Filed Washington State Court of Appeals Division Two
February 27, 2024
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II BUILDING INDUSTRY ASSOCIATION OF No. 57502-7-II WASHINGTON, a Washington non-profit trade association, and SOUNDBUILT HOMES, LLC., a Washington Limited Liability Company,
Appellants,
v. PUBLISHED OPINION
THE STATE OF WASHINGTON and THURSTON COUNTY AUDITOR, MARY HALL, in her official capacity,
Respondents.
CHE, J. ⎯ Building Industry Association of Washington and Soundbuilt Homes, LLC
(Soundbuilt) appeal the order granting summary judgment in favor of the State and the Thurston
County Auditor (collectively, the State).
To record documents with the county auditor in the course of their business, BIAW, or its
members, pay a document recording surcharge. Generally, the surcharge finances affordable
housing and related funds. BIAW filed a declaratory judgment action against the State arguing,
among other things, that the document recording surcharge violated article VII, sections 1 and 5
of the Washington Constitution. BIAW and the State moved for summary judgment. The trial
court found that BIAW asserted only facial challenges to the surcharge. The trial court granted
summary judgment for the State and denied summary judgment for BIAW. No. 57502-7-II
We hold that the document recording surcharge does not violate article VII, section 1 or 5
of the Washington Constitution, and that the trial court properly ruled that BIAW asserted only a
facial challenge. Consequently, we affirm the trial court’s grant of summary judgment in favor
of the State.
FACTS
Building Industry Association of Washington is a non-profit trade association supporting
Washington homebuilders. The majority of Building Industry Association of Washington
members are contractors that construct single-family homes. Soundbuilt is a Washington-based
limited liability company engaged in the home building industry. Building Industry Association
of Washington and Soundbuilt (collectively BIAW) alleged that they or their members paid the
document recording surcharge imposed under the following statutes in the regular course of their
business: former RCW 36.22.178 (2021), repealed by LAWS OF 2023, ch. 277, § 13; former
RCW 36.22.179 (2021), repealed by LAWS OF 2023, ch. 277, § 13; former RCW 36.22.1791
(2021), repealed by LAWS OF 2023, ch. 277, § 13; RCW 36.22.240; and ENGROSSED SECOND
SUBSTITUTE H.B. 1277, 67th Leg., Reg. Sess. (Wash. 2021) (hereafter HB 1277).
BIAW filed for declaratory judgment arguing, among other things, that the document
recording surcharge is a tax that violates article VII, section 1 and 5 of the Washington
Constitution. BIAW moved for summary judgment. The State filed a cross-motion for summary
judgment arguing, among other things, that the document recording surcharge is not a property
tax.
At the summary judgment hearing, BIAW asserted that it was bringing both facial and
as-applied constitutional challenges. The trial court found that BIAW presented only facial
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challenges. The trial court granted summary judgment for the State and denied summary
judgment for BIAW.
BIAW appeals.
ANALYSIS
I. LEGAL BACKGROUND
Chapter 36.22 RCW pertains to the duties of county auditors. The county auditor is the
“recorder of deeds and other instruments in writing which by law are to be filed and recorded in
and for the county for which he or she is elected.” RCW 36.22.010(1). To that end, chapter
36.22 RCW requires county auditors to assess various surcharges for such recording.
Generally, former RCW 36.22.178 required the county auditor to assess a $13 per
recorded document surcharge to finance affordable housing related funds, but the county could
have retained up to five percent for the collection, administration, and local distribution of the
funds. Former RCW 36.22.179 required the county auditor to assess a $62 per recorded
document surcharge to finance homeless housing and assistance funds, but the auditor was
required to retain two percent for collection of the fee. And former RCW 36.22.1791 required
the county auditor to assess an $8 per recorded document surcharge to support local homeless
housing and assistance. Generally, RCW 36.22.240 requires the county auditor to assess a $2.50
per recorded document surcharge to finance the growth management planning and review fund.
In 2021, the legislature passed HB 1277, requiring the county auditor to assess $100 per
recorded document to fund affordable housing, eviction prevention, and housing stability
services. That surcharge was codified into former RCW 36.22.176 (2022), repealed by LAWS OF
2023, ch. 277, § 13. The combined total of the aforementioned surcharges amounted to $185.50
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per document. The aforementioned statutes exempted various documents from their respective
surcharges.
But in July 2023—after BIAW had filed this action—the legislature repealed all of the
aforementioned statutes except RCW 36.22.240. LAWS OF 2023, ch. 277, § 13. And the
legislature added a new section to Chapter 36.22 requiring the county auditor to assess a $183
per recorded document surcharge, subject to various exemptions.1 LAWS OF 2023, ch. 277, § 1.
This surcharge was codified into RCW 36.22.250.
Under this statute, the county auditor retains one percent of the total funds collected for
its fee collection activities. RCW 36.22.250(2)(a). After adding the RCW 36.22.250 surcharge
with the $2.50 imposed by RCW 36.22.240, the total amount of the surcharge for recording a
document remained unchanged. The new surcharge was enacted to reduce administrative
complexity and increase the transparency of revenue flows from the document recording
surcharge. FINAL B. REP. ON SECOND SUBSTITUTE S.B. 5386, 68th Leg., Reg. Sess. (Wash
2023).
We construe BIAW’s arguments as challenging RCW 36.22.250 and RCW 36.22.240.
1 RCW 36.22.250(1) exempts the following documents from the $183 surcharge:
(a) Assignments or substitutions of previously recorded deeds of trust; (b) Documents recording a birth, marriage, divorce, or death; (c) Any recorded documents otherwise exempted from a recording fee or additional surcharges under state law; (d) Marriage licenses issued by the county auditor; and (e) Documents recording a federal, state, county, city, or water-sewer district, or wage lien or satisfaction of lien.
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II. FACIAL CHALLENGE TO THE DOCUMENT RECORDING SURCHARGE’S CONSTITUTIONALITY
We review summary judgment orders de novo. Royal Oaks Country Club v. Dep’t of
Revenue, ___ Wn.3d ___, 541 P.3d 336, 339 (2024). Summary judgment is appropriate when
the pleadings, depositions, and affidavits “show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c).
The party facially challenging a statute’s constitutionality must show that “no set of
circumstances exists in which the statute, as currently written, can be constitutionally applied.”
City of Redmond v. Moore, 151 Wn.2d 664, 669, 91 P.3d 875 (2004). If the party meets that
burden, the statute is rendered inoperative. Id. Because statutes are presumed constitutional, the
challenger bears the heavy burden of proving a statute’s unconstitutionality beyond a reasonable
doubt. Sch. Dists.’ All. for Adequate Funding of Special Educ. v. State, 170 Wn.2d 599, 605,
244 P.3d 1 (2010).
A. Article VII, Section 1
BIAW argues that the document recording surcharge is a property tax that violates the
uniformity requirement of the Washington Constitution. We disagree.
The uniformity requirement of article VII, section 1 of the Washington Constitution
provides, “All taxes shall be uniform upon the same class of property within the territorial limits
of the authority levying the tax.”
i. The Document Recording Surcharges are Taxes
For article VII, section 1 to apply to the document recording surcharge, the document
recording surcharge must be a tax. City of Snoqualmie v. King County Exec. Dow Constantine,
187 Wn.2d 289, 298, 386 P.3d 279 (2016). “‘[T]ax’” is defined as “‘an enforced contribution of
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money, assessed or charged by authority of sovereign government for the benefit of the state or
the legal taxing authorities. It is not a debt or contract in the ordinary sense, but it is an exaction
in the strictest sense of the word.’” Id. (quoting State ex rel. City of Seattle v. Dep’t of Pub.
Utils. of Wash., 33 Wn.2d 896, 902, 207 P.2d 712 (1949)).
We use a broad version of the Covell2 factors to determine whether the document
recording surcharge is a tax or a fee. Id. at 300-01. To that end, we examine (1) the purpose of
the charge, (2) where the money raised by the charge is allocated, and (3) whether there is a
relationship between the charge and the service. Id. at 301-02. As to the first factor,
If the primary purpose is to raise revenue used for the desired public benefit, the charges are a tax. If the primary purpose is to regulate the fee payers—by providing them with a targeted service or alleviating a burden to which they contribute—that would suggest that the charge is an incidental tool of regulation.
Arborwood Idaho, L.L.C. v. City of Kennewick, 151 Wn.2d 359, 371, 89 P.3d 217 (2004).
As to the second factor, the charge is more likely a tax if the money it raises is allocated
into a general fund, rather than a fund for a specific purpose. Dow Constantine, 187 Wn.2d at
301. Additionally, the charge is more likely a fee if the revenue raised is segregated and
apportioned solely to the authorized regulatory purpose. Samis Land Co. v. City of Soap Lake,
143 Wn.2d 798, 809-10, 23 P.3d 477 (2001). And the charge is more likely a fee if the charge
regulates the entity or activity that is being charged. Id.
For the third factor, we ask “‘whether people pay the cost because they use the service.’”
Dow Constantine, 187 Wn.2d at 301 (quoting Lane v. City of Seattle, 164 Wn.2d 875, 882, 194
2 Covell v. City of Seattle, 127 Wn.2d 874, 905 P.2d 324 (1995), abrogated on other grounds by Yim v. City of Seattle, 194 Wn.2d 682, 451 P.3d 694 (2019)).
6 No. 57502-7-II
P.3d 977 (2008)). If there is not a direct relationship between the charge and the service received
by those who pay the fee, or between the charge and the burden produced by the fee payer, the
charge is probably a tax. Arborwood Idaho, 151 Wn. 2d at 372-73.
Here, the document recording surcharge is a tax. As to the first factor, the overwhelming
purpose of the surcharge is to alleviate the housing crisis by financing certain funds, which is a
desired public benefit. RCW 36.22.250 allocates the $183 surcharge to a myriad of funds
relating to homeless housing and assistance. Only one percent of the total surcharge, $1.83, is
distributed and used by the county auditor for its surcharge collection activities. RCW
36.22.250(2)(a). The remaining 99 percent, $181.17, of this surcharge is distributed to other
funds related to the housing crisis.
Further, RCW 36.22.240(1)(a)-(b) allocates the money raised by the surcharge to specific
housing affordability related funds. Even though one percent of the total document recording
surcharge goes to surcharge collection activities, the primary purpose of the document recording
surcharge is to raise revenues for desired public benefits. Thus, the first factor supports finding
that the surcharge is a tax.
As to the second factor, neither RCW 36.22.250 nor RCW 36.22.240 allocate surcharge
funds into a general fund, which supports a fee determination. But the charge does not regulate
the entity or activity—document recorders or the act of document recordation—being charged;
rather, it allocates money to a desired public benefit, which supports a tax determination. Thus,
the second factor is largely neutral as to whether the document recording surcharge is a tax.
As to the third factor, document recorders do not pay the document recording surcharge
because they use the service. As stated above, only one percent of the surcharge is allocated to
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the administration of the recordation service. RCW 36.22.250(2)(a). Document recorders pay
the surcharge mainly to finance the State’s housing programs. And document recorders may be
individuals with no relationship to the housing construction industry. As such, there does not
appear to be a relationship between the recorded documents that qualify for the surcharge and the
service provided, which suggests the document recording surcharge is a tax.
Based on our analysis of the Covell factors, we determine that the document recording
surcharge is a tax.
ii. The Document Recording Surcharge Is an Excise Tax
BIAW argues that the document recording surcharge is a property tax because certain
documents associated with property ownership are required to be recorded under RCW
65.04.030, and owners must record their deeds to protect their interest from subsequent
purchasers under RCW 65.08.070(1). We disagree.
Because only property taxes are subject to the uniformity requirement, we next determine
whether the document recording surcharge constitutes a property tax within the meaning of the
Washington Constitution. Quinn v. State, 1 Wn.3d 453, 470, 526 P.3d 1 (2023) cert. denied, No.
23-171 WL 156468 (S. Ct. Jan. 16, 2024).
While a property tax is defined as “a tax on the mere ownership of property,” “an ‘excise
tax’ applies to the exercise of rights in and to property or the exercise of a privilege.” Id. at 471.
In determining whether the document recording surcharge is a property tax, we keep in mind that
“‘[t]he character of a tax is determined by its incidents, not by its name.’” Kunath v. City of
Seattle, 10 Wn. App. 2d 205, 214, 444 P.3d 1235 (2019) (quoting Jensen v. Henneford, 185
Wash. 209, 217, 53 P.2d 607 (1936)). We note that “‘a tax imposed upon a particular use of
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property or the exercise of a single power over property incidental to ownership, is an excise.’”
Quinn, 1 Wn.3d at 474 (internal quotation marks omitted) (quoting Morrow v. Henneford, 182
Wash. 625, 630, 47 P.2d 1016 (1935)).
The document recording surcharge is not a property tax because it is not levied on
property ownership, but rather on “the exercise of rights in and to property or the exercise of a
privilege.” Id. at 471. RCW 36.22.250 and RCW 36.22.240 require the county auditor to assess
the surcharge for each document recorded with certain exemptions.
RCW 65.04.030 requires the auditor, upon payment of fees, to record the following
instruments:
(1) Deeds, grants and transfers of real property, mortgages and releases of mortgages of real estate, instruments or agreements relating to community or separate property, powers of attorney to convey real estate, and leases which have been acknowledged or proved: PROVIDED, That deeds, contracts and mortgages of real estate described by lot and block and addition or plat, shall not be filed or recorded until the plat of such addition has been filed and made a matter of record;
(2) Patents to lands and receivers’ receipts, whether for mineral, timber, homestead or preemption claims or cash entries;
(3) All such other papers or writing as are required by law to be recorded and such as are required by law to be filed.
That statute does not place an obligation on property owners; rather, it places recordation
requirements on the auditor.
BIAW appears to rely on the subsection (3) language—“All such other papers or writing
as are required by law”—language in the catch-all provision to show that the document recording
surcharges are imposed on the mere ownership of property. RCW 65.04.030(3). But we are not
9 No. 57502-7-II
persuaded by BIAW’s argument that the catch-all provision places recordation requirements on
property owners. Indeed, RCW 65.04.030 begins, “The auditor or recording officer must . . . .”
And while RCW 65.08.070’s title is “Real property conveyances to be recorded,” it does
not require property owners to record real property conveyances. Rather, the statute merely
provides that real property conveyances “may be recorded” to protect the purchaser’s interest
against subsequent purchasers. RCW 65.08.070(1). While protecting one’s interest in real
property is a compelling reason to record one’s conveyance, that does not make the document
recording surcharge a property tax.
Individuals are required to pay the document recording surcharge when they engage in
certain activities or transactions relating to real property like recording a deed, mortgage, or a
power of attorney to convey real estate. But individuals also pay the document recording
surcharge to record documents when they engage in certain activities or transactions unrelated to
real property, like filing name change orders, certificates of appointment, claims for damages,
declarations of payment, judgments, oaths of office, and writs of mandamus.
No one is required to pay the document recording surcharge merely for owning property.
Indeed, BIAW concedes that “a conveyance need not be recorded in order to be legally binding
on the parties to the transaction described in the document itself.” Br. of Appellant at 12. Thus,
the document recording surcharge is tethered to a specific activity or transaction—recording
documents, not to the mere ownership of property.
Consequently, we hold that the document recording surcharge is not a property tax
subject to the uniformity requirement, but it is instead an excise tax.
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B. Article VII, Section 5
BIAW argues that the document recording surcharge violates article VII, section 5 of the
Washington Constitution. We disagree.3
Article VII, section 5 of the Washington Constitution provides that “No tax shall be
levied except in pursuance of law; and every law imposing a tax shall state distinctly the object
of the same to which only it shall be applied.” “The ‘state distinctly’ requirement is directed to
the relationship between the tax and the purpose of the tax.” Ley v. Clark County. Pub. Transp.
Benefit Area, 197 Wn. App. 17, 25, 386 P.3d 1128 (2016) (quoting Sheehan v. Cent. Puget
Sound Reg’l Transit Auth., 155 Wn.2d 790, 804, 123 P.3d 88 (2005)). An action is
unconstitutional when it diverts taxes, originally designated for specific purposes stated in the
enabling law, towards a “‘wholly unrelated project or fund.’” Id. at 26 (quoting Sheehan, 155
Wn.2d at 804).
The charges authorized in RCW 36.22.250 and RCW 36.22.240 do not violate article VII,
section 5. The legislature enacted the statutes allowing for a document recording surcharge, so
the surcharge is levied pursuant to law. The object of the surcharge is stated—to finance
affordable housing related funds.
In this context, “[a]rticle VII, section 5 would render unconstitutional actions taken to
divert taxes assessed for those purposes into some wholly unrelated project or fund.” Sheehan,
155 Wn.2d at 804. But BIAW does not even allege that there has been such a diversion of funds.
3 As a preliminary matter the State argues that we should decline to consider the article VII, section 5 claim as it is undeveloped on appeal and below. But we review this argument as it was sufficiently developed below and now on appeal.
11 No. 57502-7-II
Indeed, BIAW acknowledges that the document recording surcharge “go[es] to programs related
to affordable housing.” Br. of Appellant at 31. Thus, the document recording surcharge does not
violate article VII, section 5 of the state constitution.
BIAW relies on Lane4 to argue that the document recording surcharge violates article
VII, section 5 because its purpose is to raise revenue, and the homebuilders are required to pay
the document recording surcharge at a fixed amount unrelated to whether the builders are
constructing affordable housing.
In Lane, Seattle Public Utilities (SPU) historically paid for hydrants by charging a flat
hydrant fee to ratepayers. 164 Wn.2d at 880. Due to a case law change, SPU stopped charging
ratepayers, and the city paid for the hydrants using its general fund. Id. To recoup the lost
revenue, Seattle raised taxes on SPU, which caused SPU to raise its rates on water ratepayers.
Id. Ratepayers sued SPU for hydrant payments made by ratepayers, claiming the hydrant
payments were an impermissible tax on ratepayers. Id.
Our Supreme Court determined that charging ratepayers a hydrant charge was a tax. Id.
at 883. Then, the court held that the imposition of those charges was unconstitutional under
article VII, section 5 because “Seattle did not declare the charge to be a tax until 2005 or state a
lawful object of a tax or statutory authority.” Id. at 884.
BIAW’s reliance on Lane in inapposite. The State, unlike cities, possesses “plenary
power to tax.” In re Estate of Hambleton, 181 Wn.2d 802, 817, 335 P.3d 398 (2014). And so,
the tax was passed with statutory authority. Additionally, as stated above, the surcharge states a
4 164 Wn.2d 875.
12 No. 57502-7-II
lawful object. Consequently, we hold that the document recording surcharge is not facially
unconstitutional under article VII, section 5 of the Washington Constitution.
III. AS-APPLIED CHALLENGE TO THE DOCUMENT RECORDING SURCHARGE’S
CONSTITUTIONALITY
BIAW argues that the trial court erred by ruling that its challenges to the document
recording surcharge was not an as-applied challenge. We disagree.
“An as-applied challenge to the constitutional validity of a statute is characterized by a
party’s allegation that application of the statute in the specific context of the party’s actions or
intended actions is unconstitutional.” Moore, 151 Wn.2d at 668-69. “Holding a statute
unconstitutional as-applied prohibits future application of the statute in a similar context, but the
statute is not totally invalidated.” Id.
The allegations in the complaint regarding the document recording surcharge were
abstract, arguing that the surcharge was broadly unconstitutional. The allegations hardly
mention BIAW’s specific circumstances and context. On appeal, BIAW merely alleges that its
members and Soundbuilt individually paid the document recording surcharge and that they had a
constitutional right not to pay unconstitutional surcharges. Merely paying the document
recording surcharge does not characterize BIAW’s allegations in the specific context of their
actions.
More generally, the essence of BIAW’s argument is that the document recording
surcharge is unconstitutional because (1) any person who records certain documents with the
auditor pays nonuniform property taxes and (2) the document recording surcharge statutes fail to
comply with article VII, section 5 of the state constitution, which is a broad argument
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encompassing any person who paid the surcharge. Thus, the trial court properly ruled that
BIAW solely brought a facial challenge to the document recording surcharge.
Even assuming that BIAW properly presented an as-applied challenge, its claim fails.
For the same reasons discussed above, the document recording surcharge is not unconstitutional.
The fact that BIAW members and Soundbuilt individually paid the surcharge does not change
this determination.
Accordingly, we hold that the trial court properly ruled that BIAW asserted only a facial
constitutional challenge. And even if the trial court erred, we hold that the as-applied challenge
fails.
CONCLUSION
We affirm the trial court’s grant of summary judgment in favor of the State.
Che, J. We concur:
Maxa, P.J.
Lee, J.