In 2022, the Legislature passed Senate Bill 5755, allowing eligible cities to establish a limited Sales and Use Tax Incentive to encourage redevelopment of underdeveloped lands, particularly parking lots. The incentive is meant to stimulate the redevelopment of vacant or underdeveloped property, through a 10-year limited sales-and-use-tax deferral program, thereby helping property owners or developers to revitalize properties by building affordable housing.
Spokane is the first city in Washington to adopt code enabling use of the Sales and Use Tax Incentive (aka Parking 2 People). This incentive helps the City to realize the goals of the Comprehensive Plan more fully, while also encouraging construction of more affordable housing and providing a benefit to the construction industry.
To encourage construction of affordable rate housing by incentivizing the redevelopment of underutilized parking lots in the City, the sales and use tax deferral program allows an applicant to defer the standard 9% sales and use tax on all applicable purchases related to their project. Upon approval, the Department of Revenue will issue a tax exemption certificate to the property owner and/or taxpayer. Spokane’s limited Sales and Use Tax Incentive is outlined in Chapter 08.07D SMC.
Property owners can expect to save approximately $900 for every $10,000 spent on applicable taxed goods and services. Examples of applicable items include:
To receive approval, a project must set aside at least 50% of the units as affordable rental housing or affordable homeownership housing to very low, low, and moderate-income households. At least 50% of the investment project set aside for multifamily housing units will be rented at a price at or below fair market rent for Spokane county or sold at a price at or below Spokane county median price. For further details, see Section 08.07D.020 SMC.
One year from the issuance of the certificate of occupancy, and each year for ten years, the property owner needs to complete an annual tax performance report certifying that the property is compliant with its contract, as well as an annual Tax Performance Report to be submitted to the Washington State Department of Revenue.
The city must notify the Department of Revenue if compliance with the program is not maintained. All deferred sales and use taxes would then be immediately due and payable. The DOR would assess interest at the rate provided for delinquent taxes and penalties retroactively to the date of deferral, per RCW 82.92.110.