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The HBAA held meetings this week with Senator Tripp Pittman (R-Daphne) to express its concerns about Senate Bill 241. Drafted by the Alabama Department of Revenue, the bill seeks to bypass an administrative ruling that reinforced the HBAA's long-held belief that the state lodging tax does not apply to apartment rentals.
The issue stems from the Mitchell v Department of Revenue case where the Department had assessed a lodging tax against Mitchell for apartment leases of less than 180 days. The current law states:
"There is levied and imposed, in addition to all other taxes of every kind now imposed by law, a privilege or license tax upon every person, firm, or corporation engaging in the business of renting or furnishing any room or rooms, lodging, or accommodations to transients in any hotel, motel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished to transients for a consideration,..."
The administrative law judge in the case ruled that the apartment complex was not subject to the tax, in part because it did not regularly lease apartments for less than 180 days. In fact, Mitchell, over the course of a 3 ½ year period, was found to only have rented 12 apartments for less than 180 days. That number was less than 1 percent of the complex's total rentals.
Why is this important? Though rare, apartment complexes do rent for periods of less than 180 days. Further, there may be instances where a single family builder may rent a house to an individual or family for less than 180 days. The bill as drafted could apply to both situations.
The HBAA will meet with the Department of Revenue next week to discuss a proposed amendment to the bill that would exempt apartments and single family homes from the provisions of the bill. The HBAA is not alone in its opposition to the measure. The Alabama Association of Realtors has also weighed in on the issue and is expected to propose an amendment.
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