tax valuations; timeshare
property
SB 1224 defines a uniform property valuation method for timeshare properties and classifies them as class 4 property (rented residential property valued at a 10% assessment ratio).
In 2001, the Legislature passed legislation that changed several provisions of Arizona’s real estate timeshare statutes (Laws 2001, Chapter 170). These changes incorporated modern variations of the timeshare product, streamlined existing timeshare requirements, increased and modernize consumer protections and authorized payment of finder fees.
At the same time, court cases involving the classification and valuation of timeshares were being heard in Maricopa and Mohave counties. In London Bridges Resort Inc. v. Mohave County, the timeshare property owner challenged the Mohave County Assessor’s valuation of the timeshare property using the gross market value for each accommodation. The County Assessor then reduced the gross market value to account for the nonrealty components of the sales price and for personal property in the accommodation. The court ruled that this method of valuation was permissible.
In Scottsdale Links Condominium Association v. Maricopa County, the timeshare property owner challenged the Maricopa County Assessor’s classification of the timeshare property as commercial property (class 1). The assessor and the timeshare property owner settled this matter prior to a court ruling. In an effort to prevent future problems, S.B. 1224 requires managing entities to submit a “use form” to the county assessor including information about the number of accommodations and nights that were used by a transient occupant for commercial use. These provisions attempt to address the problem of entities developing timeshare properties (class 4) and using them for commercial use.
Currently, there is no statutory method for valuation of timeshare properties in the State of Arizona. This has created some inconsistencies when the county assessor values timeshares. S.B. 1224 is a cooperative piece of legislation proposed by the American Resort Development Association (ARDA) and county assessor representatives, requiring county assessors to value timeshare property by utilizing the gross sales price of the timeshare interval less a presumed reduction of 65 percent to account for nonrealty components. This bill also requires a county assessor to classify a timeshare as a class 4 rental property.
A fiscal note has been prepared and the impact cannot be determined, but if there were an impact, JLBC estimates that it would not be until 2005.
· Classifies, in class 4 property taxation, timeshare properties that are not used for commercial or industrial purposes.
· Requires county assessors to value timeshare property based on the original gross sales price of the timeshare interest to the buyer and further specifies that if there is insufficient original sales, county assessors may use comparable timeshare interest sales minus 65 percent for nonrealty components.
· Specifies that nonrealty components include unusual financing, excess sales commission costs, atypical developer risks, extraordinary initial marketing costs, club memberships, business going concern value, transactions that are not at arms length, extended marketing time and the value of any personal property.
· Requires county assessors to value timeshare interest based on resale prices and further specifies that if there is insufficient resale prices, county assessors may use comparable resale prices minus any nonrealty components, including atypical resale cost and personal property.
· Requires county assessors to notify the managing entity of a timeshare property if the county assessor does not agree with a 65 percent reduction of the gross sale price for nonrealty components and develop an alternative method of determining the value of the timeshare property.
· Requires each managing entity to file a use form with the county assessor before September 30 of each year and specifies that the use form will be prescribed by DOR and will contain the following information:
· name and mailing address.
· total number of accommodations and available nights.
· total number of nights each accommodation was occupied in a year.
· the gross sales price of a timeshare interest.
· Allows a managing entity to appeal the classification of a timeshare property if a use form was not filed with the county assessor.
· Requires that a county assessor treat a timeshare property as if no transient occupancy occurred if the transient use of timeshare property was less than ten percent of all available nights.
· Specifies that the managing entity as indicated on the use form is the agent of the timeshare property owner.
· Defines accommodation as a unit that is available for residential occupancy use in a timeshare plan.
· Defines association as any organized body of timeshare purchasers.
· Defines developer as any entity that is directly or indirectly in the business of selling, leasing, planning, mortgaging or transferring timeshare properties.
· Defines managing entity as any entity that is responsible for managing a timeshare property.
· Defines promotion as any type of plan or device used as incentive to sale timeshare interest.
· Defines timeshare interest as an estate or timeshare use.
· Defines timeshare property as one or more timeshare accommodations.
· Defines transient occupant as any person using a timeshare accommodation, but does not include a person using the accommodation as part of a promotion, timeshare interest or exchange program.
· Makes technical changes.
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45th Legislature
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Second Regular Session 3 May
31, 2002
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