New Bill Exempts Real Estate Excise Tax for Real Property Sales or Transfers for Affordable Housing

Legal Alert

The Washington legislature recently passed a bill expanding affordable housing tax exemptions. HB 1643 was signed into law by Governor Inslee on March 30, 2022 and will exempt from the real estate excise tax a sale or transfer of real property for affordable housing to a nonprofit entity, housing authority, public corporation, county, or municipal corporation.

Real estate excise tax (REET) is usually due on the sale or transfer of real property in Washington State, including the sale or transfer of a controlling interest in an entity that owns real property. Beginning with sales dated on or after January 1, 2020, the REET rate increased substantially, especially for real property with a gross selling price of over $3 million. The tax is usually paid by the seller of the property.

HB 1643 exempts from REET, beginning on January 1, 2023, the sale or transfer of real property to a nonprofit, housing authority, public corporation, county, or municipal corporation if the grantee intends to use the property for affordable rental housing and receives, or qualifies for, real and personal property tax exemptions. Qualifying entities must certify their intent, by affidavit at the time of sale or transfer, to receive or qualify for the eligible tax exemption within certain time frames depending on the use of the property. Time frames are shorter for continued existing affordable housing operations versus property that will be substantially renovated, versus low-income housing that will be newly developed on a property. If a qualifying grantee fails to receive, or qualify for, a property tax exemption within the appropriately designated timeline, all unpaid REET becomes due plus interest.

If you have any questions regarding this bill, please contact one of the attorneys listed here. We would be happy to discuss this new affordable housing REET exemption and how it may apply to your specific situation.

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