Now that Rhode Island's new statewide Non-Owner-Occupied Property Tax has taken effect, REALTORS® working with any type of residential property, which can include 2-, 3-, and 4-unit dwellings depending on the municipality,  should be aware that some of these properties may now be subject to the tax.

A common misconception is that the tax only affects luxury single-family homes or vacation properties. In reality, the tax applies more broadly. Any property that is classified as residential by the municipality, is not owner-occupied, and has an assessed value of $1 million or more may be subject to the tax unless the owner can document that an exemption applies.

Because Rhode Island property values have increased significantly in many communities, more multifamily properties are meeting the $1 million assessment threshold.

 Local Classification and Assessment Matter

Whether a property is considered "residential" for purposes of the tax depends on how the municipality classifies the property, not simply the number of dwelling units.

REALTORS® should encourage their clients to verify two important pieces of information early in the transaction:

• Confirm the property's municipal classification. The local municipality or zoning department can help determine whether the property is classified as residential for purposes of the tax.

• Review the municipal assessment records. If the property's assessed value is $1 million or more, it may fall within the scope of the new tax if the other statutory requirements are met.

Taking these steps early can help identify potential issues before they affect the closing timeline.

Many Rental Properties May Qualify for an Exemption

Not every non-owner-occupied residential property will owe the tax.

The regulations provide an exemption for residential rental properties that are rented for 183 days or more during the privilege year under a written lease subject to the Rhode Island Residential Landlord and Tenant Act. Short-term rentals may also qualify if they are rented for at least 183 days during the privilege year and are subject to the applicable state lodging taxes.

Property owners should maintain documentation supporting any exemption, including lease agreements and other records requested by the Division of Taxation.

The Certificate of No Tax Due Form Is Now Available

The Rhode Island Division of Taxation has released the Non-Owner-Occupied Property Tax Certificate Request (Form RI-6678). 

Even when a property owner believes an exemption applies, closing attorneys and cooperating brokers will likely still require a Certificate of No Tax Due before closing to confirm that any applicable tax has been satisfied or that no tax is owed.

The request form should be submitted at least 10 business days before closing and no more than 30 days before the scheduled closing date. Sellers must provide information regarding owner occupancy, rental activity, and any applicable exemption, along with supporting documentation when required.

REALTOR® Practice Tips

When listing or selling a higher-value residential property, particularly a 2-, 3-, or 4-unit property, REALTORS® should encourage their clients to:

• Verify the property's municipal classification.
• Review the municipal assessment records to determine whether the assessed value exceeds $1 million.
• Discuss with the closing attorney early in the transaction whether a Certificate of No Tax Due will be required.
• Submit the Certificate of No Tax Due request well in advance of closing to avoid unnecessary delays.

As the first year of implementation unfolds, REALTORS® who understand these new requirements can help clients identify potential issues early, avoid last-minute surprises, and keep transactions on track.

REALTORS®, for more information, please contact the Rhode Island Association of REALTORS® Legal Department at [email protected].

Resource

Rhode Island Division of Taxation Non-Owner-Occupied Property Tax

Certificate of No Tax Due requests: [email protected]

For additional guidance, forms, and frequently asked questions, visit the Rhode Island Division of Taxation's Non-Owner-Occupied Property Tax webpage.