HOUSE OF REPRESENTATIVES
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to impose the general excise tax on the death benefit or other gross income derived from life settlement insurance policies.
SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§237- Tax on gross income from life settlement insurance policy. (a) For the purpose of this section:
"Gross income derived from a life settlement insurance policy" means:
(1) The value of the death or other benefit paid upon the passing of the insured to a person unrelated to the insured under a life settlement insurance policy; and
(2) Any compensation received by a person, other than the insured, from the transfer of a life settlement insurance policy to another person.
"Life settlement insurance policy" means a life insurance policy between an insurer and insured under which:
(1) A third party unrelated to the insured purchases, pays for, or otherwise finances the purchase of the policy for the insured, but the third party is designated as the beneficiary;
(2) The insured purchases the policy with the insured's own funds, but designates an unrelated third party as the beneficiary in return for compensation from the third party; or
(3) The insured transfers the policy to an unrelated third party in return for compensation from the third party.
"Transfer" includes assignment, sale, gift, devise, or bequest.
(b) Except as otherwise provided under subsection (c) or (d), there is hereby levied, and shall be assessed and collected annually, a general excise tax against the gross income derived from a life settlement insurance policy by a person unrelated to the insured. The tax shall be equal to four per cent of the gross income.
(c) In no instance shall the tax under this section be levied, assessed, or collected on:
(1) Any compensation received by the insured of a life insurance policy for the transfer of the policy to another person or designation of a beneficiary; or
(2) Any death benefit paid under a life insurance policy upon the death of the insured to a person related to the insured."
SECTION 3. Section 237-24, Hawaii Revised Statutes, is amended to read as follows:
"§237-24 Amounts not taxable. This chapter shall not apply to the following amounts:
Amounts] Except as otherwise provided
under section 237- , amounts received under life insurance policies and
contracts paid by reason of the death of the insured;
Amounts] Except as otherwise provided
under section 237- , amounts received (other than amounts paid by reason
of death of the insured) under life insurance, endowment, or annuity contracts,
either during the term or at maturity or upon surrender of the contract;
(3) Amounts received under any accident insurance or health insurance policy or contract or under workers' compensation acts or employers' liability acts, as compensation for personal injuries, death, or sickness, including also the amount of any damages or other compensation received, whether as a result of action or by private agreement between the parties on account of the personal injuries, death, or sickness;
as otherwise provided under section 237‑ , the value
of all property of every kind and sort acquired by gift, bequest, or devise,
and the value of all property acquired by descent or inheritance;
(5) Amounts received by any person as compensatory damages for any tort injury to the person, or to the person's character reputation, or received as compensatory damages for any tort injury to or destruction of property, whether as the result of action or by private agreement between the parties (provided that amounts received as punitive damages for tort injury or breach of contract injury shall be included in gross income);
(6) Amounts received as salaries or wages for services rendered by an employee to an employer;
(7) Amounts received as alimony and other similar payments and settlements;
(8) Amounts collected by distributors as fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts collected by such distributors as a fuel tax imposed by any Act of the Congress of the United States;
(9) Taxes on liquor imposed by chapter 244D on dealers holding permits under that chapter;
(10) The amounts of taxes on cigarettes and tobacco products imposed by chapter 245 on wholesalers or dealers holding licenses under that chapter and selling the products at wholesale;
(11) Federal excise taxes imposed on articles sold at retail and collected from the purchasers thereof and paid to the federal government by the retailer;
(12) The amounts of federal taxes under chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on sugar manufactured in the State, paid by the manufacturer to the federal government;
(13) An amount up to, but not in excess of, $2,000 a year of gross income received by any blind, deaf, or totally disabled person engaging, or continuing, in any business, trade, activity, occupation, or calling within the State; a corporation all of whose outstanding shares are owned by an individual or individuals who are blind, deaf, or totally disabled; a general, limited, or limited liability partnership, all of whose partners are blind, deaf, or totally disabled; or a limited liability company, all of whose members are blind, deaf, or totally disabled;
(14) Amounts received by a producer of sugarcane from the manufacturer to whom the producer sells the sugarcane, where:
(A) The producer is an independent cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of 1948 (61 Stat. 922, Chapter 519) as the Act may be amended or supplemented;
(B) The value or gross proceeds of the sale of the sugar, and other products manufactured from the sugarcane, are included in the measure of the tax levied on the manufacturer under section 237-13(1) or (2);
(C) The producer's gross proceeds of sales are dependent upon the actual value of the products manufactured therefrom or the average value of all similar products manufactured by the manufacturer; and
(D) The producer's gross proceeds of sales are reduced by reason of the tax on the value or sale of the manufactured products;
(15) Money paid by the State or eleemosynary child-placing organizations to foster parents for their care of children in foster homes;
(16) Amounts received by a cooperative housing corporation from its shareholders in reimbursement of funds paid by the corporation for lease rental, real property taxes, and other expenses of operating and maintaining the cooperative land and improvements; provided that the cooperative corporation is a corporation:
(A) Having one and only one class of stock outstanding;
(B) Each of the stockholders of which is entitled solely by reason of the stockholder's ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building owned or leased by the corporation; and
(C) No stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except in a complete or partial liquidation of the corporation; and
(17) Amounts received by a managed care support contractor of the TRICARE program that is established under Title 10 United States Code chapter 55, as amended, for the actual cost or advancement to third party health care providers pursuant to a contract with the United States."
SECTION 4. Section 4 of Act 70, Session Laws of Hawaii 2009, is amended to read as follows:
"SECTION 4. This Act shall take effect on
July 1, 2009 and shall be repealed on December 31, 2013; provided that section
237-24,] 237-24(3), (5) to (16), Hawaii Revised Statutes, shall
be reenacted in the form in which [ it] they read on June 30,
2009[ .] and section 237-24(1), (2), and (4), Hawaii Revised Statutes,
shall be reenacted in the form in which they read on December 30, 2013."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2011.
General Excise Tax; Life Settlement Insurance
Imposes the general excise tax on the gross income derived from a life settlement insurance policy. States expressly that the tax shall not be imposed on any compensation received by an insured for the transfer of the policy or designation of a beneficiary or any death benefit received by a person related to the insured. (PROPOSED HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.