Many people who own houseboats on Kentucky lakes are shirking local and state property taxes, but a bill pending before state lawmakers would change that, according to supporters of the measure.
House Bill 304 would require owners of houseboats registered with the U.S. Coast Guard, called documented boats, to also register the vessels at the clerk’s office in the county where they’re moored and pay property taxes there.
Right now, owners of documented boats are supposed to file a tangible tax return at the office of the county property valuation administrator (PVA) and pay the tax on the assessed value of the boat.
Many don’t comply, according to PVAs in several lake counties.
Tim Poppewell, the PVA in Russell County, which is on Lake Cumberland, said he used aerial images to count the number of houseboats at four marinas in the county.
For 2018, owners filed tax returns on 264 documented houseboats, but there were 501 houseboats visible, meaning only a little over half the owners were complying with the law, Popplewell said.
The actual compliance rate is likely less because he only counted houseboats he could see, not boats under covered slips or large cabin cruisers, which also can be documented with the Coast Guard, Popplewell said.
Some tax assessors around Kentucky’s lakes have wrestled with how to collect property taxes on documented houseboats because there hasn’t been a good way to identify owners who don’t pay.
One reason is that documented houseboats don’t have to display a state registration sticker.
Owners of smaller fishing boats and ski boats have to register their vessels at the county clerk’s office and display a registration number and sticker on the bow, so there’s a way for authorities on the lakes to see if someone’s sticker is not up to date.
Under HB 304, documented houseboat owners would pay the property tax on the boat when registering at the clerk’s office and would have to put a sticker on the boat.
That would allow officers from the state Department of Fish and Wildlife Resources to see if the sticker was current.
Supporters said HB 304 would bring houseboats in line with what other boat owners already have to do, and would address the problem of some houseboat owners not paying taxes while others do.
“It’s a fairness bill, a compliance bill,” Popplewell said.
Taylor County PVA Chad Shively said it’s a conservative estimate that no more than 30 percent of the houseboat owners at marinas on Green River Lake in the county are paying tangible property taxes as required.
His office received 50 tax returns in 2018 on documented boats, while Shively counted 200 houseboats in aerial photos.
Houseboat owners have the option of registering documented vessels at the clerk’s office and paying taxes that way, but few do, Shively said.
The current system isn’t fair to people who pay, Shively said, likening it to taxing only every fourth house in a subdivision.
“Some people are paying and some are not and that is the issue,” Shively said of the need for HB 304. “There’s no difference in three out of four houses in a subdivision being off the tax roll and three out of four documented boats being off the tax roll.”
One example was former state Rep. C. Wesley Morgan, who acknowledged in 2017 that he hadn’t paid property taxes on his luxury, 112-foot-long houseboat in more than a decade.
Morgan said his understanding was that if the boat was registered with the Coast Guard, he didn’t have to pay taxes on it.
Documenting a boat with the Coast Guard does not exempt it from property taxes.
Supporters said HB 304 would not impose new taxes, but rather create a way to collect taxes people already are supposed to be paying.
“It’s already in the books,” said the sponsor, Rep. John “Bam” Carney, a Republican from Campbellsville who is House majority floor leader. “It’s just trying to be fair across the board.”
Documented houseboat owners who do pay their taxes already get a big break on the state property tax rate compared to owners of smaller boats that don’t qualify for federal documentation.
The state rate on documented boats is 1.5 cents per $100 of assessed value. The rate is 45 cents on bass boats, pontoons and other smaller vessels.
Legislators cut the state rate in 1998 after a marina operator in Western Kentucky raised a concern about people moving their houseboats out of state to avoid taxes.
Many houseboat owners argue they face high tax costs, even with the big break on the state rate, because of higher local rates, and owners who live out of state grumble about paying taxes for schools and other services in Kentucky counties that they don’t use.
Houseboat owners would still get the lower state property tax rate under HB 304.
And Carney said there is some potential that with new revenue coming in under the bill, schools could hold tax rates lower than they could without the money.
Michelle Edwards, executive director of the Kentucky & Tennessee Marina Association, said the association had not yet announced a position on the bill.
J.D. Hamilton, who owns Lee’s Ford Marina Resort in Pulaski County, argued that rather than addressing one issue on boat taxation, legislators should look at a comprehensive overhaul of taxes and fees to help the state’s boating and boat-building industries.
“It would be smarter,” said Hamilton, who plans to meet with legislative leaders on the issue.
Carney’s bill could have a significant impact on local tax revenue, which counties and schools lose when people don’t pay.
Shively estimated there would have been an additional tax revenue totaling $148,243 for the school system, health department and other services in Taylor County in 2018 if all documented houseboat owners paid property taxes as required.
In Russell County, Popplewell figured that the school system, the county and other taxing districts such as the library and ambulance services missed out on a total of $278,852 last year as a result of houseboat owners not paying property taxes. Of that, $147,327 would have gone to the school system.
Carney’s measure could help schools and local agencies at a time when many face tight budgets and rising costs, supporters said.
After a January 2018 shooting at Marshall County High School in which two students were slain, many schools are considering safety improvements, and legislators are weighing bills to boost school safety.
The proposals include requiring school districts to appoint a safety coordinator and provide suicide-prevention training for educators, and include a goal of having more mental-health professionals available to students.
The Kentucky School Boards Association said in a recent legislative update that HB 304 would increase revenue for school districts in counties where there are documented boats, and that it had long “supported this fix.”
Trent Lovett, the school superintendent in Marshall County, said the district has gotten grants in the wake of the shooting to enhance safety, but those could run out.
“Obviously, additional income would be great,” Lovett said.