The Washington legislature recently passed two bills expanding affordable housing tax exemptions. Governor Inslee signed SHB 2384, revising the property tax exemption for low-income housing. He vetoed SHB 2634 that would have created an exemption from real estate excise tax (“REET”) for property to be used for affordable housing.
SHB 2384, amending the property tax exemption for low-income housing, will become effective on June 11, 2020. Under the new law, on July 1, 2021, the maximum income for a qualifying household will increase from 50% to 60% of area median income. This will make the property tax exemption consistent with income thresholds under the federal low-income housing tax credit and tax-exempt bond programs. The new law also eliminates the requirement for an annual renewal declaration. Nonprofits must now file a renewal declaration every third year after the initial declaration. Finally, the new law provides that financing provided to a nonprofit by the Washington State Housing Finance Commission will count as qualified financing for purposes of the exemption.
SHB 2634 would have eliminated the REET on sales to a nonprofit entity (including a limited partnership in which a nonprofit is a general partner) that intended to use the property for affordable housing. The bill was designed to incentivize sales to affordable housing developers by reducing the seller’s transaction costs. Unfortunately, this bill was vetoed by Governor Inslee for fiscal reasons.
We will continue monitoring future legislative activities concerning the proposed REET exemption. If you have any questions regarding these bills, please contact one of the attorneys listed here. We would be happy to discuss these bills and other parts of the new law that may apply to your specific situation.