TAXATION ‑- REAL PROPERTY ‑- APPLICATION OF TAX EXEMPTION PROVIDED UNDER CHAPTER 288, LAWS OF 1971, 1ST EX. SESS., TO HEIRS OR GRANTEES OF A TAX EXEMPT PROPERTY OWNER

TAXATION ‑- REAL PROPERTY ‑- APPLICATION OF TAX EXEMPTION PROVIDED UNDER CHAPTER 288, LAWS OF 1971, 1ST EX. SESS., TO HEIRS OR GRANTEES OF A TAX EXEMPT PROPERTY OWNER

The tax exemption provided for under §§ 4 and 5 of chapter 288, Laws of 1971, 1st Ex. Sess., for certain elderly or retired persons is a personal exemption which does not follow the property to the benefit of the claimant's heirs or grantees; therefore, when a person who is qualified for this tax exemption timely files his claim for it but thereafter dies or sells the property upon which he resides prior to the time the taxes to which the exemption applies become payable, his heirs or other new owners of the subject property do not receive the benefit of the exemption.

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                                                                 October 6, 1971

Honorable Earl F. Angevine
Prosecuting Attorney
Skagit County Court House Annex
Mount Vernon, Washington 98273

                                                                                                                 Cite as:  AGO 1971 No. 31

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office with respect to the real property tax exemption granted to certain elderly or retired persons under §§ 4 and 5, chapter 288, Laws of 1971, 1st Ex. Sess.  The question to be considered may be stated as follows:

            When a person who is qualified for the real property tax exemption under the provisions of §§ 4 and 5, chapter 288, Laws of 1971, 1st Ex. Sess., timely files his claim for it but thereafter dies or sells the property upon which he resides prior to the time the taxes to which the exemption applies become payable, do his heirs or other new owners of the subject property receive the benefit of the exemption?

            We answer your question in the negative.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            Sections 4 and 5, chapter 288, Laws of 1971, 1st Ex. Sess., add two new sections to chapter 84.36 RCW.  In substance, beginning with taxes payable in 1972, this legislation provides for an exemption from all or a portion of the excess levies imposed for a given year upon real estate used as their residence to those persons who meet each of the specific requirements set forth therein as follows:

            "A person shall be exempt from any legal obligation to pay a percentage of the amount of real property taxes due and payable in 1972 and subsequent years as the result of the levy of additional taxes in excess of regular property tax levies as that term is defined in section 13 of this 1971 amendatory act, as now or hereafter amended, and/or from such regular property tax levies in accordance with the following conditions:

            "(1) The property taxes must have been imposed upon a residence which has been regularly occupied by the person claiming the exemption during the two calendar years preceding the year in which the exemption claim is filed; or the property taxes must have been imposed upon a residence which has been regularly occupied by the person claiming the exemption during the preceding calendar year and the person claiming the exemption must also have been a resident of the state of Washington for the last three calendar years preceding the year in which the claim is filed.

            "(2) The person claiming the exemption must have owned, at the time of filing, in fee, or by contract purchase, the residence on which the property taxes have been imposed.  For purposes of this subsection, a residence owned by a marital community shall be deemed to be owned by each spouse.

            "(3) The person claiming the exemption  [[Orig. Op. Page 3]] must have been sixty-two years of age or older on January 1st of the year in which the exemption claim is filed, or must have been, at the time of filing, retired from regular gainful employment by reason of physical disability.

            "(4) No person who, during the preceding calendar year, has regularly occupied the residence on which the taxes have been imposed shall have received during the preceding calendar year any earnings of the type and amount which would cause any deduction from social security benefits for a recipient of such benefits pursuant to 42 U.S.C. 403 as in effect on the effective date of this 1971 amendatory act:Provided, That the earnings of any occupant living with and paying rent to the person claiming exemption shall not be included in the determination of the eligibility of such person for the exemption.

            "(5) The amount that the person shall be exempt from an obligation to pay shall be calculated, on the basis of the combined income, from all sources whatsoever, of the person claiming the exemption and his or her spouse for the preceding calendar year, in accordance with the following schedule:

                                    "Income                                    Percentage of Excess

                                      Range                                     Levies Exemption

                                    "$4,000 or less            One hundred percent

                                    "$4,001-$6,000          Fifty percent

            "Provided,however, That, solely with respect to a person within the income range of $4,000 or less, in the event that taxes due and payable include no excess levies or include excess levies less than $50.00, the amount of the exemption shall be $50.00 and the difference shall be attributed pro rata to regular property tax levies of each of the taxing districts.

            "This section shall be effective as to claims  [[Orig. Op. Page 4]] made in 1971 and subsequent years with respect to taxes due and payable in 1972 and subsequent years."  (Section 4, chapter 288, Laws of 1971, 1st Ex. Sess.)

            This enactment, like its predecessor, chapter 168, Laws of 1965, Ex. Sess. (RCW 84.36.125-84.36.127),1/ was passed by the legislature in exercise of the authority granted to it by Article VII, § 10 (Amendment 47), of our state constitution, which provides:

            "Notwithstanding the provisions of Article 7, section 1 (Amendment 14) and Article 7, section 2 (Amendment 17), the following tax exemption shall be allowed as to real property:

            "The legislature shall have the power, by appropriate legislation, to grant to retired property owners relief from the property tax on the real property occupied as a residence by those owners.  The legislature may place such restrictions and conditions upon the granting of such relief as it shall deem proper.  Such restrictions and conditions may include, but are not limited to, the limiting of the relief to those property owners below a specific level of income and those fulfilling certain minimum residential requirements."

            This enabling amendment clearly restricts exemption statutes of the type here involved solely to the relief of "retired property owners" from taxes on property occupied as a  [[Orig. Op. Page 5]] residence.  Thus, if we were to interpret § 4 of chapter 288, Laws of 1971, 1st Ex. Sess., as benefiting the heirs or grantees of the retired property owner, a serious constitutional question could arise.  Such a construction would be contrary to the rule that when a statute is open to two interpretations, one of which will render it constitutional and the other unconstitutional or open to grave doubt, the former construction should be adopted.  Soundview Pulp Co. v. Taylor, 21 Wn.2d 261, 150 P.2d 839 (1944); see, also,Linder v. United States, 268 U.S. 5, 69 L.Ed. 819, 45 S.Ct. 446 (1925).

           Beyond this, we note further that this new tax exemption statute, like its predecessor, does not purport to give an automatic exemption.  Accord, AGO 65-66 No. 122 [[to State Auditor on December 6, 1966]](copy enclosed) in which, discussing the timetable for first implementation of chapter 168, Laws of 1965, Ex. Sess., we said:

            "In considering your questions the first point to be noted is that the statute does not automatically grant an immediate exemption to those persons who may be qualified under its terms.  The exemption must be affirmatively claimed. . . .

            "Further complicating the matter is the fact that the statute provides for an 'exemption' which is in reality a personal deduction from the amount of taxes otherwise due.  As such, it is unique in the property tax field.  Existing statutes, all of which relate to exemption from assessment of specific types of property, have no application to such a personal deduction.  We are obliged, therefore, to seek the answer to your questions from the language of the act itself.

            "In doing so, we must follow a strict construction of the act.

            "'. . . In construing a statute of tax exemption which is susceptible of more than one meaning, it is the rule that the statute shall be strictly construed.  We said inSpokane County v. Spokane, 169 Wash. 355, 13 P. (2d) 1084:

             [[Orig. Op. Page 6]]

            "'"Taxation is the rule, and exemption is the exception.  Where there is an exception, the intention to make one should be expressed in unambiguous terms.  Columbia Irr. Dist. v. Benton County, 149 Wash. 234, 270 Pac. 813."'  Crown Zellerbach v. State, 45 Wn.2d 749, 757, 278 P.2d 305 (1954)."

            See, also, 51 Am.Jur., Taxation, § 533, wherein the following general proposition is stated:

            "An exemption from taxation is a personal privilege which cannot be assigned or transferred by the person to whom it is granted without the consent of the legislature, given in clear and unmistakable terms.  In the absence of any clear expression of intent to that effect in the legislative grant of an exemption or immunity from taxation, the exemption or immunity does not attach to or follow the property of the person in whose favor it is given, when the title passes to another."

            The personal nature of the exemption granted by this legislation is, in our opinion, clearly evidenced by the language of the act itself.  Repeated for ease of reference, § 4, chapter 288, Laws of 1971, 1st Ex. Sess.,supra, offers the exemption as follows:

            "A person shall be exempt from any legal obligation to pay a percentage of the amount of real property taxes due and payable in 1972 and subsequent years as the result of the levy of additional taxes in excess of regular property tax levies as that term is defined in section 13 of this 1971 amendatory act, as now or hereafter amended, and/or from such regular property tax levies in accordance with the following conditions: . . ."  (Emphasis supplied.)

            The conditions thereinafter set forth relate to specific requirements which the person claiming the exemption must have before he becomes entitled to it.  Subsection (5) of § 4 reads:

             [[Orig. Op. Page 7]]

            "(5)The amount that the person shall be exempt from an obligation to pay shall be calculated, on the basis of the combined income, from all sources whatsoever,of the person claiming the exemption and his or her spouse for the preceding calendar year, in accordance with the following schedule: . . ."  (Emphasis supplied.)

            Under subsection (2) of § 5, claims for exemption are to be made annually in the year of the levy.  The taxes become due and payable the following year and it is then that "the person" ‑ the one who has qualified and timely filed his claim ‑ is relieved from the "obligation to pay" all or a portion of any excess levy on his residence.  In other words, the act does not, by its terms, exempt or make any property immune from any part of an excess levy.  Rather, the property becomes subject to those levies but thereafter, at the time of payment, the qualified claimant is "exempt from an obligation to pay" such levies in whole or in part.2/

            Consistent with this construction of the current 1971 act is RCW 84.36.125 which codifies § 1 of the original 1965 exemption act.  Although the other provisions of this original act have been supplanted by later legislation as described above, this "legislative declaration of purpose" remains in effect, as follows:

            "Due to the tremendous rise in living costs during the past decade, including increased property taxes, the failure of federal old age and survivors insurance and similar types of pension systems to adequately reflect in their pension payments these costs, and because savings once deemed adequate for retirement living are now grossly inadequate, it is therefore deemed necessary that the legislature now grant people retired on fixed incomes some relief from real  [[Orig. Op. Page 8]] property taxes.  This relief must be granted to insure that thousands of persons now retired on fixed incomes can remain in possession of their homes, thus not becoming a burden on state or local government."

            A reading of the entire act, including this continuing expression of its purpose thus discloses beyond any doubt the intent of the legislature to grant a certain measure of tax relief only to those persons described therein ‑ for whose benefit alone it was enacted.  The exemption is intended to be a personal one, afforded only to those able to meet all of the statutory conditions and who file a claim therefor.  The act is not designed to be of benefit to the heirs or grantees of the person entitled to the exemption.  We conclude, therefore, that the tax exemption granted pursuant to §§ 4 and 5, chapter 288, Laws of 1971, 1st Ex. Sess., does not follow the property to the benefit of the claimant's heirs or grantees.