Lodging Property Tax Treatment

Legislative Oversight Committee Concerning Tax Policy. The bill establishes that, for property tax years commencing on or after January 1, 2026, a short-term rental unit, which is an improvement that is designated and used as a place of residency by a person, family, or families, but that is also leased for overnight lodging for less than 30 consecutive days in exchange for a monetary payment (short-term stay) and is not a primary residence, and the land upon which the improvement is located, may be classified as either residential real property or lodging property. If, during the previous property tax year, a short-term rental unit was leased for short-term stays for more than 90 days, then it is classified as lodging property. Otherwise, it is classified as residential real property. Actual value for a short-term rental unit that is classified as lodging property is to be determined solely by application of the market approach to appraisal.

The bill also specifies, with an exception for a property that qualifies as a bed and breakfast, that a building designed for use predominantly as a place of residency by a person, a family, or families but that is actually used, or available for use, to provide short-term stays only is a hotel and motel.

For purposes of applying the classification of either residential or lodging to a short-term rental unit, annually, the assessor is required to send notice to owners of short-term rental units of the number of days during the prior property tax year that the assessor has determined the property was leased for short-term stays. An owner must sign and return the notice and, if the owner disputes the number of days the property was leased for short-term stays, the owner must provide evidence demonstrating a different number of days the property was leased for short-term stays.

Additionally, the property tax administrator is required to establish and administer a pilot program to develop a statewide database and uniform reporting system to track short-term rental units.

(Note: This summary applies to this bill as introduced.)