HOUSE OF REPRESENTATIVES

H.C.R. NO.

167

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 
   


HOUSE CONCURRENT

RESOLUTION

 

requesting the department of taxation TO study the imposition of a windfall profit tax on the fair market value of improvements that revert to a lessor at the termination of a commercial or industrial lease.

 

 

WHEREAS, many local family-owned and small businesses operate on leased land under ground leases; and

WHEREAS, most commercial or industrial ground leases require the lessee to make all improvements, including all required structural improvements and, in some cases, required infrastructure, on the leased land; and

WHEREAS, for the entire term of the lease, the lessee will pay lease rents in increasing amounts over the term of the lease, in addition to real property taxes and any other assessments to the leasehold property; and

WHEREAS, at the termination of the lease, all improvements remaining on the leasehold property revert to the ownership of the lessor, resulting in a windfall profit to the lessor; and

WHEREAS, in many cases the lessor may immediately enter into another lease with another lessee, charging a higher lease rent because the property is now improved with a structure, with the lessor thereby continuing to profit from the improvements made and paid for by the original lessee; and

WHEREAS, the Legislature finds that significant questions continue to be raised regarding the possibility that negative economic impacts are being visited upon the interests of consumers, small businesses, and the working and retired taxpayers of the State as a result of the State's failure to tax the windfall profits received by commercial and industrial lessors upon the termination of leases and the reversion of improvement on the leasehold property; and

WHEREAS, the Legislature is interested in the legality, equity, and feasibility of the imposition of a tax on the value of the improvements that revert to a lessor upon the termination of a commercial or industrial lease; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-third Legislature of the State of Hawaii, Regular Session of 2005, the Senate concurring, that the Department of Taxation, with the assistance of the Attorney General, is requested to consider the legality, equity, and feasibility of the imposition of a tax on the fair market value of all improvements on a leasehold property that revert to the ownership of the lessor upon the termination of a commercial or industrial lease; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to estimate the amount of additional revenue to the State that the imposition of this proposed tax may realize; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to review other state laws to determine whether a similar tax is imposed in other jurisdictions; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to report its findings and recommendations, including any proposed legislation, to the Legislature not less than twenty days prior to the convening of the Regular Session of 2006; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Director of Taxation and the Attorney General.

 

 

 

OFFERED BY:

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Report Title:

Taxation; Leasehold Improvements