HB 2009
In CommitteeHouse
Controlling interest/REET
Clarifying the calculation of the real estate excise tax for the transfer of a controlling interest in an entity holding real property.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill clarifies how the real estate excise tax is calculated when someone sells a controlling interest (more than 50% ownership) in a company that owns real property in Washington. Instead of taxing only the price paid for the ownership stake, the tax will now be based on the full market value of the underlying property, proportionate to the percentage of ownership transferred.
- Clarifies that when a company owning Washington real property transfers more than 50% ownership (a 'controlling interest'), the real estate excise tax is based on the property’s full market value multiplied by the percentage of ownership sold.
- Specifies that if the property’s market value can’t be determined, the tax will use the property’s current assessed value from the county tax rolls.
- Reaffirms that the 'selling price' for tax purposes includes all consideration paid (e.g., cash, assumed debt), but excludes certain government liens and relocation assistance.
- Replaces previous ambiguity in how controlling-interest transfers were taxed by making the property’s value — not just the transaction price — the tax base.
Who is affected
- Real estate developers and investors — People or businesses buying or selling controlling interests (more than 50% ownership) in companies that own real estate in Washington — this bill changes how the real estate excise tax is calculated for such transactions.
- County government staff — County auditors and treasurers who collect and process real estate excise tax payments; they must apply the new calculation method starting August 1, 2025.
- General public property owners — Homeowners and small property owners who may indirectly be affected if developers shift strategies due to higher or more transparent taxes on certain property transfers.
Pro/Con Analysis
Potential Benefits (5)
Increases state and local tax revenue by ensuring that controlling-interest transfers are taxed based on the full market value of the underlying property, closing a significant loophole that allowed underreporting of transaction value—this revenue can support public services that benefit everyday Washingtonians.
FinancialPeopleRef: RCW 82.45.030(2)Improves fairness and transparency in real estate taxation by aligning tax liability with economic reality—reducing incentives for artificial transaction structuring helps prevent market distortions and speculative behavior that can destabilize local housing markets.
Public SafetyPeopleRef: RCW 82.45.030(2)Provides clarity and consistency for county assessors and treasurers by codifying a clear hierarchy for valuation (market value first, then assessed value), reducing disputes and litigation over tax assessments in controlling-interest transfers.
Local GovernmentPeopleRef: RCW 82.45.030(4)Levels the playing field for small and mid-sized real estate operators who cannot afford the legal and accounting resources to structure tax-advantaged transfers—reducing competitive distortions caused by preferential tax treatment for sophisticated actors.
Business & EmploymentPeopleRef: RCW 82.45.030(2)May reduce speculative real estate investment in high-value properties by increasing transaction costs for large-scale transfers—this could slightly improve housing affordability over time by discouraging short-term flipping of apartment buildings and other multi-unit housing.
HousingPeopleRef: RCW 82.45.030(2)
Potential Concerns (5)
Increases tax burden on real estate investors and developers who transfer controlling interests (e.g., in apartment buildings, commercial properties, or land parcels), especially when the transaction price is deliberately structured below the property’s market value—this eliminates a common tax-avoidance strategy and raises compliance costs for sophisticated real estate transactions.
FinancialPeopleRef: RCW 82.45.030(2)May reduce liquidity in commercial real estate markets by increasing the effective tax on large-scale property transfers, potentially dampening investment in new development or rehabilitation projects—particularly impactful for mid-sized real estate firms that rely on portfolio-level transactions to raise capital.
Business & EmploymentLean peopleRef: RCW 82.45.030(2)Could indirectly raise housing costs if developers pass increased tax compliance costs to buyers or renters, especially in tight markets where developers operate on thin margins—though this effect is likely modest and secondary to broader supply constraints.
HousingLean peopleRef: RCW 82.45.030(4)Increases administrative complexity for county treasurers and auditors, who must now determine the full market value of underlying property in controlling-interest transfers—though the use of county-assessed values as a fallback mitigates this burden.
Local GovernmentRef: RCW 82.45.030(3)Reduces opportunities for high-net-worth individuals and institutional investors to defer or reduce real estate excise tax by structuring sales as stock or membership interest transfers rather than direct property sales—this closes a loophole that disproportionately benefited wealthy actors and large real estate funds.
FinancialPeopleRef: RCW 82.45.030(2)
Who Is Most Affected
Real estate investment firms and private equity funds that buy/sell apartment complexes, office buildings, or land parcels often structure controlling-interest transfers to minimize tax liability. This bill eliminates that strategy, increasing their tax burden and potentially reducing returns on large-scale real estate investments.
County staff must now verify market values or rely on assessed values for controlling-interest transfers, increasing workload and requiring training on the new methodology—though the use of existing county assessment rolls reduces the burden.
Homeowners and small landlords are unlikely to be directly affected, but may benefit indirectly from increased public revenue and reduced speculative pressure on multi-unit housing markets—though any impact on housing supply or development costs is likely small.
Mortgage lenders and title companies may face slightly higher due diligence requirements for transactions involving controlling-interest transfers, but the bill’s clarity reduces long-term legal uncertainty.
Local governments (cities, counties, school districts) benefit from increased real estate excise tax revenue, which can support public services like schools, roads, and emergency services—especially valuable in high-appreciation markets where controlling-interest transfers are common.