Honolulu, Hawaii



RE:    S.B. No. 1121

       S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2021

State of Hawaii




     Your Committee on Hawaiian Affairs, to which was referred S.B. No. 1121 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to exempt any housing development developed by the Department of Hawaiian Home Lands from general excise taxes.


     Your Committee received testimony in support of this measure from the Department of Hawaiian Home Lands and one individual.  Your Committee received comments on this measure from the Tax Foundation of Hawaii and one individual.


     Your Committee finds that the Department of Hawaiian Home Lands provides housing at affordable rates when compared to similar housing available in Hawaii.  However, the Department of Hawaiian Home Lands does not receive sufficient funding to develop house lots for all applicants on the waiting list.  Additionally, the Department of Hawaiian Home Lands does not currently receive sufficient funding to reduce the waiting list by ninety percent over the next decade.  The Department of Hawaiian Home Lands has stated that it would take one hundred eighty-two years to meet the demand of the waitlist at its current rate.  The Department of Hawaiian Home Lands has provided a conservative estimate of $4,500,000,000 of infrastructure costs alone to develop twenty-eight thousand lots, without accounting for new land acquisition.  To further the interest of beneficiaries, the Department of Hawaiian Home Lands proposes that its housing development projects be exempt from general excise taxes that will result in cost savings to assure economic feasibility which will ultimately make feasible the production of lower cost housing units.


     Your Committee has heard the concerns of the Tax Foundation of Hawaii that the proposed exemption presented in this measure is similar to the affordable housing exemptions in sections 46-15.1 and 201H-36, Hawaii Revised Statutes.  However, the proposed exemption in this measure appears to be more relaxed.  The existing low-income housing exemption requires a regulatory agreement of a duration of at least five years for moderately rehabilitated projects, ten years for substantially rehabilitated projects, and thirty years for new projects.  The Tax Foundation of Hawaii notes that because the Department can exempt any developer from the compliance agreement requirement and there are no standards for when the exemption may be exercised, this uncertainty may lead to arbitrary interpretations and applications of the exemption.  The Tax Foundation also noted several existing benefits that are unique to residents of Hawaiian homesteads and comments that the proposed tax exemption would be "layered" upon those existing benefits.


     Your Committee has amended this measure by making technical, nonsubstantive amendments for the purposes of clarity and consistency.


     As affirmed by the record of votes of the members of your Committee on Hawaiian Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1121, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1121, S.D. 1, and be referred to your Committee on Ways and Means.


Respectfully submitted on behalf of the members of the Committee on Hawaiian Affairs,