I wanted to make sure I understand this situation. I received an email from AirBnB today about a new bill in the MA state legislature titled " An Act to promote sustainable affordable housing." AirBnB said that the bill would levy a 5% tax on STR operators. What I see is that it would levy a 5% tax on STR operators where the unit is not in an owner occupied building.
Does that seem right to you all? I’ve copied the text below.
Section 3D. Short Term Rental Business Excise
(a) An operator of a short-term rental, as defined in section 1 of this chapter, shall pay an annual assessment of 5 per cent of the operator’s gross revenues derived from operation of short-term rentals in the commonwealth.
(1) For the purposes of this section, an operator of a short-term rental shall not include any person operating an owner-occupied property.
(b) An operator shall pay the above assessment to the department of revenue annually, not later than the 30th of January in the following year.
(c) An operator shall submit to the department of revenue a full report of the revenues generated from each of the operator’s short-term rental properties and the addresses of each of said properties.
(d) All monies derived from the assessment in this section shall be credited by the department of revenue to the municipal affordable housing trust fund, as authorized by section 55C of chapter 44, of the municipality in which the person operated said short-term rentals.
(e) If the municipality in which the person operated said short-term rentals has not established a municipal affordable housing trust fund, all monies derived from monetary penalties under this section shall be credited to the General Fund of the city or town, provided, however that all monies derived from monetary penalties under this section shall not be used for any other purpose besides the development of affordable housing within the municipality.
(f) If the person operated said short-term rentals in multiple municipalities, the monies shall be distributed among the municipalities proportionally based on the percentage of the operator’s total properties in each municipality.
The proposed law says:
I don’t see where it defines ‘owner-occupied property’ though that term is probably defined elsewhere in MA real estate law. Note that the proposed law does not say that an operator of a short-term rental shall not include any person operating a rental that is also their primary residence. Nor does the language limit it to an owner-occupied rental (i.e., a home share host).
So, the law would seem to exclude an operator who lives in a building with, say, four rental properties. Or even 444 rental properties. Yet it’s difficult to believe that is the intention.
Elsewhere MA does make a distinction to owner-occupied properties of 1-4 units.
I don’t know if there is legislative history that would clarify the intention here.
The proposed language was proposed by Senator Susan Moran, in case you wanted to research this further or ask her the intention.
From her website she uses different terminology: “owner-occupied homes”.
The proposed law would be part of Chapter 64G of MA laws where section 1 defines a short-term rental to say “provided, however, that a private owner-occupied property shall be considered a single unit if leased or rented as such.”
So, I don’t think the intention here is to exclude operators where they simply live in the building since the law being amended treats an owner-occupied property as a single unit ‘if leased or rented as such’.
Yes, the way it reads, off-site hosts are the ones who are going to be taxed. If you live on the property, you’d be exempt. Sounds quite sensible to me, compared to the regs they bring in some other places, which don’t seem to acknowledge that owner-occupied properties don’t generally cause any problems.
I guess you’d have to find out exactly what they consider owner-occupied. For instance, do you have to live in the same building, or in another dwelling on the property. The way it’s written, it seems to me that it could be a separate dwelling, as “property” means the entire lot you own.
Excellent points - thank you very much!
A very helpful point! Thank you very much!
Hi, Glenn, if someone rents out the entire place on Airbnb, does that mean this person would have to pay this extra 5% tax? What does that mean owner occupied building? I rent out my apartment which is my primary residential property when I am not in town. This definition is confusing.
The definition, standing alone here, is confusing.
But if your property is your primary residence (so you live there for more than half the year) then it would seem to me that you would not be subject to the 5% tax.
I guess most of the hosts who rent out their entire place in MA would be affected by this new bill? Are you going to submit your voice to the State Legislature suggested by the Airbnb email?
Yes, I already have.
I made the point that I thought that the definition was unclear, that I hoped it would provide an exemption for someone who lived on the property for more than half the year and would include 1-4 units (there are many ‘triple deckers’ here in Worcester), and that I thought it unfair that the tax did not apply to hotels, bed and breakfasts and other housing alternatives. [I’m sure their argument is that STRs remove housing stock but those alternatives do not, but still made the point.]
Thank you, Glenn! I think I will submit as well.
I suspect that the bureaucrats who come up with regs are probably not aware of all the possible hosting situations, which is why they aren’t drilling down to be clear.
Like they may just think that it’s either that the host is an off-site investor, or a home-share host. Not taking into account hosts who live on the property in another dwelling, or those who use the property themselves part of the year, or only rent the entire home when they go away to work or on holiday.
If I were in this situation, I think that if I lived on the property, as my primary residence, I would be inclined not to ask for clarification, as the wording says “owner occupied property”, and I wouldn’t want them to realize they need to be more clear than that, and possibly add wording that made me subject to the extra tax.
I’d wait to see if they said I needed to pay that 5% if, for instance if I lived in another dwelling on the property, because their current wording wouldn’t stand up in court as not being an owner-occupied property.
I’ve just found that when dealing with govt., in any situation, it’s best not to volunteer information, but to simply answer any questions as asked.
Thanks for bringing this up. I’m very interested in what other states are proposing. Here in California is a piece of legislation taxing all STRs 15% including home share/rooms hosts. By comparison, this in MA does not seem terribly extreme. We home share/rooms hosts are not negatively contributing to available housing stock; however, we will be taxed as if we were and at 15%.
This tax does not apply to hotels and motels.
We live in interesting times…