REPORT TITLE:
Construction Industry


DESCRIPTION:
Exempts gross proceeds received by state subcontractors from
federal construction contracts from the general excise tax.
(SB2131 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2131
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO FEDERAL CONSTRUCTION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The purpose of this Act is to provide a general
 
 2 excise tax exemption for Hawaii's subcontractors to help
 
 3 rejuvenate their businesses.  In addition, this Act clarifies
 
 4 that the definition of contractors in chapter 444, Hawaii Revised
 
 5 Statutes, includes all contractors working in the State directly
 
 6 or indirectly for the federal government to the extent allowed
 
 7 under federal law.  Therefore, those contractors, including out-
 
 8 of-state contractors, are subject to the licensing and other
 
 9 provisions of chapter 444, Hawaii Revised Statutes.
 
10      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
11 by adding a new section to be appropriately designated and to
 
12 read as follows:
 
13      "�237-    Exemption of federal construction contracts.  (a)
 
14 Any provision of the law to the contrary notwithstanding, there
 
15 shall be exempted from, and excluded from the measure of the
 
16 taxes imposed by this chapter, all of the gross income or gross
 
17 proceeds received by state subcontractors that arises from
 
18 federal construction contracts.
 
19      (b)  For the purposes of this section:
 

 
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 1      "State subcontractor" means a contractor for whom a
 
 2 deduction may be taken by another contractor pursuant to section
 
 3 237-13(3)(B), whether or not a deduction is taken, and that:
 
 4      (1)  Is licensed as a contractor pursuant to chapter 444;
 
 5      (2)  Is licensed to conduct business in this State pursuant
 
 6           to section 237-9;
 
 7      (3)  Submits a bid under the name appearing on the person's
 
 8           current contracting or business license;
 
 9      (4)  Is a domestic corporation, partnership, or business
 
10           organized or formed under the laws of the State;
 
11      (5)  Has maintained its principal place of business within
 
12           the State for at least two hundred consecutive days
 
13           prior to the submission of a bid;
 
14      (6)  Has filed a Hawaii resident income tax and all other
 
15           applicable tax returns for the preceding tax year and
 
16           has paid all amounts owing on those tax returns;
 
17      (7)  Has complied with all applicable Hawaii employment,
 
18           insurance, and worker's compensation laws;
 
19      (8)  If an employer with one or more employees, eighty-five
 
20           per cent of its employees are state residents; and
 
21      (9)  If a joint venture, is composed entirely of entities
 
22           that qualify under paragraphs (1) to (8).
 

 
 
 
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 1      "State resident" means an individual who:
 
 2      (1)  Resides in the State at least two hundred days of the
 
 3           year; and
 
 4      (2)  Has filed a Hawaii resident income tax return in the
 
 5           taxable year immediately preceding a bid for a state
 
 6           contract by the individual's employer or business that
 
 7           is a state contractor and has paid all amounts owing on
 
 8           that tax return; provided that an individual who was a
 
 9           state resident, left the State to attend school or
 
10           serve in the armed forces of the United States of
 
11           America, and returned to the State to work for a state
 
12           contractor is a state resident, even though the
 
13           individual has not yet resided in the State for at
 
14           least two hundred days or filed a Hawaii resident
 
15           income tax return or paid all amounts owing on that tax
 
16           return."
 
17      SECTION 3.  Section 444-1, Hawaii Revised Statutes, is
 
18 amended by amending the definition of "contractor" to read as
 
19 follows:
 
20      ""Contractor" means any person who by oneself or through
 
21 others offers to undertake, or holds oneself out as being able to
 
22 undertake, or does undertake to alter, add to, subtract from,
 
23 improve, enhance, or beautify any realty or construct, alter,
 

 
Page 4                                                     2131
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 repair, add to, subtract from, improve, move, wreck, or demolish
 
 2 any building, highway, road, railroad, excavation, or other
 
 3 structure, project, development, or improvement, or do any part
 
 4 thereof, including the erection of scaffolding or other
 
 5 structures or works in connection therewith.
 
 6      "Contractor" includes a subcontractor, a specialty
 
 7 contractor, and any person, general engineering, general
 
 8 building, or specialty contractor who performs any of the
 
 9 activities listed in the previous paragraph directly or
 
10 indirectly for the federal government[.], to the extent allowed
 
11 under federal law."
 
12      SECTION 4.  If any provision of this Act, or the application
 
13 thereof to any person or circumstance is held invalid, the
 
14 invalidity does not affect other provisions of applications of
 
15 the Act which can be given effect without the invalid provision
 
16 or application, and to this end the provisions of this Act are
 
17 severable.
 
18      SECTION 5.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 6.  This Act shall take effect on July 1, 2000, and
 
21 shall apply to gross proceeds or gross income received after
 
22 June 30, 2000.