Key facts
- A new Rhode Island law imposes an additional tax on second homes valued over $1 million.
- The tax is $5 per $1,000 of assessed value above $1 million.
- More than 40 homeowners, represented by Hinckley Allen, have filed a lawsuit challenging the tax's constitutionality.
- Plaintiffs argue the tax selectively targets second-home owners, particularly out-of-state residents, violating constitutional protections.
- The state identified 8,245 non-owner-occupied properties that may be subject to the tax.
A lawsuit has been filed in Rhode Island challenging the constitutionality of a new tax targeting high-value second homes. The law, which took effect July 1, imposes an additional $5 tax for every $1,000 of assessed value on second homes valued above $1 million. The measure, widely referred to as the 'Taylor Swift Tax,' is being contested by over 40 homeowners represented by the law firm Hinckley Allen.
Plaintiffs argue that the tax violates both federal and state constitutional protections by selectively targeting second-home owners, particularly those who reside out-of-state and cannot vote in Rhode Island. They contend there is no reasonable basis to single out these homeowners for an additional tax burden, asserting that second-home owners often consume fewer municipal services and contribute positively to local communities.
Supporters of the tax argue that owners of high-value second homes place additional demands on municipal services and should be encouraged to make more housing available for renters. However, the lawsuit filing disputes these assertions, with Jerry Petros, chair of Hinckley Allen’s litigation group, stating that these homeowners already pay substantial property taxes and contribute significantly to municipal services.
According to the Rhode Island Division of Taxation, as of May, 22,431 residential properties had assessed values exceeding $1 million, with 8,245 classified as non-owner-occupied and potentially subject to the new tax. The plaintiffs also point to statements from the legislation's sponsor acknowledging the impact on out-of-state residents, arguing the law conflicts with the principle of 'no taxation without representation.' The filing further notes that the tax revenue is intended to fund tax credits for low-income housing developers, which the homeowners argue amounts to transferring funds from property investors to private developers.
This legal challenge follows a similar situation in New York City, where a temporary pause was lifted on enforcement steps related to a pied-à-terre tax on luxury residential properties that are not the owner's primary residence.