STAND. COM. REP. NO.54

Honolulu, Hawaii

, 2001

RE: S.B. No. 456

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Tourism and Intergovernmental Affairs, to which was referred S.B. No. 456 entitled:

"A BILL FOR AN ACT RELATING TO TRANSIENT ACCOMMODATION TAX,"

begs leave to report as follows:

The purpose of this measure is to repeal the transient accommodations tax (TAT) imposed on time share units.

Your Committee received testimony in support of this measure from Marriott International, Inc., and Lawai Beach Resort. The Department of Taxation, Hawaii Tourism Authority and two members of the Maui County Council submitted testimony in opposition. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that Act 156, Session Laws of Hawaii 1998, included time share units in the TAT because time share ownership is generally considered as a periodic vacation rental rather than conventional real estate ownership, and owners are similar to transient occupants of hotels. Owners of time share units, however, pay both property taxes and general excise taxes as part of the maintenance fees for the unit. As a result, time share owners believe they bear a disproportionate share of the taxes collected.

Your Committee further finds that currently the TAT on time share units generates approximately $2,000,000 per year. Under law, 55.2 per cent is distributed in support of visitor-related activities, with 17.3 per cent for the convention center and 37.9 per cent for the Hawaii Tourism Authority (HTA). The remaining 44.8 per cent is distributed to the counties.

Your Committee understands that the HTA will expend up to $61,000,000 of its share of the TAT revenues, which is less than the distribution authorized for HTA, leaving an unexpended surplus. Repeal of the TAT on time share units would then have little, if any, adverse effect on visitor-related programs. However, your Committee is concerned that the repeal of the TAT on time share units would have a considerable impact on the counties. Their forty-five per cent share of the total $2,000,000 revenue loss would be nearly $1,000,000, a loss which the counties can ill afford.

Your Committee finds the concerns of time share owners to be a valid consideration in the repeal of the TAT for time share units. Your Committee also finds that additional revenue should be allocated to the counties to replace the subsequent loss from the tax on time shares. Your Committee has amended this measure to:

(1) Transfer an additional $1,000,000 annually of TAT revenues to the counties;

(2) Change the effective date of the Act to July 1, 2001; and

(3) Make technical, nonsubstantive changes to reflect preferred drafting style.

As affirmed by the record of votes of the members of your Committee on Tourism and Intergovernmental Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 456, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 456, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Tourism and Intergovernmental Affairs,

____________________________

DONNA MERCADO KIM, Chair