Dear WH&LA Lodging Member:
Governor Walker signed the State Budget into law on Thursday, Sept. 21, with 99 Vetoes to the Budget passed by the State Assembly and State Senate. A few vetoes were agreed to right before the Senate passed the Assembly version, in order to gain approval by 3 State Senators who refused to vote in favor without a few final concessions. The challenge was that if the Senate made any changes to the already-passed Assembly version, they would have to call the Assembly back into session to get their approval, something likely not going to occur. Thus the only way to gain passage was for the Governor to agree to a few changes through his veto powers, which he agreed to do.
As you likely already heard in the news, there were many adjustments considered by all remaining parties last week, with nothing certain until the Budget was signed. Below you will find a few highlights impacting the lodging industry that by no means can cover everything that everyone may find of interest. We will start with the issue most widely commented on around the state, and also likely the most complex and detailed, so please be sure to continue reading after this summary to learn the rest.
SHORT-TERM RENTALS - NEW REQUIREMENTS!
As summarized previously, there were three primary components to this proposal, with the last one pursued by the Realtor's Association, not the WH&LA. The Governor did not veto any of the three components, so all will now become law. The three components are: 1) Lodging Marketplace Requirements 2) Short-Term Rental Requirements 3) Municipality Requirements. We are going to frame this all differently from the last communication, to help outline how this will impact our industry more clearly. First we will start with important definitions:
- "Short-Term Rental" means a residential dwelling that is offered for rent for a fee and for fewer than 29 consecutive days
- "Residential Dwelling" means any building, structure, or part of the building or structure, that is used or intended to be used as a home, residence, or sleeping place by one person or by two or more persons maintaining a common household, to the exclusion of all others
- "Lodging Marketplace" means an entity that provides a platform through which an unaffiliated third party offers to rent a short-term rental to an occupant and collects the consideration for the rental from the occupant
Now, for what the new law says:
- Any person who maintains, manages, or operates a "Short-Term Rental" for more than 10 nights each year must: 1) obtain a license for the property to operate as a "tourist rooming house" by DATCP - which includes passing inspections and paying a licensing fee, and 2) obtain a license for conducting such rentals from the municipality or county, if such a license or permit exists.
- Any "Lodging Marketplace" must: 1) register as such with the state Dept. of Revenue in order to conduct short-term rentals in Wisconsin 2) collect and remit state sales tax, county sales tax, and applicable Special Baseball District, Local Exposition District, and Premier Resort Area Taxes to the state Dept. of Revenue for short-term rental sales 3) collect and remit Local Room Tax to municipalities for their sales of short-term rentals in municipalities with such a tax and 4) advise the residential dwelling property owner that such remittances have occurred
- A municipality: 1) CAN prohibit short-term rentals of less than 7 consecutive days duration 2) CAN limit the total number of consecutive days the short-term rental can occur within, as long as the total is not less than 180 days, starting with the date of the first rental night 3) Can NOT prohibit short-term rentals of 7 consecutive days or longer 4) Can NOT continue any part of an ordinance that is inconsistent with the above
- The Room Tax collection requirement for a Lodging Marketplace applies as soon as a Lodging Marketplace registers with the DOR
What else applies that is not spelled out in this legislation:
- Any property licensed as a Tourist Rooming House is required to collect/remit state and county sales taxes, Baseball District taxes, Exposition District taxes, Premier Resort Area Taxes that apply, and municipal Room Tax in effect. If a Lodging Marketplace does not collect and remit for them, they would be responsible to do so the same as other tourist rooming houses.
- Other than what is restricted above, a municipality retains their other rights.
- A Lodging Marketplace is only obligated to collect and remit taxes on "short-term rentals" as defined above (i.e. A residential dwelling), not on all types of rentals.
- All the components go into effect immediately, as no delay was incorporated into the budget language.
There will be many questions that will arise as this law takes effect, and WH&LA will try to assist as best possible. We will watch for any DOR statements on their procedures and interpretations to keep members informed.
LATE CHANGE
: HISTORIC BUILDING REHABILITATION TAX CREDITS REDUCTION
Within the 99 vetoes the Governor made was a surprise addition that caught most everyone by surprise. Joint Finance Committee had changed the Governor's proposal to limit total Historic Building Tax Credits to $10 million annually, and instead eliminated the aggregate cap and allowed for an up to $5 million per parcel cap for each one awarded. In the Governor's veto, as he was unable to reinstate his cap, he reduced the amount per award to up to $500,000 maximum, stating if the legislature wishes to pursue separate legislation that comes closer to his proposed $10 million cap, he may be open to changes, as he feels this program is getting too costly. He stated that the effective date of the new per parcel cap is July 1, 2018 to allow projects currently under consideration time to incorporate the limitation into their plans.
PERSONAL PROPERTY TAX - MODEST REDUCTION
The WH&LA was part of a large coalition pursuing the elimination or reduction of Personal Property Taxes assessed by many municipalities in our state, one of the only states left in the midwest to allow such a tax on the property owned by businesses that were already taxed when purchased. The largest obstacle was that nothing could move forward unless the losses in revenue to municipalities would be offset by the state somehow. With an estimated cost of over $260 million each year to eliminate this tax, something unaffordable in this budget, the final proposal provided a $70 million reduction in Personal Property Taxes by exempting machinery for non-manufacturing businesses, defined as "a structure or assemblage of parts that transmits force, motion, or energy from one part to another in a predetermined way by electrical, mechanical, or chemical means, and which may not include a building.
While we will need to wait for more detailed clarification issued by the state Dept. of Revenue (DOR), it is anticipated that such machinery as laundry machines would be eligible, and possibly dishwashers and vacuum cleaners as well. The WH&LA will send further information out to lodging members when released by the DOR.
P
REVENTION OF NEW PREMIER RESORT AREA TAX IN LACROSSE
WH&LA members in LaCrosse had asked for our assistance in stopping a new proposal that would have added a new Premier Resort Area Tax (PRAT) on not only lodging properties, but also all tourism-related businesses in LaCrosse, as they felt this would be a deterrent to tourism business. We met with all members of Joint Finance Committee and key legislative leaders to express the concerns, noting that it was not only a barrier to attracting tourists, but it was also likely that many other businesses in the area had no idea how broad a range of businesses would be adding this tax or they never would have allowed it to move forward to asking the state for a special exception to impose a PRAT. Joint Finance did not include this new tax, and it was not added by either the Assembly nor the Senate, and thus was stopped. Now, the only way this can move forward is to be introduced as separate legislation and go through the normal bill process, with committee hearings in both houses, and passage by both committees plus full votes during session in each house - a much tougher path.
RECONSIDERATION OF NEW EXPOSITION TAX ON LODGING IN SUPERIOR
Also not included by Joint Finance, the Assembly, and the Senate was a proposal for a new added 2.5% room tax in Superior, along with a new .5% tax on restaurants and car rentals with a broadly worded new interpretation on an Exposition District and an Exposition Center that would have included funding for leased space for operating commercial activities. The new tax would have placed Superior as the highest room tax in the state, and two full percentage points higher than their Duluth competitors - terrible positioning for them to try to attract more tourists. The WH&LA suggested the proposers re-consider such a high percentage of the funding burden on lodging businesses, and expressed a concern for such an expansion of room taxes that would open the door in other parts of the state as a new precedent for higher room taxes. It appears that the percentage was not reduced, and Joint Finance Committee, along with both the Assembly and Senate, chose not to include the proposal in the Budget. Similar to the issue above, this proposal would need to go through the bill process to receive further consideration.
STATE TOURISM BUDGET
The State Tourism marketing budget was considered and finalized early in Joint Finance deliberations. With so many agencies facing budget cuts, there was a concern that the Tourism Budget could have faced a similar fate, which with their $1 generates $8 ROI would not have been a wise decision by any party. While by exact numbers there was a minor budget reduction, some of that was for a position transfer to DOA, like other agencies, and some was advised by the Tourism Dept. to be not replacing a vacancy, they have clarified that the Tourism Marketing Budget portion has not declined in the State Budget. Two small earmarks were added in the process that remained in the final budget, however in the big picture, the State Tourism Marketing Budget was unscathed, a small victory in itself, with other states reporting cuts to their tourism budgets.
TRANSPORTATION FUNDING
A compromise was finally reached that allowed most legislators to find something they liked, but almost universally they found something they didn't like as well. Pressure was added for the Dept. of Transportation to reduce staffing deemed by many to be excessive, to pursue new approaches to projects that could save money while adding efficiencies, and to use more bonding (but less than the Governor's original proposal by over $100 million) to fund transportation. The WH&LA was part of a small coalition appealing to the Governor to veto a component providing $2.5 million for another contracted study on the future of tolling, which he did indeed veto, sending the savings to more transportation funding instead. We believe that this will slow down the concept of pursuing tolling in our state, something that our organization and most of the tourism industry opposes due to the deterrent to attracting out of state visitors, instead of demonstrating an inviting, hospitable state that is easy to travel in.
P
RIMITIVE CABINS EXCEPTIONS TO BUILDING CODES
Originally added in a last-minute motion by Joint Finance Committee that took most everyone by surprise, the language was strengthened by the Assembly in their amendments so that it much more clearly provides an exception to building codes for a structure that: 1) is not used as a home or residence 2)is used primarily for recreational hunting activity 3)was constructed prior to dec. 31, 1997 and 4) does not exceed two stories in height (including a basement if applicable). The term used in the final budget is now "primitive rural hunting cabin", and municipalities and counties would not have jurisdiction over their construction or inspections. Previous language which many of us questioned was so broad that interpretations could go way beyond the intention of the sponsors.
As always, thank you for your interest and support.
Best,
Trisha
