Current through Register Vol. 24-06, March 15, 2024
For the purposes of chapter 458-61A WAC, the following
definitions apply unless the context requires otherwise:
(1)
"Affidavit" means the real
estate excise tax affidavit provided by the department for use by taxpayers in
reporting transfers of real property. Both the seller/grantor and the
buyer/grantee, or their agents, sign the affidavit under penalty of perjury.
The term also includes the form used to report to the department transfers and
acquisitions of a controlling interest in an entity owning real property in
this state under WAC
458-61A-101.
(2)
"Agricultural land" means
farm and agricultural land and farm and agricultural conservation land, as
those terms are defined in
RCW
84.34.020, including any structures on such
land.
(3)
"Consideration" means money or anything of value, either tangible
or intangible, paid or delivered, or contracted to be paid or delivered,
including performance of services, in return for the transfer of real property.
The term includes the amount of any lien, mortgage, contract indebtedness, or
other encumbrance, given to secure the purchase price, or any part thereof, or
remaining unpaid on the property at the time of sale. For example, Lee
purchases a home for $250,000. He puts down $50,000, and finances the balance
of $200,000. The full consideration paid for the house is $250,000.
(a) "Consideration" includes the issue of an
ownership interest in any entity in exchange for a transfer of real property to
the entity. For example, if Julie transfers title to 20 acres of commercial
property to Smith Development, LLC in exchange for a 50% ownership interest in
the company, that constitutes consideration for the transfer. In the case of
partnerships, consideration includes the increase in the capital account of the
partner made as a result of the partner's transfer of real property to the
partnership, unless the transfer is otherwise specifically exempt under WAC
458-61A-211
or
458-61A-212.
(b) "Consideration" includes the assumption
of an underlying debt on the property by the buyer at the time of transfer. For
example, Ben buys a residence, valued at $300,000, from Liza. Liza was
purchasing the property on a real estate contract that has an outstanding
balance of $175,000. Ben gives Liza $125,000 in cash and he assumes the
obligation on the real estate contract, which Liza assigns to him. Real estate
excise tax is due on $300,000, which is the total consideration for the
sale.
(c) "Consideration" does not
include the amount of any outstanding lien or encumbrance in favor of the
United States, the state, or a municipal corporation for taxes, special
benefits, or improvements. For example, Mel buys residential property for
$300,000. The title is encumbered by a lien for unpaid property taxes in the
amount of $12,000, and a lien for municipal sidewalk improvements in the amount
of $6,000. Although Mel will become liable for those liens in order to take
title to the property, they are not considered part of the purchase price for
the purpose of calculating real estate excise tax. The real estate excise tax
is due only on the purchase price of $300,000.
(4)
"Consumer price index for
shelter" means the most current seasonally adjusted index for the
shelter expenditure category of the consumer price index for all urban
consumers (CPI-U) as published by July 31st by the Bureau of Labor Statistics
of the United States Department of Labor.
(5)
"Controlling interest"
means:
(a) In the case of a profit
corporation, either fifty percent or more of the total combined voting power of
all classes of stock of the corporation entitled to vote, or fifty percent of
the capital, profits, or beneficial interest in the voting stock of the
corporation; and
(b) In the case of
any other corporation, or a partnership, association, trust, or other entity,
fifty percent or more of the capital, profits, or beneficial interest in the
corporation, partnership, association, trust, or other entity.
(6)
"County" means
the county treasurer or its agent.
(7)
"Date of sale" means the
date (normally shown on the instrument of conveyance or sale) that ownership of
or title to real property, or control of the controlling interest in an entity
that has a beneficial interest in real property, is delivered to the
buyer/transferee in exchange for valuable consideration. In the case of a lease
with option to purchase, the date of sale is the date when the purchase option
is exercised and the property is transferred. "Date of sale," "date of
transfer," "conveyance date," and "transaction date" all have the same meaning
and may be used interchangeably in this chapter. The real estate excise tax is
due on the date of sale.
(8)
"Department" means the department of revenue.
(9)
"Domestic partner" has the
same meaning as defined in chapter 26.60 RCW.
(10)
"Floating home" means a
building on a float used in whole or in part for human habitation as a
single-family dwelling, which is not designed for self-propulsion by mechanical
means or for propulsion by means of wind, and which is on the property tax
rolls of the county in which it is located.
(11)
"Governmental entity"
means:
(a) The United States;
(b) The state of Washington ("state"),
including its departments and institutions, as distinct from its corporate
agencies or instrumentalities; and
(c) Any municipal corporation or political
subdivision of the state of Washington.
(12)
"Growth of the consumer price
index for shelter" means the percentage increase in the consumer price
index for shelter as measured from data published by the Bureau of Labor
Statistics of the United States Department of Labor by July 31st for the most
recent three-year period for the selling price threshold adjustment in 2022,
and the most recent four-year period for subsequent selling price threshold
adjustments.
(13)
"Mining
property" is property containing or believed to contain metallic or
nonmetallic minerals, and sold or leased under terms that require the buyer or
lessee to conduct exploration or mining work thereon, and for no other
purpose.
(14)
"Mobile
home" means a mobile home as defined by
RCW
46.04.302.
(15)
"Mortgage" has its ordinary
meaning, and includes a "deed of trust" for the purposes of this chapter,
unless the context clearly indicates otherwise. The term "underlying debt" may
also be used to refer to a mortgage or other security interest.
(16)
"Municipal corporation or
political subdivision of the state of Washington" means any county,
city, town, school district, fire protection district, or other authority
identified as a municipal corporation or political subdivision of the state of
Washington by statute and that qualifies for the property tax exemption
provided by Article VII of the Washington state Constitution.
(17)
"Park model trailer" means
a park model trailer as defined in
RCW
46.04.622.
(18)
"Real estate" or
"real property" means any interest, estate, or beneficial interest
in land or anything affixed to land, including the ownership interest or
beneficial interest in any entity that owns land, or anything affixed to land,
including standing timber and crops. The term includes condominiums and
individual apartments for which the buyer receives a warranty deed. The term
includes used mobile homes, used park model trailers, used floating homes, and
improvements constructed upon leased land. The term also includes any part of
an irrigation system that is underground or affixed to the land. The term does
not include irrigation equipment that is above the ground or that is not
affixed to land. See
RCW
82.12.020 for the tax treatment of sales of
irrigation equipment that is not included in the definition of "real
estate."
(19)
"Real estate
contract" or "contract" means any written agreement for
the sale of real property in which legal title to the property is retained by
the seller as security for the payment of the purchase price. The term does not
include earnest money agreements or options to purchase real
property.
(20)
"Sale"
means:
(a) Any conveyance, grant, assignment,
quitclaim, or transfer of the ownership of or title to real property, including
standing timber, or any estate or interest therein for a valuable
consideration, and any contract for such a conveyance, grant, assignment,
quitclaim, or transfer, and any lease with an option to purchase real property,
including standing timber, or any estate or interest therein or other contract
under which possession of the property is given to the purchaser, or any other
person at the purchaser's direction, and title to the property is retained by
the vendor as security for the payment of the purchase price. The term includes
the grant, relinquishment, or assignment of a life estate in property. The term
also includes the grant, assignment, quitclaim, sale, or transfer of
improvements constructed upon leased land.
(b) The term "sale" also includes the
transfer or acquisition within any thirty-six-month period of a controlling
interest in any entity with an interest in real property located in this state
for a valuable consideration. For the purposes of this chapter, all
acquisitions of persons acting in concert are aggregated for the purpose of
determining whether a transfer or acquisition of a controlling interest has
taken place. For purposes of establishing the applicable thirty-six-month
period for a transfer or acquisition pursuant to the exercise of an option, see
WAC
458-61A-101.
(c) The term "sale" also applies to
successive sales of the same property. An owner of real property is subject to
payment of the real estate excise tax upon the entry of each successive
contract for the sale of the same parcel of property. For example, Bob owns a
house that he sells to Sam on a real estate contract. Real estate excise tax is
paid on the transfer from Bob to Sam. Sam makes several payments, until he
becomes unemployed. Since Sam can no longer make payments on the property, he
conveys it back to Bob. Bob then makes a subsequent sale of the house to Sally.
Real estate excise tax is due on the transfer from Bob to Sally. See WAC
458-61A-209
for the tax implications on the conveyance from Sam back to Bob.
(d) The term "sale" does not include:
(i) Those real property transfers that are
excluded from the definition of "sale" and exempted from the real estate excise
tax under RCW 82.45.010(3)
and this chapter, including transfers without valuable consideration.
(ii) The transfer of lots or graves in an
established cemetery. An established cemetery is one that meets the
requirements for ad valorem property tax exemption under chapter 84.36
RCW.
(iii) The transfer of an
interest in real property merely to secure a debt or the assignment of a
security interest, release of a security interest, satisfaction of a mortgage,
or reconveyance under the terms of a mortgage or deed of trust.
(iv) A deed given to a purchaser under a real
estate contract upon fulfillment of the terms of the contract provided that the
proper tax was paid on the original transaction. The fulfillment deed must be
stamped by the county treasurer as required by WAC
458-61A-301,
and the stamp must show the affidavit number of the sale for which the deed is
fulfilling.
(v) A qualified sale of
a manufactured/mobile home community, as defined in
RCW
59.20.030.
(e)
Examples. The following
examples, while not exhaustive, illustrate some of the circumstances in which a
transfer may or may not be taxable. These examples should be used only as a
general guide. The status of each situation must be determined after a review
of all of the facts and circumstances.
(i)
John paid off his home mortgage and wants to get a loan to make improvements
and buy a new car. John obtains an equity loan, secured by his home as
collateral. This transaction is not subject to the real estate excise
tax.
(ii) Bob purchased real
property from Sam pursuant to a real estate contract. Real estate excise tax
was paid on the purchase price at the time of the sale. Bob has now paid off
the property, and Sam is issuing a fulfillment deed to Bob indicating that the
real estate contract has been satisfied. The fulfillment deed from Sam to Bob
is not subject to the real estate excise tax.
(iii) Diane has made the final payment on her
mortgage, and the bank issues a full reconveyance of her property, indicating
that the mortgage is paid in full. The reconveyance is not subject to the real
estate excise tax.
(iv) Bill is
refinancing his mortgage for a lower interest rate. There is a balloon payment
on the new loan that will require that he refinance again in five years.
Neither transaction is subject to the real estate excise tax.
(21)
"Seller" means any individual, receiver, assignee, trustee for a
deed of trust, trustee in bankruptcy, trust, estate, firm, partnership, joint
venture, club, company, joint stock company, limited liability company,
business trust, municipal corporation, quasi municipal corporation,
association, society, or any group of individuals acting as a unit, whether
mutual, cooperative, fraternal, nonprofit or otherwise, but it does not include
the United States or the state of Washington. The term "grantor" is used
interchangeably with the term "seller" in this chapter and has the same meaning
for purposes of the real estate excise tax.
(22)
"Selling price" means the
true and fair value of the property conveyed. There is a rebuttable presumption
that the true and fair value is equal to the total consideration paid or
contracted to be paid to the seller or to another person for the seller's
benefit.
(a) When the price paid does not
accurately reflect the true and fair value of the property, one of the
following methods may be used to determine the true and fair value:
(i) A fair market appraisal of the property;
or
(ii) An allocation of assets by
the seller and the buyer made under section 1060 of the Internal Revenue Code
of 1986, as amended.
(b)
When the true and fair value of the property at the time of sale cannot
reasonably be determined by either of the methods in (a) of this subsection,
the market value assessment for the property maintained in the county property
tax rolls at the time of sale will be used as the selling price.
RCW
82.45.030.
(c) When the sale is of a partial interest in
real property, the principal balance of any debt remaining unpaid at the time
of sale will be multiplied by the percentage of ownership transferred, and that
amount added to any other consideration to determine the selling
price.
(d) In the case of a lease
with option to purchase, the selling price is the true and fair value of the
property conveyed at the time the option is exercised.
(23)
"Timberland" means land
classified under chapter 84.34 RCW or designated under chapter 84.33 RCW,
including any structures and standing timber on such land, and standing timber
sold apart from the land upon which it sits.
(24)
"United States" means:
(a) The federal government, including the
executive, legislative, and judicial branches, its departments, and federal
entities exempt from state or local taxation by reason of specific federal
statutory exemption.
The mere fact that an entity is a federal entity, such as an
instrumentality of the federal government or a federal corporation, does not
mean that the entity is immune from tax. The taxability of a federal entity
depends on the benefits and immunities conferred upon it be Congress. Thus, to
determine the current taxable status of federal entities, the relevant portion
of the federal law should be examined.
(b) "United States" does not include entities
associated with but not a part of the United States, such as the National Guard
(an instrumentality of the state of Washington). Nor does it include entities
contracting with the United States government to administer its
programs.
Statutory
Authority:
RCW
82.01.060,
82.45.150, 12 U.S.C. § 2077
and 531 U.S. 316(2001); 164 Wn.2d 310, 324 (2008). WSR 13-21-016, §
458-61A-102, filed 10/4/13, effective 11/4/13. Statutory Authority:
RCW
82.45.150,
82.32.300, and
82.01.060. WSR 11-16-106, §
458-61A-102, filed 8/3/11, effective 9/3/11. Statutory Authority:
RCW
82.45.150. WSR 08-24-095, § 458-61A-102,
filed 12/2/08, effective 1/2/09. Statutory Authority:
RCW
82.32.300,
82.01.060(2), and
82.45.150. WSR 05-23-093, §
458-61A-102, filed 11/16/05, effective 12/17/05. WSR 13-21-003, §
458-61A-102, filed 10/3/2013, effective
11/3/2013