Governor signs Rep. Terry Nealey’s ‘tax fairness’ bills

Two bills authored by Rep. Terry Nealey, R-Dayton, designed to provide more fairness in Washington state’s tax system were signed into law today (Friday) by Gov. Jay Inslee.

House Bill 2539 will ensure surviving spouses or heirs are no longer charged a real estate excise tax on their inherited real property.

“Several county treasurers were misinterpreting the law and charging surviving spouses or other heirs a real estate excise tax when they inherited property from their deceased family. This tax is normally imposed on each sale and/or transfer of real property, but it was never intended to have the state profit from someone who’s lived in their home and their spouse dies, and they inherit the property,” said Nealey, ranking Republican on the House Finance Committee.

Nealey’s bill clarifies the inheritance exemption in the law. Under his measure, the heir (or heirs) may qualify for the exemption by submitting to the county treasurer a certified copy of the death certificate along with a lack of probate affidavit affirming he or she is the rightful heir to the property.

The bill takes effect June 9.

House Bill 2540 will reduce the penalty against those who make a mistake on their tax form when reporting tax preferences they have received from the state.

Nealey says the bill stemmed from an enormous penalty an Eastern Washington food processing firm received when it discovered a tax reporting error on a form it had submitted, and then reported the error to the state Department of Revenue (DOR).

“Five years ago, a bookkeeper was filling out a report for a local food processing firm receiving a tax preference. Unfortunately, she put a correct number on a wrong line of the form. The company discovered the inadvertent error and voluntarily reported it to the state. DOR’s response was to find the company more than $660,000 — for doing the honest and right thing,” said Nealey.

Current law allows DOR to fine 100 percent of the tax preference claimed. Nealey’s bill will reduce that penalty to 35 percent the first time a taxpayer is assessed the penalty. That penalty raises to 50 percent upon subsequent violations.

“People who do the right thing should not be thrown out of business because of a simple clerical error,” concluded Nealey.

House Bill 2540 takes effect July 1.

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Photo: Gov. Jay Inslee signs House Bills 2539 and 2540 into law. Both “tax fairness” bills were sponsored by Rep. Terry Nealey, R-Dayton.

Rep. Terry Nealey watches as his bills are signed by Gov. Inslee

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