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Advocacy - Washington State
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The 2019 Washington State 105-day legislative session ended Sunday, April 28, 2019. State Lawmakers passed an aggressive two-year budget. The two-year state operating budget that began July 1, 2017 and will end June 30, 2019 is $43.7 billion dollars. The two-year budget just passed is $52.4 billion, begins July 1, 2019 and represents a 19.9% increase.

In the past four months, BOMA advocacy team members, our advocacy consultants and BOMA’s Executive leaders met with more than 70 lawmakers in Olympia. They represented the interests of owners, real estate professionals, industry partners and also represented the voice of commercial real estate. BOMA members, advocacy consultants and staff have signed in or testified at nearly two dozen hearings to ensure our voice and concerns are heard.


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BOMA Victories on Behalf of Members and the Commercial Real Estate Ownership

Dual Agency: BOMA played a major role in defeating two bills that if passed, would have drastically changed current authorized dual agency practices in Washington State. Being able to provide dual agency services to both the seller and buyer when fully disclosed and approved in writing, preserves a significant income line of business for a large number of BOMA member firms. The primary sponsors of these bills, a tenant lease representative firm, sought to impose restrictions and take away tenant choice. To see more information, click here.

Business & Occupation Tax: The legislature passed a bill that will raise the B&O tax on 43 service business types from 1.5% to 1.8%. BOMA, working closely with real estate coalition partners, was successful in excluding real estate services from this new 20% B&O tax surcharge.

The language in the legislation that passed contain a couple of unusual clauses that are somewhat ambiguous and set unusual precedents. The statute includes language that says imposing the surcharge is construed against the taxpayer and in favor of the tax. It also sets precedent by changing the burden of proof for a taxpayer to prevail in a challenge to an assessment from a preponderance of the evidence to a higher “clear, cogent, and convincing” evidence standard. To see more information, click here.

Capital Gains Tax: BOMA also played a key role in defeating proposed new Capital Gains Taxes. The Governor had proposed a 9% Capital Gains tax in his budget and both the state House and Senate considered their own versions a capital gains tax proposal. Considering that BOMA dues are usually one cent per square foot or less a year, the return on this investment when compared to a 9% tax on income from the sale of commercial real estate or even a business is worth doing the math. To see more information, click here.

Rights of Persons Experiencing Homelessness: BOMA opposed legislation that would have imposed Seattle's homeless camping policy statewide. The bill, if passed, would have allowed homeless persons to camp anywhere in Washington "public places" unless taxpayers provided a no barrier shelter and would have created a protected class for homeless persons.
To see more information, click here.


Partial Victories on Behalf of Members and the Commercial Real Estate Ownership

Building Energy Standards: While new building energy standards and regulation legislation passed, BOMA succeeded in gaining an amendment lowering a requirement that would have required that basic infrastructure be built at the time of construction that could expand EV (electric vehicle) charging to 50% of all parking spaces.

BOMA succeeded in getting this reduced to 20%. Note: there is a requirement that 10% of all new buildings with parking dedicate 10% to functional EV charging. There are elements in the new legislation that BOMA supported. However, BOMA fought hard unsuccessfully to prevent a particularly ill-advised penalty clause for non-compliance. BOMA proposed an amendment to limit any non-compliance fine to no more than $25,000/yr. However, we were just short on votes and the bill that passed provides for up to a $1/SF per year fine. We will try to change in rule-making. To see more information, click here.


Most Significantly Harmful Legislation that Passed

REET: The legislature passed a measure to increase the state portion of the Real Estate Excise Tax (REET) from the current 1.28% to a graduated REET that begins at 1.1% and reaches 3% for all real estate transactions greater than $3 million. This will more than double the transfer tax when owners sell commercial real estate. Example: For the sale of a $400 million office building today the seller would pay $5.120 million in excise tax. Beginning January 1, 2020 that sale would be taxed at $11.91 million.

  • 1.1% if the selling price is equal to or less than $500,000;
  • 1.28% on the portion of the selling price that is greater than $500,000 but equal to or less than $1,500,000;
  • 2.75% on the portion of the selling price that is greater than $1,500,000 but equal to or less than $3,000,000; and
  • 3% on the portion of the selling price that is greater than $3,000,000.

Example:
Before Jan. 1, 2020: $400,000,000 at 1.28% sale: Current real estate excise tax = $5,120,000
After Jan. 1, 2020: $400,000,000 sale would increase to $11,910,000

Effective Jan. 1, 2020 the same sale:
First $500,000 x 1.10% = $ 5,500
Next $1,000,000 x 1.28% = $ 12,800
Next 1,500,000 x 2.75% = $ 41,250
Above $3,000,000 x 3.0% = $11,910,000

For more on this REET tax and the extraordinary efforts BOMA’s advocacy team made to mitigate this tax, click here.


BOMA Supported But Failed to Pass

C-PACER Financing: Local government and local lenders cooperate on loans secured by the property tax obligation, similar to a local improvement district. The debt does not appear as an obligation on the building owner’s balance sheet and the repayment obligation stays with the property rather than the owner whenever the building is sold. C-PACER financing would enable low-cost, long-term funding for commercial energy efficiency, renewable energy and resilience projects such as earthquake reliance improvements on unreinforced masonry buildings in Washington State. To see more information, click here.



Contacts & Resources

For more information, please contact:
Rod Kauffman
President/BOMA Seattle King County
rkauffman@bomaseattle.org

 


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