Kentucky lawmakers are taking another look at how watercraft such as houseboats are taxed, and this time around, it appears that change is called for.
It is a little different tale from the one that emerged a decade ago regarding boats on Kentucky waters that were federally documented vessels. That controversy arose when Kentucky boat owners who exercised the option to register their boats federally rather than with the state began receiving tangible personal property tax bills from the state.
Many who operated recreational boats that were federally documented had the misperception that they were immune from state taxes. In fact, the only thing they were immune from was the requirement that owners pay the annual state registration fee. As government bodies everywhere became more strapped for cash, county property valuation administrators began making the rounds of boat docks and assessing documented vessels that weren't on their tax roles. In many cases owners were assessed interest and penalties for failing to file the required annual tangible personal property tax form on such vessels.
That created an uproar, which resulted in a push in Frankfort by owners of documented vessels to be exempted from state tax. But legislators concluded that owners of such vessels in fairness should have to pay the tax, just as people who register their boats with the state do.
But now the tax picture has taken a different twist, particularly with reference to people who own and operate houseboats on Kentucky waters. According to an article in the Lane Report, boat operators who had been accustomed to paying the state property tax suddenly found other taxing districts piling on with their own bills, including schools, fire districts and cities. It has become a big enough issue with individual boat owners and marina operators to get the attention of two legislative committees - the Interim Joint Committee on Labor and Industry and the Interim Joint Committee on Economic Development and Tourism. The committees met last week at Lake Cumberland State Resort Park to hear concerns about the current tax structure and tour the lake by houseboat.
Kentucky Marina Association President Bill Jasper told the committees that boaters are upset at having their boats taxed essentially as homes in counties where they cannot and do not avail themselves of such services as schools. He points out that it is illegal to live on the state's lakes so taxing boaters as if they are full-fledged residents is unfair.
Jasper says there is also a competitive element to the boat taxes, since neighboring Tennessee does not assess property tax on boats.
Several solutions were discussed before the committee, such as restricting taxation of boats to state tax only or coming up with a standardized rate. Another option, and we think it may be the best one, is to simply assess an annual fee in lieu of taxes. That is the method used by Tennessee, Ohio, Indiana and Florida and it strikes us as the most hassle-free.
As owners of documented vessels know, figuring out the valuation of older boats for the tangible personal property tax return they must file each year is more art than science. Add that to the muddle of boaters in different counties paying differing rates to a differing variety of taxing districts, and the idea of a standardized annual fee based on the length of the boat makes sense. We think that is the approach the Legislature should pursue.