TAXATION ‑- PROPERTY ‑- COUNTIES ‑- CITIES AND TOWNS ‑- APPLICATION OF 106 PERCENT LIMITATION TO COUNTY TAX REFUND LEVY
The 106 percent limitation on property taxes imposed by RCW 84.55.010 applies to taxes levied by a county pursuant to RCW 84.68.040 for the county refund fund; and the limitation is to be applied to the levy for the year in which the refund is made and not the yearfor which it is made.
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March 26, 1981
Honorable Norm Maleng
King County Prosecuting Attorney
E550 King County Courthouse
Seattle, Washington 98104
Cite as: AGO 1981 No. 3
Attn: Richard Holmquist, Chief Civil Deputy
By recent letter you requested our opinion on the two following questions:
1. Does the 106 percent limitation on regular property tax levies imposed by RCW 84.55.010 apply to taxes levied by a county pursuant to RCW 84.68.040 for the county refund fund?
2. If the answer to the first question is in the affirmative, and accordingly the 106 percent limitation is applicable, should the limitation be applied to the levy for the yearfor which the refund is made, or should it be applied to the levy for the year in which the refund is made?
We answer your first question in the affirmative and your second question as set forth in the analysis.
[[Orig. Op. Page 2]]
The 106 percent limitation on regular property taxes is imposed by RCW 84.55.010 which provides that:
"Except as provided in this chapter, the levy for a taxing district in any year shall be set so that the regular property taxes payable in the following year shall not exceed one hundred six percent of the amount of regular property taxes lawfully levied for such district in the highest of the three most recent years in which such taxes were levied for such district plus an additional dollar amount calculated by multiplying the increase in assessed value in that district resulting from new construction, improvements to property, and any increase in the assessed value of state‑assessed property by the regular property tax levy rate of that district for the preceding year."
The definition of "regular property taxes," in turn, is found in RCW 84.04.140, which reads as follows:
"The term 'regular property taxes' and the term 'regular property tax levy' shall mean a property tax levy by or for a taxing district which levy is subject to the aggregate limitation set forth in RCW 84.52.043 and RCW 84.52.050, as now or hereafter amended, or which is imposed by or for a port district or a public utility district."
In view of this definition, the question becomes this: Is the property tax levy for the county tax refund fund, as provided for in RCW 84.68.0401/ ". . . subject to the aggregate limitation set [[Orig. Op. Page 3]] forth in RCW 84.52.043 and RCW 84.52.050, . . ." Clearly, in our view, it is. For that limitation is applicable to all county property taxes except those imposed pursuant to voter approval under RCW 84.52.052 and Art. VII, § 2 of the State Constitution.
Further, the language of RCW 84.68.040 itself clearly shows that the levy to be made thereunder for the county tax refund fund is a regular property tax levy. For the levy is to be ". . . given precedence over all other tax levies for county and/or taxing district purposes . . ." As we show at page 10,infra, in our discussion of the second question, this language was inserted in 1937, in recognition of the fact that the levy was subject to the 40 mill limit, the predecessor of the aggregate one percent limit now found in RCW 84.52.050 and Art. VII, § 2 (Amendment 55) of the State Constitution.
On the constitutional level, the 40 mill limit was changed to the one percent limit in 1972, through adoption of the 55th Amendment. On the statutory level, the corresponding change was made the next year, by § 1, chapter 194, Laws of 1973, 1st [[Orig. Op. Page 4]] Ex. Sess. (now codified as RCW 84.52.050). Obviously, the levy for the refund fund continues to remain subject to the new limit. And by thus remaining "subject to the aggregate limitation set forth in . . . RCW 84.52.050," the levy thereby falls within the definition of regular property tax levy set forth in RCW 84.04.140.
Accordingly, in summary, we must answer your first question in the affirmative.
Before directly answering this further question it may be useful to give an illustration of the problem to which the question is addressed.
Assume that for a specific taxing district (e.g., a county) the amount of the levy made in 1981, for taxes due and payable in 1982, is $1,000,000. Assume further that this $1,000,000 is the maximum allowable under the 106 percent limitation. And, next, assume that a taxpayer within this taxing district pays his taxes in 1982 under protest, and then, pursuant to RCW 84.68.020, brings a refund action in superior court on the ground that his property was overvalued. He wins, and obtains a judgment for $100,000 of county taxes.2/
Assume also that this judgment is entered in July of 1983 and that accordingly the levy for funding it (under RCW 84.68.040,supra) is also to be made in 1983, for taxes due and payable in 1984. And, assume lastly that the dollar equivalent of the 106 percent limitation for the county's 1983 levy is $1,200,000.
In terms of this illustration your second question can now be [[Orig. Op. Page 5]] stated very simply: For purposes of the 106 percent limitation, is the $1,000,000 levy for the refund fund to be considered a 1981 levy? Or a 1983 levy?
The important practical difference between the two answers can also be seen from our illustration. If the $100,000 levy is to be treated as a 1983 levy, subject to the 106 percent limitation of $1,200,000, then the amount of tax money left for general county purposes, after payment of the refund judgment, will be $1,100,000. On the other hand, if the $100,000 levy is treated as a 1981 levy, subject to the 106 percent limitation of $1,000,000 for that year, the county may keep all of the 1983 levy ($1,200,000) and the 106 percent limitation for 1981 ($1,000,000) is arguably not exceeded either, for reasons which we shall examine next.
To understand these conclusions, consider what would have happened in 1981 if the taxpayer's property had not been overvalued in the first place. The total assessed valuation in the county would have been somewhat less, by the amount of the actual over-valuation. And, accordingly, the levy rate for every taxpayer in the county would have been slightly more.3/ But the county would still have received‑-and have been able to keep‑-the total $1,000,000. The equivalent of the $100,000 actually refunded in our example, in other words, would have been initially paid, not by a single taxpayer, but instead by all of the taxpayers in the county by reason of the slightly higher levy rate.
The levy made for the refund fund could thus be viewed as simply a mechanism for redistributing the 1981 levy among the taxpayers in the county in the same manner as it should have been distributed initially if the particular taxpayer had not been over-valued. In our example, the taxpayer has overpaid, all other taxpayers have underpaid, and the levy for the tax refund fund would be a mechanism for picking up the underpayments by the other taxpayers and using them to pay for the overpayment by this particular taxpayer; in that manner, there would simply be a redistribution of the tax burden, all within the 106 percent limitation of $1,000,000 for 1981. For after the refund, only $900,000 of this $1,000,000 levy could have actually been collected; the levy of $100,000 for the refund fund could be viewed as simply a mechanism for collecting the rest of it.
[[Orig. Op. Page 6]]
Such a redistribution, we should observe, is what actually results under the statute establishing the mechanism for the levy for the county tax refund fund. RCW 84.68.040,supra. The effect of that levy is to collect from all of the taxpayers in the county the additional amount of money which‑-interest aside‑-they would have paid initially had the particular taxpayer obtaining the refund not been over-valued in the first place. See, again, the statute as above quoted at pp. 2 and 3. Nevertheless we must conclude that, in terms of our example, the 106 percent limitation for 1983, rather than the 106 percent limitation for 1981, is controlling.
The reason for this conclusion will be found in so much of RCW 84.55.010,supra, as states:
". . . the levy for a taxing district in any year shall be set so that the regular property taxes payable in the following year shall not exceed one hundred six percent . . ." (Emphasis supplied.)
In other words, the yearin which the levy is made is the controlling factor. And, in turn, the other statute involved, RCW 84.68.040, supra, makes it clear that the levy for the refund year is to be madein 1983, even though it may be made for 1981. Once again, it provides:
"Annually,at the time required by law for the levying of taxes for county purposes, the proper county officers required by law to make and enter such tax levies shall make and enter a tax levy or levies for said county tax refund fund . . ." (Emphasis supplied.)
In summary, as our previous discussion has suggested, we certainly cannot deny that there would be ample justification for the legislature to take a different approach and, instead, make the applicable 106 percent limitation that for 1981. We cannot find in the statutes, however, any indication that it is actually done so. Indeed, the language which we have quoted from the above two provisions clearly indicates it has not.
In reaching this conclusion we are not unmindful of Greb v. King County, 187 Wash. 587, 60 P.2d 690 (1936), which you have [[Orig. Op. Page 7]] cited to us. The factual situation in Greb, as described by the Court, was as follows:
"The plaintiff is the owner of real and personal property in King county, against which there was levied, for the year 1935, taxes for state, county, and other purposes in the sum of $104.25. In the amount of this tax, there was included seventy cents on account of the delinquent taxes due the state from King county for the seventh preceding year. This seventh-year delinquency was spread on the current roll, in accordance with the provisions of [what is now RCW 84.48.110] . . ."4/
For 1935 property tax levies, there was then in effect the familiar forty mill limit, at that time imposed pursuant to an initiative rather than (as later) a constitutional provision.5/ The question in Greb was thus whether the amount to be collected for the seventh-year delinquency‑-amounting to about seventy cents‑-was within that limit. As stated by the Court, at p. 589:
". . . If the questioned item [the seventy cents] in the levy is controlled by the forty mill limit law, the state levy is in excess of the limit and, to the extent of the excess, illegal."
The Court held, however, that the "questioned item" was not subject to the forty mill limit, reasoning as follows:
"It is to be noted with respect to the seventh-year delinquency thatno action is taken by the levying authority of either the state or county. The state auditor ascertains from his books the amount due the [[Orig. Op. Page 8]] state from the county for the seventh preceding year and certifies it to the assessor, who spreads it on the roll for the current year. If the term 'levy' may be properly used at all with respect to the seventh-year delinquency, it is a levy having its foundation not in any act of the levying boards but in the statutory mandate imposing a ministerial duty upon the state auditor and county assessor. It may be called an accounting process for the collection of money already owing by the property and inhabitants of the county to the state. The delinquency for the seventh preceding year is a subsisting tax obligation of the county to the state." (Emphasis supplied.)
The Court, in short, viewed the procedure simply as one involving the collection of money owing from an earlier levy which had been made seven years before. As also stated by the Court, at p. 593:
". . . Neither the first nor second initiative can be construed as intending to disable the state from collecting taxes already levied. . . ." (Emphasis supplied.)
And later, at p. 594:
"It is our opinion that the provision of . . . [the present RCW 84.48.110] in relation to the seventh-year delinquency is not repealed by initiative No. 94,nor is it a new levy in the sense that it is included within the limitations of the initiative." (Emphasis supplied.)
As the Court's reference to "neither the first nor the second initiative" indicates, the forty mill limit was fairly new in 1935. It had first been enacted by Initiative Measure No. 64, adopted by the voters at the November 1932 general election and was then reenacted two years later as Initiative Measure No. 94. Thus, the levy made seven years previously was not covered by the forty mill limit. Had it been so covered, of course, this would have presented a problem which the Court in fact did not have to face in Greb.
[[Orig. Op. Page 9]]
But why, in any event, is the reasoning of that case not also applicable here? There, as the Court noted, it was dealing with a statute (RCW 84.48.110) which does not involve any action by the levying authority of either the state or the county. Here, however, the applicable statute (RCW 84.68.040) does involve such action. Specifically it reads, once again, as follows:
"Annually, at the time required by law for the levying of taxes for county purposes,the proper county officers required by law to make and enter such tax levies shall make and enter a tax levy or levies for said county tax refund fund, which said levy or levies shall be given precedence over all other tax levies for county and/or taxing district purposes, as follows:
". . ." (Emphasis supplied.)
As this language shows, the levy for the county refund fund is to be made at the same time as other county levies are made, is to made by the same county officers as make those other levies, and is to be considered as much a true levy as the other levy made by those officers.6/
Further, there is a clear recognition in that above quoted language that a levy for the tax refund fund is itself to be [[Orig. Op. Page 10]] subject to the forty mill limit or, more precisely, to its present successor, the one percent limitation now embodied in Art. VII, § 2 (Amendment 55) and in RCW 84.52.050. And this is further reason why the approach taken in Greb cannot be applied to a levy for the tax refund fund.
When the predecessor of RCW 84.68.040 was first enacted, as § 4, chapter 62, Laws of 1931, it did not contain the phrase ". . . which said levy or levies shall be given precedence over all other tax levies . . ." This phrase was inserted by § 2, chapter 11, Laws of 1937. This 1937 amendment was obviously made in order to conform the procedures for making the levy for the refund fund to the requirements of the forty mill limit.7/
We thus must conclude that the approach taken by the Court in theGreb case is here inapplicable, and that Greb is not inconsistent with our conclusion that a levy made for the county tax refund fund is subject to the 106 percent limitation in effect for the year in which the levy is made.
[[Orig. Op. Page 11]]
We trust that the above will be of assistance to you.
Very truly yours,
KENNETH O. EIKENBERRY
TIMOTHY R. MALONE
Assistant Attorney General
*** FOOTNOTES ***
1/RCW 84.68.040 reads, in material part, as follows:
"Annually, at the time required by law for the levying of taxes for county purposes, the proper county officers required by law to make and enter such tax levies shall make and enter a tax levy or levies for said county tax refund fund, which said levy or levies shall be given precedence over all other tax levies for county and/or taxing district purposes, as follows:
"(1) A levy upon all of the taxable property within the county for the amount of all taxes collected by the county for county and/or state purposes held illegal and recoverable by such judgments rendered against the county within the preceding twelve months, including legal interest and a proper share of the costs, where allowed, together with the additional amounts hereinafter provided for;
"(2) A levy upon all of the taxable property of each taxing district within the county for the amount of all taxes collected by the county for the purposes of such taxing district, and which have been held illegal and recoverable by such judgments rendered against the county within the preceding twelve months, including legal interest and a proper share of the costs, where allowed.
". . ."
2/Typically, these refund actions are brought on the ground of over-valuation of the taxpayer's property, and accordingly will involve not just county taxes, but taxes paid to all of the other taxing districts in which the particular property is located. These taxes may include not only regular property taxes, as defined in RCW 84.04.140, but also voter-approved excess levies‑-usually for school districts. For purposes of this illustration, however, we focus on that portion of the total amount to be refunded which is payable by a specific taxing district. For the 106 percent limitation operates on a district-by-district basis and, as we shall shortly see, the statute providing for the levy for the tax refund fund does so as well.
3/By "every taxpayer," we include the taxpayer receiving the refund. The fact that the levy rate would have been higher for his property should be taken into account in determining the amount of the refund.
4/The procedures for collecting such delinquent state taxes are today essentially the same as they were at the time of the Greb case. Under RCW 84.48.110, the state certifies ". . . to each county assessor the amount due to each state fund and unpaid from such county for the seventh preceding year, and such delinquent state taxes shall be added to the amount levied for the current year. . . ."
5/See, chapter 2, Laws of 1935, Initiative Measure 94, and Amendment 17 to the State Constitution.
6/The term "levy," we might observe, has had an interesting history in our state Supreme Court's decisions. InCarkonen v. Williams, 76 Wn.2d 617, 458 P.2d 280 (1969), the Court recognized the term "levy" as meaning the legislative act of adopting a levy ordinance. Then, inDept. of Revenue v. Hoppe, 82 Wn.2d 549, 512 P.2d 1094 (1973), the Court found for the term "a variety of meanings." 82 Wn.2d at 553. In fact it found about half a dozen. See 82 Wn.2d at 553, 554. The Court finally appears to have gotten back on track in Gellatly v. Chelan County, 85 Wn.2d 314, 534 P.2d 1027 (1975), in which it observed, with marvelous understatement:
". . . Understandably, too, the legislature could not necessarily foresee that we would expand [in Dept. of Revenue v. Hoppe] upon our definition of 'levy' set forth inCarkonen v. Williams, . . ." 85 Wn.2d at 319.
7/In an unpublished letter opinion of this office to Representative Floyd C. Miller, April 9, 1942, dealing with the procedures for handling tax refunds payable from the county tax refund fund, it is stated:
". . . Of course, the total of the tax refund levy and the direct levy must comply with the limitation on tax levies prescribed by Laws of 1939, chapter 2, section 1 . . ."
The reference here is, of course, to the forty mill limit as reenacted by Initiative Measure No. 129. The letter goes on to state:
". . . No irreconcilable conflict between the two taxing bodies [the county which makes the levy for the refund fund and another taxing district] can result, though, in the event that a reduction is necessary in order to comply with the limitations referred to, for the reason that the statute to which you refer specifically provides that the tax refund fund levy 'shall be given precedence over all other tax levies.'"