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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
AMENDED
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 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 make a reasonable attempt to notify an owner or the owner's designee of a citation within seven business days after the citation is issued using the contact information provided by the owner.
5. States that a local government is not required to provide notice of a citation to vacation or short-term rental owners that are not required by a local government to provide contact information before offering the rental for rent.
6. Requires, within 30 days after a verified violation, a local government to notify ADOR and the vacation or short-term rental owner of the verified violation of the local government's applicable laws, regulations or ordinances and, if the owner received the verified violation, whether the local government imposed a civil penalty on the owner and the amount of the civil penalty, if assessed.
7. Specifies that if multiple verified violations arise out of the same response to an incident at a vacation or short-term rental, those verified violations are considered one verified violation for the purposes of assessing civil penalties.
8. Prohibits a vacation rental or short-term rental from being used for nonresidential purposes, including for a special event that would otherwise require a permit or license pursuant to a local government ordinance or a state law or rule or for retail use, restaurant use, banquet space or other similar use.
Verified Violation Penalties
9. Requires an operator, if an operator fails to comply with TPT licensing and posting requirements, to pay the following civil penalty:
a) $250 for a first offense; and
b) $1,000 for a second and any subsequent offense.
10. Requires an operator, if an operator received a verified violation, to pay the following civil penalty:
a) for a first verified violation received for a property:
i. $500, if the local government did not impose a civil penalty on the operator; or
ii. the difference between $500 and the amount of the civil penalty the local government imposed on the operator for the verified violation;
b) for a second verified violation received on the same property within a 12-month period:
i. $1,000, if the local government did not impose a civil penalty on the operator; or
ii. the difference between $1,000 and the amount of the civil penalty the local government imposed on the operator for the verified violation;
c) for a third and any subsequent verified violation received on the same property within a 12-month period:
i. $1,500 or 50 percent of the gross monthly revenues of the lodging accommodation at which the violation occurred for the month in which the violation occurred, whichever is greater; or
ii. the difference between $1,500 or 50 percent of the gross monthly revenues and the amount of the civil penalty the local government imposed on the operator for the verified violation.
11. Allows a hearing officer, if the operator appeals the civil penalty, to waive or lower a civil penalty for a first verified violation based on the operator's diligence in attempting to prohibit renters from violating state law or a city or town's applicable laws, regulations or ordinances.
12. Requires a hearing officer, in determining whether to waive or lower a civil penalty, to consider:
a) whether rules that prohibit activities violating state law or the city's or town's applicable laws, regulations or ordinances were included in the advertisement for the lodging accommodation, vacation or short-term rental; and
b) whether the prohibited activity rules were posted in a conspicuous location inside the lodging accommodation, vacation or short-term rental.
13. Defines, for the purposes of verified violation penalties, online lodging operator as a person that is engaged in the business of renting to an occupant, including a transient, any lodging accommodation in Arizona offered through an online lodging marketplace and includes an owner of a vacation or short-term rental that is not offered through an online lodging marketplace.
Confidential Information Disclosure
14. Allows a local government tax official, if there is a legitimate business need relating to enforcing specified laws, regulations and ordinances, to redisclose TPT license information relating to a vacation or short-term rental property owner or operator from the new license report and license update report, if the information is limited to the:
a) TPT license number;
b) type of organization or ownership of the business;
c) legal business name and, if different, the doing business as name;
d) business mailing address, tax record physical location address, telephone number, e-mail address and fax number;
e) date the business started in Arizona, the business description and the North American Industry Classification System Code; and
f) name, address and telephone number for each owner, partner, corporate officer, member, managing member or official of the employing unit.
15. Limits redisclosure to nonelected officials in other units within the local government.
16. Prohibits a tax official from redisclosing TPT license information to an elected official or an elected official's staff.
17. Subjects, to confidentiality standards established by ADOR, redisclosure of TPT license information by a local government tax official.
Miscellaneous
18. Defines verified violation as a finding of guilt or civil responsibility for violating any state law or local ordinance relating to prohibited vacation or short-term rental uses that have been finally adjudicated.
19. Defines tax official as a nonelected employee or the nonelected employee's designee or agent who is responsible for tax administration.
20. Defines terms.
21. Makes technical and conforming changes.
22. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Specifies that a vacation or short-term rental may not be used for a special event that would otherwise require a permit or license pursuant to a local government ordinance, state law or rule.
2. Requires a local government, if a property owner received the verified violation, to state whether there was a civil penalty imposed on a property owner.
3. Specifies that if multiple verified violations arise out of the same response to an incident at a vacation or short-term rental, the verified violations are considered one verified violation for the purpose of assessing civil penalties.
4. Removes law enforcement agencies from the authorized recipients of confidential information.
5. Removes confidential information disclosures, with exceptions.
Amendments Adopted by Committee of the Whole
2. States that a local government is not required to provide notice of a citation to vacation or short-term rental owners if contact information has not been provided to the local government.
3. Stipulates penalty amounts based on whether a civil penalty was imposed for the verified violation.
4. Allows a hearing officer to waive or lower the civil penalty for a first verified violation if an operator appeals a civil penalty and requires the hearing officer to consider certain criteria in determining whether to waive or lower a civil penalty.
5. Makes technical and conforming changes.
House Action Senate Action
GOV 2/21/19 DPA 8-2-1-0 COM 3/28/19 DPA 4-2-2
3rd Read 3/11/19 41-19-0
Prepared by Senate Research
April 29, 2019
MG/gs