Bills filed to update room occupancy tax rules

Legislators appear ready this year to modernize the rules governing room occupancy taxes to better reflect rapidly changing business practices in the new sharing or “access economy.”
 
Last year, Gov. Charlie Baker signed legislation to regulate transportation network companies, such as Uber and Lyft, and this year bills have been filed in the House and Senate to update the rules for short-term residential rentals, mainly online services such as as Airbnb and HomeAway.
 
Local officials have a growing interest in updating room occupancy rules, as new forms of short-term rentals are quickly expanding in cities and towns across the state, but are not subject to the state and local room occupancy excise. The short-term rentals also compete with traditional rentals that do pay the excise, such as hotels and bed and breakfasts.
 
Local officials have also asked about rules to protect the health and safety of guests and to mitigate the impact of short-term rentals on housing and neighborhoods.
 
The governor included language in his fiscal 2018 state budget bill that would extend the room occupancy excise to short-term rentals that are rented for 150 days or more.
 
Rep. Aaron Michlewitz, the point person in the House on this issue, has filed a bill that would add a new Chapter 64N to the General Laws – the room occupancy excise is governed by Chapter 64G – that would organize new forms of short-term rental and room occupancy and provide new rules for taxation and regulation. Rep. Michlewitz visited the MMA Fiscal Policy Committee last November to talk about his work on this issue.
 
The MMA has asked municipal officials across the state, particularly in tourism regions, to weigh in on the proposal before any public hearing later this year.
 
The key to the proposed rules in the Michlewitz bill lies in the definitions for three different types of hosts: “residential hosts,” “commercial hosts” and “professionally managed hosts.”
 
The bill defines a residential host as the owner or tenant of a residential unit who is offering a unit for tourist or transient use for not more than 60 days per year. The unit must be the host’s primary residence, and a residential host would be limited to one unit per municipality and three units statewide. The definition of tourist or transient use is limited to any use of a residential unit for less than 30 days. It appears that this type of host would include small-scale Airbnb-type hosts who rent their primary residence for a limited number of days.
 
A commercial host is defined as the owner or tenant of a residential unit who is either offering the unit for tourist or transient use for more than 60 days or offering a unit (or units) that is not their primary residence. It seems that this host would include large-scale Airbnb-type hosts that are offering units that are not their primary residence, or are renting for more than 60 days in total.
 
A professionally managed host is defined as any person or business entity who is the owner or tenant of a residential unit who is offering the unit for tourist or transient use. Units offered by this type of host must be rented for five consecutive nights or more. The host must employ or serve as the manager for the property.
 
Any city or town, following local acceptance, would be authorized to impose a local excise tax upon renters of short-term residential units for transient or tourist use, as defined in the bill. Local acceptance would be by the local legislative body.
 
The municipal tax schedule in the bill provides for rates for residential hosts of as much as 5 percent, commercial hosts as much as 10 percent, and professionally managed hosts as much as 6 percent (or 6.5 percent in Boston).
 
The bill also sets a tax rate schedule for the state excise.
 
Any city or town adopting the excise would be required to distribute half of the excise collected from a commercial host to programs addressing low- and moderate-income housing.
 
Any city or town adopting the excise would be required to make rules that require all short-term rentals to undergo an annual safety inspection. Inspections would have to occur within 30 days after the host has registered the unit. The Department of Revenue would be required to maintain a short-term residential rental registry.
 
The Michlewitz bill includes several local options that would allow cities and towns to limit or regulate short-term rentals. Any city or town, following local acceptance, would be authorized to restrict short-term residential rentals by any host to permanent residents of the unit. Any city or town, following local acceptance, would be able to restrict the number of days a host may rent out short-term residential rentals. And any city or town could require a commercial host or a professionally managed host to obtain a local business license. Acceptance in these cases would be by the local legislative body.
 
The Department of Revenue would be required to establish a short-term residential rental registry, and all hosts would be required to list each unit on the registry. The DOR would be required to establish the registry no later than Dec. 31, 2018. Cities and towns would be required to establish a system for evaluating applicants by Dec. 31, 2018.
 
The bill would also require the host to comply with all federal and state laws and local rules, and maintain appropriate liability insurance. Residential hosts would be required to show that the unit is their primary place of residence, identify the number of days the unit is rented, and comply with any rent control rules.
 
Renters would be required to show that there are not any outstanding municipal health and safety code violations, and post inside the front door of a unit notice showing where fire safety and other devices and equipment are located.