THE SENATE

S.B. NO.

1183

TWENTY-NINTH LEGISLATURE, 2017

S.D. 2

STATE OF HAWAII

H.D. 2

 

C.D. 2

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


PART I

SECTION 1. Section 46-16.8, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) Each county that has established a surcharge on state tax prior to [[]July 1, 2015,[]] under authority of subsection (a) may extend the surcharge [from January 1, 2023,] until December 31, [2027,] 2028, at the same rates. A county electing to extend this surcharge shall do so by ordinance; provided that:

(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance; and

(2) The ordinance shall be adopted prior to [July] January 1, [2016, but no earlier than July 1, 2015.] 2018.

A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted an ordinance extending the surcharge on state tax. [Beginning on January 1, 2023, the] The director of taxation shall levy, assess, collect, and otherwise administer the extended surcharge on state tax.

(c) Each county that has not established a surcharge on state tax prior to [[]July 1, 2015,[]] may establish the surcharge at the rates enumerated in sections 237-8.6 and 238-2.6. A county electing to establish this surcharge shall do so by ordinance; provided that:

(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

(2) The ordinance shall be adopted prior to [July] January 1, [2016,] 2018 [but no earlier than July 1, 2015]; and

(3) No county surcharge on state tax that may be authorized under this subsection shall be levied prior to January 1, [2018,] 2019, or after December 31, [2027.] 2028.

A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance. Beginning on January 1, [2018,] 2019, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax."

SECTION 2. Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each county surcharge on state tax that may be adopted or extended pursuant to section 46-16.8 shall be levied beginning in [the] a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

(1) Prior to:

(A) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted prior to December 31, 2005; or

(B) January 1, [2018,] 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but prior to [July 1, 2016;] January 1, 2018; and

(2) After December 31, [2027.] 2028."

SECTION 3. Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each county surcharge on state tax that may be adopted or extended shall be levied beginning in [the] a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

(1) Prior to:

(A) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted prior to December 31, 2005; or

(B) January 1, [2018,] 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but prior to [July 1, 2016;] January 1, 2018; and

(2) After December 31, [2027.] 2028."

SECTION 4. Section 248-2.6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If adopted by county ordinance, all county surcharges on state tax collected by the director of taxation shall be paid into the state treasury quarterly, within ten working days after collection, and shall be placed by the director of finance in special accounts. Out of the revenues generated by county surcharges on state tax paid into each respective state treasury special account, the director of finance shall deduct [ten] one per cent of the gross proceeds of a respective county's surcharge on state tax to reimburse the State for the costs of assessment, collection, [and] disposition, and oversight of the county surcharge on state tax incurred by the State. Amounts retained shall be general fund realizations of the State."

SECTION 5. Act 247, Session Laws of Hawaii 2005, as amended by Act 240, Session Laws of Hawaii 2015, is amended by amending section 9 to read as follows:

"SECTION 9. This Act shall take effect upon its approval; provided that:

(1) If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

(2) If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act; and

(3) If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

(A) The ordinance shall be repealed on December 31, 2022; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to [Act 240, Session Laws of Hawaii 2015;] an act of the legislature; and

(B) This Act shall be repealed on December 31, [2027;] 2028; and

[(C) Section] section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed."

PART II

SECTION 6. Section 46-16.8, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Each county with a population greater than five hundred thousand that adopts or extends a county surcharge on state tax ordinance pursuant to subsection (a) or (b) shall use the surcharges received from the State for[:

(1) Capital] capital costs of a locally preferred alternative for a mass transit project[; and

(2) Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1).

The]; provided that revenues derived from the county surcharge on state tax shall not be used [to]:

(1) To build or repair public roads or highways, bicycle paths, or support public transportation systems already in existence prior to July 12, 2005[.];

(2) For operating costs of the mass transit project or any purpose not consistent with this subsection; or

(3) For administrative or operating costs, including personnel costs, of a rapid transportation authority charged with the responsibility for constructing or operating the mass transit project, or both;

provided that nothing in this section shall be construed as prohibiting a county from using county funds that are not derived from a surcharge on state tax for a purpose for which surcharge revenues are otherwise prohibited under paragraph (2) or (3)."

PART III

SECTION 7. (a) For the purposes of this section:

"Locally preferred alternative for a mass transit project" means the minimum operable segment of the locally preferred alternative for a mass transit project that the county rapid transportation authority is constructing under a full funding agreement with the Federal Transit Administration.

(b) A county shall not:

(1) Prohibit the use of county funds for the capital cost of the locally preferred alternative for a mass transit project; or

(2) Expend funds derived from the county surcharge on state tax revenues for purposes other than as provided in section 46-16.8(e) or (f), Hawaii Revised Statutes, as applicable.

Notwithstanding any other law to the contrary, if there is an existing ordinance that violates paragraph (1) or (2), or both, in effect on the effective date of this Act, the county shall repeal the ordinance before December 31, 2017.

(c) The mayor of a county shall notify the director of taxation within ten days of the mayor's approval of the repeal of an ordinance that violates subsection (b)(1), (b)(2), or both.

PART IV

SECTION 8. Section 237D-2, Hawaii Revised Statutes, is amended to read as follows:

"237D-2 Imposition and rates. (a) There is levied and shall be assessed and collected each month a tax of:

(1) Five per cent for the period beginning on January 1, 1987, to June 30, 1994;

(2) Six per cent for the period beginning on July 1, 1994, to December 31, 1998;

(3) 7.25 per cent for the period beginning on January 1, 1999, to June 30, 2009;

(4) 8.25 per cent for the period beginning on July 1, 2009, to June 30, 2010; and

(5) 9.25 per cent for the period beginning on July 1, 2010, and thereafter;

on the gross rental or gross rental proceeds derived from furnishing transient accommodations.

(b) Every operator shall pay to the State the tax imposed by subsection (a), as provided in this chapter.

(c) There is levied and shall be assessed and collected each month, on the occupant of a resort time share vacation unit, a transient accommodations tax of:

(1) 7.25 per cent on the fair market rental value until December 31, 2015;

(2) 8.25 per cent on the fair market rental value for the period beginning on January 1, 2016, to December 31, 2016; and

(3) 9.25 per cent on the fair market rental value for the period beginning on January 1, 2017, and thereafter.

(d) Every plan manager shall be liable for and pay to the State the transient accommodations tax imposed by subsection (c) as provided in this chapter. Every resort time share vacation plan shall be represented by a plan manager who shall be subject to this chapter.

(e) Notwithstanding the tax rates established in subsection (a)(5) and subsection (c)(3), the tax rates levied, assessed, and collected pursuant to subsections (a) and (c) shall be 10.25 per cent for the period beginning on January 1, 2018, to December 31, 2028; provided that of the tax revenues collected pursuant to this section that are in excess of a 9.25 per cent tax:

(1) $25,000,000 per year shall be allocated to the new start education special fund established under section 302A‑   ; and

(2) The remainder shall be remitted to a county with a population greater than five hundred thousand that adopts or extends a county surcharge on state tax ordinance pursuant to section 46‑16.8, and shall be used only for the capital costs of a locally preferred alternative for a mass transit project; provided that revenues remitted pursuant to this paragraph shall not be used for:

(A) Operating costs of the mass transit project or any purpose not consistent with this paragraph; or

(B) Administrative or operating costs, including personnel costs, of a rapid transportation authority charged with the responsibility for constructing or operating the mass transit project, or both."

SECTION 9. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) [Revenues] Except for the revenues collected pursuant to section 237D-2(e), 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 for every fiscal year thereafter until and including fiscal year 2027-2028, and $93,000,000 for [each] fiscal year 2028-2029 and each fiscal year thereafter 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]:

(A) 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

(B) For fiscal year 2018-2019, and for every fiscal year thereafter until and including fiscal year 2027-2028, all revenues derived from the 44.1 per cent of revenues allocated each year to the city and county of Honolulu pursuant to this paragraph shall be expended only for the capital costs of a locally preferred alternative for a mass transit project; provided that revenues remitted pursuant to this subparagraph shall not be used for:

(i) Operating costs of the mass transit project or any purpose not consistent with this subparagraph; or

(ii) Administrative or operating costs, including personnel costs, of a rapid transportation authority charged with the responsibility for constructing or operating the mass transit project, or both;

provided further that if a county public employer does not meet its annual required contribution obligation pursuant to subparagraph (A) and section 87A-42, then the contribution required under subparagraph (A) shall take priority over the allocation made pursuant to this subparagraph; 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 V

SECTION 10. The legislature finds that the construction of publicly funded major mass transit projects place a substantial burden on taxpayers, especially when those projects far exceed the initial cost estimates that were provided to taxpayers. The legislature also finds that such financial burdens are a matter of statewide concern that fall under its purview pursuant to article VIII, section 6, of the Hawaii State Constitution and that impositions of such financial burdens imposed upon taxpayers at any single time should be limited. Plans to renovate or redevelop large public event venues generally require significant amounts of taxpayer money, and imposing that additional burden on taxpayers through the issuance of general obligation bonds or other financing mechanisms available to political subdivisions, which are funded by tax revenues, is not prudent in counties that are already imposing substantial financial burdens on taxpayers to fund major mass transit projects.

Accordingly, the purpose of this part is to prohibit a county that is collecting a general excise tax surcharge to fund capital costs of a locally preferred alternative for a mass transit project from using public funds to reconstruct or redevelop an event venue that is within a Hawaii community development authority community development district or in a manner that requires Hawaii community development authority approval.

It is not the intent of the legislature in enacting this part to prohibit any county from reconstructing or redeveloping an event venue within a Hawaii community development district with other than public financing.

SECTION 11. A county that receives revenues from a county surcharge on state tax established pursuant to section 46-16.8, Hawaii Revised Statutes, is prohibited from using public funds to reconstruct or redevelop an event venue, including its associated infrastructure and appurtenances, that is within a Hawaii community development authority community development district or in a manner that requires Hawaii community development authority approval, from the effective date of this Act to December 31, 2028; provided that this section shall not apply to aggregated expenditures that total no more than what is necessary from the effective date of this Act to December 31, 2028, for the operation or maintenance and repair of an event venue.

As used in this section, "maintenance and repair" means ordinary maintenance and repair that is necessary to keep a facility clean, safe, accessible, and operational, but excludes the construction of new facilities or the reconstruction or redevelopment of existing facilities.

PART VI

SECTION 12. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"302A- New start education special fund; established. (a) There is established the new start education special fund to be administered by the department.

(b) Transient accommodations tax revenues allocated to the new start education special fund pursuant to section 237D‑2(e)(1) shall be deposited into the new start education special fund.

(c) Moneys in the new start education special fund shall be expended for the purposes of the new start education program."

PART VII

SECTION 13. This Act shall not be construed to prohibit the use of funds generated by a county for purposes not prohibited by state law.

SECTION 14. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 15. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 16. (a) This Act shall take effect upon its approval; provided that the effect of this Act shall be subject to the conditions of subsections (b) and (c).

(b) For each county that has extended a surcharge on state tax pursuant to section 46-16.8(b), Hawaii Revised Statutes, as amended in section 1 of this Act, if on December 31, 2017, the county is in compliance with all of the conditions pertaining to the authority to extend the surcharge under section 46-16.8(b), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in sections 7(b) and 11 of this Act, then effective January 1, 2018, the director of taxation may levy, assess, and collect the transient accommodations tax at the increased rate established under part IV of this Act; provided that:

(1) If on December 31, 2017, the county is not in compliance with all of the conditions set out in section 46-16.8(b), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in sections 7(b) and 11 of this Act, the increase in transient accommodations tax rates and the remittance of the revenues thereof to a qualifying county, pursuant to part IV of this Act, shall not take effect; and

(2) If at any time between January 1, 2018, and December 31, 2028, the county is not in compliance with all of the conditions set out in section 46‑16.8(b), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in sections 7(b) and 11 of this Act, the increase in transient accommodations tax rates and the remittance of the revenues thereof to a qualifying county, pursuant to part IV of this Act, shall be immediately suspended until the county is in compliance with all of the conditions set out in section 46-16.8(b), Hawaii Revised Statutes, as amended in section 1 of this Act, and sections 7(b) and 11 of this Act.

(c) For each county establishing a surcharge on state tax pursuant to section 46-16.8(c), Hawaii Revised Statutes, as amended in section 1 of this Act, if on December 31, 2018, the county is in compliance with all of the conditions pertaining to the surcharge adoption authority under section 46-16.8(c), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in section 7(b) of this Act, then effective January 1, 2019, the director of taxation may levy, assess, and collect the surcharge on state tax and disburse surcharge revenues pursuant to part I of this Act; provided that:

(1) If on December 31, 2018, the county is not in compliance with all of the conditions set out in section 46-16.8(c), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in section 7(b) of this Act, the authorization to levy, assess, and collect a surcharge on state tax and the disbursement of surcharge revenues, pursuant to part I of this Act, shall not take effect; and

(2) If at any time between January 1, 2019, and December 31, 2028, the county is not in compliance with all of the conditions set out in section 46‑16.8(c), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in section 7(b) of this Act, the authorization to levy, assess, and collect a surcharge on state tax and the disbursement of surcharge revenues, pursuant to part I of this Act, shall be immediately suspended until the county is in compliance with all of the conditions set out in section 46-16.8(c), Hawaii Revised Statutes, as amended in section 1 of this Act, and all of the conditions set out in section 7(b) of this Act.



 

Report Title:

County Surcharge on State Tax

 

Description:

Authorizes a county that has adopted a surcharge on state tax to extend the surcharge for one additional year, to 12/31/2028. Authorizes a county to adopt a surcharge on state tax before 1/1/2018, provided that certain conditions are met. Increases the transient accommodations tax by 1.0 per cent from 1/1/2018 to 12/31/2028 and provides that $25,000,000 of the annual revenue shall be allocated to the New Start Education Special Fund and the remainder shall be remitted to a county with a population greater than five hundred thousand to be used only for capital costs of a locally preferred alternative for a mass transit project. Provides that all revenue from the portion of transient accommodations tax revenues that is otherwise allocated to the City and County of Honolulu shall be used only for capital costs of a locally preferred alternative for a mass transit project. Prohibits a county from using public funds to renovate or redevelop an event venue within a Hawaii Community Development Authority community development district while the county is collecting a surcharge on state tax to finance capital costs of a locally preferred alternative for a mass transit project. Establishes the New Start Education Special Fund. (CD2)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.