Topic:
MUNICIPAL FINANCE; LEGISLATION; BOATING; LIE DETECTORS; MOTOR VEHICLES; PROPERTY TAX;
Location:
BOATS AND BOATING; TAXES - PROPERTY;

OLR Research Report


June 20, 2007

 

2007-R-0377

REASONS FOR REPLACING THE PROPERTY TAX ON MOTORBOATS WITH AN ANNUAL REGISTRATION FEE

By: John Rappa, Principal Analyst

You asked why the legislature replaced the property tax on motorboats with an annual registration fee and whether it considered doing the same thing regarding the property tax on motor vehicles.

REASON FOR EXEMPTING VESSELS FROM PROPERTY TAXES

The legislature exempted all vessels from the property tax in 1981 (PA 81-423). That act also replaced the tax with an annual state registration fee on motorboats and required the state to remit a portion of the fee revenue back to the towns. The legislature did this because towns were losing revenue as more boat owners found ways to legitimately avoid the tax.

During the Senate debate on SB 430, which became PA 81-423, Senator Schneller discussed the unintended consequences of taxing vessels as personal property. By law, vessel owners had to pay taxes to the town where the vessel was docked for most of the year. But, “we have had a great problem with this personal property tax on boats, of identifying boats and having this tax paid,” he stated (Senate Transcripts, May 20, 1981, pp. 4100-01).

Essex First Selectman Richard Riggio explained why shoreline towns were finding it harder to impose the tax on vessel owners. “An owner can moor his boat in one town during the summer and move to another for the winter and legally the owner need not pay the tax in either town.” He added that this was a “very common occurrence substantiated by shoreline and Connecticut River town assessors” (Finance Committee Public Hearing Transcripts, April 14, 1981, p. 1790).

The property tax was also driving owners to register their vessels in other states that did not impose the tax. SB 430 was intended to reverse that trend, Representative Rybak explained. The bill aims to “encourage more residents to register their boats in Connecticut by replacing the local personal property tax on boats and providing the towns with a payment in lieu of taxes to be funded out a revised state registration fee schedule.” He estimated that the out-of-state registrations cost the state $6.8 million (House Proceedings, May 29, 1981, p. 8628).

IMPOSING A STATE REGISTRATION FEE ON MOTOR VEHICLES

The legislature has not considered replacing the local property tax on motor vehicles with a statewide registration fee similar to the one for motorboats. But it has considered proposals to replace that tax with a statewide property tax. Most based the tax on a statewide mill rate and required the state to return the revenue back to the towns. Several legislatively commissioned studies also recommended replacing the local tax with a statewide tax. Attachment 1 is a 2003 OLR report summarizing these bills and commission recommendations (2003-R-0902).

JR:ts