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Ways & Means debates taxing mixed‑use land tied to short‑term rentals
Summary
Legislators reviewed language from Act 73 that would apportion tax rates on mixed‑use properties by building use, using a bakery plus short‑term rental example to argue whether land should be split proportionally and how attestation and assessment would work.
Members of the House Ways & Means Committee on Feb. 4 examined how language in Act 73 would classify mixed‑use parcels and how that classification would affect property taxes.
Kirby Heating, legislative counsel, used a 30‑acre hypothetical to show the mechanics: a 2,000‑square‑foot building with a 1,500 sq ft bakery (75%) and a 500 sq ft short‑term rental (25%). “75% of the value would be, tax using the non homestead nonresidential rate, and 25 of the value of the building will be taxed as nonhomestead residential rate,” Heating said, describing the draft text. He added that, under the version before the committee, the underlying land’s value would be split on the same proportional basis so that 25% of the land value would be taxed at the higher short‑term rental residential rate.
The committee pressed on how use would be determined. Heating said assessing officials would identify the number of dwelling units and that owner attestation about square‑footage use would be compared to the grand list; the Department of Taxes would retain the authority to verify accuracy. “It wouldn’t be all on the assessing officials to figure out questions like percentage of square footage use. That would be more on the property owner with presumably the Department of Taxes having an ability to also look into the truthfulness of what’s being reported,” Heating said.
Members raised concerns about incentives the proposal could create. Several lawmakers asked whether owners could reconfigure or subdivide property, or place a low‑value nonresidential structure on a parcel, to shift tax treatment. Heating acknowledged those risks and said the proposal tries to balance fairness and administrability: valuation remains a separate appraisal process and the draft ties tax treatment to the proportional use of the building rather than per‑square‑foot traceability of the land.
The committee tested other fact patterns in a round of hypothetical scenarios. On seasonal cabins and camps, Heating noted the draft definition of “dwelling” excludes properties not fit for year‑round habitation, which would default those structures to nonhomestead nonresidential classification unless the Department of Taxes established a different rule. Members also asked for clearer statutory cross‑references on mobile homes, manufactured housing and RVs; Heating recommended the committee either incorporate an existing statutory definition or draft a clarifying reference.
The committee asked staff to draft clarifications on manufactured homes and employer‑provided housing and agreed to revisit the classifications next week with the requested language and additional examples.
The discussion did not include a formal vote; the committee directed staff to return with proposed clarifying amendments and additional drafting for review.
