Legislature Establishes Cape Cod and Islands Water Protection Fund

BOSTON – The short-term rental tax bill passed last week by the Massachusetts Legislature will help to fund water quality improvement projects on Cape Cod and the Islands.

The bill, which extends the 5.7 percent hotel tax to short-term rentals through online services like AirBnB and allows municipalities to collect up to an additional 9 percent, created the Cape Cod and Islands Water Protection Fund.

The fund will be supported by a 2.75 percent excise tax on all Cape and Islands rentals.

The legislation is expected to generate an estimated $34.5 million and $25.5 million in state and local revenues, respectively, based on the most recent Senate Ways and Means Fiscal Impact Report.

The entire Cape and Islands legislative delegation worked to include the fund into the bill. The effort was spearheaded by Cape and Islands State Senator Julian Cyr (D-Truro) and 4th Barnstable State Representative Sarah Peake (D-Provincetown) spearheaded the effort.

“Christmas came early for Cape Cod, Martha’s Vineyard and Nantucket,” said State Senator Julian Cyr.

“It’s been a long road to pass short-term rental legislation and I want to commend Rep. Peake for her dogged determination to finally realize this critical priority was passed on Beacon Hill. This legislation addresses the popular online vacation rental market on Cape Cod, Martha’s Vineyard and Nantucket by making sure that it is held to the same standards as the traditional lodging industry and will also generate much needed local revenue for all the towns across our region.”

The expanded tax base will automatically apply to all 175-plus cities and towns in Massachusetts that have already adopted the local room occupancy excise to date. The bill, as amended, will now head to Governor Baker for his signature.

Cyr added, “The creation of the Cape and Islands Water Protection Fund within this legislation is an essential step to fund the Commonwealth’s $1 billion commitment to help clean up the excess nitrogen pollution in our bays and estuaries. I want to thank the entire Cape & Islands Delegation who strongly believed, as I do, that the financial burden for wastewater management plans should not rest solely on the shoulders of Cape and Island property taxpayers, but that it should be shared by those who visit to our shores and contribute to the nitrogen problem.”

“The short-term rental legislation levels the rental market playing field, provides consumer protection and public safety measures, and most importantly for every homeowner on the Cape and Islands, it’s a local aid bill that will provide real property tax relief,” said Representative Sarah Peake (D-Provincetown).

“The 2.75% wastewater surcharge provides the mechanism to have our thousands of visitors who come here to enjoy our beautiful beaches, harbors and ponds help pay for the clean up. The local excise tax will now be accessed across all rental platforms substantially increasing the flow of revenue into every community‘s general fund. Without this, many would see their real estate taxes rise beyond what they could afford.”

“Our ecology and environment are the reason people from all over the world flock to the Cape and Islands,” said Representative Randy Hunt (R-Sandwich).

“Given the mandate of the Section 208 Plan and its accompanying $4 billion price tag for managing and improving our water quality, the 2.75% excise represents $1 billion of tax relief for property owners in Barnstable County. We will appropriately share the cost of protecting our natural resources with our guests who join us each year.”

The estimated price tag for cleanup efforts and future maintenance on the Cape and Islands is $4 billion.

The fund will provide assistance for critical municipal or regional water pollution abatement projects.

The trust fund will be administered under the State Treasurer’s Office similar to way the existing state revolving fund is administered.

An advisory board made up of representatives from each participating town, the Cape Cod Commission and the Martha’s Vineyard Commission.

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