In a statement on the suit, the plaintiffs argue the fees violate the U.S. Constitution’s Commerce Clause and Equal Protection Clause by “discriminating against interstate commerce and intentionally targeting non-resident timeshare owners.”
In the complaint, the plaintiffs argue it is “targeted, discriminatory, revenue legislation that has the purposeful intent to impose fees almost exclusively on interstate commerce violates the Commerce Clause,” citing various times Gov. Kenneth Mapp has said the legislation aims to seek funding from visitors to the territory. Timeshare Lawsuit
The complaint does not say how this fee is distinct from the many other taxes and fees in many U.S. jurisdictions that have been aimed primarily at out of state travelers for many decades. For example, a great many jurisdictions, including the USVI, charge hotel occupancy fees, which are, by the nature of hotels, aimed at getting revenue from visitors instead of residents. Williamsburg, Va., a town with a large tourist industry, charges a restaurant meals tax specifically aimed at deriving revenue from out of town and out of state visitors.
The USVI is also not the only jurisdiction to charge extra fees specifically on timeshares. Virginia Beach, Va. charges additional fees of $2 per night plus 8 percent occupancy tax. Hawaii charges a transient occupancy tax on timeshares of 9.25 percent per night.
“The comments by Governor Mapp and others make it clear that the intention in enacting the Timeshare Impact Fee is to make non-resident timeshare owners exclusively bear the costs of funding the U.S. Virgin Islands revenue needs,” the plaintiffs say elsewhere in the complaint.
Individual income taxes, gross receipts taxes and real property taxes each separately contribute vastly more than the projected revenues from the timeshare fee.
Finance Commissioner Valdamier Collens testified to the Senate in February that his department projected the fee would generate around $19 million per year. The V.I. budget is nearly a billion dollars per year. Its structural deficit is around $170 million per year. The government also increased tobacco, alcohol and soda taxes, which are projected to generate similar amounts of revenue. It also increased hotel occupancy taxes and gross receipts taxes in recent years, to try to staunch the territory’s deficits.
The timeshare group also argues the fee will hurt business.
“This fee is discriminatory and will drastically impact the future growth and health of the timeshare industry in the U.S. Virgin Islands,” Ken McKelvey, ARDA-ROC Chair said in their statement.
“Timeshare owners in the USVI already pay the highest real estate property tax rate in the territory making this particular fee an exorbitant burden on the ability of the territory to compete with similar markets,” McKelvey continued.
While the V.I. rate for timeshares is higher than other V.I. property tax rates, V.I. property tax rates are actually lower than most states. According to the Tax Foundation, 49 of the 50 states have higher homeowner property tax rates than the USVI, with only Hawaii, at 0.28 percent, coming in lower. The V.I. rate for timeshare units is 1.407 percent, a bit lower than Hawaii, which charges 1.43 percent for timeshares.
The lobbying group also says the fees will be bad for the territory’s economy, saying that timeshares have seen sustained growth for the past quarter century and that current 70 percent average occupancy rates may fall.
“This fee will hurt the local economy, discourage tourism to the USVI and negatively impact the continued growth of timeshares in the USVI. Fighting this fee will benefit the local economy, and those USVI residents whose incomes and livelihood depend on the local tourism industry, specifically timeshares,” McKelvey said.
The organization made similar arguments when it vigorously opposed the fees when the governor proposed it and during legislative hearings. (See related links below)