Washington Department of Revenue Issues Special Notice Interpreting SHB 2384 on Property Tax Exemption for Affordable Housing

Legal Alert

In our previous legal alert here, we discussed the changes that SHB 2384 made to the property tax exemption for nonprofit family housing under RCW 84.36.560. On June 11, 2020, the Washington Department of Revenue (the “Department”) issued a Special Notice (“Notice”) providing the Department’s interpretation of the new law.

Qualifying Criteria

Under SHB 2384, beginning July 1, 2021, the maximum income for a qualifying household will increase from 50% to 60% of area median income (“AMI”). The Notice clarifies that the increased income limit applies to new applications received on or after July 1, 2021, and to all renewals due by March 31, 2022.

SHB 2384 provides that a project will continue to qualify for a full exemption if the income of qualifying households exceeds the statutory income requirements but remains at or below 80% of AMI. This section of SHB 2384 became effective on June 11, 2020. The Notice states that the first renewals that would be affected by this change would be due March 31, 2021. This change applies to all tenants who qualified at the time of the initial approval, regardless of when the initial approval was made. The Notice provides an example, which states that if a nonprofit submits a renewal in February 2021, and one of the previous qualified tenant’s income increased to 75% of AMI, the tenant’s unit would continue to be considered a qualifying unit because the renewal was submitted after June 11, 2020 and the tenant’s income was at or below 80% of AMI.


SHB 2384 allows nonprofits to renew an exemption every three years, rather than annually. The Notice states that the three-year cycle for nonprofits with an existing exemption will start now, and their first renewals are due March 31, 2023. The Notice explains that if a nonprofit purchases an existing exempt property, the purchaser would typically start its own three-year cycle after submitting qualifying documentation. However, there could be situations when the purchaser assumes the property’s existing three-year renewal cycle, such as when there is change in the ownership structure and no income information is required. The Notice further notes that a nonprofit can submit revised income documentation prior to the required three-year renewal to receive greater exemption if the number of qualifying households has changed, and if the Department’s review results in a change to the exemption, the updated exemption would establish a new three-year renewal period.

WSHFC Financing

Finally, the Notice confirms that, for property tax emption purposes under SHB 2384, the Washington State Housing Finance Commission is an eligible funding source for all nonprofits providing affordable housing for qualifying households.

If you have any questions regarding the Department’s interpretation of SHB 2384, please contact one of the attorneys listed in this alert.

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