HomeMy WebLinkAboutAB2676 Transient Occupancy TaxesREQUEST:
DATE:
x e�
CITY OF PALM DESERT
COMMUNITY SERVICES DEPARTMENT
STAFF REPORT
CONSIDERATION OF LEGISLATIVE REVIEW COMMITTEE ACTION
ON AB 2676 (CALDERON) AT ITS MEETING OF MARCH 25, 2008
April 10, 2008
CONTENTS: AB 2676 Language
RECOMMENDATION:
By Minute Motion, concur with the action taken by the Legislative Review Committee at its
meeting of March 25, 2008, and direct staff to prepare a letter of opposition for the Mayor's
signature with regard to AB 2676 (Calderon) relative to transient occupancy taxes.
BACKGROUND:
Existing law authorizes cities to impose a tax on transient occupancy of a room or living space in
a hotel, tourist home, house, or other lodging. If passed, AB 2676 would make legislative
findings and declarations regarding Transient Occupancy Tax (TOT) and the retroactive
imposition of those taxes by certain local taxing authorities. It would prohibit cities that impose
TOT from retroactively imposing a tax in certain situations and would apply to Charter Cities.
Any regulation or restriction on the collection of TOT by the State of California to local agencies
will effect the manner in which we collect these monies, and again, could constitute a "take" of
local funds, which the City of Palm Desert depends upon to provide public safety, infrastructure,
traffic, etc., services to its residents and visitors.
Therefore, the Legislative Review Committee recommends that the City Council oppose AB
2676 and direct staff to prepare a letter stating that position to appropriate Legislators for the
Mayor's signature.
ji �C'&t/
PATRICIA SCULLY, CEE
SENIOR MANAGEMENT ANALYST
,n
SHEILA R. 6ILLIGAN
ACM/COMMUNITY SERVICES
PAUL GIBSON
DIRECTOR OF FINANCE/
CITY TREASURER
CARLOS L. OROGA
CITY MANAGER
REQUEST:
DATE:
CITY OF PALM DESERT
COMMUNITY SERVICES DEPARTMENT
STAFF REPORT
CONSIDERATION OF LEGISLATIVE REVIEW COMMITTEE ACTION
ON AB 2676 (CALDERON) AT ITS MEETING OF MARCH 25, 2008
April 10, 2008
CONTENTS: AB 2676 Language
RECOMMENDATION:
By Minute Motion, concur with the action taken by the Legislative Review Committee at its
meeting of March 25, 2008, and direct staff to prepare a letter of opposition for the Mayor's
signature with regard to AB 2676 (Calderon) relative to transient occupancy taxes.
BACKGROUND:
Existing law authorizes cities to impose a tax on transient occupancy of a room or living space in
a hotel, tourist home, house, or other lodging. If passed, AB 2676 would make legislative
findings and declarations regarding Transient Occupancy Tax (TOT) and the retroactive
imposition of those taxes by certain local taxing authorities. It would prohibit cities that impose
TOT from retroactively imposing a tax in certain situations and would apply to Charter Cities.
Any regulation or restriction on the collection of TOT by the State of California to local agencies
will effect the manner in which we collect these monies, and again, could constitute a "take" of
local funds, which the City of Palm Desert depends upon to provide public safety, infrastructure,
traffic, etc., services to its residents and visitors.
Therefore, the Legislative Review Committee recommends that the City Council. oppose AB
2676 and direct staff to prepare a letter stating that position to appropriate Lecisl 3torsi for tie 0
Mayor's signature. "44
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PAUL GIBSON
DIRECTOR OF FINANCE/ Co
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CARLOS L. OR i' GA H
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PATRICIA SCULLY, CFEE
SENIOR MANAGEMENT ANALYST
•' SHEILA R. 6ILLIGAN
ACM/COMMUNITY SERVI
CITY MANAGER
AB 2676 Asscmbly Bill - INTRODUCED Page 1 of 4
BiL� Ni;MLiEIt: A3 7676 INTRODCCED
BIL� l'�XT
TI�''"ROC;JCEU QY Ilssembly Member Cl:arles Calderon
FEBRUA'�Y 22, 20G8
I1n act to add Secti.on 728�. 5 to the Revenue and 'Paxation Code,
relating to �axat�on.
LFG�jLATIVE COUNSEi.,'S DIGEST
AB 2676, as introduced, Crarles Calderor,. Taxation: transient
occupancy tax.
�xisting law author'_zes the '_egislative body of a city or county,
or a city and courity to ir�pose a tax ori transient occupancy of: a rcom
or living snace in a ho�ei, inn, tou�'_st home or house, motel or
o�her lodqiny. Existir�y '_aw also reaL;res the ].eqislative body of a
c�.ty or county, or a city and cotinty thaL elects to exempt fr.om these
�axes cerLai:� �orei an, state, and local govern:�•.ental err�ployees and
off i cers to create a �orrr, fo� these errployees an<i offi_cers to cla.i.m
the exe:npt�on.
This nil� wo�':.d make legislative findir:gs and declarati.ons
regardinq transient ocr_u�ancy tax, and t�e �etroactive irrposi.tion of
those taxes �y cer�ain local �ar,iny author'_ties.
"'his bil] �,vould rrcrilD'-~ a city, county, o� city a*�d ccu:�ty �hat
impeses a �ransien' occupUncy tax fror,l retreactively imposina t�at
tax in certain situations, as specif�ea. Th.is bill would also aPnl.y
to charrer c.ities.
Vote: major�ty. Appropriation: no. r'iscal coRuriittee: no.
State-r.tandated ioca]. prograrr,: no.
THE PEO'LE OE' 'PHE STA='E Oc CA:�I�ORN�A '::C ENACT AS �OL:�OnrS:
S=C'?'ION � . T:�e Lecisla:.Lre tiereby fir:as and declares all of �:ne
fol�.ow�r.c•
�a) Vir.tually every city, courty, and ci�y and county in the State
of Californi.a nas er.acLed a t:.�x on tr.ar�sien� occupancy of hetels,
inns, and simi .�3r transi.er.t iodginq establis:i:r;e:its. 'ihese taxes,
com.Tenly known dS "1:.ransient oc:�upancy -ax�� (OY' ���'�)1��� � ��beC� tdX� �� OT
"hote'_ tax, " are universa�ly imposed on �he guest for the priv�lege
of occupyinq a room in tne trar:sie:it lodg'_r.g cstabli.shrnent .
;b; Althougn Lhe legal incicience o`: *�_s tax fall.s on the gues�,
`�e ordinar.ces Wr.��r� c.reate a:�d im:�.le*nen� these taxes �n;pose cr. the
or�erators Or OWCPLS of. t:ie lcdg_'ng establ_shr�er.ts, or both, the
obligalio:� to ccilec� the tax and r.emit it tc the local tax
collect�ori aaency. =a_lure of an owner or oPerator to coilect and
r.emit the tax at the time, and in the manner, specified by the local.
`ransient occuparicy tax ordinance subjects the owner and operator, or
bo�'�, to civi.l liability, including penalties a:�d ir,terest on
delinquer.t tax payments, amo�q other iiabilities �nd ob_igations.
;c) '1'raditionally, t�ese local trar.si.enL occupar.cy taxes have been
calculated by the taxirig �liT1SC�1Ctions on tne basis of multiplying
ri�e guest 's roo�n rate (the rr.u�:tiplicand) by tne `ax �ate (the
m�ultipl�er) . For exUmn]e, �i the room rate is �ifty dol..!ars ;$50) ner
niqht ar.d the �ec:al �ransient o�cupa:ic:y :.ax rate i s ] 0 per<,enL, �he
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AB 2G76 Asscmbly Bill - INTRODUCED Page 2 of 4
transient ccc�spancy tax is five collars ($5) for each night a guest
stays at tne establishme:�t .
(d) In recen� years, however, mar.y local �ransient occupancy tax
jur..isdictions have ccrr�enced interpreting tY:eir respec:tive transient
occ�spancy t�x ordinances to s�art, �or Lhe first time, to include
withir, the multip'icand to which the rnultiplier tax rate is applied
amounts of Money paid by quests over and above what they pay as tfie
actual room rate for staying � n the establishmen�. For exarZple, in
2003, ihe Sar. Fran�isco treasurer and tax co].l.ector advised transient
loaginq operato�s that �he Ci.ty and County ef SUr. Francisco's hotel
tax of i4 percent �ow applied to such thi.ngs as "Charqes for parkinq
(includi:ig valet services) for notc�l guests, " including, charges to
hotel cuests for parkir:g located on the hotel oremises regardless how
chargec, and ct-:arges to hete' gues�s f.or parking located off �he
hotel prem.ises where such cnarae is added to the room bi.11 and paid
to the l:otel operator. Prio� to �his time, the City and County of Sa:�
Francisco tiad never iT.posed its trar.sier.t occUpancy tax on amounts
guests pa�d for parking, had never informed .lodging owners and
operators that gues�s owea any sucn parking fees, ar.d had r.ever
sought �o co.11ect trar.sient ocrupancy tax on such parkir.g fees. 'Phus,
for exaT.ple, _f o guest in San Francisco paid two hundred dollars
(5200) to s::ay in a guest roo*�t and also (S20) as a parking fee, �he
Sari Eranc�sco transien� cccupancy tax amounts to thirty dollars and
eighty cents ($30. 80) , insteau of the twe-�ty-eight dollars ($28) tax
that applied prior Lo San Francisco's 2003 oarking fee "guidelines. "
Similarly, other iurisdictions have started to levy tr,eir
transient occupancy taxes w�th respect to amou�its and circuMstances
that had not beer: supject to �hose taxes previously. I� i.s not
uncor,unor. =or icc31 �ur.isdictions to '_evy tre:� respec: ive trar.sien`
occupancy laxes w� ;n respect to "coMp'_�r�entary" rcoms, for which �he
lodying operater rece.ives r.o consiaerat�on, attri.tion and
cance�l.ation �ees in grcup contracts, and o`her charges paid by
quests.
(e) Simil.arly, a nt:iriber of local tra:�sient occspar.cy tax
jurisdictions have commer�ced interpreting their respective transient
occspancy tax ordiriances to require tt-:at guests who are exempt from
that tax pr.oduce do::urrientatior: over ar.d abcve tre documentation that
was previous:Ly required by the �ax jt�r�sdicticr. to establisn the
ques�s' riqht: �o �he excn;ct i.on. Fer exarip.le, many loca� jur:i.sdict�ens
exen:tit fror� tnei.r zespective �rar.sient occu�ancy taxes employees o�
:.'a�i�ornia and �he fede-al goverr�menl wf�ile �raveling on official
business. �n order to be exetzipt frorn the transie:i� occuparicy tax,
these guests are recuired to compleLe specified exempti.ori
documentation, �s prescriped by tt�e taxirig authorities. Recently, at
!east or.e city has inforrr,ed its tra:�sient �odqiriy operators lhat ever.
thouqti their gcvcrn;r�er.t-c:r�ployee guests compiete the samc
docurne:�t-.atior: that has alw�ys bee:� required, the operators must now
presen� ac.`uai. government-issued trave] orders as a prerequis.ite to
�e: r.g er.ti;..led to thc exempticn. F'a;'ure o� the lodgirig opera�ors to
now ;:ollect s�cl; travel orders exposes tt-:e operator to 1=ai�ility for
the tax wl:ic:i the exei�pt eMNloyee tivot:ld have oaid.
(f) I:� the vas� majorl.ty of tt:e situations referred to in
subdivisions (d) anci (e; , the local taxing auttiori.ties have created
these new tax liabilities wit:nout amending their respective trans.ient
occupar.cy tax ordinances and without seeking any approval from their
r�soect�ve ele;torates.
(g) Ir. a great many of tnc cases referred �o in subdivisions (d;
ar,d (e) , the lccal. �axi.r.g author�ties have not only svught to apply
the�e new �.ax rule5 prespective�.y, but they also seek to collect
thc:se a:nc�rits retrcactively, �:n many cases un to three years. Tn such
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AB 267G Assembly Bill - INTRODUCED Page 3 of 4
situat�ons, t:�e 'ax authorities !�ave requireci lodqing operators to
pay �he new tax amounts alieaed to be owing, but also penalt:ies and
interest relater.' tnereto.
(h) Ir�asmuch as the leqal incidence of loca� transient occupar.cy
taxes fa] ]. on tne guesls who stay in trar.sient lodqinq
establishments, regardless of ttie amount of the taxes, ar,d inasmuch
as lodgir,q operators or owners, or both, are liable for collecting
�hose taxes from the guests and re:nitting them to the taxing
authorities, it is imperative that lodqing cperators know at tFie tir�e
thaL they receive paymenY_ from �heir guests what the total transient
occupancy tax liability wil] be so that they can coll.ect the full
amount owir.g and remit the same to �he �axing authority. If, however,
-hese new tax 'evi.es are appii.ed retroactively, the lodging operator
wi'� bc unable, bo�ti .f:ror� a orac�ical standpoint and from a Legal
standpoint, to obtain pay:�tent t:�ereof from the people legal] y liab;e
for the tax, �'ie establisnr�ent 's quests.
(i) '�he retroacti.ve app'_icatior. of this type oL` new transient
occupancy tax 1_ability ir, tt:ose situati.ons co�rpels the impermissible
stiif.ting of the liabi�ity for the tax `rom the guest tio the operator
or owner, or bot:�, of the tra:�sient lodging establist�ment .
;j ) Assurninq �hat the types of new impos�tions cf tax described i:�
s�aUdivis-ons (d) and ;e) are l.aw�ul pr.ospect�ve'_y notwithstanding
the fact that �hey d�d not recei.ve approval by :�ocal voters as
contemplated by Proposit.i.on 218, and notwi�hstanding the fact that
��any of t"�em �vere .imoosed wi.thout _`ormal amend:r,ent of the underlying
transient occupancy �ax o-dinances (whic:� issues the Legi.slature
expre�ssly declines �o add�ess in t:�is leqislation) , the Legislature
finds ar.d declares that the i:npcsi�i.on of these new tax levies on a
retrc�::��-ve basi� vici.a�es the fsndamer.tal dUe process riqh�s of �ne
owners anc opera�ors of transient �cdgir.g establisYiR�.ents, as
quaranteec: by Sect�.on 7 or 71rY.icle 2 of tne Califor�ia Constitution,
ar.d there�ore those tax levies should be pronibi�ed.
(k) T?�e �eqislature finds tnat this legislation is declaratory of
ex=stir,g cor.stitutiona� law with respect to both ger.eral law cities
and cna�ter ciLi.es.
S��. 2. Sect�or. 7?82.5 i s added Lo tYie Rever�Ue and '1'axatior Code,
to read:
72�2. 5. ;ai Norw�thstar.dirg any ott-:cr provision of law, a ci�y,
cou:�ty, or city and county snal.i r.et retroactively levy a trar.sieri�
occupar.cy tax, wnetl:er au�horized by Secti.on 7280, by local char�er,
or otnerwise, in ar.y amount in either of tne �ollowinq situations:
(1) When the ITili� C:Lp�1Cul"1CI amount wnic� is miiltipl.:ed by tihe
tr�r.sier:t occupancy tax rate is sough�, to be exparided by a
jurisdiction to include any item, transact�on, amount, type of
charge, or. type of payirient, iriclud.ing, but not iimited to, parkir.g
fees, attrit-or� fees, compl`rr.entary rooms, cancellation fees, and
"reward" or "po�nt" redemptions, whi;:h is nct express' y and with
ur;ambigi:ous specificity se� £ort:i in the jurisdic�ion's transier.t
occuPancy tax ordinar.ce, and which was r.o� r�reviously �axed by t:he
j�,r�sdictior. under its transient occupancy tax ordinance.
(2) iN:�en the owr,er or opera�or oL a transient lodging
establishment p-esents the documenta�ion, which the jurisdiction has
ereviously required and found accentable for purpose of establishing
that ar.y particular guest was entitled to exemption under the
applicable transient occupancy tax ordinance, and the taxing
authority determir.es that additior.al documentation or records wil..l
the�eafter bc reaLired to cstablist� that ariy particu]ar guest was
ent iti ed to exe:��.pt i on ur:de: that ordinance.
(b) This sec�.ion s��ail also apply to charter cities.
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AB 267G Assembly Bill - INTRODUCED Page 4 of 4
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