Were mandatory social-club dues paid by homeowners exempt as homeowners' association assessments?

Subject

Mandatory Social Dues by Residents of Community

Plain-English summary

The homeowners' mandatory social dues were taxable because they were paid to a country club that was not a qualifying homeowners' association. Every community property owner had to hold at least a social membership, pay equal annual social dues, and could face a lien for nonpayment. Those facts made the payment mandatory and tied it to ownership, but they did not satisfy the association requirement.

The club also admitted nonresident equity golf members. Those nonresidents had voting rights equal to resident members on matters not exclusively related to golf. Florida concluded that a homeowners' or condominium association must be composed exclusively of parcel or unit owners; creating a resident-only social membership category inside a broader club did not satisfy that constituency test.

Because the payment failed the association requirement, the Department did not decide whether the club facilities were common elements or whether the other exemption conditions were met. The club had already agreed that optional resident golf charges and all nonresident golf dues were taxable.

What this means for you

Mandatory payment and a lien right are not enough for Florida's association-dues exception. The legal identity and full membership of the payee matter. A recreational club that includes nonowners may remain taxable even when every homeowner is compelled by recorded covenants to join it.

Common questions

Q: Did tying membership to home ownership make the club a homeowners' association? No. The club's nonresident membership and voting rights prevented it from being composed exclusively of parcel owners.

Q: Could the resident social-membership class be analyzed separately? No. The ruling examined the club as a whole rather than treating one membership category as a separate association.

Q: Did Florida decide whether the facilities were common areas? No. Once the club failed the association criterion, the Department said the remaining requirements were irrelevant to this request.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04(1) — recreational club dues as taxable admissions
• Fla. Admin. Code r. 12A-1.005(5)(d)2.d. — exception for qualifying mandatory association dues
• Fla. Stat. §§ 617.301(7), 718.103(2) — homeowners' and condominium association definitions
• Downey v. Jungle Den Villas Recreational Association, Inc., 525 So. 2d 438 (Fla. 5th DCA 1988)
• Siegel v. Division of Florida Land Sales & Condominiums, 453 So. 2d 414 (Fla. 3d DCA 1984)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-062

Original ruling text

SUMMARY

A country club, located in a residential community,
endeavors to determine if social membership dues paid by
residents of the community are exempt as mandatory payments
to a homeowners' association. In order for membership dues
to be exempt, the dues must be (1) mandatory, (2) paid to a
homeowners' association, (3) required to be paid as a
condition of ownership, and (4) the club facilities are
part of the common elements of the real property.

The club has at least three categories of membership: 1.
Social members; 2. Resident golf member; and 3. Nonresident golf member. The social membership is made up
exclusively of homeowners in the residential community.
All homeowners are required to be at least social member of
the club. Since there are categories of membership that
are made up of non-residents, the club is not a homeowners'
association.

Aug 18, 1998

Re: Technical Assistance Advisement 98A-062
Sales and Use Tax - Mandatory Social Dues by Residents of
Community
Sections: 212.02, 212.04, F.S.
Rule: 12A-1.005, F.A.C.
Petitioner: XXX (herein"Club")
Related Entity: XXX (herein "Community")
Related Entity: XXX (herein "Association")
FEI: XX

Dear:

This letter is a response to your petition dated May 12, 1998,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the

Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

DISCUSSION OF FACTS

From your letter:

The Club was incorporated in the State of Florida under
Chapter 617 of the Florida Not-For-Profit Corporation Act.
The Declaration of Protective Covenants and Restrictions
[for Community] (Exhibit B), [and the] Articles of
Incorporation [of Club] (Exhibit C) and By-Laws [of Club]
(Exhibit D)... are attached. From these documents it can
be determined that the Club is structured to own, operate,
preserve and maintain the Country Club Area and the golf,
tennis and other recreational and social facilities located
thereon for the benefit of its members. The Club is
specifically addressed and subject to all applicable terms
of the Declaration of Protective Covenants and Restrictions
of... Community (the residential community).

The Club has three basic categories of membership: (1)
Social Members, (2) Resident Golf Members and (3)
Nonresident Equity Golf members. When an individual
purchases a residence (real property) in the community,
they are required to obtain at least a Social membership in
the Club. Additionally, when an individual purchases such
real property, the Club can not deny admission of a Social
membership status to the purchaser. Resident Golf and
Nonresident Equity Golf categories of membership are
optional and can only be acquired based upon availability.
All homeowners in the community are charged an equal,
annual amount for social membership dues.... [T]he Club
agrees that State sales tax applies to all optional fees
such as the incremental dues for Resident Golf and all dues
charged to Nonresident Equity Golf members. The exemption
for sales tax only pertains to the mandatory social
membership dues of resident members.

The membership voting rights are found in Article V Members - B., page 6 of the Articles of Incorporation. All
property owners in the [Community] are at least Social
members and as such, receive one vote and a membership is
canceled if such person sells their property and moves out
of the [Community]. Furthermore, all equity members,
whether Resident or Non-Resident, who purchase an optional
Golf Equity membership, maintain their single vote status.
Social equity members who have not purchased the optional
Golf memberships can not vote on matters which specifically
relate to golf or the golf course.... (Emphasis in
Original)

The voting rights of the club provide that Social Members and
Non-resident Equity Golf Members have equal votes on matters
which do not pertain exclusively to the golf course.

From your letter:

As referred to in Section 9 - Accounting Records; Fiscal
Management - 9.2 page 11 of the By-Laws, the Board of
Directors of the Club adopts annual social and golf budgets
sufficient to maintain and operate the Club and to fulfill
the obligations of the Club. Upon such adoption of the
annual budgets, the Board of Directors sets forth and
publishes the annual dues rates for each respective
membership category charged to each member of the Club.

No Resident equity member may waive or otherwise escape
liability for the amounts charged each resident of the Club
by non-use of the facilities or abandonment of his or her
parcel. This is achieved in accordance with Article XIII Covenants to Pay Club Dues and Club Assessments for Club
Expenses; Establishment and Enforcement of Liens - B. and
C.(3.) on pages 48 and 49 of the Declaration of Protective
Covenants and Restrictions which states, among other
things, "Any and all Club Dues and Club Assessments levied
by the Club... are hereby declared to be charge and
continuing lien upon the Contributing Units against which
such Club Dues and Club Assessments are levied." The Club
also has the ability to file an action in equity to

foreclose its lien if any amounts, including the mandatory
social membership dues, are not paid in accordance with the
terms of the Declaration. (Emphasis in Original)

According to the Declaration of Protective Covenants for
Community, a separate Florida not-for-profit corporation,
[Association] was formed. This corporation is "delegated and
assigned certain powers and duties of ownership, operation,
administration, maintenance and repair of portions of the
Property; the enforcement of the covenants and restrictions
contained in the Declaration; and the collection and
disbursement of the [property owner's association] expenses..."
No additional documentation concerning the property owner's
association was provided.

Requested Advisement

You endeavor to elicit advice as to whether the mandatory social
dues to the Club from residents of the Community are exempt from
tax.

Discussion, Analysis, and Conclusion of Law

Section 212.02(1), Florida Statutes, defines "admissions":

The term "admissions" means and includes the net sum of
money after deduction of any federal taxes for admitting a
person or vehicle or persons to any place of amusement,
sport, or recreation or for the privilege of entering or
staying in any place of amusement, sport, or recreation,
including, but not limited to, theaters, outdoor theaters,
shows, exhibitions, games, races, or any place where charge
is made by way of sale of tickets, gate charges, seat
charges, box charges, season pass charges, cover charges,
greens fees, participation fees, entrance fees, or other
fees or receipts of anything of value measured on an
admission or entrance or length of stay or seat box
accommodations in any place where there is any exhibition,
amusement, sport, or recreation, and all dues and fees paid
to private clubs and membership clubs providing
recreational or physical fitness facilities, including, but

not limited to, golf, tennis, swimming, yachting, boating,
athletic, exercise, and fitness facilities, except physical
fitness facilities owned or operated by any hospital
licensed under chapter 395. (Emphasis Supplied)

Section 212.04(1)(a), Florida Statutes, provides:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who sells or
receives anything of value by way of admissions.

Rule 12A-1.005(5), Florida Administrative Code, provides in
pertinent part:

DUES AND INITIATION FEES, EQUITY AND NONEQUITY MEMBERSHIPS,
CAPITAL CONTRIBUTIONS AND ASSESSMENTS, REFUNDABLE AND
NONREFUNDABLE DEPOSITS, AND USER FEES.

(a)1. Dues paid to any organization, including athletic
clubs, health spas, civic, fraternal, and religious clubs,
and organizations which provide physical fitness facilities
or recreational facilities such as golf courses, tennis
courts, swimming pools, yachting, boating, athletic,
exercise, and fitness facilities, are taxable, except as
provided in paragraphs (3)(g) and (j) of this rule.

(d)2. The following payments made to private clubs or
membership clubs are not "fees" which are subject to tax on
admissions.

d. Mandatory dues and fees paid to a condominium
association, homeowners' association, or cooperative
association when they are required to be paid as a
condition of ownership or occupancy of real property and
the club facilities are part of the common elements or
common areas of the real property. (Emphasis Supplied)

Section 617.301(7), Florida Statutes, defines "homeowners'
association":

"Homeowners' association" or "association" means a Florida

corporation responsible for the operation of a community in
which the voting membership is made up of parcel owners or
their agents, or a combination thereof, and in which
membership is a mandatory condition of parcel ownership,
and which is authorized to impose assessments that, if
unpaid, may become a lien on the parcel. The term
"homeowners' association" does not include a community
development district or other similar special taxing
district created pursuant to statute. (Emphasis Supplied)

Section 718.103(2), Florida Statutes, defines "association" as
related to condominiums:

"Association" means, in addition to those entities
responsible for the operation of common elements owned in
undivided shares by unit owners, any entity which operates
or maintains other real property in which condominium unit
owners have use rights, where unit owner membership in the
entity is composed exclusively of condominium unit owners
or their elected or appointed representatives, and where
membership in the entity is a required condition of unit
ownership. (Emphasis Supplied)

Rule 12A-1.005(5)(d)2.d., F.A.C., cited above, provides that a
fee is not a taxable admission if the fee is (1) mandatory, (2)
paid to a homeowners' association, condominium association, or
cooperative association(FN 1), (3) required to be paid as a
condition of ownership, and (4) the club facilities are part of
the common elements or common areas of real property.

The first criterion that must be satisfied is that the payment
of the fee must be mandatory. Article IX(A)1.a. of the
Declaration provides that "Each Dwelling Unit Owner... shall be
a `Social Member' of the Club..." Article XIII(A)1. of the
Declaration provides that "... there is hereby imposed upon each
Social Member... the affirmative covenant and obligation to pay
to the Club... all applicable Club Dues.... Each Club Member
shall be obligated to pay his respective Social Membership
Dues...." The Declaration also provides that if the club fees
are not paid, a lien may be placed upon the member's property in
the Community. Since each unit owner is required to be a member

of the Club, and each member of the Club is required to pay the
dues, the dues satisfy the criteria of being mandatory.

The second criterion is that the fees must be paid to a
homeowners' association. Section 617.301(7), F.S., introduced
above, defines a "homeowners' association" or an "association"
as a Florida corporation responsible for the operation of a
community and made up of parcel owners or their agents. This
definition does not contemplate membership in the association of
anyone other than parcel owners. Section 718.103(2), F.S., also
introduced above, defines a "condominium association" as an
entity that operates the common elements of a condominium and
which is made up exclusively on unit owners. In Downey v.
Jungle Den Villas Recreational Association, Inc., 525 So.2d 438
(Fla. 5DCA 1988), the Fifth District Court of Appeal found that
"The recreation association should be treated as a condominium
association under the constituency test.' The essence of that test addresses whether the recreation association'smembership
is comprised of only condominium unit owners, and only
condominium unit owners have rights in the property administered
by the Association....'" Id. at 440. See also Siegel v.
Division of Florida Land Sales and Condominiums, Department of
Business Regulation, 453 So.2d 414, 417 (Fla. 3DCA 1984). It is
plain from Article V of the Restated Articles of Incorporation
of the Club that its membership is not made up exclusively of
unit/parcel/home owners.

Further evidence that the Club is not a homeowners' association
is that non-resident members of the Club have equal voting
rights with resident members of the club on all matters not
related exclusively to the golf course. Article V. B., Restated
Articles of Incorporation.

While it may be argued that the Club is made up of various
categories of membership, and that the Social Membership
category is comprised only of parcel owners, and all parcel
owners are required to maintain Social Membership, such an
argument is imperfect. Neither statutes defining the various
types of associations, nor the case law, contemplates
subcategories of membership in the associations where some
categories of membership are made up exclusively of parcel

owners while other categories may have non-parcel owner members.
The statutes and the case law are quite clear that qualifying
associations, among other things, are made up exclusively of
parcel owners.

Since the fee fails to meet the second criterion required in
order to be exempt, it is irrelevant whether the fee meets the
remaining requirements. Therefore, the remaining requirements
will not be discussed.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the department
only under the facts and circumstances described in the request
for this advice, as specified in Section 213.22, F.S. Our
response is predicated upon those facts and the specific
situation summarized above. You are advised that subsequent
statutory or administrative rule changes or judicial
interpretations of the statutes or rules upon which this advice
is based may subject similar future transactions to a different
treatment from that which is expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of Section 213.22,
F.S. Your name, address, and any other details that might lead
to identification of the taxpayer must be deleted by the
Department before disclosure. In an effort to protect the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or this response.

Sincerely,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/414-9838

Enclosure
Control #34207

Footnote 1: "Cooperative Association" is defined in Section
697.03, F.S. The taxpayer does not meet the definition of a
cooperative association.