Underutilized property/tax

AN ACT Relating to expanding the limited sales and use tax 1
incentive program to encourage redevelopment of underutilized 2
property; amending RCW 82.92.007, 82.92.010, 82.92.020, 82.92.040, 3
82.92.070, 82.92.090, 82.92.100, 82.92.110, and 82.92.120; amending 4
2022 c 241 s 15 (uncodified); and adding a new section to chapter 5
82.92 RCW. 6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:7
Sec. 1. RCW 82.92.007 and 2022 c 241 s 2 are each amended to 8
read as follows: 9
It is the purpose of this chapter to encourage the redevelopment 10
of underdeveloped ((land)) property in targeted urban areas, thereby 11
increasing affordable housing, employment opportunities, and helping 12
accomplish the other planning goals of Washington cities. The 13
legislative authorities of cities to which this chapter applies may 14
authorize a sales and use tax deferral for an investment project 15
within the city if the legislative authority of the city finds that 16
there are significant areas of underdeveloped ((land)) property and a 17
lack of affordable housing in areas proximate to the ((land)) 18
property. If a conditional recipient maintains the property for 19
qualifying purposes for at least 10 years, deferred sales and use 20
taxes need not be repaid. 21
S-3428.3
SENATE BILL 5884
State of Washington 69th Legislature 2026 Regular Session
By Senators Riccelli, Trudeau, Conway, Frame, Lovelett, Nobles, and
Shewmake
Prefiled 12/15/25. Read first time 01/12/26. Referred to Committee
on Housing.
p. 1 SB 5884
Sec. 2. RCW 82.92.010 and 2022 c 241 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 homeownership housing" means housing intended for 5
owner occupancy to low or moderate-income households whose monthly 6
housing costs, including utilities other than telephone, do not 7
exceed 30 percent of the household's monthly income.8
(2) "Affordable rental housing" means housing for very low or 9
low-income households whose monthly housing costs, including 10
utilities other than telephone, do not exceed 30 percent of the 11
household's monthly income. 12
(3) "Applicant" means an owner of underdeveloped property.13
(4) "City" means a city with a population of at least 135,000 and 14
not more than ((250,000)) 275,000 at the time the city initially 15
establishes the program under this section. 16
(5) "Conditional recipient" means an owner of underdeveloped land 17
granted a conditional certificate of program approval under this 18
chapter, which includes any successor owner of the property.19
(6) "County median price" means the most recently published 20
quarterly data of median home prices by the Washington center for 21
real estate research. 22
(7) "Eligible investment project" means an investment project 23
that is located in a city and receiving a conditional certificate of 24
program approval. 25
(8) "Fair market rent" means the estimates of 40th percentile 26
gross rents for standard quality units within counties as published 27
by the federal department of housing and urban development.28
(9) "Governing authority" means the local legislative authority 29
of a city having jurisdiction over the property for which a deferral 30
may be granted under this chapter. 31
(10) "Household" means a single person, family, or unrelated 32
persons living together. 33
(11)(a) "Initiation of construction" means the date that a 34
building permit is issued under the building code adopted under RCW 35
19.27.031 for construction of the qualified building, if the 36
underlying ownership of the building vests exclusively with the 37
person receiving the economic benefit of the deferral.38
(b) "Initiation of construction" does not include soil testing, 39
site clearing and grading, site preparation, or any other related 40
p. 2 SB 5884
activities that are initiated before the issuance of a building 1
permit for the construction of the foundation of the building.2
(c) If the investment project is a phased project, "initiation of 3
construction" applies separately to each phase. 4
(12) "Investment project" means an investment in multifamily 5
housing, including labor, services, and materials incorporated in the 6
planning, installation, and construction of the project. "Investment 7
project" includes investment in related facilities such as 8
playgrounds and sidewalks as well as facilities used for business use 9
for mixed-use development. 10
(13) "Low-income household" means a single person, family, or 11
unrelated persons living together whose adjusted income is more than 12
50 percent but is at or below 80 percent of the median family income 13
adjusted for family size, for the county, city, or metropolitan 14
statistical area, where the project is located, as reported by the 15
United States department of housing and urban development.16
(14) "Moderate-income household" means a single person, family, 17
or unrelated persons living together whose adjusted income is more 18
than 80 percent but is at or below 115 percent of the median family 19
income adjusted for family size, for the county, city, or 20
metropolitan statistical area, where the project is located, as 21
reported by the United States department of housing and urban 22
development. 23
(15) "Multifamily housing" means a building or a group of 24
buildings having ((two)) four or more dwelling units not designed or 25
used as transient accommodations and not including hotels and motels. 26
((Multifamily units may result from new construction or 27
rehabilitation or conversion of vacant, underutilized, or substandard 28
buildings to multifamily housing.))29
(16) "Owner" means the property owner of record.30
(17) "Partially used land" means a parcel occupied by a use that 31
includes enough land to be further subdivided for additional 32
development without rezoning.33
(18) "Residential target area" means an area within an urban 34
center or urban growth area that has been designated by the governing 35
authority as a residential targeted area in accordance with this 36
chapter.37
(19) "Underdeveloped property" means any vacant, partially used, 38
or underutilized land identified by the governing authority under RCW 39
36.70A.115 as suitable for development of affordable homeownership or 40
p. 3 SB 5884
rental housing. "Underdeveloped property" does not include state-1
owned lands held under lease, held in trust, or that are otherwise 2
intended for specific purposes. 3
(20) "Underutilized land" means a parcel in multifamily, mixed-4
use, commercial, and industrial zones that could be redeveloped to a 5
more intensive land use than that which currently occupies the 6
property including, but not limited to, land used as a surface 7
parking lot for parking of motor vehicles off the street or highway, 8
that is open to public use with or without charge, as of June 9, 9
2022. 10
(((18))) (21) "Urban center" has the same meaning as in RCW 11
84.14.010.12
(22) "Vacant land" means any property, dwelling, building, or 13
structure that meets two of the following factors:14
(a) The dwelling, building, or structure has not been lawfully 15
occupied for a period of five years or more from the time of 16
application;17
(b) The property, dwelling, building, or structure constitutes a 18
threat to the public health, safety, or welfare as determined by the 19
governing authority; or20
(c) The value of improvements on the property is less than 21
$10,000, unless that property is in use by an adjacent property.22
(23) "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. 3. RCW 82.92.020 and 2022 c 241 s 4 are each amended to 29
read as follows: 30
(1) For the purpose of creating a sales and use tax deferral 31
program under this chapter, the governing authority must adopt a 32
resolution of intention to create a sales and use tax deferral 33
program as generally described in the resolution. The resolution must 34
state the time and place of a hearing to be held by the governing 35
authority to consider the creation of the tax deferral program and 36
may include such other information pertaining to the creation of the 37
deferral program as the governing authority determines to be 38
p. 4 SB 5884
appropriate to apprise the public of the action intended. However, 1
the resolution must provide information pertaining to:2
(a) The application process; 3
(b) The approval process; 4
(c) The appeals process for applications denied approval; and5
(d) Additional requirements, conditions, and obligations that 6
must be followed postapproval of an application; and7
(e) Additional affordability and income eligibility conditions 8
not otherwise inconsistent with this chapter. 9
(2) The governing authority must give notice of a hearing held 10
under this chapter by publication of the notice once each week for 11
two consecutive weeks, not less than seven days, nor more than 30 12
days before the date of the hearing in a paper having a general 13
circulation in the city. The notice must state the time, date, place, 14
and purpose of the hearing. 15
(3) Following the hearing or a continuance of the hearing, the 16
governing authority may authorize the creation of the program.17
Sec. 4. RCW 82.92.040 and 2022 c 241 s 6 are each amended to 18
read as follows: 19
The duly authorized administrative official or committee of the 20
city may approve the application and grant a conditional certificate 21
of program approval if it finds that: 22
(1)(a) The investment project is set aside primarily for 23
multifamily housing units and the applicant commits to renting or 24
selling ((at)):25
(i) At least 50 percent of the units as affordable rental housing 26
or affordable homeownership housing to very low, low, and /or 27
moderate-income households((. In a mixed-use project, only the ground 28
floor of a building may be used for commercial purposes with the 29
remainder dedicated to multifamily housing units)); or30
(ii) 20 percent of the units as affordable rental housing or 31
affordable homeownership housing to very low, low, and/or moderate-32
income households if the city requires it and the investment project 33
is located in a residential target area that the governing authority 34
has determined has adequate affordable housing;35
(b) In a mixed-use project, only the ground floor of a building 36
may be used for commercial purposes with the remainder dedicated to 37
multifamily housing units;38
p. 5 SB 5884
(c) At least 50 percent of the investment project set aside for 1
multifamily housing units will be rented at a price at or below fair 2
market rent for the county or sold at a price at or below county 3
median price; and 4
(((c))) (d) The applicant commits to any additional affordability 5
and income eligibility conditions adopted by the local government 6
under this chapter not otherwise inconsistent with this chapter;7
(2) The investment project is, or will be, at the time of 8
completion, in conformance with all local plans and regulations that 9
apply at the time the application is approved; 10
(3) The investment project will occur on land that constitutes 11
underdeveloped property; 12
(4) The area where the investment project will occur is located 13
within an area zoned for residential or mixed uses;14
(5) The terms and conditions of the implementation of the 15
development meets the requirements of this chapter and any 16
requirements of the city that are not otherwise inconsistent with 17
this chapter; 18
(6) The land where the investment project will occur was not 19
acquired through a condemnation proceeding under Title 8 RCW; and20
(7) All other requirements of this chapter have been satisfied as 21
well as any other requirements of the city that are not otherwise 22
inconsistent with this chapter. 23
NEW SECTION. Sec. 5. A new section is added to chapter 82.92 24
RCW to read as follows: 25
(1) The following criteria must be met before an area may be 26
designated as a residential targeted area: 27
(a) The area must be within an urban center, as determined by the 28
governing authority; 29
(b) The area has a high number of underdeveloped, underutilized, 30
and/or vacant properties; 31
(c) Proximate to the land, as determined by the governing 32
authority, there is insufficient available, desirable, and convenient 33
residential housing, including affordable housing, to meet the needs 34
of the public; 35
(d) A significant number of existing improvements proximate to 36
the area do not meet the maximum permitted density for property that 37
allows for multifamily, mixed-use, commercial, and industrial uses;38
p. 6 SB 5884
(e) The provision of additional housing opportunity, including 1
affordable housing, in the area, as determined by the governing 2
authority, will assist in achieving one or more of the stated 3
purposes of this chapter; and 4
(f) The city must determine that designation of the area is in 5
compliance with the antidisplacement requirements in RCW 6
36.70A.070(2). 7
(2) For the purpose of designating a residential targeted area or 8
areas, the governing authority may adopt a resolution of intention to 9
so designate an area as generally described in the resolution. The 10
resolution must state the time and place of a hearing to be held by 11
the governing authority to consider the designation of the area and 12
may include such other information pertaining to the designation of 13
the area as the governing authority determines to be appropriate to 14
apprise the public of the action intended. 15
(3) The governing authority must give notice of a hearing held 16
under this chapter by publication of the notice once each week for 17
two consecutive weeks, not less than seven days, nor more than 30 18
days before the date of the hearing in a paper having a general 19
circulation in the city or county where the proposed residential 20
targeted area is located. The notice must state the time, date, 21
place, and purpose of the hearing and generally identify the area 22
proposed to be designated as a residential targeted area. The 23
governing authority must send a copy of the notice to all taxing 24
districts in the proposed residential targeted area.25
(4) Following the hearing, or a continuance of the hearing, the 26
governing authority may designate all or a portion of the area 27
described in the resolution of intent as a residential targeted area 28
if it finds, in its sole discretion, that the criteria in subsections 29
(1) through (3) of this section have been met. 30
(5) After designation of a residential targeted area, the 31
governing authority must adopt and implement standards and guidelines 32
to be utilized in considering applications and making the 33
determinations required under RCW 82.92.040. 34
(6) The governing authority may adopt and implement as a 35
contractual prerequisite to any exemption granted pursuant to RCW 36
82.92.020: 37
(a) A requirement that applicants pay at least the prevailing 38
rate of hourly wage established under chapter 39.12 RCW for journey 39
p. 7 SB 5884
level and apprentice workers on residential and commercial 1
construction; 2
(b) Payroll record requirements consistent with RCW 39.12.120(1);3
(c) Apprenticeship utilization requirements as defined in RCW 4
39.04.310; and 5
(d) A contracting inclusion plan developed in consultation with 6
the office of minority and women's business enterprises.7
(7) Before changing any adopted standards, guidelines, 8
requirements, or conditions under subsections (5) and (6) of this 9
section, the governing authority must notify all taxing districts in 10
the residential targeted area of the proposed changes.11
Sec. 6. RCW 82.92.070 and 2022 c 241 s 9 are each amended to 12
read as follows: 13
(1) Within 30 days of the issuance of a certificate of occupancy 14
for an eligible investment project, the conditional recipient must 15
file with the city the following: 16
(a) A description of the work that has been completed and a 17
statement that the eligible investment project qualifies the property 18
for a sales and use tax deferral under this chapter;19
(b) A statement of the new affordable housing to be offered as a 20
result of the new construction; and 21
(c) A statement that the work has been completed within three 22
years of the issuance of the conditional certificate of program 23
approval. 24
(2) Within 30 days after receipt of the statements required under 25
subsection (1) of this section, the city must determine and notify 26
the conditional recipient as to whether the work completed and the 27
affordable housing to be offered are consistent with the application 28
and the contract approved by the city, and the investment project 29
continues to qualify for a tax deferral under this chapter. The 30
conditional recipient must ((notify)) provide the department a copy 31
of the city's determination within 30 days from receiving the city's 32
determination to schedule an audit of the deferred taxes. The 33
department must determine the amount of sales and use taxes 34
qualifying for the deferral. If the department determines that 35
purchases were not eligible for deferral it must assess interest, but 36
not penalties, on the nonqualifying amounts. 37
p. 8 SB 5884
(3) The city must notify the conditional recipient within 30 days 1
that a tax deferral under this chapter is denied if the city 2
determines that: 3
(a) The work was not completed within three years of the 4
application date; 5
(b) The work was not constructed consistent with the application 6
or other applicable requirements; 7
(c) The affordable housing units to be offered are not consistent 8
with the application and criteria of this chapter; or9
(d) The owner's property is otherwise not qualified for a sales 10
and use tax deferral under this chapter. 11
(4) If the city finds that the work was not completed within the 12
required time period due to circumstances beyond the control of the 13
conditional recipient and that the conditional recipient has been 14
acting and could reasonably be expected to act in good faith and with 15
due diligence, the governing authority may extend the deadline for 16
completion of the work for a period not to exceed 24 consecutive 17
months, and must notify the department of the extension.18
(5) The city's governing authority may enact an ordinance to 19
provide a process for a conditional recipient to appeal a decision by 20
the city that the conditional recipient is not entitled to a deferral 21
of sales and use taxes. The conditional recipient may appeal a 22
decision by the city to deny a deferral of sales and use taxes in 23
superior court under RCW 34.05.510 through 34.05.598, if the appeal 24
is filed within 30 days of notification by the city to the 25
conditional recipient. 26
(6) A city denying a conditional recipient of a sales and use tax 27
deferral under subsection (3) of this section must notify the 28
department and taxes deferred under this chapter are immediately due 29
and payable, subject to any appeal by the conditional recipient. The 30
department must assess interest at the rate provided for delinquent 31
taxes and penalties retroactively to the date of deferral. A debt for 32
deferred taxes will not be extinguished by insolvency or other 33
failure of the recipient. 34
Sec. 7. RCW 82.92.090 and 2022 c 241 s 11 are each amended to 35
read as follows: 36
(1) A ((conditional)) recipient of a conditional certificate of 37
program approval issued by the city must submit an application for a 38
sales and use tax deferral certificate to the department before 39
p. 9 SB 5884
initiation of the construction of the investment project. In the case 1
of an investment project involving multiple qualified buildings, 2
applications must be made for, and before the initiation of 3
construction of, each qualified building. The application must be 4
made to the department in a form and manner prescribed by the 5
department. The application must include a copy of the conditional 6
certificate of program approval issued by the city detailing 7
specifics of the investment project conditionally approved and 8
clarifying any portions of the project not approved for a tax 9
deferral, estimated construction costs, time schedules for completion 10
and operation, and any other information required by the department. 11
The department must ((rule on )) review the application for 12
completeness and provide a tax deferral certificate within 60 days.13
(2) The department must provide information to the conditional 14
recipient regarding documentation that must be retained by the 15
conditional recipient in order to substantiate the amount of sales 16
and use tax actually deferred under this chapter. 17
(3) The department may not accept applications for the deferral 18
under this chapter after June 30, 2032. 19
(4) The application must include a waiver by the conditional 20
recipient of the four-year limitation under RCW 82.32.100.21
(5) This section expires July 1, 2032. 22
Sec. 8. RCW 82.92.100 and 2022 c 241 s 12 are each amended to 23
read as follows: 24
(1) After receiving the conditional certificate of program 25
approval issued by the city , for each eligible investment project, 26
and provided to the department by the applicant, the department must 27
((issue)) review the application for completeness and provide a sales 28
and use tax deferral certificate for state and local sales and use 29
taxes due under chapters 82.08, 82.12, and 82.14 RCW, within 60 days, 30
on each eligible investment project. 31
(2) No certificate may be issued for an investment project that 32
has already received a deferral under chapter 82.60 RCW or this 33
chapter.34
(3) The department must keep a running total of all estimated 35
sales and use tax deferrals provided under this chapter during each 36
fiscal biennium. 37
(((3))) (4) The deferral certificate is valid during active 38
construction of a qualified investment project and expires on the day 39
p. 10 SB 5884
the city issues a certificate of occupancy for the investment project 1
for which a deferral certificate was issued. 2
(((4))) (5) This section expires July 1, 2032. 3
Sec. 9. RCW 82.92.110 and 2022 c 241 s 13 are each amended to 4
read as follows: 5
(1) If a conditional recipient voluntarily opts to discontinue 6
compliance with the requirements of this chapter, the recipient must 7
notify the city and department within 60 days of the change in use or 8
intended discontinuance. 9
(2) ((If, after the department has issued a sales and use tax 10
deferral certificate and the conditional recipient has received a 11
certificate of occupancy, the city finds that a portion of an 12
investment project is changed or will be changed to disqualify the 13
recipient for sales and use tax deferral eligibility under this 14
chapter, the city must notify the department and all deferred sales 15
and use taxes are immediately due and payable. The department must 16
assess interest at the rate provided for delinquent taxes and 17
penalties retroactively to the date of deferral. A debt for deferred 18
taxes will not be extinguished by insolvency or other failure of the 19
recipient.20
(3))) This section does not apply after 10 years from the date of 21
the certificate of occupancy. 22
(3)(a) If, on the basis of the tax performance report under RCW 23
82.32.534 or other information, the city or the department finds that 24
an investment project is no longer an eligible investment project 25
under RCW 82.92.010 at any time during the calendar year in which the 26
investment project is certified as having been operationally 27
completed, or at any time during any of the nine succeeding calendar 28
years, a portion of deferred taxes are immediately due according to 29
the following schedule:30
31
32
Year in which use occurs Percent of deferred taxes
due
33 1 100
34 2 90
35 3 80
36 4 70
37 5 60
p. 11 SB 5884
1 6 50
2 7 40
3 8 30
4 9 20
5 10 10
(b) The department must assess interest at the rate provided for 6
delinquent taxes under chapter 82.32 RCW, but not penalties, 7
retroactively to the date of deferral.8
(4) The debt for deferred taxes may not be extinguished by 9
insolvency or other failure of the recipient. Transfer of ownership 10
does not terminate the deferral. The deferral is transferred, subject 11
to the successor meeting the eligibility requirements of this 12
chapter, for the remaining periods of the deferral.13
Sec. 10. RCW 82.92.120 and 2022 c 241 s 14 are each amended to 14
read as follows: 15
(1) Transfer of investment project ownership does not terminate 16
the deferral. The deferral is transferred subject to the successor 17
meeting the eligibility requirements of this chapter.18
(2) The transferor of an eligible project must notify the city 19
and the department of such transfer. The city must certify to the 20
department that the successor meets the requirements of the deferral. 21
The transferor must provide the information necessary for the 22
department to transfer the deferral. If the transferor fails to 23
notify the city and the department, all deferred sales and use taxes 24
are immediately due and payable. The department must assess interest 25
at the rate provided for delinquent taxes ((and)), but not penalties, 26
retroactively to the date of deferral. 27
Sec. 11. 2022 c 241 s 15 (uncodified) is amended to read as 28
follows: 29
(1) This section is the tax preference performance statement for 30
the tax preference s contained in chapter 241, Laws of 2022 and 31
chapter . . ., Laws of 2026 (this act) . This performance statement is 32
only intended to be used for subsequent evaluation of the tax 33
preferences. It is not intended to create a private right of action 34
by any party or to be used to determine eligibility for preferential 35
tax treatment. 36
p. 12 SB 5884
(2) The legislature categorizes ((this)) these tax preferences as 1
ones intended to induce certain designated behavior by taxpayers, as 2
indicated in RCW 82.32.808(2)(a). 3
(3) It is the legislature's specific public policy objective to 4
expand affordable housing options for very low to moderate-income 5
households, specifically in underdeveloped urban areas.6
(4)(a) To measure the effectiveness of the tax preference s in 7
((this act )) chapter 241, Laws of 2022 and chapter . . ., Laws of 8
2026 (this act) , the joint legislative audit and review committee 9
must evaluate the number of increased housing units on underdeveloped 10
property. If a review finds that the number of affordable housing 11
units has not increased, then the legislature intends to repeal 12
((this)) these tax preferences. 13
(b) The review must be provided to the fiscal committees of the 14
legislature by December 31, 2030. 15
(5) In order to obtain the data necessary to perform the review 16
in subsection (4) of this section, the joint legislative audit and 17
review committee may refer to any available data source, including 18
data collected by the department under ((section 10 of this act )) RCW 19
82.92.080. 20
--- END ---
p. 13 SB 5884