Property Tax—Regular Levies.
All real and personal property is subject to a tax each year based on the highest and best use, unless a specific exemption is provided by law. The annual growth of all regular property tax levy revenue is limited as follows:
An additional amount is added on based on the increase in assessed value in a district from:
The state collects two regular property tax levies for common schools. The revenue growth limit applies to both levies. Participants in the senior citizens, individuals with disabilities, and qualifying veterans property tax exemption program receive a partial exemption from the original state levy and a full exemption from the additional state levy.
The Washington Constitution also limits regular levies to a maximum of 1 percent of the property's value, or $10 per $1,000 of assessed value. There are individual district rate maximums and aggregate rate maximums to keep the total tax rate for regular property taxes within the constitutional limit, for example:
For property tax purposes, the state, counties, and cities are collectively referred to as senior taxing districts. Junior taxing districts—a term that includes fire, hospital, flood control zones, and most other special purpose districts—each have specific rate limits as well.
Prorationing and "The Gap."
The tax rates for senior and junior taxing districts, excluding the state, must fit within an overall rate limit of $5.90 per $1,000 of assessed value. If the statutory $5.90 or constitutional $10 limit are exceeded, statute establishes the sequential order in which the levies must be proportionally reduced or eliminated, a process referred to as prorationing, to conform to the statutory and constitutional limits.
Some regular property tax levies—including levies for criminal justice purposes, port districts, and emergency medical services—are subject to the $10 constitutional limit but not the $5.90 aggregate rate limit. These levies have protections from general prorationing requirements and exist within the "gap" that remains after subtracting the state levy and the $5.90 in local regular levies from the constitutional $10 limit per $1,000 of assessed value.
Property Tax—Excess Levies.
Excess levies are imposed in addition to regular levies and are not subject to the constitutional $10 limit. Taxing jurisdictions with excess levy authority include local school districts, public facilities districts, and transportation benefit districts. Most excess levies require a 60 percent voter approval. Local school district levies for operation, transportation, and capital projects require simple majority voter approval.
Levy Lid Lift.
Voters may approve regular property tax increases above the revenue growth limit. This voter-approved increase is referred to as a levy lid lift. A levy lid lift may be authorized for a single year or for multiple years, not to exceed six years. A multiyear lid lift must be for a specific purpose.
Personal Property Tax Exemption and Production Excise Tax.
Beginning with tax levied for collection in calendar year 2025, all qualified personal property owned by an eligible taxpayer and used for the generation of renewable energy is exempt from the state property tax levy.
The term "qualified personal property" means personal property that is used exclusively for the generation or storage of renewable energy in a facility, the construction of which began on or after July 1, 2023.
The term "renewable energy" means energy produced by a solar or wind facility with nameplate capacity sufficient to generate at least one megawatt of nameplate capacity of alternating current power.
For eligible taxpayers who are not assessed as a public utility, the taxpayers must apply for the personal property exemption with the applicable county assessor. If an eligible taxpayer is assessed as a public utility, the application for an exemption must be filed with the Department of Revenue (DOR). In either case, applications are due by March 31 in order to claim the exemption for property taxes due and payable in the upcoming calendar year.
The application must include an attestation that the eligible taxpayer has registered with the DOR to pay the production excise tax and designate if the claimed personal property exemption is for 10 or 15 years. After the initial application, only an annual attestation by the eligible taxpayer is required to continue the personal property tax exemption.
Eligible taxpayers granted a personal property tax exemption are subject to a production excise tax for the privilege of using qualified renewable energy generating systems as an electric power source in Washington. The production excise tax rates are:
Energy Facility Siting.
The Energy Facility Site Evaluation Council (EFSEC) was established in 1970 to provide a single siting process for major energy facilities. The EFSEC coordinates all evaluation and licensing steps for siting certain energy facilities, as well as specifies the conditions of construction and operation. After evaluating an application, the EFSEC submits a recommendation either approving or rejecting an application to the Governor, who makes the final decision on site certification. If approved by the Governor, a site certification agreement is issued in lieu of any other individual state or local agency permits.
The laws that require or allow a facility to seek certification through the EFSEC process apply to the construction, reconstruction, and enlargement of energy facilities, biorefineries, and electrical transmission facilities, with many specifications. Energy facilities of any size that exclusively use alternative energy resources, such as wind or solar energy, may opt in to the EFSEC review and certification process. Energy facilities that exclusively use alternative energy resources and choose not to opt in to the EFSEC review and certification process must instead receive applicable state and local agency development and environmental permits for their projects directly from each agency.
Projects of Statewide Significance.
Since 1997 a process has existed to support the development of certain types of industrial projects of statewide significance. To qualify for designation as a project of statewide significance, a project must meet capital investment or job creation requirements. Possible designations include: (1) border-crossing projects; (2) private projects investing in manufacturing, research, and development; (3) projects that will provide a net environmental benefit; and (4) projects that will further commercialization of an innovation. The Legislature has designated certain types of projects as projects of statewide significance; for all other types of projects, an application for designation as a project of statewide significance must be submitted to the Department of Commerce (Commerce). The application must include a letter of approval from jurisdictions where a project is located and must commit to providing the local staff necessary to expedite the completion of a project. Counties and cities with projects must enter into agreements with the Governor's Office of Regulatory Innovation and Assistance (ORIA) and local project managers to expedite the processes necessary for the design and construction of projects. The ORIA must provide facilitation and coordination services to expedite completion of industrial projects of statewide significance. The project proponents may provide the funding necessary for the local jurisdiction to hire the staff required to expedite the process.
State Environmental Policy Act.
The State Environmental Policy Act (SEPA) establishes a review process for state and local governments to identify environmental impacts that may result from governmental decisions, such as the issuance of permits or the adoption of land use plans. The SEPA environmental review process involves a project proponent or the lead agency completing an environmental checklist to identify and evaluate probable environmental impacts. If an initial review of the checklist and supporting documents results in a determination that the government decision has a probable significant adverse environmental impact, known as a threshold determination, the proposal must undergo a more comprehensive environmental analysis in the form of an environmental impact statement (EIS). If the SEPA review process identifies significant adverse environmental impacts, the lead agency may deny a government decision or may require mitigation for identified environmental impacts.
Under SEPA rules adopted by the Department of Ecology (Ecology), after the submission of an environmental checklist and prior to a lead agency's threshold determination, an applicant may ask the lead agency to indicate whether it is considering a determination of significance. If the lead agency indicates that a determination of significance is likely, the applicant may clarify or change features of the proposal to mitigate the impacts which led the agency to consider a determination of significance to be the likely threshold determination. If an applicant revises the environmental checklist as necessary to describe the clarifications or changes, the lead agency must make its threshold determination based on the changed or clarified proposal.
Tribal Capacity Grants.
In the 2023-2025 biennium, the Legislature appropriated $21 million for a grant program, administered by Ecology, to support consultation involving federally recognized Indian tribes related to funding decisions for projects and activities funded with Climate Commitment Act (CCA) revenues, and related clean energy siting activities. Money to fund this program was appropriated from the Climate Investment Account, one of the seven accounts created to receive CCA revenues.
Local Project Review.
Counties and cities planning under the Growth Management Act (GMA) are required to establish an integrated and consolidated development permit process for all projects involving two or more permits and to provide for no more than one open record hearing and one closed record appeal. Other jurisdictions may incorporate some or all of the integrated and consolidated development permit process. The permit process must include a determination of completeness of the project application within 28 days of submission. A project permit application is determined to be complete when it meets the local procedural submission requirements even if additional information is needed because of subsequent project modifications. Within 14 days of receiving requested additional information, the local government must notify the applicant whether the application is deemed complete. The determination of completeness does not preclude the local government from requesting additional information if new information is required or substantial project changes occur. A project permit application is deemed complete if the GMA jurisdiction does not provide the determination within the required time period.
Tax Preference Performance Statement.
Tax preferences confer reduced tax liability upon a designated class of taxpayers. These include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. There are over 700 tax preferences. Legislation that establishes or expands a tax preference must include a tax Preference performance statement (TPPS) that identifies the public policy objective of the preference, as well as specific metrics that the Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the effectiveness of the preference. All new tax preferences automatically expire after 10 years unless an alternative expiration date is provided.
Renewable Energy Excise Tax.
Personal Property Tax Exemption.
All personal property used primarily for the generation of renewable energy in a qualified energy facility is exempt from property tax beginning in calendar year 2027. In addition, all personal property used primarily for renewable energy storage in a qualified renewable energy facility is exempt from property tax beginning in calendar year 2027.
A qualified renewable energy facility is a solar or wind facility with nameplate capacity sufficient to generate at least 50 megawatts of alternating current power. "Renewable energy storage system" means commercially available technology that is capable of retaining electricity, storing energy for a period of time, and delivering the electricity after storage by chemical, thermal, mechanical, or other means.
For taxes levied for collection in 2027, the county assessor must use the most recent assessed value of any personal property exempted under this act and remove the value from the assessment rolls. If any personal property has been centrally assessed, the DOR must provide the county assessor with the apportioned assessed value from the prior year for removal from the assessment rolls.
Each taxing district, other than the state, that receives renewable energy excise tax (RE tax) revenues must permanently reduce its highest lawful levy by the assessed value for personal property exempted under this act.
Beginning January 1, 2026, the property tax levy calculation for all taxing districts will not include an increase in assessed value due to the construction of wind turbine and solar facilities.
New Renewable Energy Tax Rates.
Beginning January 1, 2027, an RE tax is imposed on qualified renewable energy systems. The rate of the RE tax is dependent on the type and age of the qualified energy systems.
The rate for a qualified renewable energy system using solar energy to generate power is:
The rate for a qualified renewable energy system using wind energy to generate power is:
The rate for a qualified renewable energy storage system is $1,500 per megawatt hour of renewable energy storage system.
"Repowered" means replacement of 30 percent or more of solar panels or wind turbines in a qualified renewable energy facility after it first becomes operational.
Beginning October 1, 2028, and every year thereafter, the RE tax rates must be adjusted by 1 percent.
An RE tax credit is authorized for property tax payments made on personal property exempted under the act if the payment was made while the qualified renewable energy facility was being constructed.
Proceeds of Renewable Energy Excise Tax.
The DOR must calculate and apportion the RE tax revenues between the state and each county. Apportionment is based on the applicable state and local property tax levies. The allocation is based on the location of the renewable energy generating system or renewable energy storage system. The state portion of the RE tax revenue must be deposited into the Renewable Energy Local Benefit Account.
The local portion of the RE tax revenue must be deposited into the Local Community Investment Account (LCIA). Monthly, the State Treasurer must distribute moneys from the LCIA proportionally to the respective county treasurer from where the RE tax revenue was received. The county treasurers shall distribute the revenues received to each appropriate local taxing district in the same proportion as the taxing district's pro rata share of the property tax rate in the prior tax year, excluding voter-approved excess levies authorized after January 1, 2026.
Each qualified renewable energy facility must file an annual report with the DOR by March 15 that provides the location and nameplate capacity of the exempt personal property. The DOR must provide a copy of the report to the appropriate county treasurers and county assessors. An exemption to prohibitions on disclosure of taxpayer information is provided to allow the DOR to share with local taxing officials, including county treasurers and assessors, the identity and tax information of taxpayers subject to the RE tax.
Local Community Investments.
Commerce will administer the Renewable Energy Local Investment Matching Grant (Grant) program. Commerce will provide matching Grants for each eligible project and establish an application process. Commerce can expend up to 5 percent of the funds appropriated for the Grant program for administrative costs. A qualifying energy project for the Grant program is an energy storage facility, a wind or solar energy production facility, associated related facilities, and any combination thereof, constructed after January 1, 2026, and located in a county or city that has entered into a local investment commitment with the project developer.
The Grants are available on a first-come, first-served basis and will be in an amount that increases commensurately with increases in value of the contribution made to the local investment commitment by the project developer and the nameplate storage and generation capacity of the qualifying energy project. A qualifying energy project must have received applicable permits under the EFSEC, the Clean Energy Coordinated Permit Process, or through the city or county permit process.
Each biennium Commerce will establish a formula to determine the size of the Grants awarded to applicants that considers:
In order for a jurisdiction to qualify for the Grants, a local investment commitment finalized after January 1, 2026, must:
Jurisdictions entering into a local investment commitment finalized between January 1, 2023, and January 1, 2026, do not have to meet this criteria.
Primary Jurisdiction.
The primary jurisdiction of a project is determined as follows:
De Facto Moratoria.
As listed earlier, a county or city must meet certain conditions to be eligible for the Grant program, including restrictions in excess of standards included in the act. These include sound limitations that are more restrictive than apply to similar facilities in the jurisdiction, zoning restrictions that limit or restrict qualifying energy projects from being developed or operated in any area zoned industrial or agricultural, and unreasonable application fees.
Specific standards applicable to eligible wind energy facilities are established in the act and include setback requirements, blade height tip limitations that are more restrictive than the Federal Aviation Administration, and tower siting requirements that prohibit shadow flicker experience of 30 hours for any occupied building or nonparticipating residence.
Additionally, there are specific standards for restrictions of eligible solar energy facilities under the act. These include setback requirements described in the act, fencing requirements for commercial solar facilities that require the perimeter to be enclosed by a fence with a height of 10 feet or more, and requirements that the components of the solar panels may not exceed 20 feet from the ground when the facility's arrays are at full tilt.
Additional Eligibility Requirements.
In order for a county to be eligible for a local investment commitment for a project that applies to and completes the county's process for development approval and files a SEPA checklist, the county's development regulations must also require a project developer to:
The primary jurisdiction of qualifying energy projects that receive applicable permits to develop or operate from the jurisdiction in which the project is located, and which do not use the EFSEC site certification process, must demonstrate to Commerce that the jurisdiction does not have a de facto moratoria on qualifying energy developments, and that the qualifying energy project would have been eligible to receive applicable permits from the primary jurisdiction.
A qualifying energy project is not rendered ineligible for the Grant program on the basis of being located in a jurisdiction that imposes requirements, standards, or restrictions on qualifying energy projects that are consistent with the permit requirements, guidelines, or best practices for the siting, development, or operation of qualifying energy facilities imposed by a state agency or state law. In addition, a qualifying energy project is not rendered ineligible for the Grant program on the basis of mitigation being imposed as a result of an environmental review by the EFSEC or the SEPA.
Decommissioning Standards.
Commerce must identify the minimum standards for decommissioning of a facility under a wind power facility agreement that must be met as part of the Grant program eligibility requirements. The act includes issues and actions that must be included in the minimum decommissioning standards. In addition, the wind power facility agreement must include financial assurances and provision of the evidence to secure performance.
Capacity Grants to Federally Recognized Indian Tribes.
Ecology must establish a biennial Capacity Grant Program to federally recognized Indian tribes. The grants under this program must be awarded equally among applicants.
The capacity grant may be used, at the discretion of each tribe, in a manner that recognizes their sovereignty, for:
It is the intent of the Legislature to appropriate $21.5 million each biennium, subject to inflationary adjustment. It is the intent of the Legislature to fund the grants for fiscal year 2026 using funds from the CCA. Beginning with fiscal year 2027, the Legislature intends to fund the Capacity Grant Program through the use of up to 50 percent of the available funds in the Local Investment Commitment Account with any remaining balance being funded through the CCA.
The participation in the Capacity Grant Program and the receipt of the grant moneys does not limit the authority of a tribe to administratively object to or legally appeal a qualifying energy project or component thereof. The eligibility of a tribe for capacity grants is not affected if they file an objection or appeal.
Technical Provisions.
The production excise tax enacted in 2023 is repealed, as is the accompanying personal property tax exemption.
The new personal property tax exemption for qualifying renewable energy facilities is exempt from the requirement of a TTPS, a JLARC review, and an automatic 10-year expiration.
The substitute bill makes the following changes:
(In support) The increase in wind and solar energy facilities is important for Washington's energy future; however, it is time to ensure that the local communities where these facilities are sited get an equal sense of the long-term economic benefits. The equipment used by wind and solar energy facilities are depreciating assets that are subject to the state and local property tax levies. The local taxing districts experience an initial increase due to this added value; however, over time there is a tax shift to the other taxpayers. In some rural counties, this is a significant tax shift.
This bill reflects extensive collaboration with stakeholders and counties in an attempt to even out the tax burden and provide more long-term certainty to renewable energy facilities, local governments, and taxpayers. Given the constitution's uniformity clause, this is not an easy fix. The current iteration is not perfect, but there needs to be an opportunity to keep working on crafting a workable solution with RE tax rates set at a level that works for everyone.
It is bill's intent that some of the tax revenues be used to further assist local communities through local investment commitment grants and tribes through local capacity grants. It is critical to continue to engage on the elements of the bill to assist in removing barriers to siting renewable energy facilities in Washington.
(Opposed) Although we are sympathetic to the challenges faced by local communities and taxing districts, it is important to the development of renewable energy in Washington to have a stable and predictable tax structure. This would be an unconstitutional and unprecedented tax swap. This bill should not apply to existing renewable energy facilities. The changes will adversely impact the power purchase agreements and financing for these existing facilities.
(Other) It is important to resolve the property tax shift that occurs under our current system. It is also important to set the rates correctly. Based on the current rate structure, some counties would see a significant revenue decrease.
This bill has a great deal of administrative complexity, especially in transitioning existing projects out of the property tax system into the new RE tax. To ensure all projects are uniformly valued, the DOR should conduct a northwest region market value study of renewable energy projects and provide this data to the counties. Moreover, removing personal property from the tax rolls in a single year might be an economic shock for some counties.
(In support) Representative Alex Ramel, prime sponsor; John Rothlin, Avista Corp; Altinay Karasapan, Climate Solutions; Paul Jewell, Washington State Association of Counties; and Joshua Rubenstein, The Nature Conservancy.