By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist
The Washington State Legislature adjourned on April 28. They finished on time, and they finished after raising over $2 billion in new taxes on Washington businesses and residents.
The Legislature gaveled in with 30 new lawmakers between the House and Senate. 18 new Democrats changed the dynamic in both the House and Senate. The Senate, traditionally a more moderate chamber, has become more progressive with the addition of 6 new Democrat members. The House, which has always had a more progressive point of view, leans even more “left” with the addition of 11 new Democrats, and an increase in their majority to 57-41. With these new faces, Democrats controlled the House, Senate, and the Governor’s office. Additionally, Governor Inslee announced his candidacy for President, providing additional support for moving a more progressive agenda.
It would be logical, then, to expect to see a high number of bills to further regulate the Foreclosure Fairness Act, the Deed of Trust Act (DOTA), or even the reintroduction of a version of the Homeowner Bill of Rights (HOBR). However, we saw no changes at all to the non-judicial foreclosure process. Lawmakers, instead, chose to focus on public foreclosures, including property liens and tax foreclosures.
HB 1643 reinforces what is already current practice. Property sold by a county at a tax lien foreclosure sale is considered sold as-is under the new law. There was a recent Division 2 Court of Appeals case that determined the legality of this practice; HB 1643 codifies that decision. Under HB 1643, there is no warranty or guarantee of any kind, expressed or implied, relative to title, eligibility to build or subdivide, or for any other purpose. The bill takes affect July 28, 2019, but is already common practice in most counties.
HB 1105 establishes a process for property tax foreclosures. Not all local governments handle tax foreclosures the same, and in a number of these cases, the owner owns the home outright. The new law requires that local treasurers send out tax notices as a prescribed schedule annually. It requires counties to send specific contact information to the homeowner after the taxpayer is two years delinquent. It requires that a taxpayer be allowed to develop a payment plan with the auditor, and that those payments be applied to the oldest debt owed first. It also allows for homeowners to seek assistance through the foreclosure hotline, and requires the treasurers to send the name and property address to the homeowner resource center for assistance.
These bills are an attempt to standardize the public process for tax foreclosures. Most public entities follow the same steps in a tax foreclosure, but not all – especially smaller counties. These statewide policies will ensure the process is the same for all local governments, and for homeowners facing a tax lien.
In the last three days of session, Washington lawmakers also chose to increase taxes on specific businesses in Washington State. For law firms and trustees, the Legislature increased the service business and occupation tax rate (B&O) by 20%, from 1.5 to 1.8% for all gross receipts for business completed in the state. This tax increase will be applied to gross receipts received beginning January 1, 2020, and is a part of HB 2158. It is worth noting, as part of this legislation, that the Washington Department of Revenue is expected to interpret the statute that the tax is owed UNLESS the tax payer can prove by clear and convincing evidence that it is not. This is a new position for the Department, which in previous years was expected to prove that the tax is owed with clear and convincing evidence – that position is now flipped onto the taxpayer. This specific provision is expected to expire in 2022; the underlying tax increase has no sunset date.
Financial institutions will also be impacted by this increase to 1.8% on their B&O rate. In addition, HB 2167 dictates that financial institutions will pay a second, additional B&O tax rate of 1.2%. This creates a 1.8+1.2% tax rate on financial institutions. Smaller, state chartered financial institutions are, for the most part, exempt, which leads some to believe this tax will not hold in court under commerce law. The tax is effective January 1, 2020.
While a relatively quiet year for non-judicial foreclosure laws, the United Trustees Association has already been asked to begin negotiations in June to reopen the DOTA for further development of the Foreclosure Fairness Act. UTA members have also provided recommendations for changes to both the successor in interest statutes, and also new language around disbursement of funds after the trustee’s sale for the 2020 session. The UTA in Washington is always happy to meet with staff and interested parties as these negotiations continue to improve current statutes and also address issues as they are identified through the trustee’s sale or other parts of the DOTA.