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GBREB Opposes New Real Estate Transfer Tax, Expansion of Occupancy Tax

In joint testimony presented last week before the Massachusetts House of Representative’s Revenue Committee, officials from the Greater Boston Real Estate Board and Massachusetts Association of REALTORS® (MAR) urged state lawmakers to oppose a measure (H.2690) that would allow the creation of a real estate transfer tax in the Town of Provincetown, as well as legislation that seeks to establish a new tax on property owners who rent their homes for a period of less than 90 days. 

GBREB and the REALTOR® organization have long argued that transfer taxes represent bad tax policy for the Commonwealth, noting that they are both discriminatory and inequitable in nature since that they single out a small segment of a community’s population – namely home buyers and sellers – to pay for a community-wide need or initiative.  Transfer taxes are tantamount to an entrance or exit fee, introducing additional costs to prospective home buyers that can act as a barrier into a community and home ownership.  In addition, they are an unreliable revenue stream since the amount they raise can fluctuate with market conditions, and imposition of a transfer tax would subvert the voter approval process inherent in a Proposition 2 ½ override, which enables voters to decide for themselves whether or not to increase their property taxes.    

At a Beacon Hill hearing on April 2, GBREB Government Affairs Director Patricia Baumer and MAR General Counsel Mike McDonagh, Esq., also called on legislators to reject four separate bills that propose to give cities and town governments that ability to levy a room occupancy tax on any non-business home rentals.  If enacted, these measures would subject owners of single and multiple family homes, bed-and-breakfast homes, seasonal cottages, condos and timeshare units to a new occupancy tax which they could be required to pay whenever they rent out all or a portion of their home for short term use of less than 90 days.  The challenges that inequitable enforcement of this type of tax could pose for communities, as well as the compliance problems homeowners would face in meeting the onerous income reporting requirements and other regulations associated with occupancy taxes are substantial and could lead to zoning changes, penal sanctions for property owners and other unintended consequences.  In addition, industry observers note that expansion of the occupancy tax to short term rentals is likely to lead many homeowners to stopping renting which would deny them full use of their property and lead to a potential loss or tourism dollars and other tax revenue communities derive from seasonal home rentals by out-of-town visitors.