Rental Unit Business Tax

In many cities, whenever the title of an improved parcel of real property is changed from an individual’s name to an entity-type name (i.e. a trust, or partnership, or an LLC, etc.) the city will presume that the property is being rented and thus will want to collect a rental unit business tax.

However, if the property owner can show that he is an owner-occupant of the residence, it will qualify for an exemption from such a business tax.

Some other exemption categories are that the property is a vacation/second home, or is occupied by an immediate family member, or is occupied by the beneficiary of the trust that’s on title, or it’s rented to a Section 8 tenant, or that it’s rented to a tax-exempt organization, etc.

Usually you will have to re-submit your exemption certificate every year or so. Failure to do so will strip you of your exemption. Failure to pay any non-exempt tax will result in a monetary penalty. If you ignore that situation the city will slap a lien against the property, forcing you to ultimately pay the tax and penalties under the threat of a foreclosure.