Report Title:

Anti-Speculation Short-Term Capital Gains Tax on Real Property Sales

Description:

Enacts an anti-speculation short-term capital gains tax by increasing the capital gains tax on real property sales, based on a graduated scale of the length of time the seller held the property. Requires tax realizations to be deposited into the rental housing trust fund.

HOUSE OF REPRESENTATIVES

H.B. NO.

1574

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INCOME TAX.

 

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

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Anti-speculation short-term capital gains tax on real property. (a) For purposes of the capital gains tax under section 235-51(f), there shall be an anti-speculation short-term capital gains tax on the net capital gains realized by the seller from the sale of real property, minus commissions, fees, and other charges, if any, related to the sale, as follows:

(1) If the real property was held by the seller for less than six months prior to the sale, the tax shall be sixty per cent;

(2) If the real property was held by the seller for six months but less than twelve months prior to the sale, the tax shall be thirty per cent; or

(3) If the real property was held by the seller for twelve months up to and including twenty-four months, the tax shall be fifteen per cent.

(b) This section shall not apply to real property sold to provide affordable rental housing for a period of not less than ten years to a resident earning less than one hundred forty per cent of the median Hawaii income, as determined by the department of taxation.

(c) The sale of unimproved real property shall not be subject to this section, but shall be determined under section 235-51(f).

(d) The department shall deposit all tax realizations pursuant to this section into the rental housing trust fund under section 201G-432."

SECTION 2. Section 201G-432, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, moneys derived from the anti-speculation short-term capital gains taxes under section 235-  , repayment of loans, interest, other returns, and moneys from other sources."

SECTION 3. Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) If a taxpayer has a net capital gain, except as provided in section 235-  , for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act, upon its approval, shall take effect for taxable years beginning after December 31, 2005.

INTRODUCED BY:

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