RCW. For applicants receiving the property tax exemption under 30
chapter 84.14 RCW, the amount of affordable housing units required 31
for eligibility under this chapter is in addition to the 32
affordability conditions in chapter 84.14 RCW. 33
(2) A property owner claiming a sales and use tax deferral under 34
this chapter for new construction of multifamily housing in a 35
transit-oriented development area may also apply for the multiple-36
unit housing property tax exemption program under section 1 of this 37
act. For applicants receiving the property tax exemption under 38
section 1 of this act, the amount of affordable housing units 39
p. 30 SB 5604
required for eligibility under this chapter is in addition to the 1
affordability conditions in section 1 of this act. 2
NEW SECTION. Sec. 21. Sections 1 through 9 of this act apply to 3
property taxes levied for collection in 2026 and thereafter.4
NEW SECTION. Sec. 22. Sections 12 through 20 of this act take 5
effect October 1, 2025.6
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