Frequently asked questions
Family Limited Partnerships and Venture Capital Funds
- What is a Family Limited Partnership (FLP)?
Any family-owned non-corporate business, which the sole activity is the production of investment income, is exempted from Occupational License Tax.
The Louisville Metro Revenue Commission requires an annual questionnaire and an annual informational return to be completed and submitted by any business entity operating as a Family Limited Partnership in order to be exempt from the occupational license tax.
DEFINITIONS TO KNOW:
- Investment Income: All gross receipts derived from dividends, interest, annuities, and sales or exchanges of stock.
- Family-Owned: At least 95% of the equity of a business is owned by members of the family
- How does a business qualify for a FLP exemption?
To qualify for the FLP exemption, the income received by family limited partnerships must be:
- From a family-owned business
- The sole activity of that business must be the production of income not derived from tangible or real property
- At least 95% of the business equity must be owned by members of the family
See LMCO 110.03(A)(13) for more information.
- What is a Venture Capital Fund (VCF)?
A limited liability company, limited liability partnership, or limited partnership, formed and operated for the exclusive purpose of buying, holding and/or selling securities (including debt securities), on its own behalf and not as a broker.
The Louisville Metro Revenue Commission requires an annual questionnaire and an annual informational return to be completed and submitted by any business entity operating as a Venture Capital Fund in order to be exempt from the occupational license tax.
- How does a business qualify for a VCF exemption?
To qualify for the VCF exemption, the venture capital fund must be:
- A limited liability company, limited liability partnership or limited partnership
- Operates exclusively on buying, holding and/or selling securities (including debt securities), on its own behalf and not as a broker, primarily in non-publicly traded companies
- The capital of the fun is mainly derived from investments by business and/or individuals who are neither related or affiliated with the fund
See LMCO 110.03(A)(12) for more information.
- Do business that qualify for the FLP and VCF exemptions have to file an OL return?
If the business files an annual informational return along with the required documentation, it is not responsible for filing an OL return.
Short-Term Rental Owners
- What is considered a Short-Term Rental?
A short-term rental is a dwelling unit (like a residence or apartment) that is rented, leased or assigned for a tenancy of less than 30 consecutive days. This includes listings offered on Airbnb, VRBO, and other online booking platforms.
All Short-Term Rental Owners (hosts) mut register with the Louisville Metro's Office of Planning & Design Services as well as the Louisville Metro Revenue Commission.
See LMCO 115.516-115.522 for more information.
- How can short-term rental owners (hosts) comply with LMRC Tax Regulations?
The first step is to register for a tax reporting number. Click here to begin the registration process. Hosts must register for both the Transient Room Tax (TR1M/TR1M-S) and the Occupational License Net Profit tax (OL-3). The TR1M/TR1M-S return is required to be filed monthly, while the OL-3 return is required to be filed annually. The filing requirements begin the day a host starts short-term rental activity.
- If I am registered with the Office of Planning & Design Services, why do I need to register with the LMRC?
All short-term rental owners (hosts) are required to report Transient and Occupational License Net Profit taxes to the LMRC. Each host is required to submit a monthly Transient return (TR1M or TR1M-S) as noted in LMCO 121.01.
Also, do to business activity as a short-term rental owner, hosts must file the annual Occupational License Net Profit tax return (OL-3) as well. This tax is collected on all net profits earned by a business within Louisville/Jefferson County. Anyone who engages in business, profession, occupation, or trade will have to pay the Occupational License Tax. There is no minimum earned net profit amount before you are liable to file a tax return.
- What is the Transient Room Tax?
The Transient Room Tax is an aggregate tax of eight and one‐half percent (8.5%) of the rent for every occupancy of a suite or room charged by all persons, companies, corporations, or others doing business as motor courts, motels, hotels, inns, or similar accommodations businesses.
- What is the difference between the TR1M form and TR1M-S form?
The TR1M form should be used by all owners that have permanent guests and is primarily used by hotels. The TR1M-S form is a simplified version that can be used by short-term rental owners and is only for hosts that do not have permanent guests.
- When is the Transient Room tax return (TR1M/TR1M-S) due?
The return and tax due must be filed and paid by the last day of the month following the month of the short-term rental activity. For example, the return and tax for short-term rental activity in May is due by June 30th. See the LMRC Tax Calendar for current due dates.
- When is the Occupational License Net Profit return (OL-3) due?
- Do I have to file a return even when I do not have renters?
Yes, hosts are required to file a monthly Transient return even if they do not have renters for that month.
- What if I just found out that I should be reporting to the LMRC?
The Transient Room tax filing requirement starts the day short-term rental activity begins. All past due returns should be filed as soon as possible. Past due returns will be subject to penalty and interest. Directions for calculating penalty and interest can be found on the TR1M/TR1M-S instructions.
- Do I need to register and file separate returns for each rental property?
No, a short-term rental owner should only register once with the LMRC even if they have multiple rental properties or use different renting methods. The TR1M and TR1M-S forms have fields for the host to report rental activity for multiple locations and multiple rental methods. The host should only file one Transient Room tax return per month for all short-term rental activities.
- I rent my house on Airbnb. Do they file the Transient Room return on my behalf?
No, Airbnb only collects and remits the tax for the short-term rental owner (host). Airbnb does not fulfill your obligation to file the return. You are still required to register and file the monthly Transient Room return with the Louisville Metro Revenue Commission (LMRC).
- How will I know the amount of tax Airbnb has remitted on my behalf?
Airbnb provides this information to hosts on the “Transaction History” report through the platform. This report outlines the gross amount the host charged the guest for the stay, and the amount of taxes Airbnb collected and remitted on behalf of the host. The TR1M and TR1M-S forms provide space for a host to identify the portion of tax remitted by Airbnb on their behalf and requires a copy of the "Transaction History" report as support.
- Do other online booking platforms (other than Airbnb) collect and remit transient room taxes to LMRC?
Airbnb is currently the only online booking platform that collects and remits the Transient Room tax to the LMRC on behalf of the host. If the host is renting through any other online platform or some other method, the host is required to remit that portion of the tax along with the Transient Room tax return.