I am writing in response to comments made by the Wilmington town supervisor at the meeting on Tuesday, Feb. 6 to discuss the proposed revision of Wilmington’s short-term rental law. In particular, I am writing about his definition of what constitutes a business. The proposed revisions to the law described STRs as “businesses.”

As I understood his argument, a business is the same as your profession, and anything you do in addition to your profession is not a business. By his definition, if someone is both a teacher and a realtor, or if the teacher paints houses for money every summer and even has a name for this painting enterprise, neither the selling of real estate nor the painting of houses is a business for that individual. According to the supervisor’s definition, that individual’s business is teaching, period.

According to New York state law (20 CRR-NY 16-2.): “Definition of doing business. (a) The term doing business is used in a comprehensive sense and includes all activities which occupy the time or labor of people for profit.” Therefore, if an individual makes a profit at some effort, they are “doing business” according to New York state law.

Based on 20 CRR-NY 16-2, Wilmington should recognize STRs as businesses as other local New York governments are doing, including Geneva and our neighbors in Saranac Lake. According to the National Association of Realtors (http://tinyurl.com/yyxrr2us), operating a short-term rental is considered a business by most local governments.

The supervisor also appeared to make the argument that STRs were not businesses, but investments. In Alvary v. United States, it was determined that “The rental of real estate is a trade or business if the taxpayer-lessor engages in regular and continuous activity in relation to the property, even if the taxpayer rents only a single piece of real estate.” Alvary v. United States, 302 F.2d 790, 796 (2d Cir. 1962). The ruling in Gilford v. Comm’r., 201 F.2d 735 (2d Cir. 1953) determined that landlords who do not do all of the work themselves, but hire others (e.g., VRBO for advertising, individuals for cleaning), also qualify as a business.

There can be federal tax advantages for the owner of an STR if the STR is treated as a business. For example, Section 179 of the tax code allows landlords to write off the costs of improvements (http://tinyurl.com/2ywpfe6w). In addition, the Tax Cuts and Jobs Act, which lowered the amount that can be taken as personal deductions for mortgage interest, does not apply to rental businesses, so landlords can deduct all mortgage interest on rental properties as a business expense.

In summary, although New York state does not tax STRs as businesses, by its own definition of what constitutes a business, STRs should be taxed as businesses. Thus, the Wilmington town board should maintain the language in the proposed revised STR law that describes STRs as businesses.

Sincerely,

Linda Shuster

Wilmington