REPORT Title:

Long-Term Care Income Tax and Income Tax Credit

Description:

Establishes a long-term care income tax to pay for long-term care benefits; establishes long-term care income tax credit for amounts paid for purchase of long-term care insurance; makes appropriation. (SD2)

HOUSE OF REPRESENTATIVES

H.B. NO.

1616

TWENTY-SECOND LEGISLATURE, 2003

H.D. 1

STATE OF HAWAII

S.D. 2


 

A BILL FOR AN ACT

 

relating to long-term care.

 

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

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART   . LONG-TERM CARE INCOME TAX

235-A Purpose. The purpose of this part is to implement chapter 346C.

235-B Long-term care income tax imposed on individuals; rates; withholding; self-employed; tax form; exclusions; scheduled increases. (a) In addition to the tax imposed under section 235-51, there is hereby imposed on the taxable income of every:

(1) Unmarried individual (other than a surviving spouse, or the head of a household);

(2) Married individual who does not make a single return jointly with the individual's spouse under section 235-93;

(3) Surviving spouse;

(4) Head of a household; and

(5) Trust; provided that the beneficiary of the trust is not also subject to the tax imposed under this section,

a long-term care tax in the amount of $120 in each taxable year beginning in the taxable year after December 31, 2004. A taxpayer who files a joint return under section 235-93, and the taxpayer's spouse together with whom the taxpayer jointly files a return, shall each pay the amount of the tax.

(b) Any taxpayer under subsection (a) who has wages withheld pursuant to section 235-61, shall be subject to section 235-B regarding withholding of long-term care income tax on wages.

(c) Any self-employed taxpayer, who is required to file a return individually or jointly under this chapter, or any other taxpayer who is either required or elects to make estimated tax payments, shall include the amount of the long-term care income tax in the amount of estimated tax payments made for the taxable year.

(d) The long-term care income tax shall be increased as follows:

For the taxable year beginning after: The tax shall be:

December 31, 2005 $144;

December 31, 2006 $168;

December 31, 2007 $192;

December 31, 2008 $216;

December 31, 2009 $240;

December 31, 2010 $264;

December 31, 2011 $276;

(e) For taxable years beginning after December 31, 2012, the board of trustees shall recommend to the legislature for consideration in the regular session of 2011, any adjustment to the amount of the long-term care income tax; provided that the recommendation shall be substantiated by an actuarial report and opinion similar to that required under section 346C- .

(f) The tax under this chapter shall not be imposed on the taxable income of a taxpayer taxed pursuant to section 235-51(c) or (d) if the taxpayer's gross income is less than $10,000, or a taxpayer taxed pursuant to section 235-51(a) or (b) if the taxpayer's gross income is less than $16,000.

235-C Portability; conformity to federal law. (a) A person vested to receive defined benefit who leaves the State and is not required to file a return may continue to be vested if the person makes payment to the board of trustees established under chapter 346C, in the manner and amount as determined by the board.

(b) Payment of defined benefits under section 235-F shall be made without regard to the place of residence, including the state or country, of the person vested under section 235-E.

235-D Withholding of long-term income tax on wages. (a) The terms "wages", "employee", and "employer" shall have the same meaning as defined in section 235-61.

(b) Every employer who pays wages to employees shall deduct and withhold from those wages the amount of tax as provided in section 235-B.

(c) For each withholding period (whether weekly, biweekly, monthly, or otherwise) the amount of tax to be withheld shall be at a rate that, for the taxable year, will yield the tax imposed by section 235-51 and by this part upon each employee's annual wage, as estimated from the employee's current wage in any withholding period. The tax for the taxable year shall be calculated upon the assumptions contained in section 235-61(c).

(d) Alternatively, at the election of the employer, the employer may deduct and withhold from each employee an amount of tax determined on the basis of tables to be prepared and furnished by the department of taxation, which amount of tax shall be substantially equivalent to the amount of tax provided by subsection (c).

235-E Vesting to receive a defined benefit. (a) Any individual who has paid the long-term care income tax under section 235-B for ten years, shall be fully vested to receive the defined benefit provided under section 235-F, but shall continue to be subject to the income tax under section 235-B.

(b) An individual shall earn one-tenth of the defined benefit under section 235-F for each consecutive twelve-month period that the individual pays the income tax under section 235-B. An individual shall be allowed twelve consecutive months of non-payment of the income tax without penalty; provided that after the twelve consecutive months of non-payment, the individual shall forfeit one-tenth of the defined benefit amount for each year of non-payment.

(c) If an individual dies before July 1, 2007, the estate or heirs, as appropriate, of that individual may make a claim for reimbursement of the income taxes paid under section 235-B by the individual.

235-F Defined benefit. (a) Beginning July 1, 2007, payment of a defined benefit for long-term care services shall commence. The defined benefit shall be $70 a day up to a cumulative period of three hundred sixty-five days; provided that the daily defined benefit may be adjusted from time to time by the board of trustees in accordance 346C- .

(b) The defined benefit shall begin after the thirtieth day following the date of the approval of the written certification under section 346C-8 and shall be made to the recipient of a long-term care service, or to the legal representative of the recipient in the name of the recipient, as a reimbursement for long-term care service expenditures. The amount of the defined benefit shall not be qualified by the income of the recipient.

(c) The defined benefit under this program shall be primary to private insurance and Medicaid benefits. An individual shall not receive a defined benefit while the individual is receiving Medicare benefits for long-term care; provided that if Medicare benefits are exhausted, the individual shall be required to qualify under section 346C-8.

(d) The defined benefit received under this section shall not be subject to state income tax.

235-G Remittance. Each month, the director of taxation shall remit the amount of long-term care income taxes that are paid, prepaid in estimated tax payments, or deposited with the department for that month to the board of trustees of the long-term care financing program for deposit into the long-term care benefits fund.

235-H Annual data. The director of taxation shall compile in machine-readable files (read-only computer compact disk or other suitable media) annual data on taxpayers subject to the long-term care income tax, payments, and amounts of payments made. The data so compiled shall be:

(1) Transmitted to the board of trustees of the long-term care financing program annually no later than three months after the date on which individual income tax returns are due; and

(2) Used by the board of trustees of the long-term care financing program solely for the purpose of:

(A) Maintaining an administrative file of taxpayers eligible for long-term care benefits under chapter 346C;

(B) Recording and updating the amount of premiums paid or unpaid;

(C) Determining the payment status of each individual taxpayer eligible for long-term care benefits under chapter 346C; and

(D) Computing vesting credits gained or lost for eligible taxpayers.

235-I Long-term care benefits; disbursement; benefit levels; delinquency; loss carryback; adjustment and actuarial review. (a) The proceeds of the long-term care income tax shall be deposited into the long-term care benefits fund created in section 346C-5. Benefit disbursements shall begin no earlier than the day following the end of the third year of long-term care income tax collections.

(b) The initial benefit level shall be $70 per day for three hundred sixty-five days, subject to restrictions imposed by the required vesting period, for long-term care services as described in section 431:10H-301(c). The benefits shall increase as follows:

(1) $72.10 per day on July 1, 2008;

(2) $74.26 per day on July 1, 2009;

(3) $76.49 per day on July 1, 2010;

(4) $78.79 per day on July 1, 2011;

(5) $81.15 per day on July 1, 2012;

(6) $83.58 per day on July 1, 2013, and thereafter.

(c) For any individual who is subject to the long-term care income tax and who:

(1) Is or has been delinquent in paying the tax; and

(2) Begins to pay overdue back taxes within three years of the initial delinquency,

any such delinquent long-term care income tax payments may be credited to the individual's vesting record and restore any benefit loss up to that point.

(d) Prior to any adjustment to the amount of the long-term care benefit, the board of trustees shall request a review and an opinion by the actuary in the actuarial report required under section 346C- .

235-J Confidentiality. The confidentiality privileges relating to taxpayer communications, as they apply to the department of taxation under section 231-1.5, shall also apply to the board of trustees of the long-term care financing program and its employees, and to any third party administrator that may be contracted to perform activities for the long-term care financing program."

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"235- Long-term care benefits excluded from taxation. Notwithstanding any law to the contrary, all defined benefits paid under section 235-F shall be excluded from taxation under this chapter and need not be reported as income.

235- Long-term care tax credit. (a) Each resident individual taxpayer who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for Hawaii state individual income tax purposes, may claim a long-term care tax credit against the resident taxpayer's net individual income tax liability for the taxable year for which the individual's income tax return is being filed; provided that a resident individual who has no income or no income taxable under this chapter, and who is not claimed or is not otherwise eligible to be claimed as a dependent by a taxpayer for Hawaii state individual income tax purposes may claim this credit.

(b) Each taxpayer may claim a tax credit in an amount equal to $120 for each taxable year beginning after December 31, 2005, and ending before January 1, 2009. For taxable years beginning after December 31, 2008, and ending before January 1, 2014, the tax credit shall be equal to $180.

(c) If a deduction is taken under this chapter pursuant to section 213 (with respect to the deduction for long-term costs and insurance contract premiums) of the Internal Revenue Code, no tax credit shall be allowed.

(d) The credit shall apply to a taxpayer who has paid the long-term care income tax under section 235-B and has made premium payments during the taxable year for a long-term care insurance policy that is subject to chapter 431:10H that covers:

(1) The taxpayer;

(2) The taxpayer's dependent as defined in section 152 of the Internal Revenue Code;

(3) The taxpayer's spouse;

(4) A son or daughter of the taxpayer;

(5) A stepson or stepdaughter of the taxpayer;

(6) The father or mother of the taxpayer; or

(7) A stepfather or stepmother of the taxpayer.

(e) For the purpose of this credit, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter. If the tax credits claimed by a resident taxpayer exceed the amount of income tax payment due from the resident taxpayer, the excess of credits over payments due shall be refunded to the resident taxpayer; provided that tax credits properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

(f) All claims, including any amended claims, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit."

SECTION 3. Chapter 346C, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"346C- Actuarial report and actuarial opinion. (a) The board of trustees of the long-term care financing program shall cause to be prepared an actuarial report and actuarial opinion, as defined by the Actuarial Standards Board of the American Academy of Actuaries. The report and opinion shall be prepared by a member of the American Academy of Actuaries who is a fellow of the Society of Actuaries, certifying that the program is in actuarial balance. Costs of the actuarial report shall be deemed an administrative expense under section 346C-5(b).

(b) The actuarial report shall contain a statement by the actuary certifying that the techniques and methods used are generally accepted within the actuarial profession and that the assumptions and cost estimates used are reasonable. The report shall include:

(1) An estimate of the expected future income to and disbursements to be made from the Hawaii long-term care benefits fund during each of the next ensuing ten fiscal years;

(2) A projection of the tax rates necessary to keep the Hawaii long-term care benefits fund actuarially sound over the short-range and long-range future periods;

(3) A statement of actuarial assumptions and methods used to determine costs and a detailed explanation of any change in actuarial assumptions or methods;

(4) The current and projected number of participants and beneficiaries and the current and projected paid in taxes, defined benefits, current and permanent benefit defined benefits, and the like, aggregated by current and past Hawaii taxpayer status and age;

(5) The current value of accumulated assets of the Hawaii long-term care financing program and the value of assets used by the actuary in any computation of the amount of required taxes; and

(6) The results of short-range and long-range actuarial sensitivity analyses.

(c) Based upon the actuarial report and actuarial opinion under subsection (a), the board of trustees may adjust the defined benefit under section 235-F.

(d) All work products, papers, documents, and data used or prepared by the actuary in preparing the actuarial report shall be subject to chapter 92F.

(e) The actuarial report shall demonstrate actuarial solvency for seventy-five years, and be submitted annually to the governor and the legislature."

SECTION 4. Section 36-27, Hawaii Revised Statutes, is amended to read as follows:

"36-27 Transfers from special funds for central service expenses. Except as provided in this section, and notwithstanding any other law to the contrary, from time to time, the director of finance, for the purpose of defraying the prorated estimate of central service expenses of government in relation to all special funds, except the:

(1) Special out-of-school time instructional program fund under section 302A-1310;

(2) School cafeteria special funds of the department of education;

(3) Special funds of the University of Hawaii;

(4) State educational facilities improvement special fund;

(5) Convention center enterprise special fund under section 201B-8;

(6) Special funds established by section 206E-6;

(7) Housing loan program revenue bond special fund;

(8) Housing project bond special fund;

(9) Aloha Tower fund created by section 206J-17;

(10) Domestic violence prevention special fund under section 321-1.3;

(11) Spouse and child abuse special account under section 346-7.5;

(12) Spouse and child abuse special account under section 601-3.6;

(13) Funds of the employees' retirement system created by section 88-109;

(14) Unemployment compensation fund established under section 383-121;

(15) Hawaii hurricane relief fund established under chapter 431P;

(16) Hawaii health systems corporation special funds;

(17) Boiler and elevator safety revolving fund established under section 397-5.5;

(18) Tourism special fund established under section 201B-11;

(19) Department of commerce and consumer affairs' special funds;

(20) Compliance resolution fund established under section 26-9;

(21) Universal service fund established under chapter 269;

(22) Integrated tax information management systems special fund under section 231-3.2;

(23) Hawaii tobacco settlement special fund under section 328L-2;

(24) Emergency and budget reserve fund under section 328L-3;

(25) Probation services special fund under section 706-649;

(26) High technology special fund under section 206M-15.5;

(27) Public schools special fees and charges fund under section 302A-1130(f);

(28) Cigarette tax stamp enforcement special fund established by section 28-14;

(29) Cigarette tax stamp administrative special fund established by section 245-41.5;

(30) Tobacco enforcement special fund established by section 28-15;

(31) Sport fish special fund under section 187A-9.5;

(32) Neurotrauma special fund under section 321H-4;

(33) Deposit beverage container deposit special fund under section 342G-104; [and]

(34) Glass advance disposal fee special fund established by section 342G-82; and

(35) Long-term care benefits fund established by section 346C-5;

shall deduct five per cent of all receipts of all other special funds, which deduction shall be transferred to the general fund of the State and become general realizations of the State. All officers of the State and other persons having power to allocate or disburse any special funds shall cooperate with the director in effecting these transfers. To determine the proper revenue base upon which the central service assessment is to be calculated, the director shall adopt rules pursuant to chapter 91 for the purpose of suspending or limiting the application of the central service assessment of any fund. No later than twenty days prior to the convening of each regular session of the legislature, the director shall report all central service assessments made during the preceding fiscal year."

SECTION 5. Section 36-30, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each special fund, except the:

(1) Transportation use special fund established by section 261D-1;

(2) Special out-of-school time instructional program fund under section 302A-1310;

(3) School cafeteria special funds of the department of education;

(4) Special funds of the University of Hawaii;

(5) State educational facilities improvement special fund;

(6) Special funds established by section 206E-6;

(7) Aloha Tower fund created by section 206J-17;

(8) Domestic violence prevention special fund under section 321-1.3;

(9) Spouse and child abuse special account under section 346-7.5;

(10) Spouse and child abuse special account under section 601-3.6;

(11) Funds of the employees' retirement system created by section 88-109;

(12) Unemployment compensation fund established under section 383-121;

(13) Hawaii hurricane relief fund established under chapter 431P;

(14) Convention center enterprise special fund established under section 201B-8;

(15) Hawaii health systems corporation special funds;

(16) Tourism special fund established under section 201B-11;

(17) Compliance resolution fund established under section 26-9;

(18) Universal service fund established under chapter 269;

(19) Integrated tax information management systems special fund under section 231-3.2;

(20) Hawaii tobacco settlement special fund under section 328L-2;

(21) Emergency and budget reserve fund under section 328L-3;

(22) Probation services special fund under section 706-649;

(23) High technology special fund under section 206M-15.5;

(24) Public schools special fees and charges fund under section 302A-1130(f);

(25) Cigarette tax stamp enforcement special fund established by section 28-14;

(26) Cigarette tax stamp administrative special fund established by section 245-41.5;

(27) Tobacco enforcement special fund established by section 28-15;

(28) Sport fish special fund under section 187A-9.5; [and]

(29) Neurotrauma special fund under section 321H-4; and

(30) Long-term care benefits fund under section 346C-5;

shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned."

SECTION 6. Section 235-61, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) For each withholding period (whether weekly, biweekly, monthly, or otherwise) the amount of tax to be withheld under this section shall be at a rate which, for the taxable year, will yield the tax imposed by [section] sections 235-51 and 235-B upon each employee's annual wage, as estimated from the employee's current wage in any withholding period, but for the purposes of this subsection of the rates provided by section 235-51 the maximum to be taken into consideration shall be eight per cent[.] plus the tax imposed under section 235-B. The tax for the taxable year for the purposes of section 235-51 shall be calculated upon the following assumptions:

(1) That the employee's annual wage, as estimated from the employee's current wage in the withholding period, will be the employee's sole income for the taxable year;

(2) That there will be no deductions therefrom in determining adjusted gross income;

(3) That in determining taxable income there shall be a standard deduction allowance which shall be an amount equal to one exemption (or more than one exemption if so prescribed by the director) unless (A) the taxpayer is married and the taxpayer's spouse is an employee receiving wages subject to withholding, or (B) the taxpayer has withholding exemption certificates in effect with respect to more than one employer. For the purposes of this section, any standard deduction allowance under this paragraph shall be treated as if it were denominated a withholding exemption;

(4) That in determining taxable income there also will be deducted the amount of exemptions and withholding allowances granted to the employee in the computation of taxable income, as shown by a certificate to be filed with the employer as provided by subsection (f); and

(5) If it appears from the certificate filed pursuant to subsection (f) that the employee, under section 235-93, is entitled to make a joint return, that the employee and the employee's spouse will so elect."

SECTION 7. Section 346C-2, Hawaii Revised Statutes, is amended to read as follows:

"[[]346C-2[]] Long-term care financing program; establishment. There is established the long-term care financing program, which shall be placed with the department of budget and finance for administrative purposes. The purpose of this program shall be to provide a universal and affordable system of providing for long-term care. The program shall be administered by a board of trustees. The program shall be implemented under part of chapter 235."

SECTION 8. Section 346C-4, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) The board of trustees shall:

(1) Have and maintain a fiduciary obligation for the program;

(2) Discharge their duties solely in the best interest of the program;

(3) Not knowingly participate in or undertake to conceal an act or omission of a trustee, when the act or omission is known to be a breach of fiduciary responsibility; or fail to discharge specific fiduciary responsibilities in a manner that enables another trustee to commit a breach; or having knowledge of a breach, fail to take whatever action that is reasonable and appropriate under the circumstances to remedy the breach;

(4) Act with the care, skill, prudence, and diligence under the circumstances then prevailing, that a prudent trustee, acting in a like capacity and familiar with similar matters would use in conducting an enterprise of similar character and purpose; [and]

(5) Establish a procedure to allow individuals to voluntarily pay the long-term care income tax under section 235-B, who otherwise, by reason of receiving compensation in the form of pension, social security, or amounts of interest, dividends, or other income that is insufficient to require the filing of a tax return; and

[(5)] (6) Maintain proper books of accounts and records of the administration of the program.

(b) The board of trustees may contract with a qualified entity to administer the program or to process claims for [benefit payments,] the defined benefit, or both[; provided that the entity shall be appropriately licensed under chapter 431]. Selection of the entity shall be subject to chapter 103D[; provided that the insurance commissioner shall advise the board of trustees in selection of the entity.]; provided that in addition to other customary duties, the entity shall ensure against fraud and abuse in claims for and payment of defined benefits."

SECTION 9. Section 346C-5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Expenditures from the fund shall be made solely for the purpose of [making benefit payments] paying defined benefits under section 235-F and the cost of administration."

SECTION 10. Section 346C-6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) With the advice of the director of finance to ensure investment soundness, the board of trustees shall invest moneys in the long-term care benefits fund in investments with sufficient liquidity to allow market transactions to meet expected payout requirements without substantial loss in value or unreasonable delay. The board of trustees shall invest solely in:

(1) Obligations of any of the following classes:

(A) Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that the principal of and interest on such obligations are payable in currency of the United States, or sovereign debt instruments issued by agencies of, or guaranteed by foreign governments;

(B) Revenue bonds, whether or not permitted by any other provision hereof, of the State or any political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and

(C) Obligations issued or guaranteed by any federal home loan bank including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;

(2) Obligations eligible by law for purchase in the open market by federal reserve banks; and

(3) Securities and futures contracts in which in the informed opinion of the board of trustees it is prudent to invest funds of the system, including currency, interest rate, bond, and stock index futures contracts and options on such contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the system's securities portfolios; covered put and call options on securities; and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of any of the foregoing paragraphs[; and

(4) Any other investments deemed secure on the advice of the state director of finance]."

SECTION 11. Act 245, Session Laws of Hawaii 2002, is amended by amending section 3(a) to read as follows:

"(a) The governor shall appoint a temporary board of trustees, pursuant to section 26-41, Hawaii Revised Statutes, which shall be placed within the department of health, executive office on aging, for administrative purposes to serve beginning July 1, 2002, until [June 30, 2003,] a permanent board is appointed pursuant to section -3 of the new chapter in section 2 of this Act, to design the Hawaii long-term care financing program, based upon consideration of the actuarial report submitted to the legislature by the executive office on aging in 2002, and the report of the joint legislative committee on long term care financing of 2001, as stipulated by Senate Concurrent Resolution No. 23, C.D. 1, regular session of 2001, including:

(1) Determining the amount of and means of collection of a tax or fee;

(2) Determining the nature of and amount of benefits; and

(3) Recommending a third-party administrator."

SECTION 12. The long-term care benefits fund shall reimburse the general fund, after a period of five years from July 1, 2005, for the amount of any legislative appropriation for start-up costs of the fund and for the administration of this Act, whether the appropriation is made in this Act or subsequent acts.

SECTION 13. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2003-2004, for start-up costs to collect the long-term care income tax.

The sum appropriated shall be expended by the department of taxation.

SECTION 14. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2003-2004, for start-up costs to administer the long-term care income tax under chapter 346C, Hawaii Revised Statutes.

The sum appropriated shall be expended by the department of budget and finance.

SECTION 15. In codifying the new sections added by section 1 of this Act and referenced throughout this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on July 1, 2004, and shall apply to taxable years beginning after December 31, 2003; provided that sections 13 and 14 shall take effect on July 1, 2004; provided further that the amendment made to section 36-27, Hawaii Revised Statutes, by this Act shall not be repealed when that section is reenacted on July 31, 2003, pursuant to section 9 of Act 142, Session Laws of Hawaii 1998.