HomeMy WebLinkAboutSB 133 - Transient Occupancy Taxes (TOT)REQUEST:
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DATE:
CONTENTS:
Recommendation
CITY OF PALM DESERT M'
OFFICE OF THE CITY MANAGER
STAFF REPORT
CONSIDERATION TO APPROVE A LETTER OF OPPOSITION FOR SB
133 (MCGUIRE)-TRANSIENT OCCUPANCY TAXES (TOT).
Stephen Y. Aryan, Risk Manager
July 14, 2016
1. SB 133 (McGuire) Bill Text
2. League of California Cities Opposition Letter ( dated June 21, 2016)
By Minute Motion, approve a letter of opposition for SB 133 (McGuire).
Commission Recommendation
The Palm Desert Legislative Review Committee did not meet in June and has not reviewed
this matter. Given the urgency of this legislative matter, Staff opted to bring it to the City
Council at their next regularly scheduled meeting.
Background
SB 133 (McGuire) is based on SB 1102 (McGuire) by the same author and would create an
optional statewide program related to the collection of transient occupancy tax (TOT) for units
offered by online short-term rental platforms. Examples of such platforms include Airbnb,
HomeAway (VRBO) and Flipkey. Please note that SB 1102 was held in Senate
Appropriations Committee last month and did not move on to the Assembly.
SB 133 contains too many unresolved issues surrounding the collection and payment of TOT
by short-term rental platforms. Of concern to the League of California Cities is that it would
shield platforms from disclosing basic transaction information necessary to verify that the
appropriate amount of TOT had been paid. Instead, the State Controller's Office would be
granted authority to "review" or audit such data with a lack of sufficient detail to ensure local
ordinances are complied with.
In addition, there are other revenue implications in SB 133. This measure lacks a critical
definition of "residential unit" made available through a platform. This creates confusion for
TOT collection by other types of lodging (such as hotels and motels) and has already been a
source of previous litigation. As TOT funds are an integral revenue source for Palm Desert,
Staff respectfully requests the City Council oppose this legislation.
Staff Report: SB 133 (McGuire)
July 14, 2016
Page 2 of 2
Fiscal Analvsis
Although a direct fiscal impact is currently unquantifiable, this legislation can negatively affect
the collection and payment of TOT by short-term rental platforms.
Submitted By:
Stephen Y. Ar�a n, Risk M nager
Reviewed
Lori Carney, Hu an Resources Director
Approved By:"
McCarthy, City
AMENDED IN ASSEMBLY JUKE 21, 2016
AMENDED IN ASSEMBLY JUNE 20, 2016
AMENDED IN ASSEMBLY JUNE 10, 2016
SENATE BILL
No. 133
Introduced by Senator McGuire
January 22, 2015
An act to add Chapter 1.1 (commencing with Section 7283.60) to
Part 1.7 of Division 2 of the Revenue and Taxation Code, relating to
hosting platforms.
LEGISLATIVE COUNSEL'S DIGEST
SB 133, as amended, McGuire. Transient occupancy taxes: hosting
platforms: collection.
Existing law authorizes a city, county, or city and county to impose
taxes within its jurisdiction, as provided, including a transient occupancy
tax.
This bill would authorize a city, county, or city and county to elect
to allow platforms, as defined, that elect to assume the responsibility
of collecting and remitting transient occupancy taxes on behalf of
operators, to collect and remit those taxes to that city, county, or city
and county, as specified. For cities, counties, and cities and counties
that notify the Controller of their election by April 30, 2017, and for
platforms that notify the Controller of their election by March 1, 2017,
this collection and remittance would begin on July 1, 2017. For
platforms and cities, counties, or cities and counties that provide
notifications to the Controller after those dates, the collection and
remittance would begin at least 6 months after notification, as specified.
The bill would authorize a city, county, or city and county to discontinue
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SB 133 —2—
an election and would make this discontinuance effective at least 6
months after notification to the Controller. The bill would also authorize
a platform to discontinue its election, entirely or in part, effective as
specified.
This bill, by December 31, 2018, and by December 31 of each year
thereafter, would require the Controller to review or audit a platform's
collection and remittance of tax revenue pursuant to the above -described
provisions, would further require the Controller to submit a final report
containing specific information to each city, county, or city and county
in which the platform collected and remitted taxes, and would authorize
the platform or the city, county, or city and county to appeal findings
identified in the report, as provided.
Existing constitutional provisions require that a statute that limits the
right of access to the meetings of public bodies or the writings of public
officials and agencies be adopted with findings demonstrating the
interest protected by the limitation and the need for protecting that
interest.
This bill would make legislative findings to that effect.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: no.
The people of the State of California do enact as follows:
1 SECTION 1. Chapter 1.1 (commencing with Section 7283.60)
2 is added to Part 1.7 of Division 2 of the Revenue and Taxation
3 Code, to read:
4
5 CHAPTER 1.1. VOLUNTARY OCCUPANCY TAX COLLECTION
6
7 7283.60. For purposes of this chapter, the following terms have
8 the following meanings:
9 (a) "Participating platform" means a platform that assumes the
10 responsibility for collecting and remitting to a city, county, or city
11 and county on behalf of an operator in a participating jurisdiction
12 pursuant to this chapter, the amount of transient occupancy tax on
13 a rental transaction that is facilitated by the platform for a unit that
14 is offered for occupancy for tourist or transient use for
15 compensation to the operator within a participating jurisdiction.
16 (b) "Participating jurisdiction" means a city, county, or city and
17 county that has adopted a resolution that permits a participating
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platform to collect and remit all transient occupancy tax on rental
transactions that are facilitated by the platform for any unit that is
offered for occupancy for tourist or transient use for compensation
to an operator within its jurisdiction and has notified the Controller
pursuant to subdivision (b) of Section 7283.63, and in which a
participating platform is collecting and remitting transient
occupancy tax on rental transactions that are facilitated by the
platform for any unit that is offered for occupancy for tourist or
transient use for compensation to an operator within its jurisdiction.
(c) "Operator" means a person offering, through a platform, to
make a unit available for tourist or transient use.
(d) "Personally identifiable information" means operator
information and identifiable transaction -level records. "Operator
information" means a taxpayer's or operator's identifying
information, including without limitation, the taxpayer's or
operator's name, the taxpayer's or operator's address, and the
property address of any unit made available by an operator or
occupied by a taxpayer through a participating platform.
"Identifiable transaction -level records" means any information
that reveals the amount of rent collected or the amount of transient
occupancy tax collected with respect to any individual transaction
or any individual operator.
(e) "Platform" means a marketplace that is created for the
primary purpose of facilitating the rental of a unit offered for
occupancy for tourist or transient use for compensation to the
operator of that unit, and the owner of the marketplace derives
revenues, including booking fees or advertising revenues, from
providing or maintaining that marketplace. "Facilitating" includes,
but is not limited to, the act of allowing the operator of the unit to
offer or advertise the unit on the Internet Web site provided or
maintained by the owner of the platform.
(f) "Transient occupancy tax" means a tax on the privilege of
occupying a room or rooms, or other living space, in a hotel, inn,
tourist home or house, motel, or other lodging unless the occupancy
is for a period of more than 30 days.
7283.61. On and after July 1, 2017, every participating platform
shall collect on behalf of an operator the amount of any transient
occupancy tax on every rental transaction that is facilitated by the
participating platform for a unit that is offered for occupancy for
tourist or transient use for compensation to the operator and is
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1 located within a participating jurisdiction. The participating
2 platform shall remit the amount to the participating jurisdiction
3 pursuant to applicable requirements of local ordinances governing
4 the remission, but not the reporting, of the tax.
5 7283.62. On or before March 1, 2017, the Controller shall
6 develop and publicly notice both of the following:
7 (a) Procedures that a platform shall use to notify the Controller
8 if the platform elects to, or discontinues its election to, become a
9 participating platform.
10 (b) Procedures that a city, county, or city and county shall use
11 to notify the Controller if the city, county, or city and county elects
12 to, or discontinues its election to, become a participating
13 jurisdiction.
14 7283.63. (a) On or before March 1, 2017, a platform may elect
15 to become a participating platform by using the procedures
16 developed pursuant to subdivision (a) of Section 7283.62 to notify
17 the Controller of the platform's election.
18 (b) On or before April 30, 2017, a city, county, or city and
19 county may elect by resolution to become a participating
20 jurisdiction by using the procedures developed pursuant to
21 subdivision (b) of Section 7283.62 to notify the Controller of the
22 city's, county's, or city and county's election.
23 (c) An election made pursuant to this section is effective upon
24 receipt by the Controller and until discontinued by the platform
25 or city, county, or city and county pursuant to Section 7283.65,
26 except that a city, county, or city and county's election pursuant
27 to this section shall not be effective as to a participating platform
28 that, on or before June 15, 2017, notifies the Controller that the
29 participating platform will not collect and remit transient occupancy
30 tax in the city, county, or city and county.
31 (d) The Controller shall publicly identify, by posting on the
32 Controller's Internet Web site, each platform and each city, county,
33 or city and county that has provided a notification to the Controller
34 pursuant to this section as soon as possible upon receipt, but in no
35 event later than May 31, 2017.
36 7283.64. On or after July 1, 2017, a platform that did not elect
37 to become a participating platform pursuant to Section 7283.63 or
38 had previously elected to discontinue its status as a participating
39 platform may elect or reelect to become a participating platform
40 by using the procedures developed pursuant to subdivision (a) of
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SB 133
Section 7283.62 to notify the Controller of the platform's election.
An election made pursuant to this section is effective six months
after receipt by the Controller or the date specified in the notice,
whichever is later, and until discontinued by the platform pursuant
to Section 7283.65. The Controller shall publicly identify, by
posting on the Controller's Internet Web site, each platform that
has provided a notification to the Controller pursuant to this section
as soon as possible upon receipt.
7283.65. (a) A participating platform may elect to discontinue
its status as a participating platform by using the procedures
developed pursuant to subdivision (a) of Section 7283.62 to notify
the Controller of the participating platform's election. An election
made pursuant to this subdivision is effective on the first day of
the month that is six months after the date of the election. A
participating platform may notify the Controller that the
participating platform will discontinue collecting and remitting
transient occupancy tax in any participating jurisdiction that
amends or otherwise alters the ordinance, rules, or provisions
applicable to transient occupancy tax in the participating
jurisdiction upon the effective date of the amendments or
alterations.
(b) On or before June 30, 2018, or June 30 of any year thereafter,
a participating jurisdiction may elect to discontinue its status as a
participating jurisdiction, or a city, county, or city and county may
elect to become a participating jurisdiction, by using the procedures
developed pursuant to subdivision (b) of Section 7283.62 to notify
the Controller of the participating jurisdiction's or city's, county's,
or city and county's election. An election made by June 30 of any
year pursuant to this subdivision is effective on January 1 of the
following year after the election, except that a city, county, or city
and county's election pursuant to this subdivision shall not be
effective as to a participating platform that, on or before November
15 of the year in which the election is made, notifies the Controller
that the participating platform will not collect and remit transient
occupancy tax in the city, county, or city and county.
(c) The Controller shall publicly identify, by posting on the
Controller's Internet Web site, each platform and each city, county,
or city and county that has provided a notification to the Controller
pursuant to this section as soon as possible upon receipt.
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1 7283.66. (a) By December 31, 2018, and by December 31 of
2 each year thereafter, the Controller shall review or audit a
3 participating platform's collection and remittance of tax revenue
4 pursuant to Section 7283.61 and shall submit a final report to each
5 participating jurisdiction in which the participating platform
6 collected and remitted taxes. The final report shall not disclose
7 any personally identifiable information and shall contain only the
8 following information:
9 (1) A general description of the Controller's review or audit
10 findings.
11 (2) The aggregate amount of taxes collected and remitted to
12 each participating jurisdiction by each participating platform during
13 the period covered by the report.
14 (3) An identification of any errors in the collection and
15 remittance of tax revenues within the participating jurisdiction that
16 were determined as a result of any review or audit in the
17 participating jurisdiction that were not remediated, including by
18 payment of all amounts owing, within 90 days.
19 (4) The participating platform's response, if any, to errors
20 identified by any audit or review in the participating jurisdiction
21 that were not remediated, including by payment of all amounts
22 owing, within 90 days.
23 (b) (1) The Controller shall only request the participating
24 platform to submit personally identifiable information as
25 reasonably necessary to (i) verify a participating platform's proper
26 application of geographic boundaries and (ii) verify proper
27 collection and remittance of transient occupancy tax, and shall not
28 disclose to a participating jurisdiction, publicly disclose, or
29 otherwise make known in any manner whatsoever any personally
30 identifiable information obtained from a participating platform or
31 other person in the course of conducting an audit or review required
32 by this section.
33 (2) When requested by a participating jurisdiction, the Controller
34 shall permit any duly authorized officer or employee of that
35 participating jurisdiction to examine the records of the Controller,
36 excluding any personally identifiable information, pertaining to
37 any audit or review of collections by a participating platform within
38 that participating jurisdiction. Except as otherwise provided herein,
39 this paragraph shall not be construed to allow any officer or
40 employee of that participating jurisdiction to request or examine
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-7— SB 133
1 any records other than records in the Controller's possession that
2 were obtained in the course of its review or audit of transient
3 occupancy taxes collected by a participating platform within that
4 participating jurisdiction.
5 (c) A platform or a participating jurisdiction may appeal any
6 findings identified in a review or audit report submitted pursuant
7 to subdivision (a) by providing a notice of appeal to the
8 Controller's General Counsel. The notice of appeal shall be filed
9 within 60 days from the date of the final review or audit report
10 and shall identify the issues being appealed and the basis and
11 reason for the appeal. The Controller's General Counsel shall
12 review the issues appealed and may hold an informal appeal
13 conference for purposes of taking additional information and shall
14 issue a determination within 90 days of receipt of the appeal.
15 (d) The Controller may recover the reasonable costs, measured
16 by the Controller's standard rate, of an audit or review conducted
17 pursuant to subdivision (a) or an appeal conducted pursuant to
18 subdivision (c) from the participating platform that was audited
19 or reviewed.
20 (e) This section shall not apply to cities, counties, or cities and
21 counties that are not participating jurisdictions.
22 7283.67. This ehapter does not limit the existing atitherity epf
23 � -3Yneludirtg
24 any loeal regulation that requires operators tz r_
25 eoneerning-tlaioaions eendueted inL v tj, za ,
26 ided'do not diseriminate ag
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28 7283.68. A participating platform's collection and remittance
29 of transient occupancy tax pursuant to this chapter shall be subject
30 to audit or review only by the Controller, pursuant to the
31 requirements of Section 7283.66. A participating platform shall
32 not be required to comply with audit or review requirements or
33 requests regarding the participating platform's collection and
34 remittance of transient occupancy tax pursuant to this chapter in
35 any participating jurisdiction, or to related requests or requirements
36 for personally identifiable information, by any participating
37 jurisdiction.
38 7283.69. A participating platform that complies with audit or
39 review parameters established by the Controller pursuant to Section
40 7283.66 shall not be required to provide personally identifiable
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SB 133 — 8
1 information to a participating jurisdiction, except pursuant to an
2 order by a court of competent jurisdiction.
3 7283.70. This chapter shall not be construed-ar, :, c.µt::,g to alter
4 or otherwise modify any legal duty or requirement for a
5 participating platform to collect or remit transient occupancy taxes
6 in a city, county, or city and county that is not a participating
7 jurisdiction.
8 SEC. 2. The Legislature finds and declares that Section 1 of
9 this act, which adds Section 7283.66 to the Revenue and Taxation
10 Code, imposes a limitation on the public's right of access to the
11 meetings of public bodies or the writings of public officials and
12 agencies within the meaning of Section 3 of Article I of the
13 California Constitution. Pursuant to that constitutional provision,
14 the Legislature makes the following findings to demonstrate the
15 interest protected by this limitation and the need for protecting
16 that interest:
17 People who rent units for tourist or transient use through
18 platforms have a reasonable expectation of privacy, as against
19 public disclosure, in their rental of those units and in the personally
20 identifiable information they provide to platforms in connection
21 with those rentals. Limiting the disclosure of that personally
22 identifiable information in any records obtained or generated by
23 the Controller pertaining to audits or reviews of a platform's
24 collection and remittance of transient occupancy taxes furthers the
25 purposes of Section 3 of Article I of the California Constitution
26 by appropriately balancing the interest in public disclosure with
27 the interest in preserving the privacy and confidentiality of that
28 personally identifiable information.
❑C
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CAt 1 FORN I A
ASSOCIATION of
BOUTIQUE &
cabbiBREAKFAST INNS
CALIFORNIA
LODGING LEAGUEASSOCIATION ®
OF CALIFORNIA
LiCITIES
June 21, 2016
TO: Assembly Member Susan Talamantes Eggman, Chair
Honorable Members, Assembly Local Government Committee
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FR: John Caldwell on behalf of the California Hotel and Lodging Association and
California Association of Boutique and Breakfast Inns
Dan Carrigg, League of California Cities
Dorothy Holzem, California State Association of Counties
Karen Lange, California Association of County Treasurers and Tax Collectors
RE: Senate Bill 133 (McGuire) — Transient occupancy taxes: hosting platforms: collection.
Oppose - As amended June 20, 2016
On behalf of the above named groups, we write to notify you of our respectful opposition to Senate Bill 133 by
Senator McGuire.
SB 133 is based on SB 1102 by the same author that would create an optional statewide program related to the
collection of transient occupancy tax (TOT) for units offered by online short-term rental platforms. SB 1102,
however, was held in Senate Appropriations Committee last month and while we appreciate the author's effort to
try to address the concerns through the new vehicle we must regretfully remain opposed. The urgency behind the
measure is unfounded and we believe a more deliberate approach is called for to ensure the appropriate solution,
if one is needed, is in place.
Unfortunately, SB 133 contains too many unresolved issues surrounding the collection and payment of TOT by
short-term rental platforms such as Airbnb, HomeAway (VRBO) and Flipkey. While the stated intent of SB 133
is to help improve TOT collection, local agencies have fundamental concerns with this model because it would
shield platforms from disclosing to local entities basic transaction information necessary to verify that the
appropriate amount had been paid. The State Controller's Office would instead be granted authority to "review"
or audit such data with a lack of sufficient detail to ensure local ordinances are being complied with. Under the
current drafting, there would even be limitations for those agencies that choose to rely on their established local
authority and not participate in the statewide program.
Cities and counties today can, and do, enforce existing TOT on units offered by short-term rental platforms. In
addition, cities and counties have established specific agreements with the online rental platforms based on the
unique needs of each jurisdiction and more are under consideration today. Progress is being made at the local
level. However, SB 133 could close the door on the enforcement of other important local laws that regulate short-
term rentals for health and safety purposes. That's because under the terms of SB 133, information regarding the
short-term rental properties would be hidden from the cities or counties where they are located and expressly
prohibit that information from being accessed by local agencies.
There are other revenue implications in this measure as well. First and foremost, it lacks a critical definition of
"residential unit" made available through a platform. This creates confusion for TOT collection by other types of
SB 133 (McGuire) Oppose - Coalition Letter
June 22, 2016
Page 2
lodging (such as hotels and motels) and has already been a source of previous litigation. In addition, SB 133
solely provides for TOT collection but does not include other fees and assessments generally collected at the local
level, such as business and tourism improvement district assessments and various convention center expansion
fees, among others. Under SB 133, cities and counties would not be able to collect these fees, because again, all
the information would be intentionally hidden from the cities and counties.
We appreciate the author's past efforts to help cities and counties collect additional TOT in this emerging area of
our economy. Our associations did support the more flexible approach of last year's SB 593 (McGuire), which
unfortunately stalled. However, we regret to convey that SB 133 would create more concern than relief for local
agencies. The proposed model is simply not workable. For this reason, we must respectfully ask for a NO vote
on SB 133.
Cc: Honorable Mike McGuire, California State Senate
Debbie Michel, Chief Consultant, Assembly Local Government Committee
William Weber, Consultant, Assembly Republican Caucus