REPORT TITLE:
Public Service Company Tax


DESCRIPTION:
Allows the counties to collect a part of the public service
company tax in exchange for not assessing the real property tax
on utility companies.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2930
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE PUBLIC SERVICE COMPANY TAX.



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

 1      SECTION 1.  The purpose of this Act is to transfer to the
 
 2 counties the portion of the public service company taxes
 
 3 collected from public utilities in excess of the four per cent
 
 4 rate.  According to chapter 239, Hawaii Revised Statutes, the
 
 5 public service company tax is a means of taxing the real property
 
 6 and personal property of public utility companies, among other
 
 7 things.  Although real property taxes are the primary revenue
 
 8 source for counties, the public service company tax revenue
 
 9 remains with the state government.  The legislature finds that a
 
10 more equitable allocation of the public service company tax
 
11 should be implemented.
 
12      SECTION 2.  Section 239-5, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "239-5 Public utilities, generally.(a)  There shall be
 
15 levied and assessed upon each public utility, except airlines,
 
16 motor carriers, common carriers by water, and contract carriers
 
17 taxed by section 239-6, a tax of such rate per cent of its gross
 
18 income each year from its public utility business as shall be
 
19 determined in the manner hereinafter provided.  The tax imposed
 

 
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 1 by this section is in lieu of all taxes other than those below
 
 2 set out, and is a means of taxing, on behalf of and as the agent
 
 3 for those counties that elect to participate in the revenue
 
 4 sharing provided for in section 239-10, the real property (owned
 
 5 by the public utility or leased to it by a lease under which the
 
 6 public utility is required to pay the taxes upon the property),
 
 7 and the personal property of the public utility, tangible and
 
 8 intangible, including going concern value.  In addition to the
 
 9 tax imposed by this chapter there also are imposed income taxes,
 
10 the specific taxes imposed by chapter 249, the fees prescribed by
 
11 chapter 269, any tax specifically imposed by the terms of the
 
12 public utility's franchise or under chapter 240, the use or
 
13 consumption tax imposed by chapter 238, and employment taxes.
 
14      The rate of the tax upon the gross income of the public
 
15 utility shall be determined as follows:
 
16      If the ratio of the net income of the company to its gross
 
17 income is fifteen per cent or less, the rate of the tax on gross
 
18 income shall be 5.885 per cent; for all companies having net
 
19 income in excess of fifteen per cent of the gross, the rate of
 
20 the tax on gross income shall increase continuously in proportion
 
21 to the increase in ratio of net income to gross, at such rate
 
22 that for each increase of one per cent in the ratio of net income
 
23 to gross, there shall be an increase of .2675 per cent in the
 

 
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 1 rate of the tax.
 
 2      The following formula may be used to determine the rate, in
 
 3 which formula the term "R" is the ratio of net income to gross
 
 4 income, and "X" is the required rate of the tax on gross income
 
 5 for the utility in question:
 
 6                        X=(1.8725+26.75R)%;
 
 7 provided that in no case governed by the formula shall "X" be
 
 8 less than 5.885 per cent or more than 8.2 per cent.
 
 9      However, if the gross income is apportioned under section
 
10 239-8(b) or (c), there shall be no adjustment of the rate of tax
 
11 on the amount of gross income so apportioned to the State on
 
12 account of the ratio of the net income to the gross income being
 
13 in excess of fifteen per cent, and it shall be assumed in such
 
14 case that the ratio is fifteen per cent or less.
 
15      (b)  Notwithstanding subsection (a), the rate of the tax
 
16 upon the portion of the gross income of a carrier of passengers
 
17 by land which consists in passenger fares for transportation
 
18 between points on a scheduled route, shall be 5.35 per cent.
 
19 However, if the carrier has other public utility gross income the
 
20 fares nevertheless shall be included in applying subsection (a)
 
21 in determining the rate of tax upon the other public utility
 
22 gross income.
 
23      (c)  Notwithstanding subsection (a), the rate of tax upon
 

 
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 1 the portion of the gross income of a public utility which
 
 2 consists of the receipts from the sale of its products or
 
 3 services to another public utility which resells such products or
 
 4 services shall be one-half of one per cent, provided that the
 
 5 resale is subject to taxation under this section, and provided
 
 6 further that the public utility's exemption from real property
 
 7 taxes imposed by chapter 246 shall be reduced by the proportion
 
 8 that its public utility gross income described herein bears to
 
 9 its total public utility gross income.  Whenever the public
 
10 utility has other public utility gross income the gross income
 
11 from the sale of its products or services to another public
 
12 utility shall be included in applying subsection (a) in
 
13 determining the rate of tax upon the other public utility gross
 
14 income.
 
15      (d)  Notwithstanding subsection (a) and subject to
 
16 subsection (c), the rate of taxation upon that portion of a
 
17 public utility's gross income from its public utility business
 
18 generated in a county which elects not to participate in the
 
19 revenue sharing described in section 239-10 shall be the maximum
 
20 tax rate imposed under chapter 237."
 
21      SECTION 3.  Section 239-10, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "239-10  Disposition of revenues.  (a)  All taxes collected
 

 
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 1 under this chapter shall be state realizations[.]; provided that
 
 2 after June 30, 2001, the amount of taxes collected under section
 
 3 239-5(a) from levy and assessment after June 30, 2000, in excess
 
 4 of the maximum tax rate imposed under chapter 237 on a public
 
 5 utility's gross income, shall be kept in the state treasury by
 
 6 the state director of finance in special accounts for each county
 
 7 (except Kalawao).  The state director of finance may deduct any
 
 8 reasonable costs with respect to administering this section
 
 9 before paying the remaining balance to participating counties as
 
10 provided for in this section.  The payments shall be made within
 
11 five months of the end of the fiscal year.
 
12      (b)  The director of taxation shall apportion and pay into
 
13 the special accounts, the taxes collected during the previous
 
14 fiscal year under subsection (a) before August 1 of each year.
 
15 The apportionment to the special accounts shall be based upon the
 
16 proportional contribution of actual tax receipts generated under
 
17 this chapter within each county, less projected taxpayer refunds
 
18 and other contingent liabilities such as tax appeals.
 
19      (c)  Each county shall have until January 1, 2001, to make a
 
20 one-time irrevocable election to participate in the revenue
 
21 sharing provided for in this section.  Each county shall notify
 
22 the state director of finance in writing of its election to
 
23 either participate in revenue sharing or not.
 

 
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 1      (d)  No county shall have the right to appeal any assessment
 
 2 of the public service company tax on a public utility subject to
 
 3 this chapter, nor shall any county have any access to any tax
 
 4 returns or tax return information submitted to the department of
 
 5 taxation under this chapter.
 
 6      (e)  Any county that elects not to participate in the
 
 7 revenue sharing as provided herein shall not receive any tax
 
 8 moneys under this section.  All taxes kept in a non-participating
 
 9 county's special account shall be refunded to the appropriate
 
10 public utility.
 
11      (f)  Any county that elects to participate in the revenue
 
12 sharing provided for in this section shall not directly levy or
 
13 collect any real property tax from those public utilities subject
 
14 to taxation under section 239-5(a)."
 
15      SECTION 4.  If any provision of this Act, or the application
 
16 thereof to any person or circumstance is held invalid, the
 
17 invalidity does not affect other provisions or applications of
 
18 the Act which can be given effect without the invalid provision
 
19 or application, and to this end the provisions of this Act are
 
20 severable.
 
21      SECTION 5.  Statutory material to be repealed is bracketed.
 
22 New statutory material is underscored.
 
23      SECTION 6.  This Act shall take effect upon its approval.
 
24 
 
25                              INTRODUCED BY:______________________
 

 
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