Senate fiscal committee presses for fixes to bill taxing short‑term rentals

Chairman Hofschneider opened discussion Oct. 7 in the Senate Fiscal Affairs Committee on House Bill 24‑32, the Transient Accommodation Act, which would establish a tax on transient accommodations and regulate short‑term rentals across the Commonwealth.

The bill would “modernize and strengthen our tax policy on hotel accommodation tax,” Director Daniel Alvarez of the Division of Revenue and Taxation said, but he warned that “DRT lacks the capacity in regards to the global hosting platforms” and that the department does not yet have the systems to accept collections from large online platforms. He urged time to refine the bill and build infrastructure so collection and reporting are practical.

The Marianas Visitors Authority (MVA) and the Saipan Chamber of Commerce urged passage to capture revenue they say currently escapes the tax system. Jameka Tyrone, managing director of the Marianas Visitors Authority, said the measure “modernizes the outdated hotel occupancy tax and ensures that all accommodations used by visitors…are captured in our tax system.” She said capturing revenue will help marketing, restore flight service and support visitor‑site maintenance.

Saipan Chamber President Joe Guerrero said similar bills have been drafted previously and told senators he found roughly 183 homes listed on one platform for a one‑week search; he estimated historic unpaid hotel taxes from short‑term rentals at roughly $6 million to $8 million in peak years (he described those figures as estimates). Guerrero and other business leaders urged passage and support for enforcement resources so hosting platforms can remit taxes.

Committee members and witnesses raised several recurring concerns:

- Enforcement and IT capacity: Director Alvarez said DRT is developing basic online services for local taxpayers but lacks the technical capability to receive remittances from global platforms. He asked for time and funding to develop the necessary systems. MVA and others urged the committee to support funding for DRT if required.

- Hosting platforms and legal authority: Alvarez said the bill as drafted appears to require hosting platforms to collect and remit taxes but does not clearly explain how CNMI would assert authority over global corporations not based in the Commonwealth. Several senators urged clearer drafting and model language used in other U.S. jurisdictions.

- Penalties and compliance: Senator Manny Castro expressed concern that proposed fines—cited in testimony as $500 per day for some violations—are excessive compared with other jurisdictions and could create compliance problems. The committee discussed alternative penalty structures (flat fees, percentage‑based penalties) and the need to avoid per‑day penalties that become punitive.

- Data gaps and visitor forms: Committee members questioned the quality of arrival data. Tyrone and MVA staff said customs and immigration forms capture limited “bubble” fields; the typed hotel/address field is not machine‑readable under the current scanner workflow. MVA said it will pursue scanner/software upgrades and explore drop‑down menus so customs can capture accommodation addresses and platforms.

- Safety, zoning and licensing: Senator Cruz pressed for interagency collaboration so that units converted to rentals meet fire, zoning and safety standards. Several senators said the committee should coordinate DRT, Parks & Rec, Fire and local zoning offices so licensing includes safety inspections where appropriate.

- Potential double taxation: Witnesses noted a drafting issue that could create an instance of double taxation between a new transient‑accommodation tax and business gross‑receipts tax. Director Alvarez said the bill appears to impose the tax on the operator and that a provision may be needed to exclude the transient tax from gross‑receipts calculations to avoid double taxation.

Committee direction and next steps

No final vote on the bill was taken. Chairman Hofschneider asked legislative staff and legal counsel to draft clarifying amendments and to work with DRT and MVA on technical fixes, and he asked for follow‑up proposals within roughly 15 days so the committee can consider tightened language and implementation needs. Members also asked MVA to provide more detailed arrival and accommodation data when possible.

The discussion made clear the committee broadly supports the bill’s intent to capture short‑term rental revenue and level the playing field, but members said they will not move the measure forward until language, collection mechanics, enforcement and IT requirements are clarified.