Baker Halts Momentum On Short-Term Rental Bill

Gov. Charlie Baker returned the Legislature's bill to tax and regulate short-term rentals on Wednesday, waiting until the day after the House and Senate adjourned formal sessions for the year to propose an amendment that would exempt homeowners that rent out their units for fewer than 14 days a year.

The governor is also proposing to limit the amount of information that will be made available through a new public registry of short-term rental housing units, and says changes to the definition of a short-term rental must be made in order not to violate the terms of the bonds used to finance the Boston Convention and Exhibition Center's construction.

The governor's amendment could imperil the compromise struck between the House and Senate, but should not come as a surprise to lawmakers.

House and Senate leaders, who sent Baker the bill on Monday, were briefed on some if not all of the governor's concerns Monday night, and the News Service reported then that Baker's team was considering an amendment to exempt units rented for less than 14 days.

According to a senior administration official, the governor offered at that time to return the bill before the end of formal sessions if House and Senate leaders would agreed to the changes. They did not.

"I guess we're not done," said Rep. Aaron Michlewitz, the House chair of the Financial Services Committee and the lead House negotiator on the Airbnb bill.

Asked if he thought the amendment could be dealt with during informal session, when any lawmaker can block action on any bill, Michlewitz said, "We'll see. I haven't seen the language so it's hard to comment until I see what they actually filed but I did have a conversation with them and I'm disappointed, but he has the right to do it and we'll see if we can keep talking."

The amendment filed by Baker would allow property owners that casually rent their houses or apartments for two weeks or less to avoid having to collect the state's 5.7 percent per night lodging tax from guests, register with the state or obtain $1 million liability insurance policy on their property.

The 14 days threshold is significantly smaller than the 150 days Baker proposed in his own bill, but would address the governor's concern that people renting their houses through Airbnb for a few days to generate some income not be treated like professional property owners operating de facto hotels.

"This change would exempt those who participate in this new industry only occasionally, while allowing the extension of fair tax treatment to the growing short-term rental sector as it competes with hotel and motel businesses," Baker wrote in a letter to lawmakers.

The administration estimates that the change would reduce the state's projected new revenues of $25 million by $300,000 and exempt about one-sixth of operators who would otherwise be required to register and collect and remit taxes.

The hotel industry has urged Baker to sign the compromise bill, while Airbnb has raised objections to the Legislature's proposal to make Massachusetts the first state in the nation to maintain a publicly accessible registry of all short-term rental units.

"While we appreciate the Massachusetts Senate and House for their progress on home sharing policy and taxation, a public registry of our hosts sets a precedent that negatively impacts families who home share, and the state's reputation as a business leader," Airbnb spokeswoman Crystal Davis said in a statement.

Baker's amendment would add a layer of privacy to the registry by eliminating the "personally identifiable information" from the registry.

The third section of the bill that the administration took issue with was the Legislature's decision to change the legal definition of "occupancy," which controls when the lodging tax is applied.

Current law defines occupancy for the purpose of a hotel or motel rental as a unit rented for up to 90 days. If a guest stays in a unit longer than 90 days, they no longer have to pay the tax and become subject to landlord-tenant laws.

The compromise Airbnb bill proposes to reduce that window to 31 days, but Baker said that would run afoul of the bond convenants for the Boston Convention and Exhibition Center in South Boston that were agreed to based on a defined revenue stream from hotel room rentals. For the same reason, Baker said a 2.75 percent tax on hotel rooms in Boston and select other cities, which is currently earmarked for the BCEC, cannot be diverted when it is applied to short-rentals through Airbnb or other websites to the state's general fund and the local city.

The governor's amendment proposes to restore the 90-day definition of a short-tern rental, and ensure that the 2.75 percent add-on tax on units rented in Boston, Springfield, Cambridge, Worcester, Springfield, West Springfield and Chicopee remains dedicated to the BCEC.

Sen. Michael Rodrigues, the lead Senate negotiator on the compromise bill, could not immediately be reached for comment.

Baker, in his amendment letter, expressed general support for the bill.

"I support leveling the playing field in the accommodations industry by obligating those individuals or businesses who are running hotel-like businesses to collect and remit the room occupancy tax," Baker wrote.

The House and Senate will now have to figure out whether they can address the governor's amendment -- either adopt it, reject it and return to him the original bill, or propose a third way -- in informal session when an objection for any one lawmakers can halt action.

In the House, 30 members voted against the compromise and in the Senate there were eight no votes.