A 10-acre parcel in Yakima County, Washington is currently enrolled in the Open Space Taxation Act program under RCW 84.34, which taxes the land at its current use value rather than its highest and best use value. The owner decides to convert the land to a residential subdivision. Under Washington law, which of the following most accurately describes the tax consequence of removing the land from the current use program?
Correct Answer
B) The owner will owe additional taxes equal to the difference between taxes paid and taxes that would have been owed at full market value for up to seven years, plus interest
Under RCW 84.34.108, when land is removed from current use classification (whether voluntarily or through a change in use), the owner is subject to 'compensating tax.' This compensating tax equals the difference between the taxes actually paid under current use assessment and the taxes that would have been owed at full market value assessment for each of the prior years the land was enrolled, up to a maximum of seven years, plus interest at 8% per year. This clawback provision is designed to recapture the tax benefit received during the enrollment period.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
Highest and best use is an appraisal concept that identifies the most profitable, legally permitted, physically possible, and financially feasible use of a property. It is the foundation of all property valuation.
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- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
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