Thousands of people who own houseboats on Kentucky’s lakes don’t pay required property taxes, but lawmakers are pondering a measure that could ensure the luxury boats are on the tax rolls.
House Bill 183, sponsored by Rep. Phil Moffett, R-Louisville, would require all boats to be registered with the county clerk where they are docked.
That would make it much more difficult for owners to skirt paying property taxes on houseboats and large cruisers that can be worth hundreds of thousands of dollars.
Under current law, owners must declare houseboats for tax purposes one of two ways.
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One is to file a tangible tax return on the vessel. That method is available to people who have registered their houseboats with the U.S. Coast Guard; those are called “documented” boats.
Boats more than 25 feet long likely meet the weight threshold to be documented, according to the Coast Guard.
There is an incentive to document boats because the state property-tax rate on those vessels is far lower than on undocumented boats, including smaller fishing and ski boats.
Owners who don’t go that route are supposed to get a title on their houseboats at the county clerk’s office and pay property taxes there, just as they would for smaller boats and other vehicles, according to the Revenue Department.
It would appear from state records that many owners of documented boats are not paying taxes.
Records show there are 4,913 federally-documented boats 26 feet or longer with the owner listing a Kentucky address, according to an analysis of House Bill 183 by the Legislative Research Commission.
Of that number, 1,519 owners filed tangible property-tax returns in the state, according to the analysis.
Assuming all the people with Kentucky addresses have their boats docked in Kentucky, the difference of nearly 3,400 is an approximation of the vessels on which property taxes are not being paid, the analysis said.
That doesn’t mean all 3,400 owners are not paying taxes. Some people who live in Kentucky could have their boats moored in other states, for example.
But property valuation administrators in several Kentucky counties have told the Herald-Leader they believe many owners of documented boats don’t file tangible property-tax returns as required.
“I feel certain that there are some number of that 3,400 that are evading taxes,” said Mack Bushart, executive director of the state PVA Association and former PVA in Marshall County. “I’m positive that it is a problem.”
State Rep. C. Wesley Morgan, R-Richmond, confirmed last year that he did not pay property taxes on his 112-foot long houseboat for more than a decade.
Morgan, a co-sponsor of HB 183, said that when he bought the boat in 2004, he understood that the manufacturer in Somerset would take care of the paperwork necessary to get it documented with the Coast Guard, and that he believed he did not have to pay property taxes if the boat was registered that way.
Morgan said he did not learn for years that the houseboat maker — which had gone out of business — did not document the boat with the Coast Guard.
Morgan titled the boat with the state last July.
Local officials have said there is not an easy way for them to figure out if owners of documented boats are not filing tax returns, in part because there is not a way for tax authorities to search the Coast Guard database for all documented boats on a particular lake or river.
Moffett’s bill would create a way to keep track of documented boats by eliminating the exemption that says they don’t have to be registered with the clerk in the county where they are located.
Owners would have to begin displaying a registration number and sticker on documented boats.
“It levels the standard,” Moffett said. “It makes it right for everybody.”
The bill would increase property tax revenue, though the amount could not be determined, according to the analysis.
The state does not get much property tax revenue from documented boats because it gives owners a big tax break — a rate of 1.5 cents per $100 of value, compared to a levy of 45 cents on smaller boats — but the revenue is more significant for some counties on the state’s large lakes, such as Lake Cumberland and Kentucky Lake.
HB 183 would not change the state tax rate on documented boats.