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AGLO 1970 No. 109 - August 17, 1970
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Slade Gorton | 1969-1980 | Attorney General of Washington
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                                                                 August 17, 1970
Hon. J. N. Ryder
State Senator, 46th District
6811 55th Avenue N. E.
Seattle, Washington 98115
                                                                                                             Cite as:  AGLO 1970 No. 109
Dear Senator Ryder:
            This is in reply to your letter in which you ask our opinion as to whether the property tax exemption granted under RCW 84.36.250 extends to watershed acreage owned by a nonprofit corporation engaged in distributing water to its shareholders.
            It appears from the facts furnished that the nonprofit corporation in question leases land to its shareholders for use as summer homes.  In supplying water to these homes, the corporation has built a reservoir and distribution system, and has acquired 131 acres of land which the corporation does not allow to be used for any purpose other than as a watershed for the collection of surface and ground water and to guard the water's purity.
            RCW 84.36.250 reads:
            "The following property shall be exempt from taxation:
            "All property, whether real or personal belonging to any nonprofit corporation or cooperative association and used exclusively for the distribution of water to its shareholders or members."
            It is a basic rule that exemptions from taxation must be strictly construed in favor of the right to tax, Norwegian Lutheran Church v. Wooster, 176 Wash. 581, 30 P.2d 381 (1934); Pacific Northwest Conference of The Free Methodist of North America v. Barlow, 77 W.D.2d 492 [[77 Wn.2d 487]], 463 P.2d 626 (1969).  Exemptions cannot be created by inference or implication but must be established beyond a reasonable doubt, 2 Cooley, Taxation, § 672.
            A watershed is normally understood to mean all that area of land that drains into an individual stream, lake, or in this case, a reservoir.  It may be only a few acres in area or may consist of a drainage basin hundreds of square miles in size.
             [[Orig. Op. Page 2]]    The statute in question extends the exemption only to property which is exclusively used in the "distribution" of water.  Applying the rule of strict construction, we are of the opinion that a watershed is not embraced within the exemption because its function is not that of distribution.  The term "distribution" means the allotting, dispensing, or apportioning among a number, Black's Law Dictionary (4th Ed.).  A watershed is used for the acquisition of water and for the conservation or protection of the source.  It is only remotely connected with the ultimate distribution.
            The legislative intent not to include a watershed within the exemption also becomes apparent from the fact that while watersheds may encompass thousands of acres, the statute contains no limitations on the area to which the exemption could apply.  It is doubtful that the legislature intended the possibility of huge areas of land being removed from the tax rolls.  Statutes should not be interpreted to express illogical conclusions, or unlikely consequences.  In re Horse Heaven Irrigation District, 11 Wn.2d 218, 118 P.2d 972 (1941); Alderwood Water Dist. v. Pope & Talbot, 62 Wn.2d 319, 382 P.2d 639 (1963).
            To summarize, the exemption granted by RCW 84.36.250 does not extend to any watershed belonging to a nonprofit corporation or cooperative association.  It is, in our opinion, limited to the land underlying the reservoir where the distribution begins and to all other property, real or personal, connected with and essential to the water distribution system.
Very truly yours,
Henry W. Wager
Assistant Attorney General
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