SHB 1406 - Local state-shared tax for affordable and supportive housing

What the bill does

Substitute House Bill 1406 allows local jurisdictions (cities and counties) to impose a local state-shared sales and use tax to fund affordable or supportive housing. The consumer does not pay this tax, and the effective sales tax rate remains the same. Instead, this tax is credited against the 6.5% state sales tax.

Depending on the population of the local jurisdiction, funds from this tax must be used for the following:

• acquisition, rehabilitation or construction of affordable housing
• funding the operations and maintenance costs of new units of affordable or supportive housing, or
• provide rental assistance to tenants

How to impose the tax

To impose the tax, the local jurisdiction must adopt both of the following:

• a resolution of intent to adopt legislation by Jan. 28, 2020
• legislation to authorize the tax by July 28, 2020

Local jurisdictions may impose this tax as early as Sept. 1, 2019. The tax expires twenty years from the date it was imposed. Local state-shared taxes may take effect no sooner than thirty days after the Department of Revenue (department) receives notice of the change and only on the first day of the month (RCW 82.14.055 (2)).

Terms and abbreviations

Participating City (PCi) means the city that imposes the tax.

Participating County (PCo) means the county that imposes the tax.

Qualifying Local Tax (QLT) include the following taxes:

• The affordable housing levy authorized under RCW 84.52.105.
• The sales and use tax for housing and related services authorized under RCW 82.14.530, provided the city has imposed the tax at a minimum or at least half of the authorized rate.
• The sales and use tax for chemical dependency and mental health treatment services or therapeutic courts authorized under RCW 82.14.460 imposed by a city.
• The levy authorized under RCW 84.55.050, if used solely for affordable housing.

Important dates

Tax distributions and rates

Jurisdictions will receive the tax distribution monthly when other local taxes are distributed.

The maximum tax distribution a local jurisdiction is eligible to receive equals the reported taxable retail sales within the jurisdiction in fiscal year 2019, multiplied by the authorized tax rate. The maximum tax rate a jurisdiction may impose may not exceed either 0.0146% or 0.0073%, depending on certain factors.

See tax rate tables below.

Maximum tax rates for Participating Cities (PCi) - July 28, 2019 - July 28, 2020

Maximum tax rates for Participating Cities (PCi) - On or after July 29, 2020

Maximum tax rates for Participating Counties (PCo) - July 28, 2019 - July 28, 2020

Maximum tax rates for Participating Counties (PCo) - On or after July 29, 2020