HOUSE OF REPRESENTATIVES

H.B. NO.

1586

TWENTY-NINTH LEGISLATURE, 2017

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


PART I

SECTION 1. The legislature finds that the current property tax structure caters to non-residents and burdens local residents, particularly the senior population. Non-residents are afforded the luxury of an investment in highly appreciable land while, at the same time, they are able to export their income tax to a state where the rate is lower. This results in raising the cost of living for Hawaii residents.

While the legislature believes that the tax burden should be shifted to non-residents, the legislature also believes that a fair assessment of homeowner exemptions is needed to offset the burdens local residents face. The legislature finds that the first step in this process should be to, over a three-year period, transfer the portion of transient accommodations tax revenues currently allocated to the counties into the state general fund. Second, income tax rates for Hawaii residents should be simplified and made more progressive over a period of three taxable years. As part of this process, the percentage of the population that is able to qualify for the middle-class tax bracket will expand and a zero per cent tax bracket will be established for residents who earn a significantly lower income, in order to effectively serve the portion of the population that truly needs the most assistance.

The purpose of this Act is to address the high cost of living in the State of Hawaii by enacting tax reform that reduces the tax burden for low- and middle-income earners.

PART II

SECTION 2. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Revenues collected under this chapter shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) $1,500,000 shall be allocated to the Turtle Bay conservation easement special fund beginning July 1, 2015, for the reimbursement to the state general fund of debt service on reimbursable general obligation bonds, including ongoing expenses related to the issuance of the bonds, the proceeds of which were used to acquire the conservation easement and other real property interests in Turtle Bay, Oahu, for the protection, preservation, and enhancement of natural resources important to the State, until the bonds are fully amortized;

(2) $26,500,000 shall be allocated to the convention center enterprise special fund established under section 201B-8;

(3) $82,000,000 shall be allocated to the tourism special fund established under section 201B-11; provided that:

(A) Beginning on July 1, 2012, and ending on June 30, 2015, $2,000,000 shall be expended from the tourism special fund for development and implementation of initiatives to take advantage of expanded visa programs and increased travel opportunities for international visitors to Hawaii;

(B) Of the $82,000,000 allocated:

(i) $1,000,000 shall be allocated for the operation of a Hawaiian center and the museum of Hawaiian music and dance at the Hawaii convention center; and

(ii) 0.5 per cent of the $82,000,000 shall be transferred to a sub-account in the tourism special fund to provide funding for a safety and security budget, in accordance with the Hawaii tourism strategic plan 2005-2015; and

(C) Of the revenues remaining in the tourism special fund after revenues have been deposited as provided in this paragraph and except for any sum authorized by the legislature for expenditure from revenues subject to this paragraph, beginning July 1, 2007, funds shall be deposited into the tourism emergency special fund, established in section 201B-10, in a manner sufficient to maintain a fund balance of $5,000,000 in the tourism emergency special fund;

(4) $103,000,000 for fiscal year 2014-2015, $103,000,000 for fiscal year 2015-2016, $103,000,000 for fiscal year 2016-2017, [and] $93,000,000 for [each] fiscal year [thereafter] 2017-2018, $62,000,000 for fiscal year 2018-2019, and $31,000,000 for fiscal year 2019-2020 shall be allocated as follows: Kauai county shall receive 14.5 per cent, Hawaii county shall receive 18.6 per cent, city and county of Honolulu shall receive 44.1 per cent, and Maui county shall receive 22.8 per cent; [provided that commencing with fiscal year 2018-2019, a sum that represents the difference between a county public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the county public employer's contributions into that trust fund shall be retained by the state director of finance and deposited to the credit of the county public employer's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42, if the respective county fails to remit the total amount of the county's required annual contributions, as required under section 87A-43;] and

(5) $3,000,000 shall be allocated to the special land and development fund established under section 171-19; provided that the allocation shall be expended in accordance with the Hawaii tourism authority strategic plan for:

(A) The protection, preservation, maintenance, and enhancement of natural resources, including beaches, important to the visitor industry;

(B) Planning, construction, and repair of facilities; and

(C) Operation and maintenance costs of public lands, including beaches, connected with enhancing the visitor experience.

All transient accommodations taxes shall be paid into the state treasury each month within ten days after collection and shall be kept by the state director of finance in special accounts for distribution as provided in this subsection.

As used in this subsection, "fiscal year" means the twelve-month period beginning on July 1 of a calendar year and ending on June 30 of the following calendar year."

PART III

SECTION 3. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Revenues collected under this chapter shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) $1,500,000 shall be allocated to the Turtle Bay conservation easement special fund beginning July 1, 2015, for the reimbursement to the state general fund of debt service on reimbursable general obligation bonds, including ongoing expenses related to the issuance of the bonds, the proceeds of which were used to acquire the conservation easement and other real property interests in Turtle Bay, Oahu, for the protection, preservation, and enhancement of natural resources important to the State, until the bonds are fully amortized;

(2) $26,500,000 shall be allocated to the convention center enterprise special fund established under section 201B-8;

(3) $82,000,000 shall be allocated to the tourism special fund established under section 201B-11; provided that:

(A) Beginning on July 1, 2012, and ending on June 30, 2015, $2,000,000 shall be expended from the tourism special fund for development and implementation of initiatives to take advantage of expanded visa programs and increased travel opportunities for international visitors to Hawaii;

(B) Of the $82,000,000 allocated:

(i) $1,000,000 shall be allocated for the operation of a Hawaiian center and the museum of Hawaiian music and dance at the Hawaii convention center; and

(ii) 0.5 per cent of the $82,000,000 shall be transferred to a sub-account in the tourism special fund to provide funding for a safety and security budget, in accordance with the Hawaii tourism strategic plan 2005-2015; and

(C) Of the revenues remaining in the tourism special fund after revenues have been deposited as provided in this paragraph and except for any sum authorized by the legislature for expenditure from revenues subject to this paragraph, beginning July 1, 2007, funds shall be deposited into the tourism emergency special fund, established in section 201B-10, in a manner sufficient to maintain a fund balance of $5,000,000 in the tourism emergency special fund; and

[(4) $103,000,000 for fiscal year 2014-2015, $103,000,000 for fiscal year 2015-2016, $103,000,000 for fiscal year 2016-2017, $93,000,000 for fiscal year 2017-2018, $62,000,000 for fiscal year 2018-2019, and $31,000,000 for fiscal year 2019-2020 shall be allocated as follows: Kauai county shall receive 14.5 per cent, Hawaii county shall receive 18.6 per cent, city and county of Honolulu shall receive 44.1 per cent, and Maui county shall receive 22.8 per cent; provided that commencing with fiscal year 2018-2019, a sum that represents the difference between a county public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the county public employer's contributions into that trust fund shall be retained by the state director of finance and deposited to the credit of the county public employer's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42, if the respective county fails to remit the total amount of the county's required annual contributions, as required under section 87A-43; and

(5)] (4) $3,000,000 shall be allocated to the special land and development fund established under section 171-19; provided that the allocation shall be expended in accordance with the Hawaii tourism authority strategic plan for:

(A) The protection, preservation, maintenance, and enhancement of natural resources, including beaches, important to the visitor industry;

(B) Planning, construction, and repair of facilities; and

(C) Operation and maintenance costs of public lands, including beaches, connected with enhancing the visitor experience.

All transient accommodations taxes shall be paid into the state treasury each month within ten days after collection and shall be kept by the state director of finance in special accounts for distribution as provided in this subsection.

As used in this subsection, "fiscal year" means the twelve-month period beginning on July 1 of a calendar year and ending on June 30 of the following calendar year."

PART IV

SECTION 4. Section 235-51, Hawaii Revised Statutes, is amended by amending subsections (a), (b), and (c) to read as follows:

"(a) There is hereby imposed on the taxable income of (1) every taxpayer who files a joint return under section 235-93; and (2) every surviving spouse a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $4,000 1.40% of taxable income

Over $4,000 but $56.00 plus 3.20% of

not over $8,000 excess over $4,000

Over $8,000 but $184.00 plus 5.50% of

not over $16,000 excess over $8,000

Over $16,000 but $624.00 plus 6.40% of

not over $24,000 excess over $16,000

Over $24,000 but $1,136.00 plus 6.80% of

not over $32,000 excess over $24,000

Over $32,000 but $1,680.00 plus 7.20% of

not over $40,000 excess over $32,000

Over $40,000 but $2,256.00 plus 7.60% of

not over $60,000 excess over $40,000

Over $60,000 but $3,776.00 plus 7.90% of

not over $80,000 excess over $60,000

Over $80,000 $5,356.00 plus 8.25% of

excess over $80,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $4,800 1.40% of taxable income

Over $4,800 but $67.00 plus 3.20% of

not over $9,600 excess over $4,800

Over $9,600 but $221.00 plus 5.50% of

not over $19,200 excess over $9,600

Over $19,200 but $749.00 plus 6.40% of

not over $28,800 excess over $19,200

Over $28,800 but $1,363.00 plus 6.80% of

not over $38,400 excess over $28,800

Over $38,400 but $2,016.00 plus 7.20% of

not over $48,000 excess over $38,400

Over $48,000 but $2,707.00 plus 7.60% of

not over $72,000 excess over $48,000

Over $72,000 but $4,531.00 plus 7.90% of

not over $96,000 excess over $72,000

Over $96,000 $6,427.00 plus 8.25% of

excess over $96,000.

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $15,000 $0

Over $15,000 but 6.64% of taxable income

not over $75,000 in excess of $15,000

Over $75,000 but $3,984.00 plus 7.79% of

not over $225,000 excess over $75,000

Over $225,000 $15,669.00 plus 8.50% of

excess over $225,000.

In the case of any taxable year beginning after December 31, 2018:

If the taxable income is: The tax shall be:

Not over $16,125 $0

Over $16,125 but 5.38% of taxable income

not over $75,000 in excess of $16,125

Over $75,000 but $3,167.00 plus 7.34% of

not over $225,000 excess over $75,000

Over $225,000 $14,177.00 plus 8.75% of

excess over $225,000.

In the case of any taxable year beginning after December 31, 2019:

If the taxable income is: The tax shall be:

Not over $17,500 $0

Over $17,500 but 4.12% of taxable income

not over $75,000 in excess of $17,500

Over $75,000 but $2,369.00 plus 6.88% of

not over $225,000 excess over $75,000

Over $225,000 $12,689.00 plus 9.00% of

excess over $225,000.

(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $3,000 1.40% of taxable income

Over $3,000 but $42.00 plus 3.20% of

not over $6,000 excess over $3,000

Over $6,000 but $138.00 plus 5.50% of

not over $12,000 excess over $6,000

Over $12,000 but $468.00 plus 6.40% of

not over $18,000 excess over $12,000

Over $18,000 but $852.00 plus 6.80% of

not over $24,000 excess over $18,000

Over $24,000 but $1,260.00 plus 7.20% of

not over $30,000 excess over $24,000

Over $30,000 but $1,692.00 plus 7.60% of

not over $45,000 excess over $30,000

Over $45,000 but $2,832.00 plus 7.90% of

not over $60,000 excess over $45,000

Over $60,000 $4,017.00 plus 8.25% of

excess over $60,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $3,600 1.40% of taxable income

Over $3,600 but $50.00 plus 3.20% of

not over $7,200 excess over $3,600

Over $7,200 but $166.00 plus 5.50% of

not over $14,400 excess over $7,200

Over $14,400 but $562.00 plus 6.40% of

not over $21,600 excess over $14,400

Over $21,600 but $1,022.00 plus 6.80% of

not over $28,800 excess over $21,600

Over $28,800 but $1,512.00 plus 7.20% of

not over $36,000 excess over $28,800

Over $36,000 but $2,030.00 plus 7.60% of

not over $54,000 excess over $36,000

Over $54,000 but $3,398.00 plus 7.90% of

not over $72,000 excess over $54,000

Over $72,000 $4,820.00 plus 8.25% of

excess over $72,000.

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $15,000 $0

Over $15,000 but 6.64% of taxable income

not over $75,000 in excess of $15,000

Over $75,000 but $3,984.00 plus 7.79% of

not over $225,000 excess over $75,000

Over $225,000 $15,669.00 plus 8.50% of

excess over $225,000.

In the case of any taxable year beginning after December 31, 2018:

If the taxable income is: The tax shall be:

Not over $16,125 $0

Over $16,125 but 5.38% of taxable income

not over $75,000 in excess of $16,125

Over $75,000 but $3,167.00 plus 7.34% of

not over $225,000 excess over $75,000

Over $225,000 $14,177.00 plus 8.75% of

excess over $225,000.

In the case of any taxable year beginning after December 31, 2019:

If the taxable income is: The tax shall be:

Not over $17,500 $0

Over $17,500 but 4.12% of taxable income

not over $75,000 in excess of $17,500

Over $75,000 but $2,369.00 plus 6.88% of

not over $225,000 excess over $75,000

Over $225,000 $12,689.00 plus 9.00% of

excess over $225,000.

(c) There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $2,000 1.40% of taxable income

Over $2,000 but $28.00 plus 3.20% of

not over $4,000 excess over $2,000

Over $4,000 but $92.00 plus 5.50% of

not over $8,000 excess over $4,000

Over $8,000 but $312.00 plus 6.40% of

not over $12,000 excess over $8,000

Over $12,000 but $568.00 plus 6.80% of

not over $16,000 excess over $12,000

Over $16,000 but $840.00 plus 7.20% of

not over $20,000 excess over $16,000

Over $20,000 but $1,128.00 plus 7.60% of

not over $30,000 excess over $20,000

Over $30,000 but $1,888.00 plus 7.90% of

not over $40,000 excess over $30,000

Over $40,000 $2,678.00 plus 8.25% of

excess over $40,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $2,400 1.40% of taxable income

Over $2,400 but $34.00 plus 3.20% of

not over $4,800 excess over $2,400

Over $4,800 but $110.00 plus 5.50% of

not over $9,600 excess over $4,800

Over $9,600 but $374.00 plus 6.40% of

not over $14,400 excess over $9,600

Over $14,400 but $682.00 plus 6.80% of

not over $19,200 excess over $14,400

Over $19,200 but $1,008.00 plus 7.20% of

not over $24,000 excess over $19,200

Over $24,000 but $1,354.00 plus 7.60% of

not over $36,000 excess over $24,000

Over $36,000 but $2,266.00 plus 7.90% of

not over $48,000 excess over $36,000

Over $48,000 $3,214.00 plus 8.25% of

excess over $48,000.

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $7,500 $0

Over $7,500 but 6.64% of taxable income

not over $37,500 in excess of $7,500

Over $37,500 but $1,992.00 plus 7.79% of

not over $112,500 excess over $37,500

Over $112,500 $7,834.00 plus 8.50% of

excess over $112,500.

In the case of any taxable year beginning after December 31, 2018:

If the taxable income is: The tax shall be:

Not over $8,062 $0

Over $8,062 but 5.38% of taxable income

not over $37,500 in excess of $8,062

Over $37,500 but $1,584.00 plus 7.34% of

not over $112,500 excess over $37,500

Over $112,500 $7,089.00 plus 8.75% of

excess over $112,500.

In the case of any taxable year beginning after December 31, 2019:

If the taxable income is: The tax shall be:

Not over $8,750 $0

Over $8,750 but 4.12% of taxable income

not over $37,500 in excess of $8,750

Over $37,500 but $1,184.00 plus 6.88% of

not over $112,500 excess over $37,500

Over $112,500 $6,344.00 plus 9.00% of

excess over $112,500."

PART V

SECTION 5. Section 235-54, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) In computing the taxable income of any individual, there shall be deducted, in lieu of the personal exemptions allowed by the Internal Revenue Code, personal exemptions computed as follows: Ascertain the number of exemptions which the individual can lawfully claim under the Internal Revenue Code, add an additional exemption for the taxpayer or the taxpayer's spouse who is sixty-five years of age or older within the taxable year, and multiply that number by [$1,144,] $2,288, for taxable years beginning after December 31, 1984. A nonresident shall prorate the personal exemptions on account of income from sources outside the State as provided in section 235-5. In the case of an individual with respect to whom an exemption under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the personal exemption amount applicable to such individual under this subsection for such individual's taxable year shall be zero."

PART VI

SECTION 6. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"235-   Itemized deductions; limitations. Notwithstanding any other law to the contrary, itemized tax deductions claimed pursuant to this chapter shall not exceed the lesser of:

(1) The limitation on itemized deductions under section 68 of the Internal Revenue Code; or

(2) Any of the following that may be applicable:

(A) $100,000 for a taxpayer filing a single return or a married person filing separately;

(B) $150,000 for a taxpayer filing as a head of household; and

(C) $200,000 for a taxpayer filing a joint return or as a surviving spouse;

provided that the cap amounts established in this paragraph shall not apply to charitable contributions deductible under this chapter."

PART VII

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2117; provided that:

(1) Part II shall take effect on July 1, 2017;

(2) Part III shall take effect on July 1, 2020; and

(3) Parts IV, V, VI shall apply to taxable years beginning after December 31, 2017.



 

Report Title:

Transient Accommodations Tax; Counties; Income Tax Rates; Personal Exemption; Itemized Deductions

 

Description:

Phases out the county allocation of transient accommodations tax revenues over a 3-year period. Implements new income tax brackets and rates over a 3-year period. Doubles the amount of the personal exemption. Places limitations on claims for itemized tax deductions. (HB1586 HD1)

 

 

 

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