Report Title:

General Excise Tax; Deductions

 

Description:

Accelerates the general excise tax deduction for the leasing and subleasing of real property by adopting the .875 deduction multiplier for calendar year 2002 and thereafter.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

425

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the general excise tax.

 

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

SECTION 1. The legislature finds that Act 353, Session Laws of Hawaii 1997, provides a general excise tax deduction to lessees who sublet property to mitigate pyramiding of the general excise tax on gross proceeds derived from rent. The Act phased-in the deduction over a period of seven years. This deduction, in effect, reduces the effective general excise tax rate on gross proceeds derived by subleasing activities in half per cent increments from calendar year 1998 through calendar year 2004.

The legislature further finds that accelerating the general excise tax deduction would help to stabilize the cost of doing business in the State by eliminating pyramiding as a bias toward higher rents.

The cost of the real property leasing and subleasing deduction to the state treasury was estimated at $35,000,000 per year when fully implemented. The estimated additional cost of allowing the maximum .875 deduction or 0.5 per cent general excise tax rate in 2002 is $10,000,000 to $15,000,000.

The purpose of this Act is to accelerate the general excise tax deduction for the leasing and subleasing of real property by adopting the .875 deduction multiplier for calendar year 2002 and thereafter.

SECTION 2. Section 237-16.5, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) After allocation under subsection (c), if necessary, the deduction under this section shall be allowed from the gross proceeds or gross income of the lessee received from its sublease in an amount calculated by multiplying the gross proceeds or gross income paid by the lessee to its lessor for the lease of the real property by the following amount:

(1) In calendar year 1998, .125;

(2) In calendar year 1999, .25;

(3) In calendar year 2000, .375;

(4) In calendar year 2001, .50; and

(5) In calendar year 2002[, .625;] and thereafter, .875.

[(6) In calendar year 2003, .75; and

(7) In calendar year 2004, and thereafter, .875.]

The amount calculated under paragraphs (1) to [(7)] (5) shall be deducted by the lessee from the lessee's total reported gross proceeds or gross income. The deduction allowed by this subsection may be taken by the fiscal and calendar year lessees."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2001.

INTRODUCED BY:

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