NOTE CONCERNING IMPACT ESTIMATES
OF PROPERTY TAX EXEMPTIONS:
The estimates listed in this
section reflect savings to property owners as a result of exemptions. Because the
state is projected to be at the maximum levy allowed under the levy limit during the
forecast period, there would be no additional revenue accruing to the state general fund
resulting from the broader tax base if property tax exemptions were eliminated. However,
the amount of tax paid by other property owners would be reduced as a result of lower levy
rates.
Similarly, many local taxing
districts are at their maximum levy, and thus repeal of exemptions would yield no
additional revenue to these local governments. For those districts whose regular levies
are not at their statutory maximums, there would be some additional revenue accruing with
the elimination of exemptions, but this amount is not indicated in the report since it
focuses on tax savings to taxpayers. In addition, special levy rates could be lowered with
the addition to the tax base.
PROPERTY TAX EXEMPTIONS: PERSONAL PROPERTY
84.36.070 INTANGIBLE PROPERTY
Description: Exempts from property tax the
value of assets such as cash, deposits, loans, and securities.
Purpose: The apparent purposes of the
exemption were to avoid double taxation of tangible assets underlying intangible assets,
as well as to encourage economic development. The exemption recognizes the administrative
difficulty of locating and valuing intangible assets, and collecting such a tax due to
their mobility.
Category/Year Enacted: Intangibles; 1931.
In 1997 the definition was revised providing additional examples of exempt intangibles
(trademarks, brand names, copyrights, franchises, etc.).
Primary Beneficiaries: Holders of
intangible assets.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000):* |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
1,594,079 |
1,555,816 |
1,532,412 |
1,507,521 |
| Local Levies |
5,311,494 |
5,236,706 |
5,192,180 |
5,143,169 |
*Based on the full value of assets and taxation
under the property tax at existing levy rates. Assumes that real estate mortgages and
government securities would not be subject to tax.
If the exemption were repealed, would the
estimated revenue be realized? Very unlikely; because of their mobility intangibles could
be easily concealed or moved to other states to avoid the tax. The few other states that
attempt to tax intangibles do so either: (1) under the property tax at a very low millage
rate, or (2) under an income tax based on the gains accruing from the assets.
84.36.079 SHIPS AND VESSELS UNDER CONSTRUCTION
Description: Property tax exemption is
provided for vessels under construction that are 1,000 tons or more burden upon
completion, and the materials and parts held at the site for incorporation into such
vessels.
Purpose: The purpose was apparently to
improve the competitive position of shipyards in Washington relative to those in Oregon
and California.
Category/Year Enacted: Economic
development; 1959.
Primary Beneficiaries: Owners of vessels
under construction and the shipyards where the activity occurs. However, there is
typically very little construction of vessels of this magnitude in Washington.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
7 |
7 |
7 |
8 |
| Local Levies |
21 |
22 |
22 |
23 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.36.080(1) COMMERCIAL VESSELS
Description: Vessels used for commercial
fishing or for transportation of persons or property are subject to the state property tax
levy only and are exempt from all local levies. An apportionment system (RCW 84.40.036)
was adopted in 1986 which allocates a portion of the vessel's value to this state based on
the length of time spent in Washington waters. Vessels in Washington for less than 120
days per year are entirely exempt (a day is defined as at least 16 hours).
Purpose: The apparent purpose is to lessen
the tax burden on these vessels and thus promote ocean-going commerce and commercial
fishing in Washington.
Category/Year Enacted: Economic
development; 1931.
Primary Beneficiaries: Approximately 3,500
commercial fishing vessels and documented commercial carriers.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy* |
3,336 |
3,477 |
3,645 |
3,815 |
| Local Levies |
12,045 |
12,471 |
12,969 |
13,488 |
*The difference between actual and assessed
values reflects the time spent outside of Washington waters.
If the exemption were repealed, would the
estimated revenue be realized? Yes; assuming that vessels entering the state during the
year could be taxed, not just those located in the state on the January 1 assessment date.
However no actual increased revenue would result, only shifts of tax burdens.
84.36.080(2) HISTORIC VESSELS
Description: Vessels listed on the state
or federal register of historic places are exempt from property tax.
Purpose: To encourage retention and
restoration of historic ships and vessels.
Category/Year Enacted: Individuals; 1986.
Primary beneficiaries: Owners of
approximately 20 vessels.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
12 |
12 |
13 |
14 |
| Local Levies |
37 |
38 |
40 |
42 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.36.090 OTHER SHIPS AND VESSELS
Description: This statute exempts all
ships and vessels from property tax, other than ships under construction, commercial
vessels that are partially exempt and historic vessels which are exempted by RCWs
84.36.079-.080.
Purpose: Unknown. Presumably, this statute
protects pleasure boats and others from paying both personal property tax and the 0.5
percent state excise tax. However, this statute was in existence long before the excise
tax was enacted in 1983, although the exemption did not apply to the state levy and 20% of
local levies.
Category/Year Enacted: Individuals; 1931
(the exemption applied only to 80% of local levies until 1984).
Primary Beneficiaries: Owners of pleasure
boats.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy* |
(4,543) |
(4,937) |
(5,360) |
(5,886) |
| Local Levies |
18,524 |
19,660 |
20,698 |
21,676 |
*Assumes the state 0.5 percent excise tax on
pleasure and other boats is in lieu of personal property tax; the 0.5 percent state excise
tax has been subtracted here to indicate the net impact of both taxes.
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur. Further, the estimates do not reflect
the difficulties of locating and valuing pleasure boats.
84.36.105 CARGO CONTAINERS
Description: Cargo containers used in
ocean commerce are exempt from taxation.
Purpose: The purpose is to help make
Washington ports competitive with other West Coast ports for ocean commerce.
Category/Year Enacted: Economic
development; 1975.
Primary Beneficiaries: Owners of cargo
containers.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
713 |
743 |
779 |
816 |
| Local Levies |
2,238 |
2,317 |
2,410 |
2,506 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.36.110(1) HOUSEHOLD GOODS AND PERSONAL EFFECTS
Description: Household goods and
furnishings in actual use are exempt from property taxation. Originally, the exemption
limited property owners to $300 of household effects, but in 1935 it was broadened to
include all household items in a residence that were not used for commercial purposes or
for sale.
Purpose: This exemption recognizes the
administrative difficulties of listing and valuing household items.
Category/Year Enacted: Individuals; 1871.
Primary Beneficiaries: Approximately 2.5
million residential households in the state.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
54,559
|
55,910 |
57,853 |
59,799 |
| Local Levies |
181,792 |
188,187 |
196,022 |
204,015 |
If the exemption were repealed, would the
estimated revenue be realized? No; shifts of tax burden would occur. Further, the cost of
administration and difficulties of enforcing property tax on household goods would be
significant.
84.36.110(2) $3,000 OF PERSONAL PROPERTY
Description: In addition to the complete
exemption of household goods, the first $3,000 of taxable personal property for heads of
households is exempt. Since households are effectively exempt from any personal property
tax liability, this exemption has the effect of reducing the personal property tax
liability of noncorporate businesses, which are subject to personal property tax on
business equipment and supplies.
Purpose: This exemption was originally
intended to exclude household goods and furnishings up to a value of $300. When the
statute was expanded to completely exempt these items, the $300 exemption effectively
applied only to heads of households who have taxable personal property used in a business
activity (essentially sole proprietors).
Category/Year Enacted: Individuals; 1890
(increased from $300 to $3,000 by the voters in 1988).
Primary Beneficiaries: Approximately
16,200 sole proprietors who operate a business from their residence.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
143 |
149 |
155 |
162 |
| Local Levies |
477 |
501 |
527 |
553 |
If the exemption were repealed, would the
estimated revenue be realized? No; shifts of tax burden would occur. Further, enforcement
could be difficult.
84.36.176 PLYWOOD AND PARTICLE BOARD
Description: Plywood, hardboard, and
particle board in transit through Washington may be processed in this state and held for
up to 30 days before it becomes subject to property tax. This exemption is similar to the
general exemption for goods in transit, RCW 84.36.300.
Purpose: The exemption was enacted to
assist a specific business in reducing its cost of operations. Now, with the exemption of
all business inventories, this statute can be considered as superfluous, since all
personal property held for ultimate sale is exempt.
Category/Year Enacted: Economic
development; 1967.
Primary Beneficiaries: It is presumed that
a very small number of plywood manufacturers would meet the requirements of this statute.
Conflict With Other Programs: Not
apparent.
Tax Savings ($000): Minimal; exempt as
inventory.
84.36.181 METALS IN TRANSIT
Description: Ores and metals shipped into
Washington for reduction or refinement are exempt from taxation for up to 30 days after
completion of processing.
Purpose: Purpose is to foster trade and
economic growth. Now, with the exemption of all business inventories this exemption can be
considered as superfluous, since all personal property held for ultimate sale is exempt.
Category/Year Enacted: Economic
development; 1961.
Primary Beneficiaries: Approximately 8
firms that manufacture aluminum.
Conflict With Other Programs: None
evident.
Tax Savings ($000): Minimal; exempt as
inventory.
84.36.190 METAL IN CATHODE OR BAR FORM
Description: This exemption was granted to
aluminum products in cathode or bar form held for sale and stored under negotiable
warehouse receipt.
Purpose: The purpose was to aid the then
infant aluminum industry. While the industry grew, the need for this type of warehousing
never materialized. All storage of manufactured aluminum was, and is now, handled
internally. Now, with the exemption of all business inventories, this exemption can be
considered as superfluous, since all personal property held for ultimate sale is exempt.
Category/Year enacted: Economic
development; 1949.
Primary Beneficiaries: There appears to be
no beneficiary of this exemption.
Conflict With Other Programs: None
evident.
Tax Savings ($000): None.
84.36.240 SOIL AND WATER CONSERVATION DISTRICTS
Description: The personal property of soil
and water conservation districts is exempt from property tax.
Purpose: To assist what is essentially a
quasi-governmental activity.
Category/Year Enacted: Government; 1963.
Primary Beneficiaries: There are
approximately 49 soil and water conservation districts.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
8 |
8 |
8 |
9 |
| Local Levies |
24 |
25 |
26 |
27 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.36.300 GOODS IN TRANSIT (FREEPORT EXEMPTION)
Description: Goods are exempt from
property tax if they are manufactured outside Washington by the current owner and shipped
into the state or acquired by the current owner from another instate manufacturer, and
subsequently exported in substantially the same form they were brought into the state
(although repackaging, relabeling, etc. may take place here). Items exempted include
aircraft parts and accessories, but not engines or major structural components, installed
in Washington.
Purpose: Purpose is to encourage trade and
promote economic growth.
Category/Year Enacted: Economic
development; 1961.
Primary Beneficiaries: Merchandise
wholesalers and manufacturers of aircraft.
Conflict With Other Programs: None
evident.
Tax Savings ($000): Minimal; exempt as
inventory.
84.36.470 AGRICULTURAL PRODUCTS
84.36.140 AGRICULTURAL PRODUCTS IN STORAGE OR IN
TRANSIT
Description: All agricultural and
horticultural products produced for sale by a person on lands owned or leased by the
producer are exempt from property tax. The comprehensive exemption in RCW 84.36.470 now
supersedes an earlier exemption for certain agricultural products and unprocessed timber
being held in storage or in transit on January 1, if shipped out of state by April 30.
Purpose: Originally, the exemptions were
intended to assist a depressed agricultural economy and encourage the storage of
commodities in this state. With the exemption of business inventories, the exemption of
agricultural products following harvest is superfluous because these items are held for
sale.
Category/Year Enacted: Agriculture; 1984,
following reduced assessment from 1975 through 1983 and earlier limited exemptions in 1933
and 1939.
Primary Beneficiaries: Agricultural
producers, processors and shippers.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
6,672 |
6,955 |
7,291 |
7,632 |
| Local Levies |
20,942 |
21,683 |
22,550 |
23,452 |
If the exemption were repealed, would the
estimated revenue be realized? No; shifts of tax burden would occur. Further, such items
could be considered as inventories exempt under RCW 84.36.477.
84.36.477 BUSINESS INVENTORIES
84.36.510 MOBILE HOME INVENTORIES
Description: Business inventories,
including livestock and personal property acquired or produced solely for the purpose of
sale, are exempt from tax.
Purpose: This program was enacted to
provide a stimulant to the economy and make Washington competitive with neighboring states
which were eliminating inventory taxes. (It should be noted that state B&O tax applies
to the sale of inventories each time they are sold at the wholesale and retail level.)
Category/Year Enacted: Economic
development; 1974, effective in 1984 after a ten year credit of personal property tax on
inventories against the state B&O tax.
Primary Beneficiaries: Manufacturers,
wholesalers, and retailers.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
98,827 |
103,028 |
108,003 |
113,045 |
| Local Levies |
310,210 |
321,176 |
334,024 |
347,385 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.36.600 CUSTOM COMPUTER SOFTWARE
Description: Custom computer software,
defined as software that is designed for a specific need for a single person or group of
persons, is exempt from property tax. Included in the definition is modification of canned
computer software.
Purpose: To recognize the administrative
difficulties in valuing such software and to achieve uniform treatment in all counties.
Category/Year Enacted: Economic
development; 1991.
Primary Beneficiaries: Businesses that own
custom computer software.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
1,751 |
1,825 |
1,913 |
2,002 |
| Local Levies |
5,495 |
5,689 |
5,917 |
6,154 |
If the exemption were repealed, would the
estimated revenue be realized? No; shifts of tax burden would occur. Further, there would
be difficulties in valuing custom software.
84.40.030(3) GROWING CROPS
Description: Crops that are growing in the
ground as of the January 1 assessment date are excluded from the value of the agricultural
land.
Purpose: Most crops are harvested at the
end of the growing season and therefore are not subject to property taxation. This
exemption provides equal treatment with the few crops which may be growing in the ground
on the January 1 assessment date, principally winter wheat and fall barley.
Category/Year Enacted: Agriculture; 1890.
Primary Beneficiaries: Farmers who have
crops growing in the ground on the January 1 assessment date.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
1,143 |
1,192 |
1,250 |
1,308 |
| Local Levies |
3,589 |
3,716 |
3,864 |
4,019 |
If the exemption were repealed, would the
estimated revenue be realized? Unlikely.
84.40.037 CANNED COMPUTER SOFTWARE
Description: This statute provides that
"canned" computer software is taxable at 100 percent of the acquisition cost in
the first year following purchase and at 50 percent in the second year. Thereafter, it
will be exempt from property tax. Canned software includes programs that are purchased
"off the shelf" for direct use without modification for the specific needs of
the user.
Purpose: To recognize the rapid
obsolescence of canned software and the difficulty of establishing accurate depreciation
schedules, as well as to provide uniform treatment throughout the state.
Category/Year Enacted: Economic
development; 1991.
Primary Beneficiaries: Businesses that own
canned software.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
1,315 |
1,371 |
1,437 |
1,504 |
| Local Levies |
4,127 |
4,273 |
4,444 |
4,622 |
If the exemption were repealed, would the revenue
be realized? No; shifts of tax burden would occur.
84.40.220 NURSERY STOCK
Description: Nursery stock grown in pots
or bags is exempt from property tax. This exemption was enacted when the industry changed
its method of growing such products by switching to pots and bags rather than in the
ground. Since this stock is not grown in the ground, it is not included in the growing
crops exemption under RCW 84.40.030(3).
Purpose: To treat nursery stock the same
as growing crops.
Category/Year Enacted: Agriculture; 1971.
Primary Beneficiaries: About 1,090
producers of nursery stock.
Conflict With Other Programs: None
evident.
| Tax
Savings ($000): |
CY 2000
|
CY 2001 |
CY 2002 |
CY 2003 |
|
|
|
|
|
| State levy |
83 |
87 |
91 |
95 |
| Local Levies |
262 |
271 |
282 |
293 |
If the exemption were repealed, would the
estimated revenue be realized? No; nursery stock would likely be considered as
exempt inventory.