TAXATION ‑- EXCISE ‑- LEASES ‑- APPLICABILITY OF LEASEHOLD EXCISE TAX TO SMALL BOAT MOORAGE ON INDIAN RESERVATION
(1) Where, on real property leased by it from a federally-recognized Indian tribe, a public port district has constructed and is operating a small boat moorage facility for the use of which it has established a rental fee schedule which is comparable to the fair market rental for comparable Pacific Coast moorages, the moorage rental fees paid by lessee users of the boat moorage are generally subject to the leasehold excise tax notwithstanding the exemption contained in RCW 82.29A.130(7), in all instances involving moorage leases for terms of 30 or more consecutive days.
(2) Notwithstanding the foregoing, however, the leasehold excise tax is not payable in the case of Indian tribally-owned vessels using the aforesaid moorage facility.
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March 29, 1979
Honorable Paul H. Conner
State Senator, 24th Dist.
427 Public Lands Building
Olympia, Washington 98504 Cite as: AGLO 1979 No. 17
By recent letter you requested our opinion on several questions regarding the applicability of the leasehold excise tax to particular factual situations. On the basis of our understanding of the underlying facts we here paraphrase the first two of those questions as follows:
(1) Where, on real property leased by it from a federally-recognized Indian tribe, a public port district has constructed and is operating a small boat moorage facility for the use of which it has established a rental fee schedule that is comparable to the fair market rental [[Orig. Op. Page 2]] for comparable Pacific Coast moorages, are those moorage rental fees paid by lessee users of the boat haven subject to the leasehold excise tax imposed by RCW 82.29A.030, et seq.?
(2) Assuming, generally, an affirmative answer to question (1), is the leasehold excise tax payable in the case of Indian tribally-owned vessels using the moorage facility?
We answer the foregoing questions1/in the manner set forth in our analysis.
Let us begin with a brief explanation of the leasehold excise tax as provided for in chapter 82.29A RCW, codifying the provisions of chapter 61, Laws of 1975-76, 1st Ex. Sess. Pursuant to § 14 of that act (codified as RCW 84.36.451), the following property is declared to be exempt from ad valorem property taxation:
". . .
"Any and all rights to occupy or use any real or personal property owned in fee or held in trust by the United States, the state of Washington, or any political subdivision or municipal corporation of the state of Washington, including any leasehold interest arising from such property as defined in RCW 82.29A.020. . . ."
[[Orig. Op. Page 3]]
Instead, in accordance with other sections of chapter 61, supra, some, but not all, such leasehold interests are now subject to a new leasehold excise tax,
". . . on the act or privilege of occupying or using publicly owned real or personal property through a leasehold interest on and after January 1, 1976, at a rate of twelve percent of taxable rent . . ." (RCW 82.29A.030)
There are, however, certain stated exemptions from this latter tax, all of which are set forth in RCW 82.29A.130. Among these exemptions is the following:
". . .
"All leasehold interests in any real property of any Indian or Indian tribe, band, or community that is held in trust by the United States or is subject to a restriction against alienation imposed by the United States: PROVIDED, That this exemption shall apply only where it is determined that contract rent paid is greater than or equal to ninety percent of fair market rental, to be determined by the department of revenue using the same criteria used to establish taxable rent in RCW 82.29A.020(2)(b)."
The principal issue raised by your first question is whether a negative answer thereto is called for by this last quoted exemption. We believe not.
Initially, since our answer to this question necessarily involves construing the application of a tax exemption statute with respect to the facts which you have posited, it is appropriate to consider the basic rule of construction of such exemption statutes. In the recent case ofEvergreen-Washelli Memorial Park Co. v. The Department of Revenue, 89 Wn.2d 660, 574 P.2d 735 (1978), involving construction of an excise tax exemption provision, the Washington Supreme Court held:
[[Orig. Op. Page 4]]
". . . we cannot construe statutory exemptions from taxing laws broadly. It has been the strong policy of this court to construe such exemptions narrowly. [citations omitted]" 89 Wn.2d at 663.
Giving due regard to this rule of narrow construction of tax exemption statutes, it seems clear that the leasehold excise tax exemption set forth in RCW 82.29A.130(7),supra, pertains only to leasehold interests in specifiedreal property. Yet, under RCW 84.04.080, ". . . all leases of real property and leasehold interests therein for a term less than the life of the holder . . ." are defined as being "personal property" and not real property. Therefore, in the instant case, to the extent that lessee users of the boat haven thereby have a taxable leasehold interest at all that interest is not ". . . in . . . real property of any Indian or Indian tribe, band, or community . . ." Rather, as sublessees of the lessee port district, their leasehold interests are inpersonal property. Accordingly, the exemption contained in RCW 82.29A.130(7), supra, has no applicability to such subleases.
Before moving on to your second question, however, another exemption provision in RCW 82.29A.130 should be noted. Subject to the qualifications set forth therein, subsection (9) of this section of the law exempts:
"(9) All leasehold interests which give use or possession of the leased property for a continuous period of less than thirty days: PROVIDED, That for purposes of this subsection, successive leases or lease renewals giving substantially continuous use of possession of the same property to the same lessee shall be deemed a single leasehold interest: PROVIDED FURTHER, That no leasehold interest shall be deemed to give use or possession for a period of less than thirty days solely by virtue of the reservation by the public lessor of the right to use the property or to allow third parties to use the property on an occasional, temporary basis."
Accordingly, our affirmative answer to your first question (i.e., that the moorage rental fees paid by lessee users of the boat haven are subject to the leasehold excise tax notwithstanding the exemption contained in subsection (7), supra) is necessarily limited to instances involving moorage leases for terms of thirty or more consecutive days.
[[Orig. Op. Page 5]]
Assuming the foregoing answer to question (1), you have next asked whether the leasehold excise tax is payable in the case of Indian tribally-owned vessels using the subject moorage facility. Our response to this question is in the negative.
Our basis for this answer will be found in the definition of the term "leasehold interest" in RCW 82.29A.020(1). That definition provides,inter alia, that if a lessee of publically-owned [[publicly-owned]]property would itself be exempt from property taxes if that lessee owned the property in fee no taxable leasehold interest exists. Clearly, the tribally owned property of an Indian tribe, along with any property held in trust for such a tribe by the United States or subject to a restriction against alienation imposed by the United States, is thereby exempt from ad valorem property taxation. See, RCW 37.12.060; RCW 84.36.451; andMoe v. The Confederated Salish & Kootenai Tribes of the Flathead Reservation, 425 U.S. 463, 48 L.Ed.2d 96, 96 S.Ct. 1634 (1976). Therefore, through the operation of RCW 82.29A.020(1), supra, it necessarily follows that the leasehold excise tax is likewise not collectible from an Indian tribe which is a lessee of public (e.g., in this case, port district) property.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
RICHARD H. HOLMQUIST
Senior Assistant Attorney General
*** FOOTNOTES ***
1/In addition you have asked two other questions pertaining to different, unrelated factual situations; namely, (1) a fuel supply system on a pier constructed by a port district on harbor lands leased from the state and (2) a small boat moorage operated by a port district in connection with which it offers lessee users an optional electrical service for an additional monthly charge. We will not attempt to address those questions in this opinion, however, since they appear to involve disputed factual issues which must first be resolved through the applicable Department of Revenue audit and administrative review procedures.