HOUSE OF REPRESENTATIVES

H.B. NO.

2381

TWENTY-FIFTH LEGISLATURE, 2010

H.D. 2

STATE OF HAWAII

S.D. 2

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


PART I

     SECTION 1.  In light of the budgetary shortfall, the legislature finds it crucial to clarify the intent and text of laws that would generate additional revenue for the State if implemented according to their legislative intent.  Section 237-29, Hawaii Revised Statutes, is one such law.  It provides a general excise tax exemption on "all gross income received by any qualified person or firm for the planning, design, financing, construction, sale, or lease in the State of a housing project that has been certified or approved under section 201H-36[.]"  Pursuant to section 237-29, Hawaii Revised Statutes, the Hawaii housing finance and development corporation has adopted administrative rules (title 15, chapter 306, Hawaii Administrative Rules) to implement the certification and approval of projects to receive general excise tax exemptions.  However, the legislature finds that little information is made public regarding the approval or certification of projects to receive those exemptions, as household income information used to qualify projects for the exemption are not reported outside of the department of taxation and the Hawaii housing finance and development corporation.  Furthermore, developers, landlords, or management companies who receive general excise tax exemptions for qualified housing projects do not always pass on the tax savings to their renters, resulting in both reduced tax revenue to the State and no alleviation of rental costs for Hawaii's residents.

     The legislature further finds that a definition for "qualified resident" exists under section 201H-32, Hawaii Revised Statutes.  Although the term is not referenced in section 201H-36, Hawaii Revised Statutes (relating to general excise tax exemptions for certain housing development projects under the Hawaii housing finance and development corporation), the legislature finds that numerous housing laws enacted by the legislature over the past forty years mention the critical need for affordable housing.  With increasingly serious problems of homelessness and a lack of affordable housing within the State, the legislature concludes that the housing projects developed under the Hawaii housing finance and development corporation should seriously consider and address these housing issues to the greatest extent possible.  To this end, the legislature finds that section 201H-36, Hawaii Revised Statutes, should be clarified to reflect efforts to alleviate the housing hardships encountered by Hawaii's residents.

     The purpose of this part is to:

     (1)  Ensure that claimants who receive general excise tax exemptions under section 201H-36, Hawaii Revised Statutes, continue to meet all criteria necessary to receive the exemptions;

     (2)  Increase the transparency of the process of approving and certifying general excise tax exemptions for the development of certain housing projects and rental income from those projects;

     (3)  Apply the existing definition of "qualified resident" under section 201H-32, Hawaii Revised Statutes, to the section of law relating to general excise tax exemptions for Hawaii housing finance and development corporation housing development programs; and

     (4)  Establish a method of calculating the gross annual income of households that qualifies certain persons or firms for a general excise tax exemption to be consistent with the United States Department of Housing and Urban Development's method of determining eligibility for the federal housing choice voucher (section 8) program.

     SECTION 2.  Section 201H-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

     ""Qualified person or firm" means an individual, partnership, joint venture, corporation, association, limited liability partnership, limited liability company, business, trust, or any organized group of persons or legal entities, or any combination thereof, that possesses all professional or vocational licenses necessary to do business in the State of Hawaii in conjunction with the planning, design, financing, construction (including materials and supplies for new construction, moderate rehabilitation, and substantial rehabilitation), sale, or rental of eligible housing projects."

     SECTION 3.  Section 201H-36, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§201H-36[]]  Exemption from general excise taxes.  (a)  In accordance with section 237-29, the corporation may approve and certify for exemption from general excise taxes [any]:

     (1)  Any qualified person or firm involved with the development of a newly constructed, or moderately or substantially rehabilitated project:

    [(1)] (A)  Developed under this part;

    [(2)] (B)  Developed under a government assistance program approved by the corporation, including but not limited to the United States Department of Agriculture 502 program and Federal Housing Administration 235 program;

    [(3)] (C)  Developed under the sponsorship of a private nonprofit organization providing home rehabilitation or new homes for qualified families in need of decent, low-cost housing; or

    [(4)] (D)  Developed by a qualified person or firm to provide affordable rental housing where at least fifty per cent of the available units are designated for households [with incomes] that include a qualified resident, as defined by section 201H-32, or in the absence of a qualified resident, an active duty military service member, and that have a gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, at or below eighty per cent of the area median family income as determined by the United States Department of Housing and Urban Development, of which at least twenty per cent of the available units are for households [with incomes] that include a qualified resident, as defined by section 201H-32, or in the absence of a qualified resident, an active duty military service member, and that have a gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, at or below sixty per cent of the area median family income as determined by the United States Department of Housing and Urban Development[.]; provided that any federal or state housing assistance provided to a household that is not included in gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, shall not disqualify a qualified person or firm from counting that household's income toward the eligibility criteria under this subparagraph; and

     (2)  Any qualified person or firm involved with the rental of units in a housing project that provides affordable rental housing where at least fifty per cent of the available units are for households that include a qualified resident, as defined by section 201H-32, or in the absence of a qualified resident, an active duty military service member, and that have a gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, at or below eighty per cent of the area median family income as determined by the United States Department of Housing and Urban Development, of which at least twenty per cent of the available units are for households that include a qualified resident, as defined by section 201H-32, or in the absence of a qualified resident, an active duty military service member, and that have a gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, at or below sixty per cent of the area median family income as determined by the United States Department of Housing and Urban Development; provided that:

         (A)  An exemption from general excise taxes granted to qualified persons or firms pursuant to this paragraph shall apply to only that portion of rental income received from households that meet the gross annual income requirements set forth in this paragraph; and

         (B)  Any federal or state housing assistance provided to a household that is not included in gross annual income, as calculated by the United States Department of Housing and Urban Development in determining eligibility for the federal housing choice voucher (section 8) program, shall not disqualify a qualified person or firm from counting that household's income toward the eligibility criteria under this paragraph.

     (b)  All claims for exemption under this section shall be filed with and certified by the corporation and forwarded to the department of taxation.  Any claim for exemption that is filed and approved, shall not be considered a subsidy for the purpose of this part.

     (c)  Any qualified person or firm involved with the rental of units in a housing project that claims a general excise tax exemption under this section shall require all tenants to provide the following information on the rental or lease agreement for the housing project:

     (1)  The annual gross income of the household renting each unit; and

     (2)  The number of persons domiciled in the dwelling that comprise each household.

     (d)  Any qualified person or firm that receives a general excise tax exemption under this section shall annually submit to the Hawaii housing finance and development corporation a claim for certification of the exemption and be subject to a review at least once every three years.  All claims for exemption under this section shall include certification that the income criteria, residency criteria, and number of family members per household have not changed in a way that would disqualify the household from meeting the requirements for exemption under this section.

     The corporation, in consultation with the department of taxation, shall adopt and make available forms to effectuate this section.

     (e)  If a person or firm is found to have claimed or received an exemption without meeting or continuing to meet the requirements under this section, that person or firm shall reimburse the State by a time and in the amount of the tax liability, plus interest, to be determined by the director of taxation.

     (f)  Any qualified person or firm involved with the rental of units in a housing project that claims a general excise tax exemption under this section shall not lower or raise the amount of rent charged to a tenant based upon the qualified person or firm's receipt of a general excise tax exemption on rental income from that tenant.

     [(c)] (g)  For the purposes of this section:

     "Moderate rehabilitation" means rehabilitation to upgrade a dwelling unit to a decent, safe, and sanitary condition, or to repair or replace major building systems or components in danger of failure.

     "Substantial rehabilitation":

     (1)  Means the improvement of a property to a decent, safe, and sanitary condition that requires more than routine or minor repairs or improvements.  It may include but is not limited to the gutting and extensive reconstruction of a dwelling unit, or cosmetic improvements coupled with the curing of a substantial accumulation of deferred maintenance; and

     (2)  Includes renovation, alteration, or remodeling to convert or adapt structurally sound property to the design and condition required for a specific use, such as conversion of a hotel to housing for elders.

     [(d)] (h)  The corporation may establish, revise, charge, and collect a reasonable service fee, as necessary, in connection with its approvals and certifications under this section.  The fees shall be deposited into the dwelling unit revolving fund.

     (i)  The corporation shall adopt rules, pursuant to chapter 91, for the purposes of this section.  The rules shall include but not be limited to penalties for claimants who have received a general excise tax exemption without meeting or continuing to meet the appropriate eligibility criteria in every taxable year during which the claimant has received a general excise tax exemption.  Any penalty imposed under this subsection or rule adopted thereunder shall be in addition to any back taxes owed or penalties applied thereto."

     SECTION 4.  Section 237-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

     ""Qualified person or firm" means an individual, partnership, joint venture, corporation, association, limited liability partnership, limited liability company, business, trust, or any organized group of persons or legal entities, or any combination thereof, that possesses all professional or vocational licenses necessary to do business in the State of Hawaii in conjunction with the planning, design, financing, construction (including materials and supplies for new construction, moderate rehabilitation, and substantial rehabilitation), sale, or rental of eligible housing projects."

PART II

     SECTION 5.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235‑     Residential construction and remodeling tax credit.  (a)  There shall be allowed to each individual taxpayer who owns residential real property, and is subject to the taxes imposed by this chapter, a residential construction and remodeling tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     The amount of the tax credit claimed under this section by the taxpayer in all years for which the credit is available shall be limited to       per cent of the residential construction or remodeling costs paid by the taxpayer during the taxable year for which the credit is claimed; provided that the costs shall not exceed $           in the aggregate for each residential unit and that the costs are incurred before July 1,     .

     A husband and wife filing separately, or multiple owners of a property filing separately may apportion the tax credit between themselves; provided that the tax credit may be claimed only once for a single residential property.

     If a deduction is taken under Section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the construction or remodeling cost for which the deduction is taken.

     (b)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

     All claims, including amended claims, for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (c)  The director of taxation:

     (1)  Shall prepare any forms that may be necessary to claim a tax credit;

     (2)  May require the taxpayer to furnish information to ascertain the validity of the claim for the tax credit; and

     (3)  May adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

     (d)  To qualify for the income tax credit, the taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations.

     (e)  As used in this section:

     "Construction or remodeling cost" means any costs incurred after December 31,     , for plans, design, and construction related to new construction, alterations, or modifications to a residential apartment unit or house, and shall not include any costs for which another credit was claimed under this chapter.

     "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter."

     SECTION 6.  The department of taxation shall submit a report to the legislature that compares the impact on jobs and on the state budget that is produced by four separate tax credits for:

     (1)  New construction to residential apartment units and houses;

     (2)  Renovations to residential apartment units and houses;

     (3)  New construction to hotels and resorts; and

     (4)  Renovations to hotels and resorts.

The department of taxation shall submit the report no later than twenty days prior to the convening of the regular session of 2011.

PART III

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2020; provided that part II shall apply to costs incurred in taxable years beginning after December 31, 2010 and prior to January 1, 2014.



Report Title:

GET Exemption; HHFDC Housing Development; Rental Income; Tax Credit; Residential Construction and Remodeling

 

Description:

Part I ensures that claimants who receive GET exemptions continue to meet all criteria necessary to receive the exemptions.  Increases the transparency of the process of approving and certifying certain GET exemptions.  Adds a residency requirement for households in certain housing projects to qualify rental income from those households to be GET exempt.  Amends the method of calculating the gross annual income of households to qualify certain persons or firms for a GET exemption.  Part II provides a temporary tax credit for residential construction and remodeling projects.  Requires a report to the legislature comparing the impact on jobs and the state budget for various tax credit schemes.  Sunsets 12/31/2013.  Effective 7/1/2020.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.