Department of Revenue responds to stories

The La Conner Weekly News recently published two articles about the state Department of Revenue’s March 2014 guidance that advised counties to stop assessing property tax on homes, or any other structure, constructed on tribal trust land. The federal court’s ruling that spurred the guidance had a significant effect inSkagitCounty. As a result, state and local property taxes shifted from homeowners living on tribal trust property to the others in the community.

I fully support the public’s right to know how my agency arrived at this guidance. Unfortunately, the articles have incorrectly asserted that tribes inappropriately influenced the decision and minimized the effort we made in considering the voice of the counties, on behalf of taxpayers.

Background

The federal Ninth Circuit Court of Appeals decided on July 30, 2013 thatThurstonCountycould no longer collect property tax on “permanent improvements” on tribal trust land. While the case involved the Great Wolf Lodge, built on Chehalis Tribe trust property, the ruling applies equally to other permanent improvements located on trust lands within the Ninth Circuit’s jurisdiction.

Following its issuance, assessors from all corners of the state looked to Revenue to interpret the ruling’s practical effect. Revenue immediately began analyzing the court’s decision. By August 14, 2013, two weeks after the federal court’s ruling, Revenue had contacted all 39 county assessors to gather feedback. On October 3, Revenue staff attended the Washington Association of County Officials’ conference to talk face-to-face with assessors.

To help assessors finish their work to finalize 2014 tax bills, Revenue issued interim guidance in November.

On December 13, 2013, Revenue again reached out to assessors, even calling assessors who did not immediately reply. On January 29, 2014, Revenue met with assessors to talk about the federal court decision. Then on March 19, after circulating the near-final guidance, we held a conference call for assessors to weigh in on the draft language and ask questions.

State law requires state agencies, such as the Department of Revenue, to seek out and consider tribal interests when making policy decisions that may affect them. Accordingly, we met with tribal leaders on October 29 and February 4, and invited them to a conference call on March 19. These conversations were not only necessary, but appropriate.

Contrary to what some might think, assessors did not respond with one voice. Some recognized Revenue had little choice in final guidance, while others wished the agency would oppose the court’s ruling.

SinceThurstonCountydid not appeal the court’s decision, it became final. Because Revenue and other counties were not parties, neither could appeal.

Revenue considered all the input, but the federal court’s ruling was direct: “…neitherThurstonCountynor any other state or local entity can tax the Great Wolf Lodge or other permanent improvements on that land.” That clear statement guided the agency’s interpretation of the decision.

The most sound advice Revenue could offer counties was to apply the law consistently with the federal court’s decision: exempt from the property tax rolls any permanent improvements built on tribal trust land, regardless of who owns the structure.

Other taxing options

One article suggested Revenue could have considered other solutions — such as the possessory interest tax. We don’t have this tax inWashington, and it would require lawmakers to pass a new tax.

Further, the use of possessory interest tax on a lessee’s right to possess or use land or improvements on tribal trust land is the lightning rod in the Agua Caliente Band of Cahuilla Indian Tribe’s ongoing lawsuit inCalifornia. A February 2016 federal district court ruling in the Agua Caliente case signals a strong likelihood the possessory interest tax may be invalidated. Revenue is continuing to keep an eye on the Agua Caliente case as it progresses through the courts.

I know that not every action we take will be popular, and that legal decisions can create outcomes some may not like. But it is important the public knows how we arrive at them.