property classification; short-term rentals

HB2362 - 572R - I Ver

REFERENCE TITLE:
property classification; short-term rentals

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2362

Introduced by

Representatives
Crews: Bliss, Contreras P, Liguori, Villegas

AN
ACT

amending
sections 33-1902, 42-12001, 42-12004, 42-12052 and 42-12053,
Arizona Revised Statutes; relating to property classification.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 33-1902, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1902.

Residential rental property; recording with the assessor; agent
designation; civil penalty; fee

A. An owner of residential rental property shall
maintain with the assessor in the county where the property is located
information required by this section in a manner to be determined by the
assessor.� The owner shall update any information required by this section
within ten days after a change in the information occurs. The following
information shall be maintained:

1. The name, address and telephone number of the
property owner.

2. If the property is owned by a corporation,
limited liability company, partnership, limited partnership, trust or real
estate investment trust, the name, address and telephone number of any of the
following:

(a) For a corporation, a corporate officer.

(b) For a partnership, a general partner.

(c) For a limited liability company, the managing or
administrative member.

(d) For a limited partnership, a general partner.

(e) For a trust, a trustee.

(f) For a real estate investment trust, a general
partner or an officer.

3. The street address and parcel number of the
property.

4. The year the building was built.

5. if the property is rented for
periods of less than thirty days.

B. An owner of residential rental property who lives
outside this state shall designate and record with the assessor a statutory
agent who lives in this state and who will accept legal service on behalf of
the owner.� The owner shall designate the agent in a manner to be determined by
the assessor. The information shall include the name, address and
telephone number of the agent.

C. Residential rental property shall not be occupied
if the information required by this section is not on file with the county
assessor. If the owner has not filed the information required by
this section with the county assessor and the residential rental property is
occupied by a tenant and the tenant chooses to terminate the tenancy, the
tenant shall deliver to the landlord, owner or managing agent of the property a
written ten
day
days'
notice to
comply with this section. The notice shall be delivered by certified
mail, return receipt requested, or by hand delivery. If the owner
does not comply with this section within ten days after
receipt
of
receiving
the notice, the tenant may terminate
the rental agreement and the landlord shall return all prepaid rent to the
tenant. Security deposits shall be returned in accordance with
section 33-1321, subsection D. The landlord shall return
those monies by certified mail, return receipt requested, or by hand delivery
to the tenant within ten days after the termination of the rental agreement.�
This subsection applies to any existing lease and to any new lease after August
25, 2004. Notwithstanding this subsection, an owner is in compliance
with this subsection only if the owner had filed the information required by
subsection A of this section with the county assessor.

D. All records, files and documents that are
required by this section are public records.

E. For residential rental property that is acquired
by an owner after the date of the notice of assessed valuation and the notice
prescribed by section 42-15103 and until the issuance of the next notice of
assessed valuation, a city or town shall assess a civil penalty of
one thousand dollars

$1,000
against a
person who fails to comply with this section, plus an additional
one
hundred dollars

$100
for each month after the date
of the original violation until compliance occurs. The court shall not
suspend any portion of the civil penalty provided by this subsection.

F. Notwithstanding subsection E of this section, if
a person complies within ten days after receiving the complaint that notices
the violation, the court shall dismiss the complaint and shall not impose a
civil penalty.

G. Except for newly acquired residential rental
property as prescribed by subsection E of this section, if a residential rental
property owner fails to register with the county assessor as prescribed by this
section, the city or town may impose a civil penalty in the amount of
one hundred fifty dollars per day

$150
for
each day of violation after the date of the most recent notice of assessed
valuation and the notice prescribed by section 42-15103.� If a person complies
within ten days after receiving the notice from the county assessor, the court
shall dismiss the complaint and shall not impose a civil penalty.

H. In carrying out this section, the county assessor
shall have immunity as provided in section 12-820.01.

I. The county assessor may assess a fee of not more
than
ten dollars

$10
for each
initial registration and each change of information in the registry.

J. On request from a city or town the county
assessor shall provide the most current list of all registered rental property
owners within the city's or town's boundaries.
END_STATUTE

Sec. 2. Section 42-12001, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-12001.

Class one property

For
the
purposes of taxation, class one
is established consisting of the following subclasses:

1. Producing mines and mining claims, personal
property used on mines and mining claims, improvements to mines and mining
claims and mills and smelters operated in conjunction with mines and mining
claims that are valued at full cash value pursuant to section 42-14053.

2. Standing timber that is valued at full cash
value.

3. Real and personal property of gas distribution
companies, electric transmission companies, electric distribution companies,
combination gas and electric transmission and distribution companies, and
companies engaged in
the generation of

generating
electricity that are valued at full cash value pursuant to
section 42-14151.

4. Real and personal property of airport fuel
delivery companies that are valued pursuant to section 42-14503.

5. Real and personal property that is used by
producing oil, gas and geothermal resource interests that are valued at full
cash value pursuant to section 42-14102.

6. Real and personal property of water, sewer and
wastewater utility companies that are valued at full cash value pursuant to
section 42-14151.

7. Real and personal property of pipeline companies
that are valued at full cash value pursuant to section 42-14201.

8. Real and personal property of shopping centers
that are valued at full cash value or pursuant to chapter 13, article 5 of this
title, as applicable, other than property that is included in class nine.

9. Real and personal property of golf courses that
are valued at full cash value or pursuant to chapter 13, article 4 of this
title.

10. All property, both real and personal, of
manufacturers, assemblers or fabricators, other than property that is
specifically included in another class described in this article, that is
valued under this title.

11. Real and personal property that is used in
communications transmission facilities and that provides public telephone or
telecommunications exchange or interexchange access for compensation to effect
two-way communication to, from, through or within this state.

12. Real property and improvements that are devoted
to any other commercial or industrial use, other than property that is
specifically included in another class described in this article, and that are
valued at full cash value.

13. Personal property that is devoted to any other
commercial or industrial use, other than property that is specifically included
in another class described in this article, and that is valued at full cash
value.

14. Real and personal property of electric
cooperatives that are valued at full cash value pursuant to section 42-14159.

15. Real and personal property and
improvements that are rented to lodgers for periods of less than thirty days
for a total of more than one hundred eighty days in a calendar year and that
are valued at full cash value, except:

(
a
) Property
that is occupied by the owner of the property as the owner's primary residence
that is included in class three.

(
b
) Property
for residential purposes that is rented and that is included in class four.

END_STATUTE

Sec. 3. Section 42-12004, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-12004.

Class four property

A. For the purposes of taxation, class four is
established consisting of:

1. Real and personal property and improvements to
the property that are used for residential purposes, including residential
property that is owned in foreclosure by a financial institution, that is not
otherwise included in another classification and that is valued at full cash
value.� The homesite that is included in class four may include:

(a) Up to ten acres on a single parcel of real
property on which the residential improvement is located.

(b) More than ten, but not more than forty, acres on
a single parcel of real property on which the residential improvement is
located if it is zoned exclusively for residential purposes or contains legal
restrictions or physical conditions that prevent the division of the
parcel. For the purposes of this subdivision, "physical
conditions" means topography, mountains, washes, rivers, roads or any
other configuration that limits the residential usable land area.

2. Real and personal property and improvements to
the property that are used for residential purposes and solely leased or
rented, that are not included in class one, two, three, six, seven or eight and
that are valued at full cash value.

3. Child care facilities that are licensed under
title 36, chapter 7.1 and that are valued at full cash value.

4. Real and personal property and improvements to
property that are used to operate nonprofit residential housing facilities that
are structured to house or care for persons with disabilities or who are at
least sixty-two years of age and that are valued at full cash value.

5. Real and personal property and improvements that
are used to operate licensed residential care institutions or licensed nursing
care institutions that provide medical services, nursing services or health-related
services and that are structured to house or care for persons with disabilities
or who are at least sixty-two years of age and that are valued at full
cash value.

6. Real and personal property consisting of not more
than eight rooms of residential property that are leased or rented to transient
lodgers, together with furnishing not more than a breakfast meal, by the owner
who resides on the property and that is valued at full cash value.

7. Real and personal property that consists of
residential dwellings maintained for occupancy by agricultural employees as a
condition of employment or as a convenience to the employer, that is not
included in class three and that is valued at full cash value. The
land associated with these dwellings shall be valued as agricultural land
pursuant to chapter 13, article 3 of this title.

8. Real property and improvements to property
constituting common areas that are valued pursuant to chapter 13, article 9 of
this title.

9. Real and personal property that is defined as
timeshare property by section 32-2197 and valued pursuant to chapter 13,
article 10 of this title, except for any property used for commercial,
industrial or transient occupancy purposes and included in class one to the
extent of that use.

10. Real and personal property and improvements that
are used for residential purposes
,

and

that
are leased or

is
rented to
lodgers
for periods of less than thirty days for a total of one
hundred eighty days or less in a calendar year and that are valued at full cash
value
, except for:

(a) Property
that is
occupied
by the owner of the property as the owner's primary residence and
that is
included in class three.

(b) Property
that is
used for
commercial purposes and
that is included
in class one
pursuant to section 42-12001, paragraph 15
.

11. Low-income multifamily residential rental
properties that are valued pursuant to chapter 13, article 13 of this title.

12. Real and personal property and improvements to
property of a guest ranch that meets the requirements prescribed in chapter 13,
article 12 of this title and that is included in the Arizona dude ranch
heritage trail program established by section 41-867 and that are valued
at full cash value.

B. Subsection A, paragraphs 4 and 5 of this section
do not limit eligibility for exemption from taxation under chapter 11, article
3 of this title.
END_STATUTE

Sec. 4. Section 42-12052, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-12052.

Review and verification of class three property; civil penalty;
appeals

A. Each county assessor shall review assessment
information, on a continuing basis, to ensure proper classification of
residential dwellings. The assessor may enter into intergovernmental
agreements with the department for an exchange of information to ensure a
coordinated and comprehensive review and identification of property that may be
rented while classified as class three pursuant to section 42-12003.

B. If the assessor
has reason to believe that a parcel of property that is classified as class
three pursuant to section 42-12003 is not the owner's primary residence
or
as
a qualifying family
member

member's
residence pursuant to section 42-12053, the
assessor shall notify the owner, in a form prescribed by the department as
provided by subsection D of this section, and request that the owner respond as
to whether the property meets the requirements of section 42-12003 or 42-12053,
is a secondary residence or is used as a rental property.� If the owner fails
to respond to the assessor within thirty days after the notice is mailed, the
assessor shall mail the owner a final notice within thirty days requesting that
the owner provide information as to whether the property meets the requirements
of a primary residence, a secondary residence or is used as a rental property.�
If the owner fails to respond to the assessor within fifteen days after the
final notice is mailed, the assessor shall:

1. Reclassify the property as class
one
pursuant to section 42-12001, paragraph 15 or class
four
pursuant to section 42-12004
. In addition to
other appeal procedures provided by law, the owner of the property that is
reclassified
as class four
under this paragraph may appeal
the reclassification to the county board of supervisors within thirty days
after the notice of classification is mailed. If the owner proves to
the board's satisfaction that the property is occupied as the owner's primary
residence, the board shall order the property to be reclassified as class three
property pursuant to section 42-12003.

2. Notify the county treasurer, who shall assess a
civil penalty against the property equal to the amount of additional state aid
paid pursuant to section 15-972 with respect to the property in the
preceding tax year. The civil penalty shall not be assessed if the
ownership of the property has changed after notification.� The owner of the
property shall pay a penalty under this paragraph to the county treasurer
within thirty days after the notice of the penalty is mailed.� The owner may
appeal the penalty to the county board of supervisors within the time required
for payment. If the owner proves to the board's satisfaction that
the property is occupied by the owner, the board shall waive the penalty, and
the property shall be listed as class three pursuant to section 42-12003.
Until paid or waived, the penalty constitutes a lien against the
property. The county treasurer shall deposit all revenue received
from penalties assessed under this paragraph in the county general fund.

C. Beginning in 2013 and during each elective term
of office thereafter, the county assessor shall send notices under subsection B
of this section to each owner of property classified as class three pursuant to
section 42-12003 described by any of the following:

1. The owner has a mailing address outside the
county in which the property is located.

2. The owner has a mailing address, other than a
post office box, that is different than the situs address of the property.

3. The owner has the same mailing address listed for
more than one parcel of class three property in this state.

4. The owner appears to be a business entity.

D. The department
shall:

1. Prescribe all
forms used to notify property owners under this section. The forms
shall contain information as to criteria for the reclassification of property
and the civil penalties that may result if the owner fails to respond to the
notice.

2. Monitor and review the procedures and practices
used by assessors and treasurers to accomplish the verification of class three
property and the assessment and collection of penalties prescribed by this
section and propose suggested improvements to establish uniform processes and
performance among the counties.

E. The department may inspect the records of county
assessors and county treasurers to determine compliance with the requirements
of this section and the accuracy of the classification of owner-occupied
residential property and rental property.
END_STATUTE

Sec. 5. Section 42-12053, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-12053.

Criteria for distinguishing primary residential property,
secondary residential property and rental property

A. For the purpose of classifying residential
property under sections 42-12003, 42-12004 and 42-12052, a
parcel is not considered a secondary property or rental property if the
property is occupied by a member of the owner's family, who must be:

1. The owner's natural or adopted child or a
descendant of the owner's child.

2. The owner's parent or an ancestor of the owner's
parent.

3. The owner's stepchild or stepparent.

4. The owner's child-in-law or parent-in-law.

5. The owner's natural or adopted sibling.

B. For the purpose of classifying owner-occupied
residential property under sections 42-12003, 42-12004 and 42-12052,
the department shall adopt standard criteria for use in determining whether the
property is considered to be the owner's or relative's primary residence,
including:

1. The period of occupancy each year.

2. The owner's registered voting precinct.

3. The owner's driver license address.

4. The registration address of the owner's motor
vehicles.

5. Other appropriate indicators of primary
residency.

C. For
the purpose of classifying residential property that is rented to lodgers for periods
of less than thirty days under sections 42-12001, 42-12004 and 42-12052,
the department shall adopt standard criteria to determine whether the property
is considered to be rented to lodgers for periods of less than thirty days
for more than one hundred eighty days in a calendar year, including:

1. The period of occupancy each year.

2. The duration of the rental
periods.

3. If the owner appears to be a
business entity.

4. If the owner obtained a
transaction privilege tax license for the property.
�
END_STATUTE

Sec. 6.
Applicability

This act applies to tax years
beginning from and after December 31, 2026.