WASHINGTON STATE REGISTER

WSR 99-13-017

PROPOSED RULES

DEPARTMENT OF REVENUE

[ Filed June 4, 1999, 4:29 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 99-09-085.

Title of Rule: WAC 458-16-280 Art, scientific, and historical collections and 458-16-282 Musical, dance, artistic, dramatic, and literary associations.

Purpose: WAC 458-16-280 explains the requirements that an art, scientific, or historical collection must satisfy to receive the property tax exemption available under the provisions of RCW 84.36.060. WAC 458-16-282 explains the criteria and conditions imposed on organizations, associations, or corporations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works that wish to receive a property tax exemption under the provisions of RCW 84.36.060.

Statutory Authority for Adoption: RCW 84.36.865.

Statute Being Implemented: RCW 84.36.060.

Summary: RCW 84.36.060 provides a property tax exemption to art, scientific, and historical collections and associations and to associations engaged in the production and performance of musical, dance, and artistic, dramatic, or literary works. The statute imposes different requirements on the designated collections and associations so two rules are required to explain the conditions and criteria that must be satisfied to receive a property tax exemption.

Reasons Supporting Proposal: In 1995, the legislature amended RCW 84.36.060 (section 1, chapter 302, Laws of 1995) to also allow a property tax exemption for property under construction or soon to be used for an exempt purpose. The proposed changes to WAC 458-16-280 and 458-16-282 describe these statutory provisions.

Name of Agency Personnel Responsible for Drafting: Kim M. Qually, 711 Capitol Way South, #303, Olympia, WA (360) 664-0086; Implementation and Enforcement: Sandy Guilfoil, 6004 Capitol Boulevard, Tumwater, WA (360) 753-5503.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: RCW 84.36.060 provides a property tax exemption to art, scientific, and historical collections and associations and to associations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works. Because the statute imposes different criteria and conditions on the collections and the associations exempted, DOR adopted two rules to explain the statutory requirements that must be satisfied by each organization in order to receive a property tax exemption under this statute. WAC 458-16-280 explains the requirements that an art, scientific, or historical collection must satisfy to receive an exemption. WAC 458-16-282 explains the criteria and conditions imposed on organizations, associations, or corporations engaged in the production and performance of musical, dance, artistic, dramatic, or literary works that wish to receive an exemption.

In 1995, the legislature amended RCW 84.36.060. Section 1, chapter 302, Laws of 1995 expanded the property tax exemption to include property under construction or soon to be used for an exempt purpose by the designated collections or associations. The proposed changes to WAC 458-16-280 and 458-16-282 describe these statutory provisions and will provide taxpayers and other interested parties with up-to-date information about the exemptions authorized by this statute. The revised rules will reflect the current contents of the statute.

Proposal Changes the Following Existing Rules: This is a proposal to amend two existing rules, WAC 458-16-280 Art, scientific, and historical collections and 458-16-282 Musical, dance, artistic, dramatic, and literary associations.

The proposed changes incorporate 1995 amendments to RCW 84.36.060. Section 1, chapter 302, Laws of 1995 expanded this property tax exemption to include property under construction or soon to be used for an exempt purpose by art, scientific, and historical collections and associations and associations engaged in the production and performance of musical, dance, and artistic, dramatic or literary works.

No small business economic impact statement has been prepared under chapter 19.85 RCW. A small business economic impact statement is not required because the rules and the proposed amendments do not impose any requirements or burdens upon small businesses that are not already specifically required by statute.

RCW 34.05.328 does not apply to this rule adoption. This rule is an interpretive rule as defined in RCW 34.05.328 (5)(c)(ii).

Hearing Location: Evergreen Plaza Building, 711 Capitol Way South, Audit Division Conference Room, 3rd Floor, Olympia, WA, on July 28, 1999, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Ginny Dale no later than ten days before the hearing date, TDD 1-800-451-7985 or (360) 586-0721.

Submit Written Comments to: Kim M. Qually, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail kimq@dor.wa.gov, by July 28, 1999.

Date of Intended Adoption: August 16, 1999.

June 1, 1999

Russell W. Brubaker

Assistant Director

Legislation and Policy Division

OTS-3090.1

AMENDATORY SECTION(Amending WSR 94-07-008, filed 3/3/94, effective 4/3/94)

WAC 458-16-280
Art, scientific, and historical collections.

(1) Introduction. This section explains the property tax exemption available under the provisions of RCW 84.36.060 to art, scientific, or historical collections.

(2) Definitions. For purposes of this section, the following definitions apply:

(a) "Governmental entity" means any political unit or division of the federal, state, city, county, or municipal government.

(b) "Property" means all real and personal property exclusively used to secure, maintain, ((or)) and exhibit art, scientific, or historical collections.

(3) Exemption for existing property. All art, scientific, or historical collections ((~~maintained for and exhibited~~)) owned by associations maintaining and exhibiting the collections to the general public and not for profit, ((~~as well as~~)) together with all real and personal property owned by these associations and used exclusively to secure, maintain, ((or)) and exhibit the collections, shall be exempt from taxation under the following conditions:

(a) An organization, association, or corporation must be organized and operated exclusively for artistic, scientific, or historical((~~, literary or educational~~)) purposes.

(b) The organization, association, or corporation organized and operated for artistic, scientific, or historical((~~, literary, or educational~~)) purposes must receive a substantial part of its income from a governmental entity or through direct or indirect contributions of money, real or personal property, or services from the general public. Admission or entrance fees derived from exercising or performing its purpose or function shall not be included within the figures used to calculate "a substantial part" of the organization's, association's, or corporation's income.

(i) For example, an art museum may receive support from a city government and from donations made by the general public in addition to general admission fees paid by visitors. When determining whether the art museum receives a substantial part of its income from a governmental entity or through contributions from the general public, the admission fees may not be considered as contributions from the general public.

(ii) Any organization, association, or corporation that relies on services donated by the general public for a substantial part for its support must maintain records identifying the individuals who donate their services and the number of hours they donate. The value of donated time will be calculated by using the federal minimum wage standard.

(4) Exemption for property under construction or soon to be used for an exempt purpose. Property that is being constructed, remodeled, or otherwise prepared to maintain and exhibit art, scientific, or historical collections, may qualify for exemption under certain circumstances. A nonprofit organization, association, or corporation seeking an exemption for property not currently being used for an exempt purpose may qualify if the property will be used for an exempt purpose within a reasonable period of time and proof is submitted that a reasonably specific and active program is being carried out to enable the property to be used to maintain and exhibit an art, scientific, or historical collection.

(a) Acceptable proof of a specific and active building or remodeling program shall include, but is not limited to, the following items:

(i) Affirmative action by the board of directors, trustees, or governing body of the nonprofit organization, association, or corporation endorsing and underwriting the construction or remodeling;

(ii) Itemized reasons for the proposed construction or remodeling;

(iii) Clearly established plans for financing the construction or remodeling; and

(iv) Building permits necessary to begin or continue the construction or remodeling.

(b) Property under construction shall not qualify for exemption during this interim period if the property is used by, loaned to, or rented to a for-profit organization or business enterprise.

(5) Additional requirements. Any organization, association, or corporation that applies for a property tax exemption under this section must also comply with the provisions of WAC 458-16-165. WAC 458-16-165 sets forth additional conditions and requirements that must be complied with to obtain a property tax exemption pursuant to RCW 84.36.060.

[Statutory Authority: RCW 84.08.010, 84.08.070 and chapter 84.36 RCW. 94-07-008, § 458-16-280, filed 3/3/94, effective 4/3/94. Statutory Authority: RCW 84.36.865. 86-12-034 (Order PT 86-2), § 458-16-280, filed 5/30/86; 85-05-025 (Order PT 85-1), § 458-16-280, filed 2/15/85; 81-21-009 (Order PT 81-13), § 458-16-280, filed 10/8/81; Order PT 77-2, § 458-16-280, filed 5/23/77; Order PT 76-2, § 458-16-280, filed 4/7/76. Formerly WAC 458-12-235.]

OTS-3088.1

AMENDATORY SECTION(Amending WSR 94-07-008, filed 3/3/94, effective 4/3/94)

WAC 458-16-282
Musical, dance, artistic, dramatic and literary associations.

(1) Introduction. This section explains the property tax exemption available under the provisions of RCW 84.36.060 to organizations, associations, or corporations ((~~that either produce or perform, or both,~~)) engaged in the production and performance of musical, dance, artistic, dramatic, or literary works.

(2) Definitions. For purposes of this section, the following definitions apply:

(a) "Governmental entity" means any political unit or division of the federal, state, county, city, or municipal government.

(b) "Property" means all real and personal property exclusively used to produce or perform musical, dance, artistic, dramatic, or literary works.

(3) Exemption. All real and personal property owned by or leased to a nonprofit organization, association, or corporation ((~~whose purpose is either to produce or perform or to produce and perform~~)) engaged in the production and performance of musical, dance, artistic, dramatic, or literary works for the benefit of the general public and not for profit shall be exempt from taxation under the following conditions:

(a) The property must be used exclusively to produce or perform musical, dance, artistic, dramatic, or literary works.

(b) An organization, association, or corporation must be organized and operated exclusively for musical, dance, artistic, dramatic, literary, or educational purposes.

(c) The organization, association, or corporation organized and operated for musical, dance, artistic, dramatic, literary, or educational purposes must receive a substantial portion of its income from a governmental entity or ((~~through~~)) from direct or indirect contributions of money, real or personal property, or services from the general public. Admission or entrance fees derived from ((~~exercising~~)) producing or performing ((~~its purpose or functions~~)) musical, dance, artistic, dramatic, literary, or educational works shall not be included within the figures used to calculate "a substantial part" of the organization's, association's or corporation's income.

(i) For example, a theater may receive support from a city government and from donations made by the general public in addition to ticket sales for admission to its performances. When determining whether the theater receives a substantial part of its income from a governmental entity or through contributions from the general public, the ticket sales may not be considered as contributions from the general public.

(ii) Any organization that relies on services donated by the general public for a substantial portion of its support must maintain records identifying the individuals who donate their services and the number of hours they donate. The value of donated time will be calculated by using the federal minimum wage standard.

(4) Exemption for property under construction or soon to be used for an exempt purpose. Property that is being constructed, remodeled, or otherwise prepared to be used by associations engaged in the production and performance of musical, dance, artistic, dramatic, literary, or educational works, may qualify for exemption under certain circumstances. A nonprofit organization, association, or corporation seeking an exemption for property not currently being used for an exempt purpose, may qualify if the property will be used for an exempt purpose within a reasonable period of time and proof is submitted that a reasonably specific and active program is being carried out to enable the property to be used by associations engaged in the production and performance of musical, dance, artistic, dramatic, literary, or educational works.