Owners of eleven historic vessels saved an estimated $21,000 in
2023. It is unclear if the preference met the inferred goal of keeping historic vessels
in Washington.
November 2023
Executive Summary
Preference provides a property tax exemption for ships and vessels listed on the
state or national historic register
The preference exempts ships or vessels listed on the Washington Heritage Register or
the National Register of Historic Places from paying commercial vessel tax, a type of
personal property tax.
The preference was enacted in 1986 and does not have an expiration date.
JLARC staff identified 11 vessels listed on the state or national registers that
benefit from the preference, located in five cities throughout the Puget Sound.
Stakeholders note that historic vessels in Washington provide educational, tourism,
and economic benefits to the state and its citizens.
Preference has no stated objective. Inferred intent is to keep vessels in
Washington.
This preference was enacted prior to the requirement for the Legislature to state
public policy objectives for new tax preferences. JLARC staff infer the preference is
intended to encourage owners of historic ships and vessels to keep their vessels in
Washington.
Objective (inferred)
Results
To encourage owners of historic ships and vessels to keep their vessels in
Washington.
Unclear. Eleven beneficiary vessels are currently located in
Washington. One owner indicated it plans to move its vessel out of state in
2023. It is unclear if the preference created an incentive for other owners to
keep their vessels in WA.
Recommendations
Legislative Auditor's Recommendation: Clarify
The Legislature should clarify the preference's public policy objective
and identify metrics to measure if it has been achieved.
The Department of Archaeology & Historic Preservation (DAHP) concurs with this recommendation. You can find more information in Recommendations.
Commissioners' Recommendation
Endorse the Legislative Auditor's recommendation with comment. The recent designation
of the coastline of Washington State as a Maritime Washington National Heritage Area
provides new opportunities for utilization of this tax preference.
Committee Action to Distribute Report
On November 29, 2023 this report was approved for distribution by the Joint
Legislative Audit and Review Committee.
Action to distribute this report does not imply the Committee agrees or disagrees
with the Legislative Auditor recommendations.
23-05 Final Report: Historic Ships and Vessels
November 2023
REVIEW Details
1. Eleven vessels currently use the preference
Eleven historic vessels are currently exempt from property tax
under the preference
Commercially operated vessels Vessels
used exclusively for commercial fishing or primarily for commercial purposes, such
as charter and time-share boats, tugs, and barges. are subject to
the state personal property tax. In 2021, the Department of Revenue reported 1,594
commercial vessels in Washington.
This preference exempts ships or vessels (collectively referred to as "vessels" in
this report) that are listed on the state or national historic register from the
commercial vessel tax, a type of personal property tax.
The Washington Heritage Register is maintained by the Department of Archaeology
and Historic Preservation and is the official list of districts, sites, buildings,
structures, and objects that are significant in local or state history,
architecture, archaeology, engineering, or culture.
The National Register of Historic Places is the official federal list of
districts, sites, buildings, structures, and objects deemed worthy of preservation
for their historical significance or "great artistic value."
Commercially operated vessels listed on the registers are automatically provided with
the exemption. Vessel owners do not need to take action to claim it.
The preference was enacted in 1986 without a stated public policy objective. The
enacting bill's fiscal note identified 14 qualifying historic commercial vessels in
1986. JLARC staff infer the preference is intended to encourage owners of historic
vessels to keep those vessels in Washington.
Eleven vessels owned by nonprofits and corporations currently qualify for the
preference
JLARC staff identified 11 vessels in Washington that qualify for and currently use
the preference. Nine of the 11 vessels are owned by 501(c)(3) nonprofit organizations
and two are owned by for-profit corporations. None of the vessels are owned by
individuals.
Beneficiary vessels are located at marinas in Bellingham, Friday Harbor, Olympia,
Port Townsend, and Seattle.
Exhibit 1.1: Eleven beneficiary vessels are located throughout Puget Sound
Image
Vessel name
Description
Location
Link to website
Arthur Foss
Tugboat exhibited at the Historic Ships' Wharf in Seattle.
Source: JLARC staff analysis of Department of Archaeology and Historic Preservation
and Department of Revenue data.
Unclear whether preference encourages owners to keep their vessels in
Washington
This preference began before the legislative requirement to state a public policy
objective for new tax preferences. JLARC staff infer the preference is intended to
encourage owners of historic ships and vessels to keep their vessels in Washington.
It is unclear whether the preference has met its inferred goal. Several beneficiaries
qualify for other property tax exemptions in addition to this one. Also, some vessels
on the historic registers are no longer located in Washington.
One beneficiary reported knowing about the preference
JLARC staff surveyed the owners of beneficiary vessels to determine if they were
aware of the preference and how they learned about it. Of the five that responded:
One did not know about the preference.
One said their nonprofit knew about the historic vessel preference through a
nonprofit board member.
Three knew about a different property tax exemption for nonprofit museum
collections but did not know about this preference.
Five of the 11 beneficiary vessels are part of a nonprofit museum collection, making
them eligible for a separate property tax exemption for nonprofit museums and their
collections (RCW 84.36.060(1)(a)). Without the historic vessels preference, owners of
these vessels would still not pay property tax.
Some commercial vessels on historic registers do not use the preference
The Department of Archaeology and Historic Preservation provided JLARC staff with a
list of 26 historic vessels listed on the state or national registers. JLARC staff
determined that 11 of these vessels currently benefit from the preference. The
remaining 15 have been deconstructed, relocated, or are otherwise ineligible for the
preference:
Nine vessels on the registers have relocated outside the state or have been
deconstructed, wrecked, or abandoned.
One vessel is not used for commercial purposes and is not subject to the
commercial vessel tax.
Four vessels owned by government entities are not subject to property tax.
One vessel, the Todenskjold, is currently applying for listing on the national
register and is not yet a beneficiary of the preference.
23-05 Final Report: Historic Ships and Vessels
November 2023
REVIEW Details
2. Beneficiaries estimated to save $21,000 in 2023
Beneficiaries will save an estimated $21,000 in 2023. Savings are
expected to decrease by 45% in future years.
Beneficiaries are estimated to save $21,000 in property tax in 2023
The Department of Revenue (DOR) does not maintain values for beneficiary vessels
because historic vessel owners are not required to register with DOR to claim this
preference. There is no standardized valuation method for determining the value of
historic vessels.
To determine the beneficiary savings, JLARC staff contacted beneficiary vessel owners
to obtain the most recent insurance value estimates for their vessels. Owners provided
values for six of the 11 vessels. For the five remaining vessels, JLARC staff used the
estimated vessel values from DOR's 2020 Tax Exemption Study. Those values were based
on DOR staff's 2008 conversations with a founder of the Center for Wooden Boats in
Seattle.
JLARC staff estimate that the 11 beneficiary vessels have a combined value of $9.6
million. The state property tax levy rate for vessels in 2023 is $2.15 per $1,000 of
vessel value. The estimated beneficiary savings for calendar year 2023 is $21,000. For
comparison, DOR lists 1,594 commercial vessels statewide, with an estimated total
value of $406 million and a total property tax due of $1 million in 2022.
Estimated beneficiary savings are expected to decline in future years
JLARC staff estimate that beneficiary savings will decline in 2024 onward due to
changes to tax rates and the departure of one beneficiary vessel:
DOR forecasts that the state property tax levy rate will decrease in the future.
The M/V Western Flyer, which accounts for $8,600 of the 2023 estimated beneficiary
savings, is scheduled to relocate to California after restoration work is completed
in Washington. JLARC staff estimate this will result in a 45% decrease in estimated
beneficiary savings beginning in 2025.
Exhibit 2.1: Future beneficiary savings are estimated to decline due to expected
property tax rate decreases and the departure of one vessel
Biennium
For taxes due in
Estimated vessel values
Estimated beneficiary savings
2021-23
7/1/21 - 6/30/23
2022
$9,556,000
$24,000
2023
$9,556,000
$21,000
2023-2025
7/1/23 - 6/30/25
2024
$9,556,000
$20,000
2025
$5,556,000
$11,000
2025-27
7/1/25 - 6/30/27
2026
$5,556,000
$11,000
2027
$5,556,000
$11,000
2025-27 biennium
$22,000
Source: JLARC staff analysis of insurance value estimates provided by vessel owners
and estimated vessel values used in Department of Revenue tax exemption studies.
Future estimated state property tax levy rates provided by the Department of Revenue.
Based on Washington's property tax system, eliminating the preference would result in
a shift of tax burden between property owners, but would not increase revenue for the
state.
23-05 Final Report: Historic Ships and Vessels
November 2023
Review Details
3. Historic vessels benefit the state
Historic vessels in Washington provide educational, tourism, and
economic benefits to the state and its citizens
Stakeholders note that Washington gains educational, tourism, and economic benefits
from the beneficiary vessels.
Beneficiary vessels provide opportunities to learn about Washington's maritime
history and opportunities to view, tour, or sail on a historic vessel. Five
beneficiary vessels are part of museum exhibits that highlight the vessels'
historical significance at the Historic Ships' Wharf in Seattle.
Some beneficiary vessels can be viewed or toured at community or regional tourism
events such as Olympia's Harbor Days or Port Townsend's Wooden Boat Festival.
Beneficiary vessels provide ongoing work for Washington's shipbuilding and repair
industry. One beneficiary vessel has been undergoing repairs and renovations at
Washington facilities since June 2015. Stakeholders and vessel owners note these
vessels require continual upkeep and maintenance.
Congress designated Washington's saltwater shoreline as the Maritime Washington
National Heritage Area in 2019. Some of the beneficiary vessels are identified in
the feasibility study that preceded creation of the heritage area.
Nonprofit vessel owners told JLARC staff their organizations provide educational
and maritime experiences to school groups, youths from historically disadvantaged
communities, and other groups that may not have frequent access to maritime
experiences.
Few other state and federal incentives are available to preserve historic
vessels
Vessel owners told JLARC staff that maintenance of historic vessels is ongoing and
costly. Department of Archaeology and Historic Preservation staff noted that while
they are not aware of any other incentives specifically for historic vessels, a small
number of opportunities exist to encourage preservation of historic vessels:
The National Park Service administers Save America's Treasures grants and Maritime
Heritage grants.
The Washington State Historical Society administers State Heritage Capital
Projects Fund grants.
Two of the five cities in which vessels are located have a higher percentage of
people identifying as Asian, Black/African American, or Hispanic/Latino than the
statewide average
Nine of the 11 beneficiary vessels are owned by 501(c)(3) nonprofit organizations
that are classified by the Internal Revenue Service as historic museums or
organizations, educational organizations, or marine science-affiliated
organizations. Two beneficiary vessels are owned by for-profit corporations. None
are owned by individuals.
Beneficiary vessels are located in five communities along Puget Sound. Using U.S.
Census data to determine the racial and ethnic composition of these communities,
JLARC staff found that:
Seattle, home to five vessels, has a greater concentration of people identifying
as Asian or Black/African American than the statewide average.
Friday Harbor, with one beneficiary vessel, has a greater concentration of
people identifying as Hispanic/Latino than the statewide average.
All five cities have a higher percentage of the population identifying as White
than the statewide average.
Exhibit 3.1: JLARC staff analyzed race and ethnicity detail for the five cities
where beneficiary vessels are located
Source: JLARC staff analysis of 2020 U.S. Census Bureau race and ethnicity data
for five cities and Washington State.
Race and ethnicity data about vessel owners is limited
JLARC staff reached out to the ten owners of beneficiary vessels (eight nonprofit
501(c)(3) organizations and two corporations) to ask about the race and ethnicity of
their boards and their whether their missions focus on specific racial and ethnic
communities.
Five nonprofit organizations representing six of the 11 vessels responded. Four
reported that all of their board members identify as White.
In response to questions about the nonprofits' missions:
Three noted their missions are focused on preservation and history, and that
they reach out across ethnic, age, and gender lines to appeal to all.
Another noted their focus is on sailing activities for local public school
students.
One stated they focus on providing experiential education to underserved youth,
noting that most of the students served to date are from majority Hispanic/Latino
school districts.
23-05 Final Report: Historic Ships and Vessels
November 2023
Review Details
4. Applicable statutes
RCW 84.36.080(2) and RCW 84.36.060(1)(a)
Certain ships and vessels.
RCW 84.36.080(2)
All ships and vessels which are exempt from excise tax under RCW 82.48.020(2) and
excepted from the registration requirements of RCW 82.02.570(10) shall be and are
hereby made exempt from all ad valorem taxes, except taxes levied for any state
purpose.
All ships and vessels listed in the state or federal register of historical places
are exempt from all ad valorem taxes.
[ 2011 c 171 § 126; 2000 c 103 § 24; 1998 c 335 § 5; 1998 c 229 § 1; 1983 2nd ex.s. c
3 § 51; 1983 c 7 § 23; 1961 c 15 § 84.36.080. Prior: 1945 c 82 § 1; 1931 c 81 § 1;
Rem. Supp. 1945 § 11111-2.]
Art, scientific and historical collections and property used to maintain, etc., such
collection - Property of associations engaged in production and performance of
musical, dance, artistic, etc., works - Fire engines, implements, and buildings of
cities, towns, or fire companies - Humane societies.
RCW 84.36.060(1)(a)
The following property is exempt from taxation:
All art, scientific, or historical
collections of associations maintaining and exhibiting such collections for
the benefit of the general public and not for profit, together with all real
and personal property of such associations used exclusively for the
safekeeping, maintaining and exhibiting of such collections;
All the real and personal property owned by or leased to associations engaged
in the production and performance of musical, dance, artistic, dramatic, or
literary works for the benefit of the general public and not for profit, which
real and personal property is used exclusively for this production or
performance;
All fire engines and other implements used for the extinguishment of fire, and
the buildings used exclusively for their safekeeping, and for meetings of fire
companies, as long as the property belongs to any city or town or to a fire
company; and
All property owned by humane societies in this state in actual use by the
societies.
To receive an exemption under subsection (1)(a) or (b) of this section:
An organization must be organized and operated exclusively for artistic,
scientific, historical, literary, musical, dance, dramatic, or educational
purposes and receive a substantial part of its support (exclusive of income
received in the exercise or performance by such organization of its purpose or
function) from the United States or any state or any political subdivision
thereof or from direct or indirect contributions from the general public.
If the property is not currently being used for an exempt purpose but will be
used for an exempt purpose within a reasonable period of time, the nonprofit
organization, association, or corporation claiming the exemption must submit
proof that a reasonably specific and active program is being carried out to
construct, remodel, or otherwise enable the property to be used for an exempt
purpose. The property does not qualify for an exemption during this interim
period if the property is used by, loaned to, or rented to a for-profit
organization or business enterprise. Proof of a specific and active program to
build or remodel the property so it may be used for an exempt purpose may
include, but is not limited to:
Affirmative action by the board of directors, trustees, or governing body
of the nonprofit organization, association, or corporation toward an active
program of construction or remodeling;
Itemized reasons for the proposed construction or remodeling;
Clearly established plans for financing the construction or remodeling; or
Building permits.
The use of property exempt under subsection (1)(a) or (b) of this section by
entities not eligible for a property tax exemption under this chapter, except as
provided in RCW 84.36.805, nullifies the exemption otherwise available for the
property for the assessment year.
[2014 c 99 § 10; 2009 c 58 § 1; 2003 c 121 § 1; 1995 c 306 § 1; 1981 c 141 § 1; 1973
2nd ex.s. c 40 § 5; 1961 c 15 § 84.36.060. Prior: RCW (10/5/2022 1:19 PM) [ 1 ] 1955 c
196 § 8; prior: 1939 c 206 § 8, part; 1933 ex.s. c 19 § 1, part; 1933 c 115 § 1, part;
1929 c 126 § 1, part; 1925 ex.s. c 130 § 7, part; 1915 c 131 § 1, part; 1903 c 178 §
1, part; 1901 c 176 § 1, part; 1899 c 141 § 2, part; 1897 c 71 §§ 1, 5, part; 1895 c
176 § 2, part; 1893 c 124 §§ 1, 5, part; 1891 c 140 §§ 1, 5, part; 1890 p 532 §§ 1, 5,
part; 1886 p 47 § 1, part; Code 1881 § 2829, part; 1871 p 37 § 4, part; 1869 p 176 §
4, part; 1867 p 61 § 2, part; 1854 p 331 § 2, part; RRS § 11111, part. Formerly RCW
84.40.010.]
Findings—Intent—Tax preference performance statement—Does not apply—2014 c 99:
See notes following RCW 84.36.020.
Applicability—1995 c 306: "The [This] act is effective for taxes levied for
collection in 1995 and thereafter." [1995 c 306 § 2.]
Effective date—1995 c 306: "This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the state
government and its existing public institutions, and shall take effect immediately
[May 9, 1995]." [1995 c 306 § 3.]
Applicability, construction—1981 c 141: "This act shall apply to taxes payable
in 1982 and in subsequent years and shall be strictly construed." [1981 c 141 §
6.]
23-05 Final Report: Historic Ships and Vessels
November 2023
Recommendations & Responses
Legislative Auditor's Recommendation
Legislative Auditor's Recommendation: Clarify
The Legislature should clarify the preference's public policy objective and
identify metrics to measure if the objective has been achieved.
Depending on the objective, metrics might include maintaining the number of historic
vessels in state as of a certain date, increasing the number of historic vessels on
national or state registers, or increasing educational opportunities.
Legislation Required: Yes.
Fiscal Impact: Depends on legislation.
Agency Response: The Department of Archaeology & Historic Preservation (DAHP) concurs with this recommendation.
23-05 Final Report: Historic Ships and Vessels
November 2023
Recommendations & Responses
Letter from Commission Chair
23-05 Final Report: Historic Ships and Vessels
November 2023
Recommendations & Responses
Commissioners' Recommendation
The Commission endorses the Legislative Auditor's recommendation with comment. The
recent designation of the coastline of Washington State as a Maritime Washington
National Heritage Area provides new opportunities for utilization of this tax
preference.
23-05 Final Report: Historic Ships and Vessels
November 2023
Recommendations & Responses
DOR & OFM Response
23-05 Final Report: Historic Ships and Vessels
November 2023
Recommendations & Responses
DAHP Response
23-05 Final Report: Historic Ships and Vessels
November 2023
More about this review
Study questions
Click image to view PDF of proposed study questions