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AGO 1976 No. 18 - September 29, 1976
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Slade Gorton | 1969-1980 | Attorney General of Washington

TAXATION ‑- PROPERTY ‑- REMOVAL OF EXEMPTION ‑- TAXATION OF PREVIOUSLY EXEMPT PROPERTY FOR PRIOR YEARS

The provisions of § 8, chapter 40, Laws of 1973, Ex.Sess., (RCW 84.36.810) do not authorize a county to collect property taxes upon the cessation of an exempt use covered by RCW 84.36.030, 84.36.040, 84.36.050 or 84.36.060 for years prior to the effective date of said 1973 enactment where the exemption in question was in effect during those prior years.

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                                                              September 29, 1976

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

                                                                                                                 Cite as:  AGO 1976 No. 18

Dear Sir:

            By letter previously acknowledged you have requested our opinion on a question which we paraphrase as follows:

            Does § 8, chapter 40, Laws of 1973, 2nd Ex. Sess. (RCW 84.36.810), authorize a county to collect property taxes upon the cessation of an exempt use covered by RCW 84.36.030, 84.36.040, 84.36.050 or 84.36.060 for years prior to the effective date of said 1973 enactment where the exemption in question was in effect during those prior years?

            For reasons discussed in the analysis below we answer your question in the negative.

                                                                     ANALYSIS

            In 1973, the legislature enacted a series of changes, both substantive and procedural, in the laws pertaining to the exemption of property from ad valorem taxation.  See, chapter 40, Laws of 1973, 2nd Ex. Sess.  For the most part, property which had been exempt from taxation in years prior to 1973 continued to be exempt under this new enactment so long as the use of the property remained the same and certain procedural requirements were met.  See, generally, §§ 6-19, chapter 40,supra (RCW 84.36.800 ‑ 84.36.865).  Thus, nonprofit, nonsectarian organizations (RCW 84.36.030), libraries, nursing homes and hospitals (RCW 84.36.040), private schools and colleges (RCW 84.36.050), and  [[Orig. Op. Page 2]] art, scientific and historical collections (RCW 84.36.060) which had enjoyed exempt status prior to 1973 continued to be exempt so long as the use of the property remained the same and the applicable procedural requirements (e.g., timely application to the department of revenue) were met.

            Also under the law in effect prior to 1973, property which ceased to qualify for an exemption from ad valorem taxation because of a cessation of use for any of the exempt purposes specified in chapter 84.36 RCW became immediately subject to present and future taxation.  See, RCW 84.40.350 ‑ 84.40.390; P. B. Inv. Co. v. King County, 78 Wn.2d 81, 469 P.2d 893 (1970).  On the other hand there were no provisions in the pre‑1973 law for the assessment or collection of any additional taxes because of such a cessation of exempt use.  This latter situation, however, was also changed by the 1973 law.  See, § 8, chapter 40,supra, which, as codified in RCW 84.36.810, reads as follows:

            "Upon cessation of a use under which an exemption has been granted pursuant to RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060, the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the seven years preceding, or the life of such exemption, if such be less, together with the interest at the same rate and computed in the same way as that upon delinquent property taxes:  Provided, That if the cessation of use involves a portion of the total property exemptions the provisions of this section shall apply only to that portion:  Provided further, That such additional tax shall not be imposed if the cessation of use resulted solely from:

            "(1) Transfer to an organization, association, or corporation for a use which also qualifies and is granted exemption under the provisions of chapter 84.36 RCW;

            "(2) A taking through the exercise of the power of eminent domain, or sale or transfer to an entity having the power of eminent domain in anticipation of the exercise of such power;

            "(3) Official action by an agency of the state of Washington or by the county or city within which the property is located which disallows the present use of such property;

             [[Orig. Op. Page 3]]

            "(4) A natural disaster such as a flood, windstorm, earthquake, or other such calamity rather than by virtue of the act of the organization, association, or corporation changing the use of such property;

            "(5) Relocation of the activity and use of another location or site except for undeveloped properties of camp facilities exempted under RCW 84.36.030."

            This statute became effective September 27, 1973, and was made specifically applicable to assessments made in 1973 for taxes due and payable in 1974.  See, RCW 84.36.905.1/   Your question deals with the impact of this new law upon property which had been granted an exemption under the provisions of RCW 84.36.030, 84.36.040, 84.36.050 or 84.36.060 for assessment years prior to 1973.  For example, would RCW 84.36.810 authorize the imposition of a full seven years' back taxes upon property of a private school (RCW 84.36.050) which had been granted an exemption continuously since 1960 upon the cessation of use of the property for school purposes in 1975?

            At the outset, we start with the proposition that the essential object in interpreting the meaning of any statute is to ascertain and give effect to the intent of the legislature.  Hartman v. State Game Commission, 85 Wn.2d 176, 532 P.2d 614 (1975);Krystad v. Lau, 65 Wn.2d 827, 400 P.2d 72 (1965).  In interpreting a statute, the legislature's intent must be determined primarily from the language of the statute itself.  Driscoll v. Bremerton, 48 Wn.2d 95, 291 P.2d 642 (1955).  Where the language of a statute is clear and unambiguous, and can have only one meaning, there is no room for construction.  Canteen Service v. State, 83 Wn.2d 761, 522 P.2d 847 (1974); Roza Irrigation Dist. v. State, 80 Wn.2d 633, 497 P.2d 166 (1972).  In case of doubt or ambiguity, a taxing statute is construed most strongly against the taxing power in favor of the taxpayer.  Pacific Etc. Ass'n. v. Pierce County, 27 Wn.2d 347, 178 P.2d 351 (1947);Buffelen Lumber & Mfg. Co. v. State, 32 Wn.2d 40, 200 P.2d 509 (1948).

            At first glance in this case, it would most certainly appear  [[Orig. Op. Page 4]] that the language of RCW 84.36.810,supra, is sufficient to authorize the collection of up to seven years' back taxes upon the cessation of an exempt use covered by RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060, even where the taxes cover years prior to the effective date of the 1973 act and the exemption in question was in effect during those years.  Nothing in the language of the statute,as codified, indicates any legislative intent to the contrary.  However closer analysis of the language of the statute, as actually enacted by the legislature, reveals just such an opposite intent.  The original text of § 8, chapter 40, Laws of 1973, 2nd Ex. Sess., from which RCW 84.36.810 was derived, reads in pertinent part as follows:

            "Upon cessation of a use under which an exemption has been grantedpursuant to sections 2 through 5 of this 1973 amendatory act, the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the seven years preceding, or the life of such exemption, if such be less, together with the interest at the same rate and computed in the same way as that upon delinquent property taxes: . . ."  (Emphasis supplied.)

            Sections 2 through 5 ". . . of this 1973 amendatory act . . ." are, in turn, the new, amended, versions of RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060 and not (as would appear from a literal reading of RCW 84.36.010 as codified) the earlier, pre‑1973, versions of those statutes.  Comparing the language of the session law with that of the RCW, it is clear that what has happened is that the code reviser, in the performance of his duties pertaining to the codification of legislation, has substituted the phrase ". . . pursuant to RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060 . . ." for the phrase ". . . pursuant to sections 2 through 5 of this 1973 amendatory act . . ."  This substitution, however, cannot and does not change the meaning or intent of the law as originally enacted by the legislature.  See, RCW 1.08.015(2)2/ ; also, State ex rel. Kirschner v. Urquhart, 50 Wn.2d 131, 310 P.2d 261 (1957).  And that law (§ 8, chapter  [[Orig. Op. Page 5]] 40, supra) in its session law version only manifests a legislative intent to impose an additional "cessation of exempt use" tax with respect to exemptions in effect on or after the effective date of the 1973 law ‑ because only such exemptions could be said to have been granted pursuant to §§ 2 through 5 thereof.  Conversely, any exemptions earlier obtained under the pre‑1973 versions of RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060 would not be subject to the provisions of § 8,supra (RCW 84.36.810) because such exemptions would not have been granted, in the first place ". . . pursuant to sections 2 through 5 of this 1973 amendatory act . . ."

            Although we see no doubt or ambiguity in the language of the session law as thus explained, we believe it appropriate to add that our construction of § 8,supra (RCW 84.36.810) is also supported (in the event of any ambiguity) by the rule of statutory construction that:

            ". . . where a statute is open to two constructions, one of which will render it constitutional and the other unconstitutional or open to grave doubt in this respect, the former construction and not the latter is to be adopted. . . ."  Soundview Pulp Co. v. Taylor, 21 Wn.2d 261, 268, 150 P.2d 839 (1944).

            If construed so as to authorize the collection of property taxes for periods prior to the effective date of the 1973 act, § 8, supra, (RCW 84.36.810) could be open to a possible constitutional challenge on the ground that it, in practical operation and effect, imposes a retrospective tax amounting to deprivation of property without due process of law in violation of the United States Constitution, Amendment V, and  [[Orig. Op. Page 6]] Wash. Const., Article I, § 3.  See, Nichols v. Coolidge, 274 U.S. 531, 71 L. ed. [[L.Ed.]]1184, 47 S.Ct. 710 (1927);Untermyer v. Anderson, 276 U.S. 440, 72 L. ed [[L.Ed.]]645, 48 S.Ct. 353 (1928); Blodgett v. Holden, 275 U.S. 142, 72 L. ed. [[L.Ed.]]206, 48 S.Ct. 105 (1928).  Those cases involved the imposition of a federal gift tax upon gifts of property which had been consummated prior to the effective date of the statute imposing the tax.  The court found that this taxing scheme was so arbitrary and capricious as to amount to a deprivation of property without due process of law because of the fact that the tax could not reasonably have been anticipated by the taxpayer at the time of making of the gift which thereafter became the taxable event.  Thus, where the legislature imposes a tax upon an event which has already taken place prior to the effective date of the taxing law there may be some circumstances where such an act would be held unconstitutional as violative of due process.

            Not all such taxing schemes, however, are violative of due process.  See, e.g.,Welch v. Henry, 305 U.S. 134, 83 L. ed. [[L.Ed.]]87, 59 S.Ct. 121 (1938) [state income tax imposed upon dividends received in the year prior to the enactment of the taxing statute]; Seattle v. Kelleher, 195 U.S. 351, 49 L. ed. [[L.Ed.]]232, 25 S.Ct. 44 (1904) [special assessment made for improvements constructed prior to the effective date of the imposing ordinance]; Imperial Drum & Bugle Corps v. Seattle, 14 Wn.App. 845,    P.2d     (Div. II, Ct.App., 1976) [municipal gambling tax applied to gambling revenues received prior to the effective date of the taxing ordinance].

            In those cases in which a retrospective tax has been struck down as violative of due process the disqualifying feature has been the imposition of a tax upon the voluntary act of a taxpayer who in good faith and without the slightest anticipation of a tax consequence performed the act later taxed.  Nichols v. Coolidge,supra; Blodgett v. Holden, supra.  Arguably, in the case of § 8, supra (RCW 84.36.810), that feature is lacking because the taxpayer, at the time of performing the voluntary act upon which the tax is imposed (i.e., the cessation of use of the property for exempt purposes) could reasonably be inferred to have anticipated the tax consequences and have avoided those consequences simply by continuing to devote the property to its exempt use.  On the other hand, it also seems reasonable to infer that a property owner granted exemption prior to the effective date of § 8, supra (RCW 84.36.810), would not, at the time the original exemption was granted, have anticipated the tax consequences imposed by that 1973 law upon a discontinuance of the exempt use.  To that extent, a construction of § 8, supra (RCW 84.36.810), which would impose such tax consequences upon  [[Orig. Op. Page 7]] property previously obtaining exempt status could very well be regarded as violative of due process.

            For the foregoing reasons, therefore, we answer your question in the negative.  It is our opinion that § 8, chapter 40, Laws of 1973, 2nd Ex. Sess. (RCW 84.36.810), does not authorize a county to collect property taxes upon the cessation of an exempt use covered by RCW 84.36.030, 84.36.040, 84.36.050 and 84.36.060, for years prior to the effective date of said 1973 enactment where the exemption in question was in effect during those prior years.3/

            We trust the foregoing will be of some assistance to you.

Very truly yours,


SLADE GORTON
Attorney General


PHILIP H. AUSTIN
Deputy Attorney General


MATTHEW J. COYLE
Assistant Attorney General

                                                        ***   FOOTNOTES   ***

1/Codifying § 23, chapter 40, Laws of 1973, 2nd Ex. Sess., and providing that:

            "This 1973 amendatory act is necessary for the immediate preservation of the public peace, health and safety, the support of the state government and its existing public institutions, shall take effect immediately and shall be effective for assessment in 1973 for taxes due and payable in 1974."

2/The code reviser is empowered by RCW 1.08.015 to:

            "(1) Codify for consolidation into the Revised Code of Washington all laws of a general and permanent nature heretofore or hereafter enacted by the legislature, and assign permanent numbers as provided by law to all new titles, chapters, and sections so added to the revised code.

            "(2) Edit and revise such laws for such consolidation, to the extent deemed necessary or desirable by the reviser and without changing the meaning of any such law, in the following respects only:

            "(a) Make capitalization uniform with that followed generally in the revised code.

            "(b) Make chapter or section division and subdivision designations uniform with that followed in the revised code.

            "(c) Substitute for the term 'this act,' where necessary, the term 'section,' 'part,' 'code,' 'chapter,' or 'title,' or reference to specific section or chapter numbers, as the case may require.

            "(d)Substitute for reference to a section of an 'act,' the proper code section number reference." (Emphasis supplied.)

3/Note, however, that the status of property as exempt or nonexempt must be determined anew for each assessment year.  See, RCW 84.36.805, et seq.  Thus, in view of RCW 84.36.905,supra, any exemptions granted from 1973 or subsequent tax levies must be deemed to have been granted pursuant to the new law, even though the property in question was also exempt under prior law, and thus subject to RCW 84.36.810,supra, upon any later cessation of exempt use.

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