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Attached are some talking points I've come up with this morning as possible starting points for testimony.</div>
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I plan to focus my testimony on the confusion created when auditors from the DOR interpret the law differently from one audit to another. I'm following the instructions and guidance provided to me from the auditor in 2016 in which they agreed with me that
recording fees are pass through expenses and not subject to sales tax or B&O; but when my audit has been presented in more recent audits as guidance from the DOR on the issue of the tax treatment of recording fees by other title companies it has been dismissed
as a mistake by their auditors. Those audits have been appealed but no final decisions have been issued, and it's been over two years on one of them. I have not been issued any new guidance from DOR to alert me that I was given faulty instructions, so which
auditor am I to believe? We are asking the legislature to provide us with clarity we can all rely on.</div>
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<div dir="ltr" id="divRplyFwdMsg"><span style="font-family: Calibri, sans-serif; font-size: 11pt; color: rgb(0, 0, 0);"><b>From:</b> Legislativecommittee1 <legislativecommittee1-bounces@washingtonlandtitle.com> on behalf of George Peters <execdirector@washingtonlandtitle.com><br>
<b>Sent:</b> Saturday, January 25, 2025 12:33 PM<br>
<b>To:</b> legislativecommittee1@washingtonlandtitle.com <legislativecommittee1@washingtonlandtitle.com><br>
<b>Subject:</b> Re: [Legislativecommittee1] DOR meeting yesterday</span>
<div> </div>
</div>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;">Here is the article that Maureen referenced, in PDF format.</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;">George</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">George Peters, WTP</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">Executive Director</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">Washington Land Title Association</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(5, 99, 193);"><u><a href="https://washingtonlandtitle.com" id="OWA04846f75-2371-8ffb-1e8e-dadc4152f419" class="OWAAutoLink" data-auth="NotApplicable" style="color: rgb(5, 99, 193); margin-top: 0px; margin-bottom: 0px;">https://washingtonlandtitle.com</a></u></span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">Mail: PO Box 328, Lynnwood, WA 98046</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">Delivery: 6817 208<sup>th</sup> St SW, #328, Lynnwood, WA 98036</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">206-437-5869 (Mobile)</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: rgb(31, 73, 125);">206-260-4731 (Fax)</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif; color: blue;"><u><a href="mailto:execdirector@wltaonline.org" id="OWA9d263b1a-34ef-e25e-6d79-a884dcc76c7f" class="OWAAutoLink" style="color: blue; margin-top: 0px; margin-bottom: 0px;">execdirector@washingtonlandtitle.com</a></u></span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: Calibri, sans-serif; font-size: 11pt;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: Calibri, sans-serif; font-size: 11pt;"><img alt="WLTA Logo w-Ring Blue 1a" id="x_Picture_x0020_960490399" width="168" height="96" size="6328" contenttype="image/jpeg" style="width: 1.7583in; height: 1.0083in; margin-top: 0px; margin-bottom: 0px;" data-outlook-trace="F:1|T:1" src="cid:image001.jpg@01DB6F24.F3D1A470"><img id="x_Picture_x0020_1264282886" width="95" height="95" size="68992" contenttype="image/jpeg" style="width: 0.9916in; height: 0.9916in; margin-top: 0px; margin-bottom: 0px;" data-outlook-trace="F:1|T:1" src="cid:image002.jpg@01DB6F24.F3D1A470"></span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;">This is a confidential communication intended solely for the named recipient. If you are not the intended recipient, please destroy
it and call George Peters at 206-437-5869 immediately. Thank you.</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Times New Roman", serif;"> </span></p>
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<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: Calibri, sans-serif; font-size: 11pt;"><b>From:</b> Legislativecommittee1 <legislativecommittee1-bounces@washingtonlandtitle.com>
<b>On Behalf Of </b>Maureen Pfaff<br>
<b>Sent:</b> Saturday, January 25, 2025 11:29 AM<br>
<b>To:</b> legislativecommittee1@washingtonlandtitle.com<br>
<b>Subject:</b> [Legislativecommittee1] DOR meeting yesterday</span></p>
</div>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"> </p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">All,</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">JP, Michelle, George, Carrie and I met with Rep Tharinger and two individuals from the DOR yesterday. In the course of the discussion the DOR representatives
made two statements that were surprising to me. </span></p>
<ol start="1" style="margin-bottom: 0in;">
<li style="font-family: Aptos, sans-serif; font-size: 12pt; color: black; margin: 0in;">
There is no need for them to issue guidance or clarification on the correct tax treatment of recording fees because it's been available to us online since 2013 through Det. No. 12-0374, 32 WTD 198 (September 9, 2013). Why wasn't this brought up in the meeting
we had with DOR months ago when we explained our position?</li><li style="font-family: Aptos, sans-serif; font-size: 12pt; color: black; margin: 0in;">
Rule 111 does not apply to Recording Fees and is not the test used to determine their taxability. </li></ol>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">I asked, if the DOR has specifically ruled on this issue in 2013, why did the audit conducted on my business in 2015 and finalized in 2016 not require payment
of back taxes on recording fees or instruction to me to collect Sales Tax and pay B&O Tax on recording fees going forward? It was initially included in the assessment and the only rule they brought up to determine taxability was Rule 111. I successfully
argued that we meet all three tests for recording fees being qualified as advance and reimbursements under Rule 111 which resulted in the auditor and his supervisor removing the charges during the conference held to discuss the initial findings prior to the
audit being finalized and an assessment letter issued. (both the initial letter and the final assessment letter are attached) The response yesterday was that DOR employees are human, and humans make mistakes. </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">I read the WTD from 2013 today (attached for reference) and it is mainly focused on the tax treatment of the document preparation charges for reconveyance fees,
recording fees are mentioned one time in passing in the seven-page document. I would never have thought that this case clarified the issue of taxability of recording fees had I been looking for guidance. However, the one reference made to recording fees
is that document recording is required in order to complete the escrow services we're contracted to provide, thereby making them a cost of doing business. Rule 111 is discussed throughout the document and, as that is the rule used to determine if a fee is
a qualified advance and reimbursement, I fail to see how it isn't relevant to our discussion.</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">Recording fees pass all three tests:</span></p>
<ol start="1" style="margin-bottom: 0in;">
<li style="font-family: Aptos, sans-serif; font-size: 12pt; color: black; margin: 0in;">
They are a customary reimbursement for an advance made to procure a service for the client.
<b><i>true</i></b></li><li style="font-family: Aptos, sans-serif; font-size: 12pt; color: black; margin: 0in;">
They are for services that the taxpayer does not and cannot render. <b><i>true</i></b></li><li style="font-family: Aptos, sans-serif; font-size: 12pt; color: black; margin: 0in;">
The taxpayer is not liable for the payment except as an agent for the client. <b>
<i>true:</i></b> <b><i>An escrow company or a title company providing escrow services is acting in the capacity of a dual agent to the principals in the transaction. We represent each party equally and owe them a fiduciary duty to act as their agent in the
handling of all funds and property entered into the escrow. *</i></b></li></ol>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">I asked for an explanation of what specifically makes the recording fees collected and paid through escrow different from all the other items collected and
paid through escrow (REETA, loan payoffs, the net proceeds paid out to the seller for example) so that I could better understand their position and the response was, we aren't auditors and don't really understand your business so we can't answer that question. </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">The auditor said that same thing to me repeatedly throughout my audit (that he didn't really understand how escrow works), so we met monthly for six months
and I answered all of his questions about the process of providing escrow services. He initially included recording fees in the audit findings and said I could make my case for why they shouldn't be included during the supervisor conference where the supervisor
would discuss the tax law as they have applied it, and changes would be made as appropriate. Ultimately, he and his supervisor agreed that the recording fees qualified as a passthrough, but according to the DOR I can't rely on the findings of this auditor
as given to me on the Auditor's Detail of Differences and Instructions to Taxpayer (attached). </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">Businesses are held responsible for understanding and following the law and the DOR says we are welcome to ask for guidance and clarification if we are unsure
of something. Yet when presented with the findings and instructions of their own auditors, whose job is to understand tax law and how it applies to our business, the response is that they made a mistake. I would like to also point out that my audit has been
brought up in at least two audits conducted in the past four years and dismissed as being an incorrect interpretation of the law by the current auditors - yet nothing has been brought to my attention by DOR to alert me to this fact. I have been following
their instructions in filing my Excise and B&O Tax returns since receiving them and clearly, in their current view, that means I'm filing incorrectly. Both of these audits are languishing in a protracted appeals process so none of us have clarity on this
issue.</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">If the DOR believes my audit findings were wrong, should they not have come back to me to let me know of this mistake? At a minimum, should they not have issued
public guidance to specifically say that Recording Fees do not qualify a pass-through expenses and why? If they choose to audit my company again, will they accept the answer that I was following the explicit written instructions they gave me regarding the
proper filing of our tax returns when they see that I haven't collected sales tax or paid B&O on recording fees? Or will they say I shouldn't have relied on their Auditor and require me to pay back taxes and penalties for the intervening years that I was
doing it "wrong"? Are we, as business owners, supposed to rely on information gleaned through the grapevine from other business owners in our field about what their auditor told them to determine the proper reporting of taxes? How am I to be sure that their
auditor is right and mine is wrong?</span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;">I think at least some of our testimony on Tuesday should highlight to the committee members that the DOR is not providing clarity in their decisions, is not
applying the law consistently from one audit to the next, and is not </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"> </span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="color: black;"><b>*</b>I found a really interesting paper in the Seattle University School of Law: digital commons by Robert C. Farrell that breaks down the Common Law Duties
of an Escrow Holder and speaks specifically to the agency duties contained therein. I can't find a way to download or print the document, but this link will take you to it.
</span><span style="color: blue;"><u><a href="https://core.ac.uk/reader/235979120" id="OWA1ac31033-5147-395c-653a-83f775564ead" class="OWAAutoLink" data-auth="NotApplicable" style="color: blue; margin-top: 0px; margin-bottom: 0px;">https://core.ac.uk/reader/235979120</a></u></span></p>
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<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: "Lucida Handwriting"; font-size: 14pt; color: black;">Maureen</span></p>
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<p><span style="font-family: Arial, sans-serif; font-size: 9.5pt; color: rgb(34, 34, 34);">Maureen Pfaff, President and CEO</span></p>
<p><span style="font-family: Roboto; font-size: 9.5pt; color: rgb(34, 34, 34);">Ph: (360) 457-4451 | Fax:
</span><span style="font-family: Roboto; font-size: 9.5pt; color: rgb(34, 34, 34); background-color: white;">(844) 513-2400</span></p>
<p><span style="font-family: Arial, sans-serif; font-size: 9.5pt; color: rgb(34, 34, 34);">403 S Peabody St, Port Angeles, WA 98362</span></p>
<p><span style="font-family: Roboto; font-size: 9.5pt; color: blue;"><u><a href="mailto:maureen@olypentitle.com" id="OWA6f544436-249e-91db-bd6f-d40e34e78eb6" class="OWAAutoLink" title="mailto:maureen@olypentitle.com" style="color: blue; margin-top: 0px; margin-bottom: 0px;">maureen@olypentitle.com</a></u></span></p>
<p><span style="font-family: Roboto; font-size: 9.5pt; color: blue;"><u><a href="http://www.olypentitle.com/" id="OWAa665e51a-d49c-9d97-1f64-87320a35c4d0" class="OWAAutoLink" data-auth="NotApplicable" style="color: blue; margin-top: 0px; margin-bottom: 0px;">www.olypentitle.com</a></u></span></p>
<p style="margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;"><span style="font-family: Roboto; font-size: 9.5pt; color: rgb(34, 34, 34);"> </span></p>
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<p style="margin-bottom: 10pt;"><span style="font-family: "Times New Roman", serif; color: rgb(153, 0, 0);"><b>WARNING – FRAUDULENT FUNDING INSTRUCTIONS</b></span></p>
<p style="margin-bottom: 10pt;"><span style="font-family: "Times New Roman", serif; color: rgb(34, 34, 34);"><b>Email hacking and fraud are on the rise to fraudulently misdirect funds. Please call your escrow officer immediately using contact information found
from an independent source, such as the sales contract or internet, to verify any funding instructions received. We are not responsible for any wires sent by you to an incorrect bank account.</b></span></p>
<p style="line-height: 11.05pt; margin-bottom: 10pt;"><span style="font-family: "Times New Roman", serif; font-size: 10pt; color: rgb(34, 34, 34);"> </span></p>
<p style="line-height: 11.05pt; margin-bottom: 10pt;"><span style="font-family: Arial, sans-serif; font-size: 10pt; color: rgb(51, 51, 51); background-color: yellow;"><b>ATTENTION LENDERS: Loan packages, complete with documents and balanced CD, must be received
no later than 2:00 pm PST on the day <i>prior</i> to signing.</b></span></p>
<p style="line-height: 11.05pt; margin-bottom: 10pt;"><span style="font-family: "Times New Roman", serif; font-size: 10pt; color: rgb(34, 34, 34);"> </span></p>
<p style="margin-bottom: 10pt;"><span style="font-family: "Times New Roman", serif; color: rgb(153, 0, 0);"><b><img id="x__x0000_i1025" width="96" height="96" style="width: 1in; height: 1in; margin-top: 0px; margin-bottom: 0px;" src="https://ci4.googleusercontent.com/proxy/NTeYNcEClGPpwHggQhZwTEbSA0lLJUWpRPCqETkeQth0ttOrN_jGm27ifReH9Vuc9_0=s0-d-e1-ft#https://i.imgur.com/JbY2vXS.png"></b></span></p>
<p> </p>
<p><span style="font-family: Arial, sans-serif; color: rgb(17, 85, 204);"><b><u><a href="https://www.youtube.com/watch?v=ek4TwC9owwY&feature=youtu.be" id="OWAdb7b5b56-4658-e07d-4344-b4db662f4f63" class="OWAAutoLink" data-auth="NotApplicable" style="color: rgb(17, 85, 204); margin-top: 0px; margin-bottom: 0px;">CLICK
HERE TO WATCH VIDEO </a></u></b></span><span style="font-family: Arial, sans-serif; color: blue;"><b><br>
</b></span><span style="font-family: Arial, sans-serif; color: rgb(17, 85, 204);"><b><u><a href="https://www.youtube.com/watch?v=ek4TwC9owwY&feature=youtu.be" id="OWA6a4eeb58-e52d-e2db-53f8-9316e5baf49c" class="OWAAutoLink" data-auth="NotApplicable" style="color: rgb(17, 85, 204); margin-top: 0px; margin-bottom: 0px;">ON
WIRE FRAUD PREVENTION</a></u></b></span></p>
<p style="background-color: white; margin: 0in; font-family: Aptos, sans-serif; font-size: 12pt;">
<span style="font-family: Arial, sans-serif; font-size: 11pt; color: rgb(34, 34, 34);"><i>This electronic mail may constitute a client communication that is privileged at law. It is not intended for transmission to, or receipt by, any unauthorized persons. <br>
If you have received this electronic mail transmission in error, please delete it from your system without copying it, and notify the sender by reply e-mail, so that our address record can be corrected.</i></span></p>
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