[WSBARP] REET Taxation of Transfers of Real Property by Inheritance

[K. Garl Long]

Thank you Mr. Bickel - a much needed change.

KGL

On 12/18/2015 05:53 PM, Bickel, Dwight wrote:
>
> This message to the Washington real property, probate and trust 
> lawyers is to solicit feedback related to a proposed statutory change. 
> I act as the Co-Chair of the Legislative Committee of the Washington 
> Land Title Association [WLTA].
>
> WLTA members propose a statutory amendment that will terminate the 
> burden to pay real estate excise tax [REET] upon transfers of 
> ownership of real property that occur by operation of law due to 
> Wills, trusts, divorces, court decisions, mergers, etc.
>
> WA law has not been changed to require such transfers to pay REET. The 
> law remains that only sales of real property require payment of REET. 
> There are many changes in ownership that occur by operation of law 
> that are not taxable as sales. Such transfers often require no deed of 
> conveyance or recordation.
>
> Transfers that occur pursuant to devise made by a Will are not 
> taxable. Transfers that occur due to the death of an owner pursuant to 
> the legal effect of intestate succession, community property, joint 
> tenancy, life estates and transfer on death deeds are not taxable. 
> These changes in ownership are not required to pay REET, even if there 
> is no probate or court proceeding. /See/ RCW 82.45.010 
> <http://apps.leg.wa.gov/rcw/default.aspx?cite=82.45.010>(3).
>
> Transfers of ownership that are accomplished pursuant to court orders, 
> such as partition, divorce, condemnation and quiet title, are not 
> taxable. Changes in title to real property that occur by changes in 
> the owner entity that are not sales are not taxable, also as provided 
> by the cited statute.
>
> In 2008 the Legislature enacted a new statute, now known as RCW 
> 82.45.197 <http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.197>. 
> /See/ SSB 6851 and Chapter 269, Session Laws of 2008 
> <http://leg.wa.gov/codereviser/documents/sessionlaw/2008pam2.pdf>. It 
> provided the documentation to be provided to the County Treasurer to 
> claim exemption from REET when the parties wanted to record a 
> conveyance pursuant to inheritance.  It begins:
>
> In order to receive an exemption from the tax in this chapter on real 
> property transferred as a result of inheritance under RCW 
> 82.45.010(3)(a), the following documentation must be provided:
>
> /See also/ WAC 458-61A-202 
> <http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-202> related to 
> the exemption from REET for inheritance transfers, that states, 
> “Transfers of real property by inheritance or devise are not subject 
> to the real estate excise tax.”
>
> At some point about four years ago a couple County Treasurers [Grant, 
> Skagit & Yakima] began interpreting RCW 82.45.197 as authority to 
> require heirs who receive title by inheritance to pay REET if they did 
> not have proper documentation. The position taken was that a probate 
> was required to avoid REET. This affected only a few people because 
> most intestate and non-probate heirs were not recording documents and 
> not filing excise tax affidavits.
>
> However, due to changes made by the Department of Revenue to its 
> Regulations related to REET, all transfers by operation of law are now 
> required to file an excise tax affidavit. Previously, the Regulations 
> required an excise tax affidavit and specified the documentation that 
> was required to claim exemption from REET for transfers by operation 
> of law /only when conveyance documents were recorded/.
>
> A change was made February 28, 2014 to WAC 458-61A-303 
> <http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A&full=true#458-61A-303> 
> [the regulation that explains when a real estate excise affidavit is 
> required]. It was not made due to a change in the substantive law.
>
> WAC 458-61A-303 Affidavit. (1) Introduction. This section explains
>
> when a real estate excise tax affidavit is required for the
>
> ((conveyance)) _transfer_ of ((an interest in)) real property. See WAC
>
> 458-61A-101 for procedures pertaining to transfers and acquisitions of
>
> a controlling interest in an entity owning real property in the state
>
> of Washington. (2) Affidavit required. In general, an affidavit must 
> be filed
>
> when ownership or title to real property transfers as evidenced by
>
> conveyance, deed, grant, assignment, quitclaim, _or any other document_
>
> _effectuating the transfer_including, but not limited to, the following:
>
> (b) ((Conveyance)) _Transfer_ resulting from a court order;
>
> (g) ((Conveyance)) _Transfer_ to an heir in the settlement of an
>
> estate;
>
> In the past two years, increasing number of County Treasurers are 
> actively enforcing the payment of REET for inheritance transfers. When 
> heirs sell the property, the Treasurers are requiring excise tax 
> affidavits related to the prior change of ownership, regardless of the 
> amount of time. If the documentation isn’t perfect, the heirs as 
> sellers must pay REET and penalties before the intended sale may be 
> recorded.
>
>
> The protests of these people are increasing, in part because Snohomish 
> County, a more populous county, has begun to tax the higher volume of 
> such prior transfers.
>
>
> The WLTA proposes to amend RCW 82.24.197 to expand the potential 
> documentation that will satisfy their right to claim exemption from 
> REET. At the same time, WLTA seeks to clarify that all transfers by 
> operation of law do not require excise tax affidavits and recordation 
> of affidavits in order to avoid REET.
>
> If you have comments or questions, or if you are interested to 
> contribute to the legislative process, please contact me or the 
> representatives of the RPP&T Section.
>
> **
>
> *Dwight A. Bickel***
>
> Legislative Committee Co-Chair
>
> Washington Land Title Ass'n
>
> 701 - 5th Avenue, Suite 2300
> Seattle, WA 98104
> Phone: (206) 370-3189
>
> E-mail: Dwight.Bickel at fntg.com <blocked::mailto:Dwight.Bickel at fntg.com>
>
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