New Bill Exempts Real Estate Excise Tax for Real Estate Sales or Affordable Housing Transfers | Stoel Rives LLP

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

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

HB 1643 exempts from REET, effective January 1, 2023, the sale or transfer of real estate to a nonprofit, housing authority, public corporation, county, or municipal corporation if the recipient has the intends to use the property for affordable rental housing and receives, or benefits from property and chattel tax exemptions. Eligible entities must certify their intention, by affidavit at the time of sale or transfer, to receive or qualify for the eligible tax exemption within certain time periods depending on the use of the property. Timeframes are shorter for ongoing existing affordable housing operations compared to properties that will be significantly renovated, compared to low-income housing that will be newly developed on a property. If an eligible beneficiary does not receive or qualify for a property tax exemption within the appropriate time frame, all unpaid REETs become due plus interest.