What entities have agreed to assume responsibility for pre-existing contingent liabilities related to the spin-offs of Realogy and Wyndham subsidiaries from Budget?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
In 2006, we completed the spin-offs of our Realogy and Wyndham subsidiaries (now known as Anywhere Real Estate, Inc., and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co., respectively). We do not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the spin-offs should result in a material liability to us in relation to our consolidated financial position or liquidity, as Anywhere Real Estate, Inc., Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have agreed to assume responsibility for these liabilities.
In March 2023, the California Office of Tax Appeals ("OTA") issued an opinion in a case involving notices of proposed assessment of California corporation franchise tax for tax year 1999 issued to us. The case involves whether (i) the notices of proposed assessment were barred by the statute of limitations; and (ii) a transaction undertaken by us in tax year 1999 constituted a tax-free reorganization under the Internal Revenue Code ("IRC"). The OTA concluded that the notices of proposed assessment were not barred by the statute of limitations and that the 1999 transaction was not a tax-free reorganization under the IRC. Anywhere Real Estate, Inc. has assumed 62.5%, and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have assumed 37.5% of the potential tax liability in this matter, respectively. We filed a petition for rehearing, which was denied in April 2024, and the tax assessment is expected to become payable, even if judicial relief is sought.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Anywhere Real Estate, Inc., Wyndham Hotels and Resorts, Inc., and Travel + Leisure Co. have agreed to assume responsibility for pre-existing contingent liabilities related to the spin-offs of Realogy and Wyndham subsidiaries from Budget.
Specifically, in the matter of the California Office of Tax Appeals' opinion regarding corporation franchise tax for tax year 1999, Anywhere Real Estate, Inc. has assumed 62.5% of the potential tax liability, while Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have assumed 37.5% respectively. This division of responsibility indicates a pre-arranged agreement among these entities regarding the allocation of potential liabilities stemming from the period when they were all part of the same corporate group.
This agreement is favorable for Budget, as it limits their exposure to liabilities associated with these spin-offs. However, as a prospective franchisee, it is important to understand the nature and extent of these contingent liabilities and the potential impact on the financial stability of Anywhere Real Estate, Inc., Wyndham Hotels and Resorts, Inc., and Travel + Leisure Co., as these could indirectly affect Budget.