STAND. COM. REP. NO. 1065

Honolulu, Hawaii

, 2005

RE: S.B. No. 1793

S.D. 2

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Water, Land, & Ocean Resources and Housing, to which was referred S.B. No. 1793, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO LEASEHOLD CONVERSION,"

beg leave to report as follows:

The purpose of this bill is to encourage homeownership by establishing a temporary income tax exemption of 100 percent of the income derived by a fee simple owner from the sale of a leased fee interest in a multi-family residential leasehold property or residential leasehold house lot to the lessee of the multi-family residential leasehold property or residential leasehold house lot.

Several concerned individuals supported this bill. The Hawaii Council of Associations of Apartment Owners, Hawaii Association of REALTORS, and Hawaii Independent Condominium & Cooperative Owners supported this bill with amendments. The Department of Taxation opposed this bill. The Tax Foundation of Hawaii offered comments.

Your Committees have amended this measure by:

(1) Repealing, on July 1, 2006, the statutory authorization allowing mandatory residential leasehold condemnation that permits lessees to purchase the fee simple interest in their homes. This repeal date provides an opportunity for lessees to exercise their condemnation options for a full year;

(2) Clarifying that 100 percent of the capital gain realized by a fee simple owner from the sale of a leased fee interest is exempt from income taxation;

(3) Making the income tax exemption apply to the sale of leased fee interest in a multi-family residential leasehold property to:

(A) The association of apartment owners of the multi-family residential leasehold building; or

(B) The residential cooperative corporation for the multi-family residential leasehold building;

(4) Clarifying that the term "fee simple owner" includes

"legal and equitable owners" and that the terms "fee simple owner" and "legal and equitable owners" shall have the same meaning as in section 516-1, Hawaii Revised Statutes;

(5) Clarifying that the terms "multi-family residential leasehold property" and "multi-family residential leasehold unit" include property or units within a planned unit development; and

(6) Making technical, nonsubstantive amendments for style, clarity, and consistency.

As affirmed by the records of votes of the members of your Committees on Water, Land, & Ocean Resources and Housing that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1793, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1793, S.D. 2, H.D. 1, and be referred to the Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committees on Water, Land, & Ocean Resources and Housing,

 

____________________________

MICHAEL P. KAHIKINA, Chair

____________________________

EZRA R. KANOHO, Chair