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Our members are the local governments of Massachusetts and their elected and appointed leadership.
A six-member House-Senate conference committee has been charged with working out differences between the two branches on much-anticipated legislation that would set a framework for the regulation and taxation of short-term rental of properties not already covered by the room occupancy tax and other state laws.
The two bills (H. 4327 and S. 2400) take different approaches to covering the rapidly growing short-term rental business typified by Airbnb, HomeAway and Vacation Rental by Owner, and by individual property owners using traditional and online tools to rents rooms and homes.
Both bills would add safety and regulatory measures, and would tax rentals in a manner generally similar to how hotels and other traditional accommodations are taxed under the state’s room occupancy statute.
The House bill would create a new local-option statute specifically for short-term rentals, while the Senate would expand the existing room occupancy statute to include “transient accommodations.”
State and local excises
The House and Senate bills would both provide tax consistency between traditional short-term rentals such as hotels, governed by the room occupancy excise statute (Chapter 64G), and rentals that are not covered under the occupancy statute, such as units rented through online businesses like Airbnb. The two branches, however, take very different approaches to updating to short-term rental tax law.
The House bill would create three levels of hosts, depending on the number of units being rented. A “residential host” would be defined as someone who is renting one or two units. Larger hosts would include an “investor host,” with three, four or five units, and a “professionally managed host” with six units or more. A new Chapter 64O would create a short-term rental excise schedule based on the category of the host: 4 percent for residential host units, 5.7 percent for investor host units, and 8 percent for professionally managed host units.
The maximum local-option amounts in the House bill would be 5 percent, 6 percent and 10 percent, respectively. This compares to a combined state-local room occupancy maximum for hotel stays of 11.7 percent under Chapter 64G, with higher amounts in six cities and towns for convention center financing purposes.
The Senate’s bill would apply the current room occupancy structure to new forms of short-term rentals defined as “transient accommodations” in the bill. The state and local rates would not be changed. The maximum basic local rate would remain at 6 percent.
Both the House and Senate bills would provide an additional excise amount on Cape Cod and the Islands for towns participating in the Cape Cod and Islands Water Protection Fund to help pay for water pollution abatement projects.
The House bill would require that 50 percent of any local excise amount collected from a “professionally managed host” be used for local infrastructure and housing purposes, with at least half of that amount set aside for programs for low- and moderate-income people.
Under the Senate bill, local excise collections would remain a local general fund revenue.
The House bill would establish a separate local acceptance process for short-term rentals under Chapter 64O, through a vote of the local legislative body that would take effect in the calendar quarter beginning 30 days after the vote. With the excise sections slated to take effect one year after the effective date of the proposed law, it appears that collection of new state and local revenues from short-term rentals would not commence until fiscal 2020.
The Senate bill would not change the local acceptance provisions that are set in Chapter 64G.
The House and Senate bills take different approaches to local regulation.
The more structured House bill would require any city or town that adopts the new local excise on short-term rentals to enact an ordinance or bylaw requiring that all units offered for rent undergo a safety inspection before being rented, although there is a “provisional rental” allowance. Local inspection would be required within 60 days of the registration of a unit on the state’s website.
In addition to the required local inspection, the House bill would authorize cities and towns to require that owners show that units for rent are not subject to any local code enforcement efforts.
The House bill would also authorize all cities and towns to enact local bylaws and ordinances governing short-term rentals even if the local excise has not been adopted. This would include local requirements for licensing and restrictions on the operation of rentals.
The Senate bill would simply authorize municipalities to adopt bylaws and ordinances to regulate operators, including requiring local registration, licensing and inspection. The Senate would also allow cities and towns to restrict where operators may locate.