REPORT TITLE:
Construction Industry

DESCRIPTION:
Exempts gross proceeds received from state subcontractors from GE
tax; clarifies definition of "contractor" in chapter 444, HRS;
defines "state resident"; encourages use of and establishes
criteria for project labor agreements.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        139
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO FEDERAL CONSTRUCTION.



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

 1                              PART I
 
 2      SECTION 1.  (a)  Beginning with section 8078 of the United
 
 3 States Defense Appropriations Act of 1986, all subsequent Defense
 
 4 Appropriations Acts require the contractor on a military
 
 5 construction or services project to employ Hawaii residents when
 
 6 Hawaii's unemployment rate exceeds the national average.  The
 
 7 unemployment rate in Hawaii has been above the national average
 
 8 since 1994, but the federal law has not been strictly enforced.
 
 9 Many defense construction and service contracts have been awarded
 
10 to out-of-state contractors that hire individuals that move to
 
11 Hawaii just to work on these particular federal contracts.  This
 
12 apparently is within the scope of the law, though clearly not the
 
13 intent of section 8078.  One reason given for the failure to
 
14 strictly enforce the requirement to employ Hawaii residents is
 
15 that the term "state resident" is not defined in section 8078, in
 
16 its related provisions, or in the Federal Acquisition
 
17 Regulations.
 
18      The purpose of this section is to establish a definition of
 
19 "state resident" that will provide a clear, objective, measurable
 

 
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 1 standard that can be easily followed, copied, and enforced by
 
 2 federal contracting officers in enforcing the preference
 
 3 provisions in federal law.  A clear definition of "state
 
 4 resident" will help keep profits and wages from military
 
 5 construction projects in the State.
 
 6      (b)  For purposes of the employment preference provided in
 
 7 federal law in favor of state residents, "state resident" means
 
 8 an individual who:
 
 9      (1)  Resides in the State at least two hundred days of the
 
10           year;
 
11      (2)  Has filed a Hawaii resident income tax return in the
 
12           taxable year immediately preceding a bid for a federal
 
13           contract by the individual's employer or business that
 
14           is a state contractor and has paid all amounts owing on
 
15           that tax return; provided that an individual who was a
 
16           state resident, left the State to attend school or
 
17           serve in the armed forces of the United States of
 
18           America, and returned to the State to work for a state
 
19           contractor is a state resident, even though the
 
20           individual has not yet resided in the State for at
 
21           least two hundred days or filed a Hawaii resident
 
22           income tax return or paid all amounts owing on that tax
 
23           return; and
 

 
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 1      (3)  In the case of a business entity:
 
 2           (A)  Is licensed as a contractor pursuant to
 
 3                chapter 444;
 
 4           (B)  Is licensed to conduct business in this State
 
 5                pursuant to section 237-9;
 
 6           (C)  Submits a bid under the name appearing on the
 
 7                person's current contracting or business license;
 
 8           (D)  Is a domestic corporation, partnership, or
 
 9                business organized or formed under the laws of the
 
10                State;
 
11           (E)  Has maintained its principal place of business
 
12                within the State for at least two-hundred
 
13                consecutive days prior to the submission of a bid;
 
14           (F)  Has filed a Hawaii resident income tax and all
 
15                other applicable tax returns for the preceding tax
 
16                year and has paid all amounts owing on those tax
 
17                returns;
 
18           (G)  Has complied with all applicable Hawaii
 
19                employment, insurance, and worker's compensation
 
20                laws;
 
21           (H)  If an employer with one or more employees, one-
 
22                hundred per cent of its employees are state
 
23                residents; and
 

 
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 1           (I)  If a joint venture, is composed entirely of
 
 2                entities that qualify under paragraphs (A) to (I).
 
 3                              PART II
 
 4      SECTION 2.  The purpose of this Part is to provide a general
 
 5 excise tax exemption for Hawaii's subcontractors to help
 
 6 rejuvenate their businesses.  In addition, this Part clarifies
 
 7 that the definition of contractors in chapter 444, Hawaii Revised
 
 8 Statutes, includes all contractors working in the State directly
 
 9 or indirectly for the federal government to the extent allowed
 
10 under federal law.  Therefore, those contractors, including out-
 
11 of-state contractors, are subject to the licensing and other
 
12 provisions of chapter 444, Hawaii Revised Statutes.
 
13      SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended
 
14 by adding a new section to be appropriately designated and to
 
15 read as follows:
 
16      "237-     Exemption of federal construction contracts.  (a)
 
17 Any provision of the law to the contrary notwithstanding, there
 
18 shall be exempted from, and excluded from the measure of the
 
19 taxes imposed by this chapter, all of the gross income or gross
 
20 proceeds received by state subcontractors that arises from
 
21 federal construction contracts.
 
22      (b)  For the purposes of this section:
 
23      "State subcontractor" means a contractor for whom a
 

 
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 1 deduction may be taken by another contractor pursuant to section
 
 2 237-13(3)(B), whether or not a deduction is taken, and that:
 
 3      (1)  Is licensed as a contractor pursuant to chapter 444;
 
 4      (2)  Is licensed to conduct business in this State pursuant
 
 5           to section 237-9;
 
 6      (3)  Submits a bid under the name appearing on the person's
 
 7           current contracting or business license;
 
 8      (4)  Is a domestic corporation, partnership, or business
 
 9           organized or formed under the laws of the State;
 
10      (5)  Has maintained its principal place of business within
 
11           the State for at least two-hundred consecutive days
 
12           prior to the submission of a bid;
 
13      (6)  Has filed a Hawaii resident income tax and all other
 
14           applicable tax returns for the preceding tax year and
 
15           has paid all amounts owing on those tax returns;
 
16      (7)  Has complied with all applicable Hawaii employment,
 
17           insurance, and worker's compensation laws;
 
18      (8)  If an employer with one or more employees, one-hundred
 
19           per cent of its employees are state residents; and
 
20      (9)  If a joint venture, is composed entirely of entities
 
21           that qualify under paragraphs (1) to (8).
 
22      "State resident" means an individual who:
 
23      (1)  Resides in the State at least two hundred days of the
 

 
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 1           year; and
 
 2      (2)  Has filed a Hawaii resident income tax return in the
 
 3           taxable year immediately preceding a bid for a state
 
 4           contract by the individual's employer or business that
 
 5           is a state contractor and has paid all amounts owing on
 
 6           that tax return; provided that an individual who was a
 
 7           state resident, left the State to attend school or
 
 8           serve in the armed forces of the United States of
 
 9           America, and returned to the State to work for a state
 
10           contractor is a state resident, even though the
 
11           individual has not yet resided in the State for at
 
12           least two hundred days or filed a Hawaii resident
 
13           income tax return or paid all amounts owing on that tax
 
14           return."
 
15      SECTION 4.  Section 444-1, Hawaii Revised Statutes, is
 
16 amended by amending the definition of "contractor" to read as
 
17 follows:
 
18      ""Contractor" means any person who by oneself or through
 
19 others offers to undertake, or holds oneself out as being able to
 
20 undertake, or does undertake to alter, add to, subtract from,
 
21 improve, enhance, or beautify any realty or construct, alter,
 
22 repair, add to, subtract from, improve, move, wreck, or demolish
 
23 any building, highway, road, railroad, excavation, or other
 

 
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 1 structure, project, development, or improvement, or do any part
 
 2 thereof, including the erection of scaffolding or other
 
 3 structures or works in connection therewith.
 
 4      "Contractor" includes a subcontractor, a specialty
 
 5 contractor, and any person, general engineering, general
 
 6 building, or specialty contractor who performs any of the
 
 7 activities listed in the previous paragraph directly or
 
 8 indirectly for the federal government[.], to the extent allowed
 
 9 under federal law."
 
10                             PART III
 
11      SECTION 5.  The purpose of this Part is to encourage the use
 
12 of a project labor agreement to achieve economy and efficiency in
 
13 any new federal construction project in which the State is
 
14 authorized to participate and to establish standards and criteria
 
15 for a project labor agreement that is consistent with the United
 
16 States President's memorandum dated June 5, 1997.
 
17      SECTION 6.  Project labor agreement.  (a)  In any federal
 
18 construction project in which the State is authorized by federal
 
19 law or regulation, or by agreement with the federal agency to
 
20 construct, or to participate in the construction of, any federal
 
21 structure or facility in the State, any department or agency of
 
22 the State that is authorized to award such a contract, on a
 
23 project-by-project basis, may use a project labor agreement if
 

 
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                                     H.B. NO.           H.D. 1
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 1 the project labor agreement:
 
 2      (1)  Advances the project's procurement interest in cost,
 
 3           efficiency, and quality;
 
 4      (2)  Promotes labor-management stability and compliance with
 
 5           legal requirements governing safety and health,
 
 6           employment equal opportunity, labor and employment
 
 7           standards, and other matters; and
 
 8      (3)  Is not precluded from use because of laws applicable to
 
 9           the specific construction project.
 
10      (b)  If the department or agency of the State determines
 
11 that the use of a project labor agreement will serve the goals
 
12 set forth in subsection (a), the department or agency of the
 
13 State may require that every contractor or subcontractor on the
 
14 project agree, for that project, to negotiate or become a party
 
15 to a project labor agreement with unions traditionally
 
16 representing employees working in the building and construction
 
17 industry as well as other nonunion contractors, subcontractors,
 
18 and employees, and incorporate the project labor agreement into
 
19 the requests for proposals, invitations for bid under chapter
 
20 103D, Hawaii Revised Statutes, and contract documents.
 
21      (c)  Any project labor agreement reached pursuant to this
 
22 section shall:
 
23      (1)  Bind all contractors and subcontractors on the
 

 
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 1           construction project by incorporating the project labor
 
 2           agreement into all relevant requests for proposals,
 
 3           invitations for bids under chapter 103D, Hawaii Revised
 
 4           Statutes, and contract documents;
 
 5      (2)  Fully conform to all applicable laws, regulations, and
 
 6           executive orders;
 
 7      (3)  Allow all contractors and subcontractors wishing to
 
 8           compete for contracts and subcontracts on the project
 
 9           to do so, without discrimination against contractors,
 
10           subcontractors, or employees based on union or nonunion
 
11           status;
 
12      (4)  Contain guarantees against strikes, lockouts, and
 
13           similar work disruptions;
 
14      (5)  Set forth effective, prompt, and mutually binding
 
15           procedures for resolving labor disputes arising during
 
16           the project; and
 
17      (6)  Provide other mechanisms for labor-management
 
18           cooperation on matters of mutual interest and concern,
 
19           including productivity, quality of work, safety, and
 
20           health.
 
21      (d)  This section does not require a department or agency of
 
22 the State to use a project labor agreement on any federal
 
23 construction project, nor does it preclude use of a project labor
 

 
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 1 agreement in circumstances not covered in this section.  This
 
 2 section also does not require a contractor to enter into a
 
 3 project labor agreement with any particular labor organization.
 
 4      (e)  The procurement policy board, in consultation with the
 
 5 departments that are covered by this section, shall establish
 
 6 appropriate written procedures and criteria for the
 
 7 determinations set forth in subsection (a) in accordance with
 
 8 chapter 91.
 
 9      (f)  This section does not create any right or benefit,
 
10 substantive or procedural, enforceable by a non-state party
 
11 against the State, its departments, agencies, or
 
12 instrumentalities, its officers, or employees, or any other
 
13 person.
 
14      SECTION 7.  The department of accounting and general
 
15 services shall submit a report on the results of the use of
 
16 project labor agreements authorized by this Part to the
 
17 legislature twenty days before the convening of the regular
 
18 session of 2003.
 
19      SECTION 8.  This Part shall apply to project labor
 
20 agreements entered into on or after the effective date of this
 
21 Part.  All project labor agreements entered into before the
 
22 effective date of this Part shall continue to be honored until
 
23 their termination.
 

 
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 1                              PART IV
 
 2      SECTION 9.  If any provision of this Act, or the application
 
 3 thereof to any person or circumstance is held invalid, the
 
 4 invalidity does not affect other provisions of applications of
 
 5 the Act which can be given effect without the invalid provision
 
 6 or application, and to this end the provisions of this Act are
 
 7 severable.
 
 8      SECTION 10.  This Act does not affect rights and duties that
 
 9 matured, penalties that were incurred, and proceedings that were
 
10 begun, before its effective date.
 
11      SECTION 11.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 12.  This Act shall take effect on July 1, 1999;
 
14 provided that part III of this Act shall be reviewed by
 
15 June 30, 2005.