WAC 458-19-085 — Refunds—Procedures—Applicable Limits

Agency filings affecting this section (1) Introduction. Chapters 84.68 and 84.69 RCW both set out procedures and conditions under which property taxes are refunded. This rule explains the differences between the types of refunds authorized under each chapter, the procedures related to the refunds, and the effect the refunds have on levy limits and the levy setting process in general. (2) Court ordered refunds under chapter 84.68 RCW - County tax refund fund levy. Any person who believes that the taxes levied against their property are unlawful or excessive may pay the taxes under protest, setting forth all the grounds upon which the tax is claimed to be unlawful or excessive, and bring an action in superior court or in any federal court of competent jurisdiction against the state, county, or municipality. RCW 84.68.020 . If the court determines that the taxes were indeed unlawful or excessive, it will enter a judgment in favor of the taxpayer who paid the tax under protest and determine the amount to be refunded to the taxpayer. When such a judgment is entered, the law provides a specific procedure for refunding the money to the taxpayer in RCW 84.68.030 and for taxing districts to generate the moneys to be refunded in RCW 84.68.040 . Any and all taxing districts that were levying taxes against the property at the time for which a refund is directed by court order under RCW 84.68.020 must levy, or have levied for them, an amount for the county tax refund fund. The county tax refund fund levy is a regular levy that is subject to all the applicable levy limitations provided in law for regular levies. However, the law specifically exempts a refund fund levy from the levy limit set forth in RCW 84.55.010 . (a) Method used to make refunds. When a court judgment is entered in favor of a taxpayer, RCW 84.68.030 states that the refund is to be paid via warrants drawn against the "county tax refund fund." If, at the time the judgment is entered, there are no moneys in that fund, then the warrants bear interest and are "callable under such conditions as are provided by law for county warrants." (b) Process used to generate funds for the county tax refund fund. RCW 84.68.040 provides that as part of the annual levying of taxes for county purposes, the county is required to make and enter a tax levy or levies for the county tax refund fund. The purpose of the refund fund levy is to produce moneys to be deposited into a fund from which a taxpayer, who paid taxes that were later adjudged to be unlawful or excessive, can be repaid, without unduly affecting the operating funds of the taxing districts. This levy has precedence over all other tax levies for county and/or taxing district purposes. (c) Who makes and enters the tax levies for the refund fund levy? Officers of local taxing districts, the county legislative authority, the county assessor, and any other person or entity that would normally be involved in the levy making process are required to make and enter the refund fund levy. However, if a taxing district is required to levy for the county tax refund fund and fails to do so, or if a taxing district is required to levy for the county tax refund fund and does not have a regular nonvoted levy, then the county legislative authority levies the tax for or on behalf of the district, the assessor sets the rate, and the treasurer collects the tax. (d) What limitations apply to the county tax refund fund levy? There are four basic levy limitations that need to be taken into consideration: The levy limit set forth in RCW 84.55.010 ; the constitutional (Article VII, section 2) and statutory (RCW 84.52.010 ) one percent limit; the statutory dollar rate limit for the various taxing districts; and the aggregate dollar rate limit contained in RCW 84.52.043 . (i) The levy limit set forth in RCW 84.55.010 does not apply to the county tax refund fund levy, regardless of which taxing district is involved (see RCW 84.55.070 ). Therefore, a taxing district(s) can levy the amount to be refunded even if that amount will cause the total levy of the taxing district to exceed the levy limit. For example, a court orders County A to refund $10,000 to a Taxpayer. The proper county officials in County A must determine what portion of the $10,000 is attributable to Taxing District No. 1. For purposes of this example, Taxing District No. 1 owes the Taxpayer $1,000. Taxing District No. 1's levy last year was $30,000. Without considering new construction, improvements to property, increases in the assessed value of state assessed property, and increases in assessed value due to the construction of wind turbine, solar, biomass, and geothermal facilities, the levy for this year under the levy limit would be $30,300. However, Taxing District No. 1's levy for this year, including the refund fund levy, can be $31,300. (ii) The constitutional one percent limit, the statutory dollar rate limit, and the aggregate dollar rate limit apply to any refund fund levy. Consequently, any refund fund levy must be contained within the maximum dollar rate authorized by law for any taxing district. For example, if under the levy limit, the county current expense levy rate is $1.80/$1,000 and the refund fund levy rate is $0.10/$1,000 A.V., then only $1.70 may go to the current expense fund. Similarly, if the current expense levy rate, as limited by the levy limit, is $1.50/$1,000 A.V., then the $0.10/$1,000 is added to the $1.50 making a levy rate that is $1.60/$1,000 A.V. Any combination is possible as long as the total of the two does not exceed the statutory dollar rate maximum of $1.80/$1,000 A.V. for levies made for county purposes. All moneys levied for the county tax refund fund levy are allocated first, without consideration of any delinquency, and then whatever balance is remaining goes to the district's operating fund. (e) Refund fund's relationship to excess levies. Because the refund fund levy is the direct result of a court ordered judgment in a specific amount, it does not matter whether the judgment amount is derived from taxes paid on regular, excess, or bond levies, or any combination of these levies. The refund fund levy is separate and independent of the levies from which it arose. The levy includes an additional amount deemed necessary to meet the obligations of the county tax refund fund, taking into consideration the probable portions of the taxes that will not be collected or collectible during the year in which they are due and payable, as well as any unobligated cash in hand in this fund. (f) Applicability to school district levies and state school levy. All taxing districts for which, and within which, taxes were collected unlawfully are required to levy for the refund fund. A refund fund for the school district would not be limited by a dollar rate limit. However, the school district refund fund levy would be subject to the constitutional one percent limit because the refund fund is a regular levy subject to all applicable limits. The state school levy will include a refund fund levy, which will be calculated by the department at the time it levies the state school levy. The state, as a taxing district itself, follows the same procedures that apply to any other taxing district, to the extent that those procedures are applicable. (g) Separate account in county treasury. The county treasurer must keep a separate account for each district for which a refund fund is created and can only disburse money from that account to the taxpayer(s) entitled to receive a court ordered refund. (3) Administrative refunds under chapter 84.69 RCW. Property taxes may be refunded on the order of the county treasurer before or after delinquency if the property taxes were paid under one of the circumstances listed in RCW 84.69.020 . These circumstances include errors, changes in valuation or status by a county board of equalization or the state board of tax appeals, and delays in applying for a senior citizen exemption or deferral. (a) The levy limit set forth in RCW 84.55.010 does not apply. RCW 84.55.070 states that the limitations contained in chapter 84.55 RCW do not apply to property tax refunds paid or to be paid under the provisions of RCW 84.69.180 . Therefore, an amount necessary to fund any refund paid in accordance with RCW 84.69.020 may be added to the levy for a taxing district without regard to the levy limit. A refund levy is not subject to the levy limit. However, the statutory dollar rate limit still applies to each taxing district, as well as the five dollar and ninety cent limit set forth in RCW 84.52.043 and the constitutional one percent limit set forth in Article VII, section 2 of the state Constitution and RCW 84.52.050 . (b) Refunds include interest. Refunds authorized under RCW 84.69.020 must include interest that is payable from the time the taxes were paid. The rate of interest is calculated in accordance with RCW 84.69.100 , established annually by the department, and published in WAC 458-18-220 . (c) Taxing districts, other than the state, may levy a tax upon all the taxable property within the district for the purpose of: (i) Funding refunds paid or to be paid under this chapter, except for refunds due to taxes paid more than once, RCW 84.69.020 (1), including interest, as ordered by the county treasurer or county legislative authority within the preceding twelve months; and (ii) Taxes that have been abated or canceled, offset by any supplemental taxes collected under Title 84 RCW other than amounts collected due to highly valued disputed property, RCW 84.52.018 , within the preceding twelve months can be levied by taxing districts other than the state. (iii) This subsection (3)(c)(ii) only applies to abatements and cancellations that do not require a refund under chapter 84.69 RCW. Cancellations that require a refund are included within the scope of (c)(i) of this subsection. (d) Example 1. This example demonstrates net refunds, cancellations, and supplements that occurred within the past twelve months and the refund levy that can be requested by the taxing district: Refunds $8,000 Cancellations $10,000 Abatements $1,000 Supplements $7,000 Net cancellations and abatements offset by supplements $4,000 Net amount eligible for a refund levy $12,000 (e) Example 2. This example assumes that the base for computing the allowable levy is $10,000 and refers to the county current expense levy rate that may not exceed one dollar and eighty cents per thousand dollars of assessed value in accordance with RCW 84.52.043 . (i) Statutory rate requested does not exceed the dollar rate allowable: The allowable levy for the county current expense fund $10,000 Refunds paid or to be paid $2,000 Total amount of levy $12,000 Assessed value $7,000,000 Levy rate $1.714/$1,000 The levy rate is within the statutory rate limit of $1.80/$1,000 (ii) Statutory rate requested exceeds the dollar rate allowable: Allowable levy $10,000 Refunds paid or to be paid $2,000 Total amount of levy $12,000 Assessed value $6,500,000 Levy rate $1.846/$1,000 The dollar rate cannot exceed $1.80/$1,000; therefore, the maximum that can be levied is $6,500,000 x $1.80/$1,000 $11,700 Amount to be refunded $2,000 Amount to be credited to current expense $9,700 (f) The base for computing the following year's levy limit does not include the refund levy amount. In the preceding example, the base for the following year's levy limit calculation is $10,000. However, when calculating the additional levy amount based on the value of new construction, improvements to property, increases in the assessed value of state assessed property, and increases in assessed value due to the construction of wind turbine, solar, biomass, and geothermal facilities, the actual regular levy rate (including the refund levy) is used. [Statutory Authority: RCW 84.08.010 , 84.08.070 , 84.08.080 , 84.48.200 , 84.52.0502 , and 84.55.060 . WSR 15-03-087, § 458-19-085, filed 1/21/15, effective 2/21/15. Statutory Authority: RCW 84.08.010 , 84.08.070 , 84.48.080 , 84.48.200 , 84.52.0502 , 84.55.060 . WSR 14-14-023, § 458-19-085, filed 6/23/14, effective 7/24/14. Statutory Authority: RCW 84.08.010 , 84.08.070 , 84.48.080 , 84.55.060 , 84.52.0502 , chapters 84.52 and 84.55 RCW, and RCW 34.05.230 (1). WSR 02-24-015, § 458-19-085, filed 11/25/02, effective 12/26/02.]