Consumer Cooperative Assoc.

Exempts consumer cooperative associations from certain taxes.
Makes the same laws and fees applicable to both stock and
nonstock consumer cooperative associations.  Shortens the filing
period and requires specific information to be included in an
association's annual report.

HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to facilitate and
 2 encourage the creation of new consumer cooperatives.
 3      SECTION 2.  Chapter 421C, Hawaii Revised Statutes, is
 4 amended by adding a new section to be appropriately designated
 5 and to read as follows:
 6      "421C-    Taxation.  Domestic associations incorporated
 7 under this chapter shall pay an annual license fee of $10 to the
 8 director of commerce and consumer affairs that shall be a general
 9 realization of the State and in lieu of all other corporation,
10 franchise, and income taxes, and taxes and charges upon reserves
11 held by the association for distribution to members, including
12 without limitation upon the generality of the foregoing any taxes
13 imposed under chapter 235.
14      To obtain the exemptions from taxation granted by this
15 section or any other law, the association annually shall file
16 with the director of taxation a copy of its report made under
17 section 421C-29, and additionally, within ninety days after the
18 close of its fiscal year, shall file with the tax assessor of
19 each district in which there are persons doing business to whom

Page 2                                                     2897
                                     H.B. NO.           

 1 it has paid during the preceding fiscal year any proceeds of
 2 goods marketed, a report showing the name of each person to whom
 3 the proceeds were paid, the total proceeds of sales for which the
 4 person is taxable under chapter 237 for the fiscal year, and the
 5 rate or rates of the tax applicable thereto or the several
 6 amounts thereof."  
 7      SECTION 3.  Section 235-9, Hawaii Revised Statutes, is
 8 amended to read as follows:
 9      "235-9 Exemptions; generally.  Except as provided in
10 sections 235-61 to 235-67 relating to withholding and collection
11 of tax at source, and section 235-2.4 relating to "unrelated
12 business taxable income", the following persons and organizations
13 shall not be taxable under this chapter:  banks, building and
14 loan associations, financial services loan companies, financial
15 corporations, small business investment companies, trust
16 companies, mortgage loan companies, financial holding companies,
17 subsidiaries of financial holding companies as defined in chapter
18 241, and development companies taxable under chapter 241;
19 insurance companies, agricultural cooperative associations, and
20 [fish marketing] consumer cooperative associations exclusively
21 taxable under other laws; and persons engaged in the business of
22 motion picture and television film production as defined by the
23 director of taxation." 

Page 3                                                     2897
                                     H.B. NO.           

 1      SECTION 4.  Section 237-23, Hawaii Revised Statutes, is
 2 amended by amending subsection (a) to read as follows:
 3      "(a)  This chapter shall not apply to the following persons:
 4      (1)  Public service companies (as that term is defined in
 5           section 239-2), with respect to the gross income,
 6           either actual gross income or gross income estimated
 7           and adjusted, which is included in the measure of the
 8           tax imposed by chapter 239;
 9      (2)  Public utilities owned and operated by the State or any
10           county or other political subdivision thereof;
11      (3)  Fraternal benefit societies, orders, or associations,
12           operating under the lodge system, or for the exclusive
13           benefit of the members of the fraternity itself,
14           operating under the lodge system, and providing for the
15           payment of death, sick, accident, prepaid legal
16           services, or other benefits to the members of such
17           societies, orders, or associations, and to their
18           dependents;
19      (4)  Corporations, associations, trusts, or societies
20           organized and operated exclusively for religious,
21           charitable, scientific, or educational purposes, as
22           well as that of operating senior citizens housing
23           facilities qualifying for a loan under the laws of the

Page 4                                                     2897
                                     H.B. NO.           

 1           United States as authorized by section 202 of the
 2           Housing Act of 1959, as amended, as well as that of
 3           operating a prepaid legal services plan, as well as
 4           that of operating or managing a homeless facility, or
 5           any other program for the homeless authorized under
 6           chapter 201G, part IV;
 7      (5)  Business leagues, chambers of commerce, boards of
 8           trade, civic leagues, agricultural and horticultural
 9           organizations, and organizations operated exclusively
10           for the benefit of the community and for the promotion
11           of social welfare which shall include the operation of
12           a prepaid legal service plan, and from which no profit
13           inures to the benefit of any private stockholder or
14           individual;
15      (6)  Hospitals, infirmaries, and sanitaria;
16      (7)  Cooperative associations incorporated under chapter 421
17           or 421C, or Code section 521 cooperatives which fully
18           meet the requirements of section 421-23[,] or 421C-  ,
19           except Code section 521 cooperatives need not be
20           organized in Hawaii; provided that:
21           (A)  The exemption shall apply only to the gross income
22                derived from activities which are pursuant to
23                purposes and powers authorized by chapter 421[,]

Page 5                                                     2897
                                     H.B. NO.           

 1                or 421C, except those provisions pertaining to or
 2                requiring corporate organization in Hawaii do not
 3                apply to Code section 521 cooperatives;
 4           (B)  The exemption shall not relieve any person who
 5                receives any proceeds of sale from the association
 6                of the duty of returning and paying the tax on the
 7                total gross proceeds of the sales on account of
 8                which the payment was made, in the same amount and
 9                at the same rate as would apply thereto had the
10                sales been made directly by the person, and all
11                such persons shall be so taxable; and
12           (C)  As used in this paragraph, "section 521
13                cooperatives" mean associations which qualify as a
14                cooperative under section 521 (with respect to
15                exemption of farmers' cooperatives from tax) of
16                the Internal Revenue Code of 1986, as amended;
17      (8)  Persons affected with Hansen's disease and kokuas, with
18           respect to business within the county of Kalawao;
19      (9)  Corporations, companies, associations, or trusts
20           organized for the establishment and conduct of
21           cemeteries no part of the net earnings of which inures
22           to the financial benefit of any private stockholder or
23           individual (provided that the exemption shall apply

Page 6                                                     2897
                                     H.B. NO.           

 1           only to the activities of such persons in the conduct
 2           of cemeteries and not to any activity the primary
 3           purpose of which is to produce income, even though the
 4           income is to be used for or in the furtherance of the
 5           exempt activities of such persons); and
 6     (10)  Nonprofit shippers associations operating under part
 7           296 of the Civil Aeronautics Board Economic
 8           Regulations."
 9      SECTION 5.  Section 431C-3, Hawaii Revised Statutes, is
10 amended to read as follows:
11      "421C-3 Stock and nonstock associations; general
12 corporation laws, when applicable.(a)  An association may
13 either be organized with stock or without stock.  Subject to
14 section 421C-20, if organized with stock, the association shall
15 require a certain amount of common stock to be purchased from the
16 association in order to permit a stockholder voting and
17 membership privileges, and no class of stock except common stock
18 may grant voting and membership privileges in a stock
19 association.  Subject to section 421C-20, if organized without
20 stock, the association shall require a membership fee or amount
21 of membership capital to be paid in, in order to permit the
22 member voting and membership privileges by means of issuance of a
23 membership certificate.

Page 7                                                     2897
                                     H.B. NO.           

 1      [(b) Except where otherwise provided, statutes and fees
 2 which apply to domestic profit corporations shall apply to stock
 3 associations, and statutes and fees which apply to domestic
 4 nonprofit corporations shall apply to nonstock associations.
 5      (c)] (b)  Associations may amend their articles upon
 6 approval by the director of commerce and consumer affairs of
 7 articles of amendment to convert from a stock association to a
 8 nonstock association or vice-versa.  This subsection may be
 9 employed by an association only once every two calendar years."
10      SECTION 6.  Section 421C-29, Hawaii Revised Statutes, is
11 amended to read as follows:
12      "[[]421C-29[]]  Annual report.  Every association, within
13 [one hundred twenty] ninety days [of] after the close of its
14 fiscal year, shall file with the director of commerce and
15 consumer affairs an annual report [as prescribed by the
16 director.] containing the name of the association, its place of
17 business, and a general statement of its business operations
18 during the fiscal year, showing the amount of capital stock paid
19 up and the number of shareholders, if a stock corporation, or the
20 number of members and the amount of membership fees received, if
21 a nonstock association; an income statement; and its balance
22 sheet.   A copy of the report shall be submitted to the members
23 at their annual meeting, mailed to each member of the

Page 8                                                     2897
                                     H.B. NO.           

 1 association, or printed in an official publication of the
 2 association." 
 3      SECTION 7.  Statutory material to be repealed is bracketed.
 4 New statutory material is underscored.
 5      SECTION 8.  This Act shall take effect upon its approval.
 7                       INTRODUCED BY:  ___________________________