Clearing up confusion on the Affordable Housing Tax Credit

After the Legislature stepped up to meet the demands of the housing crisis, Pierce County and Tacoma, along with local governments from across the state, are implementing Substitute House Bill 1406. The new law allows a small portion of the state’s share of the sales tax to be redirected to cities and counties for affordable housing.

Having worked on the bill’s passage on behalf of counties, I know it was a heavy lift. It’s an attempt to reverse decades of divestment in housing from the federal and state government, exacerbated by an explosion of growth, displacing a lot of low-income households. Unfortunately, the bill also has some confusing language that has made implementation less than smooth.

This week, shortly after our Council passed the bill, Tacoma rescinded theirs and heard a new one. Here’s The News Tribune’s reporting.

Affordable housing kerfuffle between Tacoma, Pierce County appears to be resolved

At issue is an interpretation of language that I discovered just before Tacoma’s Council was scheduled to vote on their bill two weeks ago.

“If a county imposes a tax authorized under this section after a city located in that county has imposed the tax, the taxable retail sales within the city in state fiscal year 2019 must be subtracted from the taxable retail sales within the county for the calculation of the maximum amount…”

This isn’t about being able to collect the tax credit in Tacoma. We still can only collect outside their jurisdiction or other cities who may pass a bill (we haven’t heard from anyone else that they plan to). But having a larger “maximum amount” would allow us to grow into the high cap.

If we subtract Tacoma from our cap, as outlined above, our estimated annual collections would be approximately $1.8 million or $36.1 million over the next 20 years. While it’s difficult to estimate growth further out than a couple years, if historic patterns hold, we estimate the higher cap would allow an additional $10–14 million.

The Department of Revenue has now confirmed my interpretation and will be issuing guidance to that effect.