Report Title:

For-profit Hospitals; General Excise Tax Exemption

 

Description:

Extends the general excise tax exemption for hospitals, infirmaries, and sanitaria to for-profit hospitals, that provide services to an annual patient population consisting of sixty per cent or more uninsured, medicaid, and medicare patients.  Makes conforming amendments.  (HB2759 HD1)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

2759

TWENTY-FOURTH LEGISLATURE, 2008

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO GENERAL EXCISE TAX.

 

 

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

 


     SECTION 1.  The purpose of this Act is to extend the general excise tax exemption for non-profit hospitals, infirmaries, and sanitaria to for-profit hospitals, infirmaries, and sanitaria that provide services to an annual patient population consisting of sixty per cent or more uninsured, medicaid, and medicare patients.

     The legislature intends that all gross income or gross proceeds derived by non-profit or for-profit hospitals, infirmaries, and sanitaria, including income or proceeds derived from the sale of prescription drugs and prosthetic devices, be exempt from the general excise tax.

     SECTION 2.  Section 237-23, Hawaii Revised Statutes, is amended by amending subsections (a), (b), and (c) to read as follows:

     "(a)  This chapter shall not apply to the following persons:

     (1)  Public service companies as that term is defined in section 239-2, with respect to the gross income, either actual gross income or gross income estimated and adjusted, that is included in the measure of the tax imposed by chapter 239;

     (2)  Public utilities owned and operated by the State or any county, or other political subdivision thereof;

     (3)  Fraternal benefit societies, orders, or associations, operating under the lodge system, or for the exclusive benefit of the members of the fraternity itself, operating under the lodge system, and providing for the payment of death, sick, accident, prepaid legal services, or other benefits to the members of the societies, orders, or associations, and to their dependents;

     (4)  Corporations, associations, trusts, or societies organized and operated exclusively for religious, charitable, scientific, or educational purposes, as well as that of operating senior citizens housing facilities qualifying for a loan under the laws of the United States as authorized by section 202 of the Housing Act of 1959, as amended, as well as that of operating a prepaid legal services plan, as well as that of operating or managing a homeless facility, or any other program for the homeless authorized under part VII of chapter 356D;

     (5)  Business leagues, chambers of commerce, boards of trade, civic leagues, agricultural and horticultural organizations, and organizations operated exclusively for the benefit of the community and for the promotion of social welfare that shall include the operation of a prepaid legal service plan, and from which no profit inures to the benefit of any private stockholder or individual;

     (6)  [Hospitals,] All nonprofit hospitals and any for-profit hospital that provides services to an annual patient population consisting of sixty per cent or more uninsured, medicaid, and medicare patients, infirmaries, and sanitaria;

     (7)  Cooperative associations incorporated under chapter 421 or Code section 521 cooperatives which fully meet the requirements of section 421-23, except Code section 521 cooperatives need not be organized in Hawaii; provided that:

         (A)  The exemption shall apply only to the gross income derived from activities that are pursuant to purposes and powers authorized by chapter 421, except those provisions pertaining to or requiring corporate organization in Hawaii do not apply to Code section 521 cooperatives;

         (B)  The exemption shall not relieve any person who receives any proceeds of sale from the association of the duty of returning and paying the tax on the total gross proceeds of the sales on account of which the payment was made, in the same amount and at the same rate as would apply thereto had the sales been made directly by the person, and all those persons shall be [so] taxable; and

         (C)  As used in this paragraph, "section 521 cooperatives" mean associations that qualify as a cooperative under section 521 (with respect to exemption of farmers' cooperatives from tax) of the Internal Revenue Code of 1986, as amended;

     (8)  Persons affected with Hansen's disease and kokuas, with respect to business within the county of Kalawao;

     (9)  Corporations, companies, associations, or trusts organized for the establishment and conduct of cemeteries no part of the net earnings of which inures to the financial benefit of any private stockholder or individual; provided that the exemption shall apply only to the activities of those persons in the conduct of cemeteries and shall not apply to any activity the primary purpose of which is to produce income, even though the income is to be used for or in the furtherance of the exempt activities of those persons; and

    (10)  Nonprofit shippers associations operating under part 296 of the Civil Aeronautics Board Economic Regulations.

     (b)  The exemptions enumerated in subsection (a)(3) to [(6)] (5) shall apply only:

     (1)  To those persons who shall have registered with the department of taxation by filing a written application for registration in such form as the department shall prescribe, shall have paid the registration fee of $20, and shall have had the exemption allowed by the department or by a court or tribunal of competent jurisdiction upon appeal from any assessment resulting from disallowance of the exemption by the department;

     (2)  To activities from which no profit inures to the benefit of any private stockholder or individual, except for death or other benefits to the members of fraternal societies; and

     (3)  To the fraternal, religious, charitable, scientific, educational, communal, or social welfare activities of such persons, or to the activities of such hospitals, infirmaries, and sanitaria as such, and not to any activity the primary purpose of which is to produce income even though the income is to be used for or in furtherance of the exempt activities of such persons.

     (c)  To obtain allowance of an exemption:

     (1)  A person under subsection (a)(3) to [(6),] (5), who has received or applied for recognition of tax exempt status under [section] Section 501(c)(3), (4), (6), or (8) of the Internal Revenue Code of 1986, as amended, or who is a subordinate person of a person who has received a group exemption letter under [section] Section 501(c)(3), (4), (6), or (8) of the Internal Revenue Code of 1986, as amended, shall register with the department by filing a statement attaching a copy of the exemption or application for recognition of exempt status and any particular facts that the department may require; and

     (2)  All other persons under subsection (a)(3) to [(6)] (5) shall file an application for exemption in the form of an affidavit or affidavits setting forth in general all facts affecting the right to the exemption and such particular facts as the department may require, to which shall be attached such records, papers, and other information as the department may prescribe."

     SECTION 3.  Section 237-24.3, Hawaii Revised Statutes, is amended to read as follows:

     "§237-24.3  Additional amounts not taxable.  In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:

     (1)  Amounts received from the loading, transportation, and unloading of agricultural commodities shipped for a producer or produce dealer on one island of this State to a person, firm, or organization on another island of this State.  The terms "agricultural commodity", "producer", and "produce dealer" shall be defined in the same manner as they are defined in section 147-1; provided that agricultural commodities need not have been produced in the [State;] state;

     (2)  Amounts received from sales of:

         (A)  Intoxicating liquor as the term "liquor" is defined in chapter 244D;

         (B)  Cigarettes and tobacco products as defined in chapter 245; and

         (C)  Agricultural, meat, or fish products;

          to any person or common carrier in interstate or foreign commerce, or both, whether ocean-going or air, for consumption out-of-state on the shipper's vessels or airplanes;

     (3)  Amounts received by the manager, submanager, or board of directors of:

         (A)  An association of apartment owners of a condominium property regime established in accordance with chapter 514A or 514B; or

         (B)  A nonprofit homeowners or community association incorporated in accordance with chapter 414D or any predecessor thereto and existing pursuant to covenants running with the land,

          in reimbursement of sums paid for common expenses;

     (4)  Amounts received or accrued from:

         (A)  The loading or unloading of cargo from ships, barges, vessels, or aircraft, whether or not the ships, barges, vessels, or aircraft travel between the [State;] state and other states or countries or between the islands of the [State;] state;

         (B)  Tugboat services including pilotage fees performed within the [State;] state, and the towage of ships, barges, or vessels in and out of state harbors, or from one pier to another; and

         (C)  The transportation of pilots or governmental officials to ships, barges, or vessels offshore; rigging gear; checking freight and similar services; standby charges; and use of moorings and running mooring lines;

     (5)  Amounts received by an employee benefit plan by way of contributions, dividends, interest, and other income; and amounts received by a nonprofit organization or office, as payments for costs and expenses incurred for the administration of an employee benefit plan; provided that this exemption shall not apply to any gross rental income or gross rental proceeds received after June 30, 1994, as income from investments in real property in this [State;] state; and provided further that gross rental income or gross rental proceeds from investments in real property received by an employee benefit plan after June 30, 1994, under written contracts executed prior to July 1, 1994, shall not be taxed until the contracts are renegotiated, renewed, or extended, or until after December 31, 1998, whichever is earlier.  For the purposes of this paragraph, "employee benefit plan" means any plan as defined in [section] Section 1002(3) of [title] Title 29 of the United States Code, as amended;

     (6)  Amounts received for purchases made with United States Department of Agriculture food coupons under the federal food stamp program, and amounts received for purchases made with United States Department of Agriculture food vouchers under the Special Supplemental Foods Program for Women, Infants and Children;

     (7)  Amounts received by a [hospital, infirmary,] medical clinic, health care facility, pharmacy, or a practitioner licensed to administer the drug to an individual for selling prescription drugs or prosthetic devices to an individual; provided that this paragraph shall not apply to any amounts received for services provided in selling prescription drugs or prosthetic devices.  As used in this paragraph:

              "Prescription drugs" are those drugs defined under section 328-1 and dispensed by filling or refilling a written or oral prescription by a practitioner licensed under law to administer the drug and sold by a licensed pharmacist under section 328-16 or practitioners licensed to administer drugs; and

              "Prosthetic device" means any artificial device or appliance, instrument, apparatus, or contrivance, including their components, parts, accessories, and replacements thereof, used to replace a missing or surgically removed part of the human body, which is prescribed by a licensed practitioner of medicine, osteopathy, or podiatry and which is sold by the practitioner or which is dispensed and sold by a dealer of prosthetic devices; provided that "prosthetic device" shall not mean any auditory, ophthalmic, dental, or ocular device or appliance, instrument, apparatus, or contrivance;

     (8)  Taxes on transient accommodations imposed by chapter 237D and passed on and collected by operators holding certificates of registration under that chapter;

     (9)  Amounts received as dues by an unincorporated merchants association from its membership for advertising media, promotional, and advertising costs for the promotion of the association for the benefit of its members as a whole and not for the benefit of an individual member or group of members less than the entire membership;

    (10)  Amounts received by a labor organization for real property leased to:

         (A)  A labor organization; or

         (B)  A trust fund established by a labor organization for the benefit of its members, families, and dependents for medical or hospital care, pensions on retirement or death of employees, apprenticeship and training, and other membership service programs.

          As used in this paragraph, "labor organization" means a labor organization exempt from federal income tax under [section] Section 501(c)(5) of the Internal Revenue Code, as amended;

    (11)  Amounts received from foreign diplomats and consular officials who are holding cards issued or authorized by the United States Department of State granting them an exemption from state taxes; and

    (12)  Amounts received as rent for the rental or leasing of aircraft or aircraft engines used by the lessees or renters for interstate air transportation of passengers and goods.  For purposes of this paragraph, payments made pursuant to a lease shall be considered rent regardless of whether the lease is an operating lease or a financing lease.  The definition of "interstate air transportation" is the same as in 49 [U.S.C.] United States Code 40102."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2008.