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Timeshare Owners Facing Higher Occupancy Taxes

Two recent bills under consideration are aimed at leveling the playing field between timeshares and traditional room rentals.  The current formula used to calculate the value of a timeshare when used by its owner appears to undervalue the market value of that unit and therefore the occupancy tax paid by the owner.

HB 809 and HB1163 are intended to correct that situation.  The result of HB1163 would be to triple the tax basis for timeshare units and HB809 temporarily (for 4-years) increases the transient occupancy tax for timeshare owners using their units from 7.25% to 9.25%.

According to the terms of the bill (HB 1163) that has just passed out of the House Tourism Committee on 1/31/2011 and will now be reviewed by the House Finance Committee (expected later this month).

The purpose of this latest legislation is to bring parity in taxes paid by someone renting an equal value hotel/condo who pays the state’s transient occupancy tax.  The basis of the time-share was based on 50% of the units maintenance costs, which when compared to comparable hotel/condo rental rates was a third of the true market value (although that is a questionable value that can be arrived at thru multiple equations). At any rate, this bill is aimed at bringing the tax basis of a timeshare closer to the true market value.

HB 809 will raise the transient occupancy tax rate from the current 7.25% to 9.25% temporarily from July 1, 2011, to June 30, 2015 on time share units used by the owners. (HB809 HD1) This bill passed out of the Tourism Committee on Feb 9th and is headed to the Finance Committee, too.

The danger with HB809 lies in the fact that what starts out as a “temporary” situation often becomes a permanent one.  And, while the timeshare owners may see this as unfairly singling them out, the fact is that they have had the benefit of having their timeshare usage undervalued for years and this is a fair adjustment making things more equitable.

You can go to the American Resort Development Association website for more information.   They are, of course, opposed to these changes.…

You can also go to the State of Hawaii legislature website:
For HB809:…
For HB1092…

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