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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
vacation rentals; short-term rentals; regulation
Purpose
Prohibits an online lodging operator from renting out a lodging accommodation without a transaction privilege tax (TPT) license and establishes penalties for verified violations relating to vacation or short-term rental uses.
Background
Laws 2018, Chapter 189 required online lodging marketplaces to register with the Arizona Department of Revenue (ADOR) for TPT payment licenses for taxes due from an online lodging operator on any transaction facilitated by the marketplace (A.R.S. § 42-5005). An online lodging marketplace is a person that provides a digital platform through which an unaffiliated third party receives compensation for renting accommodations to an occupant. An online lodging operator (operator) is a person who rents lodging to an occupant through an online lodging marketplace (A.R.S. § 42-5076).
A vacation rental or short-term rental is as any individually or collectively owned single‑family or one-to-four-family house or dwelling unit or any unit or group of units in a condominium, cooperative or timeshare, that is also a transient public lodging establishment or owner-occupied residential home offered for transient use. Current statute prohibits a city, town or county (local government) from restricting the use of or regulating vacation rentals or short‑term rentals based on their classification, use or occupancy, except: 1) to protect the public's health and safety; 2) to adopt and enforce residential use and zoning ordinances; and 3) to limit or prohibit the use of a vacation rental or short-term rental for specifies purposes (A.R.S. §§ 9-500.39 and 11‑269.17).
An individual is prohibited from disclosing confidential information received as an employee or agent or while performing administrative duties for ADOR, unless authorized by statute (A.R.S. § 42-2002). Confidential information includes: 1) returns and reports filed with ADOR for income tax, withholding tax and TPT; 2) applications for TPT licenses, luxury tax licenses and withholding licenses; 3) information discovered by ADOR concerning taxes and receipts; 4) information from the U.S. Internal Revenue Service (IRS); and 5) taxpayer information requested to be held in confidence (A.R.S. § 42-2001).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Vacation and Short-Term Rental Regulation
1. Prohibits an operator from offering for rent or renting a lodging accommodation without a TPT license.
2. Requires an operator to list the TPT license number on advertisements for all lodging accommodations the operator maintains, including online lodging marketplace postings.
3. Allows a local government to regulate vacation or short-term rentals by requiring the owner of a rental to provide the local government with contact information for the owner, or owner's designee, who is responsible for responding to complaints in person, over the phone or by e‑mail before offering for rent or renting the vacation or short-term rental.
4. Requires a local government to notify ADOR and a property owner of verified violations of the local government's applicable laws, regulations and ordinances within 30 days after a verified violation.
5. Prohibits a vacation rental or short-term rental from being used for nonresidential purposes, including for special events or for retail use, restaurant use, banquet space or other similar use.
Confidential Information Disclosure
6. Adds, to authorized recipients of confidential information, any law enforcement agency.
7. Requires, to receive confidential information, a law enforcement agency to provide an affidavit to ADOR describing the investigation and how it may result in a proceeding involving tax administration.
8. Prohibits ADOR from releasing any confidential information if ADOR determines that the information will not be used to prepare for, investigate or contribute to a proceeding involving tax administration.
9. Prohibits ADOR from disclosing confidential information provided by the IRS.
10. Allows a local government tax official, if the tax official determines that there is a legitimate business need, to redisclose TPT license information from the new license report and license update report to nonelected officials in other units within the local government.
11. Prohibits a tax official from redisclosing TPT license information to an elected official or an elected official's staff.
12. Subjects, to confidentiality standards established by ADOR, redisclosure of TPT license information by a tax official.
13. Allows ADOR to disclose other confidential information to a law enforcement agency if provided with a grand jury subpoena or a court order, unless ADOR determines that the disclosure would seriously impair any civil or criminal tax investigation or if the disclosure would be contrary to certain sections of the Internal Revenue Code.
14. Allows information provided by an online lodging marketplace to be disclosed to a local government for the purpose of enforcing laws, regulations and ordinances adopted for the management of vacation and short-term rentals.
Verified Violation Penalties
15. Requires, if an operator fails to comply with TPT licensing and posting requirements, ADOR to impose a civil penalty of not more than:
a) $250 against the operator for a first offense; and
b) $1,000 against the operator for a second and any subsequent offense.
16. Requires, if an operator receives a verified violation, ADOR to impose a civil penalty of:
a) $500 against the operator for a first verified violation received for a property;
b) $1,000 against the operator for a second verified violation received on the same property within a 12-month period; and
c) $1,500 or 50 percent of the gross monthly revenue of the lodging accommodation at which the violation occurred for the month in which the violation occurred, whichever is greater, for a third and any subsequent verified violation received on the same property within the same 12-month period.
Miscellaneous
17. Defines verified violation as a finding of guilt or civil responsibility for violating any state law, local ordinance, certain local government regulations or prohibited vacation or short-term rental uses that have been finally adjudicated.
18. Defines tax official as a nonelected employee or the nonelected employee's designee or agent who is responsible for tax administration.
19. Defines terms.
20. Makes technical changes.
21. Becomes effective on the general effective date.
House Action
GOV 2/21/19 DPA 8-2-1-0
3rd Read 3/11/19 41-19-0
Prepared by Senate Research
March 26, 2019
MG/gs