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AGO 1974 No. 8 - March 27, 1974
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Slade Gorton | 1969-1980 | Attorney General of Washington

TAXATION ‑- PROPERTY ‑- LEASEHOLD ‑- LANDLORD AND TENANT ‑- INDIANS

(1) A leasehold interest which would have qualified for a property tax exemption under the terms of § 11 (1), chapter 187, Laws of 1973, 1st Ex. Sess., as of January 1, 1973, and which has not been "renegotiated" within the meaning of § 3 (3) at any time in 1973, is exempt from such taxation for that assessment year with respect to property taxes due and payable in 1974; however, this same leasehold interest would not qualify for such an exemption from property taxes due and payable in 1974 if the leasehold had been "renegotiated" between January 1, 1973, and July 16, 1973, the effective date of chapter 187, supra.

(2) In the determination of "economic rent" as defined in § 3 (1), chapter 187, supra, a county assessor is not conclusively bound by a determination of "contract rent" made by an impartial arbitration board or, in the case of creation of a new leasehold interest, by open public bidding ‑ although this would be one of the relevant circumstances which the assessor is to consider.

(3) Where there is a change in consideration to be paid by the lessee to the lessor but the term of the lease is shortened rather than extended, a "renegotiation" does not occur within the meaning of § 3 (3) of chapter 187, supra.

(4) In order for a leasehold interest granted by an Indian to a non-Indian to be exempt from property taxation under § 11 (8), chapter 187, supra, the real property which is subject thereto must be that land of an Indian or Indian tribe that is held in trust by the United States or is subject to a restraint against alienation imposed by the United States.

                                                              - - - - - - - - - - - - -

                                                                  March 27, 1974

Honorable Christopher T. Bayley
Prosecuting Attorney
King County Court House
Seattle, Washington 98104

                                                                                                                   Cite as:  AGO 1974 No. 8

Attention:  Mr. Norman K. Maleng

Dear Sir:

             [[Orig. Op. Page 2]]

            By letter previously acknowledged you have requested an opinion of this office on a number of questions involving the taxation of certain leaseholds under chapter 187, Laws of 1973, 1st Ex. Sess.  We paraphrase those questions as follows, with all statutory references being to designated sections of the act:

            (1) Is a leasehold interest which would have qualified for a property tax exemption under the terms of § 11 (1) as of January 1, 1973, and which has not been "renegotiated" within the meaning of § 3 (3) at any time in 1073, exempt from such taxation for that assessment year with respect to property taxes due and payable in 1974?

            (2) Assuming an affirmative answer to question (1), would this same leasehold still qualify for the same exemption from property taxes due and payable in 1974 if the leasehold had been "renegotiated" within the meaning of § 3 (3) between January 1, 1973, and July 16, 1973, the effective date of chapter 187?

            (3) In the determination of "economic rent" as that term is defined in § 3 (1), is a county assessor conclusively bound by a determination of "contract rent" made by an impartial arbitration board or, in the case of creation of a new leasehold interest, by open public bidding?

            (4) Does a "renegotiation" occur within the meaning of § 3 (3) when (a) there is a change in the consideration to be paid by the lessee to the lessor, but (b) the term of the lease is shortened rather than extended?

            (5)  Where real property is leased by an Indian lessor to a non-Indian lessee, under what circumstances is the leasehold interest exempt from property taxation under § 11 (8)?

            We answer question (1) in the affirmative, questions (2), (3) and (4) in the negative, and question (5) as set forth in our analysis.

                                                                     ANALYSIS

            Introduction:

            In order to set the stage for our consideration of your questions we believe it appropriate to repeat here, and briefly expand upon, the explanation of chapter 187, Laws  [[Orig. Op. Page 3]] of 1973, 1st Ex. Sess., that we first made several months ago in AGO 1973 No. 17 [[to Helen Sommers, State Representative on August 1, 1973]], copy enclosed.

            Except as now qualified by § 11 of this 1973 act, private leasehold interests in publicly owned tax exempt real estate are taxable as personal property.  See, RCW 84.04.080.  InPier 67, Inc. v. King County, 78 Wn.2d 48, 469 P.2d 902 (1970), the Washington supreme court held that under the then existing version of RCW 84.40.030 the proper method of assessment of such interests is to determine the true cash value (or market value) of the leasehold ‑ using the same standards as for valuing taxable property in general.  However, because the rental terms of many such leases entered into prior to that decision were predicated upon assessment practices resulting in lesser valuations than would have been produced by this approach, a consequence of this court decision was the imposition of an unanticipated financial burden upon those private lessees who had relied upon the correctness of such prior practices when entering into their leases with state agencies or political subdivisions of the state.

            The legislature's initial reaction to this situation in 1971 was to provide, in § 1, chapter 43, Laws of 1971, 1st Ex. Sess., (commonly referred to as the "moratorium bill") that the pre‑Pier 67 valuation rules for leasehold interests in publicly owned property would continue to apply through assessment year 1972.  This section, however, also contained the following proviso:

            ". . .  PROVIDED, That the foregoing provisions of this sentence shall not apply to any extension or renewal, made after December 31, 1970 of the term of any such estate, or to any such estate after the date, if any, provided for in the agreement for rental renegotiation."

            Then, in 1973, the legislature met the problem again by the somewhat more complex enactment to which your immediate questions refer, chapter 187,supra.  Section 2 of this act expresses its underlying basis and purpose as follows:

            "The legislature hereby recognizes that properties of the state of Washington, counties, school districts, and other  [[Orig. Op. Page 4]] municipal corporations are exempted by Article 7, section 1 of the state Constitution from property tax obligations, but that such public properties when under lease to private lessees receive substantial benefits from governmental services provided by the units of local government.

            "The legislature further recognizes that leases of such property entered into prior to July 1, 1970, are often at a full and fair market rental predicated upon a tax obligation which was considerably less than established by the state supreme court in May of 1970 when the lessee is a nonexempt person or entity.

            "The legislature therefore recognizes that equity requires that provision be made to alleviate the impact of added tax obligations upon the lessee of public properties and does hereby provide certain property tax exemptions for leasehold estates contracted prior to July 1, 1970, where the lessee is paying a contract rent equal to or at least ninety percent of economic rent as defined in section 3 of this 1973 amendatory act and the legislature does hereby provide for a leasehold in lieu tax to fairly compensate local governmental units for services rendered to such properties and does hereby provide authorization for payment thereof.  The legislature finds that public properties subject to leasehold estate taxation or to in lieu taxation are entitled to those same governmental services provided comparable property in private ownership."

            The property tax exemption thus provided for is then spelled out in so much of § 11 as provides:

            "The following property shall be exempt from taxation:

            "(1) All leasehold estates in property  [[Orig. Op. Page 5]] owned in fee or held in trust by the government of the United States, or of the state of Washington or any political subdivision thereof, negotiated prior to July 1, 1970, which have not beenrenegotiated, extended, or renewed since July 1, 1970, and which have a contract rent equal to at least ninety percent of economic rent: . . ."  (Emphasis supplied.)

            For the purposes of this exemption three key terms are defined in § 3 of the act as follows:

            "(1) 'Economic rent' means the rental warranted to be paid in the open real estate market based on rentals being paid for comparable leases.  In the determination of 'economic rent' the private rate of return and normal costs to be private sector shall be considered.

            "(2) 'Contract rent' means the amount of consideration conveyed according to the leasehold instrument:  PROVIDED, That any prepaid rent shall be considered to have been paid in the year due and not the year when paid.

            "(3) 'Renegotiation' or 'renegotiated' means the process occasioned by any situation or circumstance which results in a change in the consideration to be paid by the lessee to the lessor for any extension or renewal of a lease."1/

             [[Orig. Op. Page 6]]

            Like chapter 43,supra, this 1973 act thus incorporated the principle that while some form of tax relief should be provided those pre‑Pier 67 lessees who have not had an opportunity for some sort of renegotiation, the relief should be limited to those cases and not extended to those other lessees who have had such an opportunity.

            Unlike chapter 43, however, chapter 187 did not simply grant a temporary moratorium from an application of the Pier 67 decision to those lessees who were thus "locked in" to their prior leases.  Instead, it granted a total exemption from property taxation to some, but not all, of them ‑ those having leases with respect to which the contract rent (as above defined) equals at least 90% of the economic rent (also as above defined) for the property in question.  In other words, the exemption is afforded only to those lessees who are receiving little or no benefit from the tax exempt status of the underlying fee; i.e., benefit in the form of substantially lower rental payments than they would have to pay in a market established by private taxable lessors.  And then, in place of that property taxation the legislature provided for the impositionupon the public lessor of an "in lieu" excise tax by the following language of § 4 of the act:

            "There is hereby levied and shall be collected an in lieu excise tax in 1974 and in each year thereafter from each lessor of a leasehold estate which is exempted from ad valorem property taxation pursuant to section 11 (1) of this 1973 amendatory act.  The tax shall be levied and collected in an amount equal to the value of the annual leasehold rent collected the previous year multiplied by the rate of fourteen percent: . . ."

             [[Orig. Op. Page 7]]   Finally to be noted by way of background for your questions is the fact that chapter 187, Laws of 1973, 1st Ex. Sess., did not contain an emergency clause and, hence, did not become effective until July 16, 1973 ‑ midway through the 1973 assessment year.2/

             Question (1):

            This last noted factor, together with the fact that the property tax process in this state involves a number of stages, leads us to your first question.  Inasmuch as the listing and assessment of property in 1973 for taxes due and payable in 1974,3/ had already occurred prior to the time that chapter 187 became effective, you ask whether the exemption provided for in § 11 (1) of that act,supra, is, nevertheless, applicable for assessment year 1973 if there has been no renegotiation during that year.  Stated otherwise, is the exemption available the first time only for assessment year 1974, in view of the fact that chapter 187 did not become effective until July 16, 1973?

            The language in § 4 which we have quoted above provides that with respect to leaseholds exempted from property taxation under § 11 (1) the public lessor is to pay an in lieu excise tax "in 1974 and in each year thereafter."  This is in recognition of the fact that since, as noted above, the economic benefit flowing from the tax exempt status of the fee estate is not in such cases being passed on to the lessee in the form of lower rental payments (i.e., rental payments substantially less than economic rent), this economic benefit must be inuring to the lessor.  Accordingly, a compensatory tax burden, in the form of an in lieu excise tax, is imposed upon the lessor.  But unless the exemption provided for in § 11 (1) is deemed to be applicable with respect to property taxes that would otherwise be levied in 1973 for collection in 1974, chapter 187 would result in  [[Orig. Op. Page 8]] the lessor paying an "in lieu excise tax" under § 4 in 1974, while the lessee would also, during 1974, be paying the property taxes levied with respect to assessment year 1973.4/

             Secondly, it will also be seen from our introductory discussion that to apply the exemption provided for in § 11 (1) for the first time in assessment year 1974, rather than assessment year 1973, would mean that those leasehold interests which were granted relief from property taxes through assessment year 1972, by reason of § 1, chapter 43, Laws of 1971, 1st Ex. Sess.,supra, would become fully taxable for one year and one year only (i.e., for assessment year 1973) and then would become completely exempt for assessment year 1974 and later.

            The incongruity of both of these results is sufficient to lead us in search of a basis for a contrary construction of the act if possible.  Accord,Wilson v. Lund, 74 Wn.2d 945, 447 P.2d 718 (1968), and cases cited therein for the proposition that:

            "The courts, in pursuance of the general object of giving effect to the intention of the legislature, are not controlled by the literal meaning of the language of the statute, but the spirit or intention of the law prevails over the letter thereof.

            ". . .

            "It is a rule of such universal application as to need no citation of sustaining authority that no construction should be given to a statute which leads to gross injustice or absurdity."

            From a standpoint of judicial precedent we believe that such a basis may be found in the case ofSnow's Mobile Homes, Inc. v. Morgan, 80 Wn.2d 283, 494 P.2d 216 (1972).  There, the question was whether an act exempting certain mobile homes from ad valorem property taxation was applicable with respect to assessment year 1969 even though it had not become effective until May 12 of that year.  In concluding that it was, the court noted that under the  [[Orig. Op. Page 9]] applicable statutes no property taxes had been imposed on this category of mobile homes during prior years, and with this in mind it said, at page 291:

            "If the 1969 amendment was not intended to apply to listings and assessments in that year, the result would be that for 1 year, and only 1 year, an ad valorem tax would be imposed.  Had the tax been imposed in preceding years, the 1969 amendment would have effected an actual change in the taxable status of the dealers' inventories, and the presumption that such a change was intended to operate prospectively only would carry great weight.  But in a unique situation such as this, where the tax has never been imposed in the past and will not be imposed in the future as long as this amendment remains in effect, it would be anomalous to ascribe to the legislature an intent that the tax should be collected in the year that it amended the act to approve the policy expressed in the exemption."

            And then, at page 292, the court went on to say:

            "The legislature had the power to cut off the tax liability at any stage.  It is undoubtedly true that more lucid language could have been chosen to express the legislative intent that no tax be imposed. . . .  While the most appropriate language was not used, we think the legislative purpose is apparent. . . ."

            It is, of course, true that the act involved in the Snow's case contained an emergency clause, while chapter 187,supra, does not; and that this was a factor in the court's decision in that case.  Had the legislaturenot intended the tax exemption therein provided for to apply to taxes levied in 1969 for 1970 collection, so the court reasoned,  [[Orig. Op. Page 10]] the emergency clause would have been a useless act.5/

             Admittedly, with respect to a leasehold interest which was not renegotiated at all during 1973, the conclusion that we here reach in reliance on the first excerpt from theSnow's case that we have quoted above ‑ i.e., that the exemption provided for by § 11 (1) of chapter 187,supra, is applicable to the case described by your first question ‑ would be the same even if an emergency clause had been included in this 1973 act.  However, as we shall next show in our analysis of question (2), the absence of an emergency clausedoes provide a different result in those cases in which there has been a renegotiation between the date on which chapter 187 would have been effective had it contained such a clause and the date on which it actually did go into effect by reason of the absence thereof.

            Question (2):

            The factual situation described in this question differs from that involved in question (1) to the extent that while the leasehold interest there in issue had still not been renegotiated as of July 16, 1973, when chapter 187 became effective, the leasehold interest here involved had been ‑ at some time between the commencement of assessment year 1973 on January 1, 1973, and the effective date of the act.

            In approaching this question, it may be useful to pinpoint the exact nature of the problem presented.  In accordance with the law which was in effect on January 1, 1973, this leasehold would not have been either partially or totally exempt from taxation ‑ and indeed no privately held leasehold interest in a publicly owned fee would have been ‑ because chapter 43, Laws of 1971, 1st Ex. Sess., had by its terms expired with the assessment year 1972.  Conversely, if we look, instead, to the pertinent statutory  [[Orig. Op. Page 11]] provisions as of July 16, 1973, the leasehold here in question still would not be exempt because by then it would not be within the literal scope of § 11 (1), chapter 187, supra, in view of its prior renegotiation.

            Accordingly, it will be seen that § 11 (1) can only operate to grant an exemption for assessment year 1973 in those cases described by your second question upon the theory that it is to be applied to all leases which met its requirements as of January 1, 1973, even though, as of July 16, 1973, they no longer did.  In other words, the central problem is whether the exemption granted in § 11 (1) is to be applied on the basis of the factual situation existing at the beginning of the 1973 assessment year on January 1, 1973, or that existing as of July 16, 1973, when chapter 187 became effective.6/

             We believe that the answer to this question is provided by further analysis of Snow's Mobile Homes, supra, along with P.B. Investment Co., Inc. v. King County, 78 Wn.2d 81, 469 P.2d 893 (1970), andStar Iron & Steel Co. v. Pierce County, 5 Wn.App. 515, 488 P.2d 776 (1971), affirmed per curiam 81 Wn.2d 680 (1972).  InSnow's Mobile Homes, as we have earlier noted, the court held that the legislature has the power to cut off the tax liability of a property owner "at any stage" ‑ at least prior to such time as the tax has been paid.  Recalling that the property tax process involves a number of stages, commencing with the listing and assessment of property (chapter 84.40 RCW) then proceeding to the equalization  [[Orig. Op. Page 12]] of the assessments (chapter 84.48 RCW), the levy of taxes (chapter 84.52 RCW) and finally, the collection of taxes (chapter 84.56 RCW), it will thus be seen that when the legislature passes a statute exempting property from taxation such as is here involved, it is, in effect, intervening in the property tax process by requiring it to stop with respect to the particular class of property which it is exempting.  From this it logically follows that if § 11 (1) of chapter 187, supra, is characterized, as we believe it should, as a legislative "cutting of the chain" of events in the property tax process, then the specific properties with respect to which this cutting applies would be determined as of the effective date of the act.

            In support of this approach to your second question we have earlier cited, in addition to theSnow's Mobile Homes case, two other recent decisions:  P.B. Investment Co. v. King County and Star Iron & Steel Co. v. Pierce County,supra.  Under these cases, the fact that a leasehold had not been renegotiated as of January 1, 1973, would not necessarily have entitled that leasehold to a tax exemption under chapter 187, even if this 1973 act had already become effective prior to that date.

            InP.B. Investment Co., the question before the court was whether certain property which had been sold by the Salvation Army was exempt from property taxes levied for assessment year 1966, for collection in 1967.  In dealing with the basic argument made in support of the claim for an exemption, the court said:

            "Plaintiff argues that because the property was still owned by the Salvation Army on January 1, 1966 and because it was then being used for purposes which qualified it for exemption, it should have been listed as exempt property for the assessment year of 1966 and thus should have been exempt from the 1967 levy.  Plaintiff contends that there is no statutory authority for the assessor to reassess property which is listed as exempt on January 1 of the assessment year.

            "King County argues that the trial court  [[Orig. Op. Page 13]] erred in accepting plaintiff's theory of the law on that issue.  The county contends that while the value of real property is assessed with reference to January 1 of the assessment year, that date is not determinative of the exemption status of the property.

            "On this issue we agree with King County."

            Then, after noting the provisions of RCW 84.40.020, RCW 84.40.040 and RCW 84.40.175, the court went on to say:

            "These provisions indicate that claims of exemption are not determined with reference to January 1, as urged by plaintiff.  Instead, the exemption determinations are made at the time of making the assessment of real property, which time extends from December until the 31st of May."

            Accord,Star Iron & Steel Co. v. Pierce County, supra, in which this same rule was made applicable to personal property as well as realty.  We would thus be faced with another "anomaly" like those rejected in our answer to question (1), if we were here to conclude that the factual situation as of January 1, 1973, is to determine the eligibility of a leasehold interest for exemption under chapter 187, supra, the effective date of which was July 16, 1973, when the January 1, 1973, factual situation would not even have been determinative for purposes of that exemption statute if its effective date had been prior to that date.

            One further point should be made with respect to this question.  As already noted in our discussion of question (1), the court in Snow's Mobile Homes, supra, rested its conclusion in part upon the presence of an emergency clause in the exemption statute there under consideration, and felt obliged to apply that statute in such a manner as to give the emergency clause a practical operative  [[Orig. Op. Page 14]] effect.  Conversely, in chapter 187 there is no emergency clause, but this fact too should be given practical operative effect; i.e., a different result should be reached in the absence of an emergency clause from that which would be reached if chapter 187 had contained such a clause.  And, as we will now illustrate, just such a difference would result under our conclusion that § 11 (1) is to be applied on the basis of the factual situation existing on the effective date of the act.

            With no emergency clause, and with its effective date therefore being July 16, 1973, § 11 (1) is to be applied in accordance with the factual situation existing as of that date.  If there had been an emergency clause in chapter 187, with the result that this act would have become effective upon approval by the governor on April 25, 1973, § 11 (1) would have been applicable in accordance with the factual situation existing either on that date or such other date as would be applicable in accordance withP.B. Investment Co. case.  On the other hand, if § 11 (1) were to be applied in accordance with the factual situation existing on January 1, 1973, the presence or absence of an emergency clause in chapter 187 would make no difference whatsoever.

            Question (3):

            Your third question requires us to refer again to the definitions of "economic rent" and "contract rent" that are set forth in § 3 of chapter 187,supra; here repeated for ease of reference, these definitions read as follows:

            "(1) 'Economic rent' means the rental warranted to be paid in the open real estate market based on rentals being paid for comparable leases.  In the determination of 'economic rent' the private rate of return and normal costs to be private sector shall be considered.

            "(2) 'Contract rent' means the amount of consideration conveyed according to the leasehold instrument:  PROVIDED, That any prepaid rent shall be considered to have been paid in the year due and not the year when paid."

             [[Orig. Op. Page 15]]

            Your question is essentially this:  When contract rent with respect to a particular leasehold is determined either through public bidding or by an arbitration process provided for in the lease instrument, is the county assessor legally required in all instances to accept that figure as representing economic rent?

            Approaching this question, we should first observe that there is no statutory provision in either chapter 187 or anywhere else which expressly places such an obligation on the assessor.  Secondly, the definition of "economic rent" as quoted above expressly requires that the determination as to what constitutes such rent is to be based upon rentals being paid for comparable leases, and not on the basis of contract rent for the specific lease for which economic rent is to be determined.  Thirdly, the "open real estate market" which is to be looked to is, by reason of the second sentence of § 3 (1), to be the market established by lease transactions between private (i.e., taxable) lessors and lessees.  And finally, the court inPier 67, Inc. v. King County, supra, in addressing itself to the question of how the assessor is to determine the value of leaseholds under the new rules laid down by it in that decision said:

            "The ultimate responsibility of the assessor is to determine the true cash value of the property.  No 'rule of thumb' can be formulated to fit every situation; but the assessor must consider all relevant circumstances pertinent and helpful in making his assessment within the ambit of the applicable statutes. An assessment which meets this test will not be set aside by the courts unless the property is so grossly overvalued as to result in a fraud upon the property owner.  Templeton v. Pierce County, 25 Wash. 377, 65 P. 553 (1901);Alaska Land Co. v. King County, 77 Wn.2d 247, 461 P.2d 339 (1969)."  (Emphasis supplied.)

            Accordingly, we conclude that the assessor is not conclusively bound to treat as "economic rent" the contract rent for a leasehold subject to chapter 187,supra, which has been determined in accordance with an arbitration procedure or public  [[Orig. Op. Page 16]] bidding.  In so advising you, however, we should nevertheless add to this an observation that the contract rent so determined would certainly be one of the "relevant circumstances" which the assessor is to consider.

            Question (4):

            Next you have asked:

            Does a "renegotiation" occur within the meaning of § 3 (3) when (a) there is a change in the consideration to be paid by the lessee to the lessor, but (b) the term of the lease is shortened rather than extended?

            In AGO 1973 No. 17,supra, it was concluded that the term "renegotiation" as it pertains to the taxability of a leasehold interest under chapter 187, refers only to a renegotiation involving an extension or renewal of the lease and to mutually agreed upon changes in the lease during its term which are not a part of an extension or renewal.  Stated otherwise, if the term of the lease remains the same, changes in other of its provisions ‑ such as a change in the contract rent ‑ would not constitute a "renegotiation."  This conclusion was based upon the definition of "renegotiation" found in § 3 (3),supra, which by its terms is expressly limited to a change in consideration or contract rent paid by the lessee to the lessor for any extension or renewal of a lease.  As noted at page 6 of that prior opinion, this definition is narrower than the ordinary concept of renegotiation.

            By the same token, we believe that it here must be concluded that such a transaction as is contemplated by your fourth question does not constitute a "renegotiation" as thus defined for the purposes of this act.  The shortening of the term of a lease is really just the opposite of an extension of the lease.

            Nor do we believe that a change in the provisions of the lease resulting in a shortening of the term would fall within the concept of "renewal" of the lease, for again, the concept of renewal is just the opposite.  As stated in Black's Law Dictionary, 4th ed., "renewal" means:  "To grant or obtain extension of, to continue in force for a fresh period; . . ." (page 1460).  Further, we would be attributing to the legislature an essentially absurd intent were we to hold that a change in consideration constitutes a renegotiation if the  [[Orig. Op. Page 17]] term is shortened, but does not constitute a renegotiation, in accordance with AGO 1973 No. 17, so long as the term remains the same.

            Question (5):

            Your final question involves an aspect of chapter 187, supra, that has not heretofore been noted, and asks:

            Where real property is leased by an Indian lessor to a non-Indian lessee, under what circumstances is the leasehold interest exempt from property taxation under § 11 (8)?

            This subsection of § 11 exempts from property taxation:

            "All leasehold estates on 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."

           In order for this exemption to apply the real property that is subject thereto must be not merely that of an Indian or Indian tribe, perse; it must, in addition, be land held in trust by the United States or land of an Indian or Indian tribe that is subject to a restriction against alienation imposed by the United States.  But if all of these conditions exist, the leasehold interest is exempt from taxation even though the lessee is a non-Indian ‑ unlike the situation covered by subsection (9) of the same statute which, in granting a further exemption, deals only with leaseholds held by enrolled Indians.7/

             [[Orig. Op. Page 18]]

            We trust the foregoing will be of assistance to you.

Very truly yours,

SLADE GORTON
Attorney General


TIMOTHY R. MALONE
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

1/Based upon the last of these three definitions we concluded in AGO 1973 No. 17 [[to Helen Sommers, State Representative on August 1, 1973]], supra, that:

            "The term 'renegotiation' as it pertains to taxable leasehold interests in property owned by the state or its political subdivisions under chapter 187, Laws of 1973, Ex. Sess., refers only to a renegotiation involving an extension or renewal of the lease and does not include mutually agreed upon changes in the lease during its term which are not a part of any extension or renewal."

            We will have occasion to refer to this aspect of chapter 187 again later in the instant opinion in responding to question (4), below.

2/See, Wash. Const., Article II, § 41 (Amendment 26) and AGO 1973 No. 8 [[to Arthur C. Brown, State Representative on March 6, 1973]].

3/See, RCW 84.40.010, et seq., together with chapter 84.48 RCW pertaining to the equalization of assessments, chapter 84.52 RCW providing for the levying of taxes, and chapter 84.56 RCW involving the collection of those taxes.

4/See, RCW 84.56.010 and 84.56.020.

5/In Snow's Mobile Homes, the court stated, at page 292:

            "The only way that the emergency clause in chapter 225 can be rendered meaningful is to construe it as evidencing an intention that ad valorem taxes should not be levied upon inventories of travel trailers and mobile homes in 1969. . . ."

6/Perhaps the problem is best illustrated by an example involving a more familiar situation; i.e., a change in ownership.  Assume that in an act having an effective date of July 16, 1973, the legislature exempted from taxation all property owned by a bona fide religious organization, even though such property was used for commercial purposes such as a hotel.  Assume further that on January 1, 1973, a certain church owned the hotel which it later sold at some time prior to July 16, 1973.  Would the exemption then taking effect be applicable on the theory that it relates back to the factual situation as of January 1, 1973, or would it be inapplicable on the ground that it addresses itself only to the factual situation on July 16, 1973?

7/The full text of this subsection grants a tax exemption to:

            "All leasehold estates held by enrolled Indians of lands owned or held by an Indian or Indian tribe where the fee ownership of such property is vested in or held in trust by the United States and which are not subleased to other than to a lessee which would qualify pursuant to this 1973 amendatory act."

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