Agenda Item 73
May 5, 2015
Public Hearing
MEMORANDUM
May 1,2015
TO:
FROM:
SUBJECT:
County Council
~
Jeffrey
L.
Zyontz'~Slative
Attorney
Public Hearing:
Expedited Bi1114-15, Taxation Room Rental and Transient Tax
Expedited Bill 14-15, Taxation - Room Rental and Transient Tax sponsored by the Council
President Leventhal at the request of the County Executive, was introduced on April 14. A
Government Operations and Fiscal Policy Committee worksession is tentatively scheduled for
May 7 at 10:00 a.m.
This Bill would expand the current tax law by treating dwelling units that are renting for
any number of people, the same as a hotel. Currently the tax applies when compensation is paid
for places that provide sleeping accommodations for 5 or more transient guests.
Background
There are now mUltiple avenues by which owners can advertise their dwelling unit or part
of their dwelling unit for rent. Such internet sites as Airbnb, HomeAway, and Loft make it easy
to
connect potential renters with people providing places to rent. The duration of these rentals
have more in common with hotels than with houses. Although these units may lack many of the
amenities of hotels, they share the same essential attribute of being places for unrelated and
unknown guests to reside for a very short tenn for a fee. Other jurisdictions, principally New York
City and San Francisco responded to complaints about unfair completion from the hotel industry
by taxing this activity. The District of Columbia will also be taxing short term residential rentals
ofdwelling units even though such rentals are not legal in their jurisdiction. Short term residential
rentals (less than 30 days), except for hotels, and bed and breakfast establishments including
country inns, are likewise illegal in Montgomery County.
This packet contains:
Expedited Bill 14-15
Legislative Request Report
Executive Transmittal Memorandum
Fiscal and Economic Impact statement
Circle #
1
3
4
5
F:\LAW\BILLS\lS14 Taxation· Room Rental And Transient Tax\PH Memo.Docx
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Expedited Bill No. ...:..14.:...-1.:...::5'--_ _ __
Concerning: Taxation - Room Rental
and Transient Tax
Revised:
3/3/15
Draft No. _1_
Introduced:
April 14. 2015
Expires:
October 14.2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President at the Request ofthe County Executive
AN EXPEDITED ACT
to:
(1)
amend the deftnition of Hotel or Motel to reduce the number of transients required.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-16(b)
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Addedto existing law
by
original
bill.
Deletedfrom existing law
by
original
bill.
Added
by
amendment.
Deletedfrom existing law or the
bill by
amendment.
Existing law unaffected
by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED BILL
No. 14-15
1
2
Sec.t. Chapter 52 (Sections 52-t6(b» is amended as follows:
(b) The following words and phrases, when used in this Section, have the
following meanings:
3
4
5
6
7
***
Hotel or motel:
(1)
Any hotel,
inn,
hostelry, tourist home or house, motel, apartment
hotel, rooming house, dwelling unit or other lodging place that
offers for compensation sleeping accommodations in the County
[to
5
or more transients at anyone time].
(2) A
hotel or motel does not include:
(A)
a hospital, medical clinic, nursing home, rest home,
8
9
10
11
12
13
14
convalescent home, assisted living facility, or home for
elderly individuals; or
(B)
a facility owned or leased by an organization that is
15
16
17
18
exempt from taxation under section
501
(cX3) of the
Internal Revenue Code if the primary use of the facility is
other than housing overnight guests.
***
Sec. 2. Effective Date.
19
20
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which
it
becomes
law.
Approved:
21
22
23
24
25
26
George Leventhal, President, County Council
Date
@
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LEGISLATIVE REQUEST REPORT
Expedited Bill 14-15
Taxation
Room Rental and Transient Tax
DESCRIPTION:
This bill amends the deftnition ofhotel or motel under the County's room
The amendment removes the
rental and transient
tax
statute.
requirement that a hotel or motel accommodate 5 or more transients and
adds "dwelling unit" to the deftnition of "hotel or motel".
The purpose of the amendment is to be able to apply the County tax to
various businesses that rent, or facilitate the rental of, single rooms or
homes within the County. Typically these types of rentals would not
have sleeping accommodations for 5 or more transients at one time and
therefore, the County tax would not apply. These rentals compete with
hotels, motels, and other lodging places to whom the tax does apply.
The goal and objective is to be able to apply the County room rental and
transient tax to these various rentals of rooms and or homes within the
County.
Department of Finance; Visit Montgomery.
To be provided by OMB.
To be provided by Finance Department.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
To be requested.
Other jurisdictions including Washington, D.C. have either
implemented a similar law or are also exploring various options to
apply their hotel and transient tax to these types of businesses as well.
Scott Foncannon, Associate County Attorney, 240-777-8973
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIPALITIES:
PENALTIES:
This law applies within municipalities in the County.
N/A
F:\LAw\BILLS\1514 Taxation - Room Rental And Transient Tax\LRR For Transient Tax BilI.Docx
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,
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLB. MARYLAND 20850
!:
,!
Isiah Leggett
County Executive
MEMORANDUM
March 23, 2015
TO:
FROM:
SUBJECT:
George Leventhal, Council President
~
i:
;
;
;
:
Isiah Leggett, County Executive
~~-
Expedited Bill XX-IS: Taxation Room Rental and Transient Tax
I
am
attaching for Council introduction an Expedited Bill to amend the definition of
Hotel or Motel under the County's room rental and transient
tax
statute. The amendment
removes from the definition that a hotel or motel accommodate 5 or more transients and adds
"dwelling
unif'
to the definition of "hotel or motel."
The purpose ofthe amendment is to
be
able to apply the County transient
tax
to
various
businesses that rent, or facilitate the rental of, single rooms or homes within the County.
Typically. these types of rentals
do
not have sleeping accommodations for 5 or more transients at
one time and therefore, the County
tax
would not apply. These rentals compete with hotels,
motels, and other lodging places to which the
tax
does apply.
My Recommended FY16 Operating Budget anticipates approval of this legislation which
we estimate will produce annual revenues of approximate1y $228,000. I urge the Council to
approve this legislation.
Attachment
cc:
Timothy
L.
Firestine, Chief Administrative Officer
Jennifer Hughes, Director, Office of Management and Budget
Bonnie IGrkland, Assistant Chief Administrative Officer
Kelly Groff, President, Visit Montgomery
montgomerycountymd.gov/311
.
""",
...
'.~
3'
,
240-773-3556 TTY
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ROCKVIllE, MARYlAND
MEMORANDUM
April 28. 2015
TO;
FROM:
SUBJECT:
George
Leventhal.
President, County Council
Jennifer A.
ector, Office
Joseph
F. Beach,
~;;,
Departme
FEIS forBill14-15E, Room
RentaJ
an
HUghe~.
ment and Budget
.Please
find
attached the
fiscal and economic impact statements for
the above­
referenced legislation.
JAH:fz
cc: Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
David Platt, Department of Finance
Jed
Millard,
Office of Management and Budget
Alex
Espinosa, Office of Management and Budget
Naeem Mia, Office ofManagemellt and Budget
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Fiscal Impact Statement
Expedited Bill 14·15, Room Rental and Transient Tax Amendment
1.
Legislative Summary.
This expedited bill amends the definition of hotel or motel under the County's room
rental and transient
tax
statute. The amendment removes the requirement that hotel or
motcl accommodate five or more transients and adds dwelling unit to the definition.
2.
An estimate of changes in County revenues and expenditures regardless of whether
the revenues or expenditures are assumed in tbe recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The legislation is estimated
io
result in a net positive change in revenues for the County's
room rental and transient tax of $228,725 annually. There are no additional expenditures
associated with collection of this amendment. However, under Section 52* 160) of the
County Code, 7 percent of the additional revenue
($16,011)
must
be
used for the
Conference and Visitors Bureau. The methodology used to estimate the revenues from
this amendment is based on an analysis of the AirBnB website and selecting residential
dwellings in Montgomery County that are offered for short-term rental
r
the number of
guests per unit, and the rental price per night provided on the website. Based on that
analysis, there are an estimated
450
locations offering rental for
Duel
guest and 34
locations offering rentals for five guests. The fiscal impact is based on assuming an
estimated
50
days of rentals annually for each dwelling in
me
County.
3.
Revenue and expenditure estimates covering at least the next
6
fiscal years.
The six-year additional revenue stream would be
$1,372,350
with no increase in
expenditures for collections. However, as mentioned in paragraph 2 above,
7
percent of
the additional revenue
($96,066)
must be used for the Conference and Visitor's BUreau.
4.
An actuarial analysis through the entire amortization period for each
bill
that would
affect retiree pension or group insurance costs.
Not Applicable
5. Later actions that may affect future revenue and ul>enditures if tbe
bill
authorizes
future spending.
Not Applicable
6. An estimate of the staff time needed to implement the
bill.
The Department of Finance will absorb the new tax collection related responsibilities
with existing staff.
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7. An explanation of how the addition of new staff responsibilities would affect other
duties.
There
will
be no significant impact to existing staff in the Department of Finance by
adding this responsibility to existing portfolios.
8. An estimate of costs when an additional appropriation is needed.
An
additional appropriation of $16,0 11
is
needed in the Conference and Visitors Bureau
Non-Departmental Account to comply with Section 52-16(j) ofthe County Code as noted
in
paragraph 2.
9. A description of any variable that could affect revenue and cost estimates.
The fiscal impact noted above is based on the number of residential dwellings currently
offered for short-term rental. Since this is a growing market in many countries, the
number of dwellings offered for rent in Montgomery County may increase over time
although that may result in lower rental prices which could partiaUy or fully offset the
. increase in rental dwellings.
10. Ranges of r(.'Venue or expenditures that are uncertain or difficult to project.
Reducing the number of days that such dwellings are rented at the provided rental price
from 50 to 30, would reduce the annual fiscal impact from $228,725 to $137,235 while
increasing the days to 75 would result in an annual fiscal impact of$343,087.
11.I:t'it bill is likely to have no fiscal impact, why that is the case.
Not
Applicable
12. Other flScal impacts or comments.
Not
Applicable
13. The following contributed to and concurred with tbis analysis:
Michael Coveyou, David Platt, Robert Hagedoorn, Department of Finance
Alex Espinosa, OtTtce of Management and Budget
(j)
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.
Ecollomic Impact Statement
Billl4-15E, Room Rental and Transient Tax
Background:
This legislation would expand the current
tax
law by treating dwelling units
that
are
renting to any number of people, the same as a hotel or motel. Under clUtent law. the tax
rate of seven percent, or occupancy
tax,
is applied to the room rental
fee
for places that
provide sleeping accommodation with a total capacity for five or
more
transient guests.
Bill 14-15E would expand the occupancy
tax
to include dwelling units that accommodate
or rent out lodging to less than five transient guests.
1.
The sources of information, assumptions, and methodologies used.
The Department of Finance assumes that:
• the occupancy
tax
rate
Vvill
be included in the room rate similar to the clUtent
practice by hotels and motels in the County,
• guests are not residents of Montgomery County and therefore the
tax
imposed
on those guests
is
a tax burden on non-residents, and
• the additional administrative costs incurred by the host will
be
included in. the
room rental fee and paid by the renter.
Since Washington., D.C. recently imposed a similar occupancy
tax
of 14.5 percent,
which is slightly more than twice the rate in the County, it is assumed that the
imposition of the occupancy tax in Montgomery COlmty to include dwelling
units
that
accommodate or rent out lodging to less than. five transjent guests would not
discourage renters from seeking lodging in Mon.tgomery County. In fact, the
comparatively lower rate in the County may incentivize some transients to seek
lodging in the County rather than in Washington. D.C.
2. A description of any variable that could affect the economic impact estimates.
Because the tax and administrative costs are included in the room rental fee which
will
be
passed on the renter, there is no variable that could affect the economic impact
estimates.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
Since the
tax
and administrative costs are asswned to be
pa.~.;;ed
along to and paid by
the non-resident guest, the owner
is
economically held
harmless.
Therefore, there
is
no
economic impact on
employn1ent~
spending, saving. investment, incomes, and
property values in the County.
4.
If
a Bill is likely to have no economic impact,
why
is that the case?
See paragraph
3.
Page I of2
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Economic Impad State.ment
BiIll4-15E,
Room
Rent~1
and Transient Tax
5. The following contributed to or concurred with this analysis: David Platt
and
Rob
Hagedoom, Iiinance.
J~Drrector--------------­
~,J--.~
Department ofFinance
Page 2 of2