Mohave County’s tax reclass on short-term rentals sets up a statewide fight over who calls the shots

Mohave County’s assessor has begun reclassifying many short-term rentals as commercial property, a shift that raises tax bills for owners and is already drawing legal fire, according to reporting by the Arizona Capitol Times. Assessor Jeanne Kentch said her office started the policy about a year ago and publicly announced it in July, moving year-round short-term rentals from a 10% assessment ratio to 15%.

“Regrettably, this will result in an increase in property taxes for properties that are primarily commercial in nature,” Kentch wrote in a county update circulated to the Capitol Times. She argued the change creates fairness by aligning full-time short-term rentals with motels and hotels that have long been taxed as commercial.

The practical consequence lands fast. Mohave County has more than 3,500 short-term rentals, and the assessor’s office has already reclassified more than 900, the Capitol Times reported. Owners should expect higher tax bills and, for those paying through escrow, higher monthly mortgage payments when servicers recalculate, said Tom Farley of the Responsible Tourism Coalition in comments to the Capitol Times.

Opponents say the county is out of bounds. Farley pointed to a 2016 state law, Senate Bill 1350, that defines property leased or rented to lodgers as residential and said the assessor is contradicting what has been on the books since 2016. Jon Riches, vice president for litigation at the Goldwater Institute, told the Capitol Times the policy is “problematic,” arguing state statute defines residential property rented to lodgers as residential use and that the assessor is conflating an owner’s business activity with the property’s actual use.

Kentch said she is acting under guidance from the Arizona Department of Revenue’s Residential Rental Property Classification Manual, which states that real property devoted to producing income for the owner is generally considered to be commercially used. The department confirmed that language exists in the 2004 manual and told the Capitol Times it is reviewing Mohave County’s new policy. The manual predates the short-term rental industry’s rise.

The fight spilled into the Legislature last year and went nowhere. Kentch helped draft House Bill 2316 to apply a similar reclassification statewide, and Rep. John Gillette, R-Kingman, sponsored it. It never received a committee hearing. Kentch told the Capitol Times the bill “kept getting put in a drawer.” The Arizona Association of Counties had also adopted a platform calling for taxes on short-term rental properties.

Industry advocates argue the county is painting with a hotel-sized brush. “The vast majority of Arizona residents who share their homes do so to help make ends meet,” said Jonathan Wicks, president of Arizonans for Responsible Tourism, in a statement to the Capitol Times. “These are not big corporations and should not be treated as such.” According to the assessor, the Mohave policy applies only to rentals of less than 30 days that are not the owner’s primary residence.

Neighborhood advocates counter that costs spill onto others. Susan Edwards, president of the Arizona Neighborhood Alliance, told the Capitol Times she hopes state law changes and said neighbors can face increases in trash and sewage use from bigger parties. She also criticized scenarios in which out-of-state owners pay residential tax rates. Her characterization reflects ongoing frustration in cities that have asked lawmakers for more local control since 2016.

For now, Mohave County’s change is moving ahead. Kentch told the Capitol Times she has received only a handful of appeals among the more than 900 reclassifications. Riches said affected owners have standing to challenge the policy in court. The Department of Revenue’s review could clarify or complicate the picture depending on what, if anything, it issues next.

Here is the larger, on-the-ground reality: When the state preempts cities and counties on short-term rentals but leaves classification gray, local officials, neighbors and owners are left to test the edges. Mohave County is doing that with the tax code. If courts side with opponents, policy whiplash will follow for everyone involved. If they do not, expect owners to bake higher carrying costs into their plans and for other county assessors to study the Mohave playbook. The Legislature can end the guessing with clear classification rules, but that will require picking a side in a fight it has largely avoided since 2016.

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