SENATE BILL REPORT

SB 5116

As Reported by Senate Committee On:

Governmental Operations, February 11, 2013

Title: An act relating to exempting transfers of real property by operation of law or court order from the requirement to file a real estate excise tax affidavit.

Brief Description: Exempting transfers of real property by operation of law or court order from the requirement to file a real estate excise tax affidavit.

Sponsors: Senators Benton, Harper and King.

Brief History:

Committee Activity: Governmental Operations: 2/11/13 [DP, DNP].

Majority Report: Do pass.

Signed by Senators Roach, Chair; Benton, Vice Chair; Braun and Rivers.

Minority Report: Do not pass.

Signed by Senators Fraser and Hasegawa, Ranking Member.

Staff: Sam Thompson (786-7413)

Background: A real estate excise tax (REET) is imposed on transfers of real estate, mobile homes, and certain other property. The state imposes the REET at a rate of 1.28 percent. Cities and counties may impose lesser rates, which vary by locale. While the REET must generally be paid by the seller, the buyer may be liable if the tax is not paid by the seller.

Some transfers by operation of law, including inheritances, are exempt from the REET, if properly documented. Required documentation may involve filing of affidavits. For example, a surviving spouse or domestic partner may file a REET affidavit affirming that they are the sole and rightful heir to a particular property that was held as community property, thus providing evidence that the transfer is exempt from REET.

Summary of Bill: No REET affidavit is required to evidence any transfer of real property by operation of law or by order of the court where no instrument of conveyance is recorded in the official records of the county in which the real property is located.

Appropriation: None.

Fiscal Note: Not requested.

Committee/Commission/Task Force Created: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony: PRO: Some counties in the state have required that these affidavits be filed for transfers occurring pursuant to court proceedings, when a conveyance may not be recorded. This burdensome requirement unnecessarily complicates conveyances, can hinder financing, and cause excessive delays until required paperwork is complete. REET affidavits should not be required for transfers when no instrument of conveyance is recorded.

CON: These affidavits can document that a REET exemption applies when there are no recorded documents to confirm that an exemption applies. They enable counties to maintain up-to-date records, and can prevent parties from being later surprised by REET bills when they should qualify for an exemption. This bill would require parties to dig through court records, including probate and divorce records, to confirm that an exemption applies, and is opposed by county treasurers, clerks, and assessors.

Persons Testifying: PRO: Stu Halsan, Gary Kissling, WA Land Title Assn.; Bob Mitchell, WA Realtors.

CON: Darryl Pheasant, Grant County Treasurer, WA State County Treasurer's Assn.; Monty Cobb, WA Assn. of County Officials.