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State State plan is to be treated as rent subject to the tourist development tax. With respect to rentals of these accommodations, while it was a generally accepted practice for many timeshare projects to pay taxes, the issue was not free from doubt. Consequently, HB 61 clarifies that timeshare resort rentals are subject to tourist development tax, tourist impact tax, convention development tax, and the transient rentals tax, by specifically listing rental of timeshare accommodations as a category of transient rental activity. Perhaps the most significant key to the taxation portion of the legislation was clarification of the treatment of regulated short-term products. A regulated shortterm product is a contractual right to use a timeshare plan’s accommodations, in which the contract (1) is executed in Florida on the same day that the prospective purchaser receives an offer to acquire an interest in a timeshare plan but does not execute a purchase contract after attending a sales presentation; and (2) provides that all or a portion of the consideration paid will be applied to or credited against the price of a future purchase of a timeshare interest, or that the cost of a future purchase of a timeshare interest will be fixed or locked in at a specified price (§721.05 (32), Florida Statutes). What prompted the clarification of the law? Broward County audited resorts owned by Fairfield Resorts, Inc. (now Wyndham Vacation Resorts), and decided that the “one-time inspection privilege packages” offered to prospective purchasers of timeshare interests should have been assessed with the county’s tourist development tax (Broward County v. Fairfield Resorts, Inc., 946 So.2d 1144 [Fla. 4th DCA 2006]). The Fourth DCA affirmed the lower court and held that “the plain meaning of §125.0104(3)(a) provides the answer to the riddle,” that timeshare or inspection privilege packages are simply not included in the provisions of the statute. As a result of the revenue uproar created by the ruling in the Broward v. Fairfield case, and in order to obtain 28 relief in other tax areas, HB 61 provides that the transient rental taxes will be due and payable on the last day of occupancy on the consideration paid for the stay acquired, as part of the regulated short-term product executed in Florida— unless the consideration paid is applied toward the purchase of a timeshare estate (a right to use a timeshare accommodation, coupled with an interest in the underlying property). As a final note, the application of the amendments in HB 61 to the tourist development tax, tourist impact tax, convention development tax, and the transient rentals tax are specifically intended to be clarifying and remedial in nature and do not provide a basis for assessments of tax or tax refunds for periods prior to July 1, 2009. Chapter 721 Amendments In addition to tackling taxes and debt cancellation products, HB 61 amends Chapter 721 in three different areas. Not all of these amendments were placed in the bill at the request of ARDA-Florida, and while these amendments may not appear significant on the surface, they do touch on important aspects of the regulation of timeshare products. The first amendment to Chapter 721 made by HB 61 is to the definition of the term “facility” in §721.05(17) (Florida Statutes), and it specifies that only those amenities made available to purchasers of a timeshare plan that are “permanent” are governed by Chapter 721. This means that provisions, such as the requirement to provide facilities to purchasers either free and clear of any encumbrances or with protections for continued purchaser access (i.e., executed, delivered, and recorded non-disturbance and subordination arrangements), will not apply to nonpermanent amenities. The apparent intent of this change is to provide developers with the tools to remain competitive, by permitting the offering of different shorter term experiences and options within a timeshare accommodation that may not fit the concept of a traditional timeshare facility—and therefore, not need to meet the same level of regulation specs. In addition to amending the definition of facility, HB 61 provides that starting July 1, 2009, every public offering statement must contain a statement that the owner’s obligation to pay timeshare assessments continues for as long as the owner owns the timeshare interest, and that a person who inherits a timeshare interest will be responsible for paying those assessments (see §721.07(5)(ii), Florida Statutes). Inclusion of these disclosures will arguably assist timeshare consumers to purchase with full knowledge of the financial obligations associated with ownership of a timeshare interest. The third amendment to Chapter 721 requires timeshare resale service providers to give certain information relating to the advertising, listing, or sale Debt Cancellation Debt cancellation products include loans, leases, or retail installment contract terms (or modifications to such instruments), pursuant to which a creditor agrees to cancel or suspend all or part of a customer’s obligation to make payments upon the occurrence of specified events. The creditor may, in turn, purchase insurance from a third party to offset the risk of financial loss from the use of debt cancellation products by consumers. Under Florida law, the term “casualty insurance” includes debt cancellation products and therefore, would ordinarily mean that any person offering the debt cancellation product would need to comply with the rigorous requirements imposed on persons who offer insurance (see §624.605(1) (r), Florida Statutes). HB 61 expands the list of entities authorized to offer debt cancellation products without deeming those products to be insurance to include the sellers of timeshare interests as well as the parents, subsidiaries, or affiliated entities of the sellers. It is hoped that by allowing debt cancellation products to be made more readily available to timeshare consumers, more consumers will be comfortable in making a purchase decision. Developments • October 2009

October 2009 Developments

Table of Contents for the Digital Edition of October 2009 Developments

October 2009 Developments - 1
October 2009 Developments - C1
October 2009 Developments - I1
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