State Advocacy Updates from Rod Kauffman

A Legislative Session Like No Other in 2021: In each legislative session, there are about 1,800 bills introduced.  Usually about 275-375 make it through the six to nine step process to become law. Due to COVID, legislative operations have been modified, unfortunately making it much more difficult to have meetings with lawmakers (49 State Senators and 98 State Representatives). This year, for the most part, bills are only being introduced in one chamber - House or Senate. Lawmakers are also trying to limit the number of bills being introduced resulting in fewer bills that will make it to the next level.

Capital Gains Tax: Capital Gains Tax has been introduced several times over the years and has not passed. This year’s version is SB 5096, and an amendment was added and passed out of committee yesterday. Key elements of the amendment are below. It is unknown if this version will make it to passage. BOMA opposes capital gains taxation, as we have every year, and we oppose this bill even with the amended language that would exempt real estate.

If capital gains becomes law, while exempting real estate, it would be much easier to add real estate at a later date. Capital gains tax would also impact many of the owners of BOMA’s non-real estate industry partner companies.

If the bill becomes law, the amendment passed yesterday would:

• Lower the tax rate from 9 percent to 7 percent
• Exempt all sales or exchanges of real estate
• Increase threshold exclusion to $250,000
• Replace sole proprietor deduction with a family-owned small business deduction
• Add exemption for the value of goodwill received when a car dealership is sold
• Deposit the first $350 million in revenues collected each year into the education legacy trust account and deposits the remainder into a new taxpayer relief account
• Make other technical clarifications and corrections

Tax Increment Financing (TIF): TIF legislation is still alive and advancing in Olympia. TIF is a broad tool that allows local governments to finance public improvements using tax increment financing. TIF is allowed in more than 40 states and is supported by a wide coalition, including BOMA.

Split Roll Real Estate Taxation: This type of taxation allows different rates for residential and commercial real estate. Split roll taxation is prohibited by the state constitution. Yet, every year there are new attempts to end that prohibition. This bill is not expected to pass. BOMA opposes this bill.

Property Value Reassessment: There are a couple of bills if passed that BOMA supports, would provide some property tax relief due to COVID.

Smoke Damper Testing and Inspection: Last session, HB 2701 was passed which requires that owners and managers both test and inspect all smoke dampers and certify they are in proper working condition. The effective date for compliance is July 1, 2021. BOMA and several fire departments and fire officials, as well as others, have been actively lobbying for a two-year extension of the implementation date. Fire Marshals are not yet set up to manage compliance and reporting. They are also short-staffed and realize they need to get authority to work with building operators that have dampers in inaccessible locations. 

BOMA has pointed out that HB2701 reduced the number of qualified vendors and technicians to do the inspections. We have noted that there are only two or three vendors in Seattle that are certified to do the work, but in two years there will be enough to accommodate scheduling and competitive pricing. BOMA advises members to get this schedule very soon in the event an extension is not given.

Dual Agency: So far in this session, a bill to prohibit Dual Agency has not been introduced and the deadline to introduce new bills has passed. BOMA successfully fought back efforts in the past two sessions that would have prohibited lessors and lessees who choose to use the same brokerage to do so. In Washington state, there already exists strict regulations to protect both sides. Dual Agency is allowed in 48 states.

Rent Control: A bill to permit rent control in Washington State died in committee this week.

Banning fossil fuels – no new natural gas installations: Look for more on this in the next BOMA E-News.

Green Energy/Environmental Mandates: BOMA continues to monitor green energy and environmental proposals introduced in the Legislature to ensure that they are workable for commercial real estate members.