JEFFERSON CITY — Many Missouri property owners who rent out their homes to visitors have seen their tax rates increase after their residential properties were reclassified as commercial properties.
It's a reclassification that many owners don't believe to be accurate given how they use their homes.
To address this, Sen. Ben Brown, R-Washington, brought Senate Bill 1066 before the Senate Local Government, Election and Pensions Committee on Monday. The bill modifies the definition of residential property for the purposes of accurate taxation.
"This bill ensures statewide consistency for property classifications," Brown said. "It received bipartisan support and passed unanimously from this committee last session."
A property owner from Kansas City testified in support. She said that the reclassification caused taxes to rise on one of her properties from $2,000 annually to $7,000. On another property, her taxes increased from $5,000 to $15,000.
She told the committee that if it wasn't for emergency local ordinances that took effect, she would have had to sell her property.
The owner of a vacation home company testified in support of the bill. The tax burden brought on by reclassifications has made it difficult for him to run his business in the state. He told the committee that seven years ago he filed for bankruptcy. Now, he only owns a few properties in Missouri and has pivoted to engaging with the hotel business in another state.
Despite the fact that the properties are meant to turn a profit, the owners argue that these reclassifications, and subsequent tax increases, are unfair because the only thing being leased commercially is the residence itself.
Another individual pointed out how the World Cup coming to Kansas City this summer makes this bill especially relevant. Without this legislation, residents who take advantage of the opportunity to lease or rent their homes to visitors may be subject to commercial tax rates.
A hotel representative argued that these scenarios where tax classification had been changed were not all the same.
He said that people's "primary residences," or frequently visited vacation homes, should be classified as residences, even if they're being rented out. He also pointed out similarities between hotels, which are classified as commercial properties, and operations where one person owns and constantly rents out several properties.
He disagreed with the bill, and proposed a modification that would set a standard for how many days out of the year a home must be inhabited by its owner for it to be classified as a residential property.