REPORT TITLE:
General Excise Tax


DESCRIPTION:
Includes a reciprocal insurer's attorney-in-fact in the
definition of insurance company for the purposes of exemption
from the general excise tax.  (HB350 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        350
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE GENERAL EXCISE TAXATION OF RECIPROCAL INSURERS
   AND THEIR ATTORNEYS-IN-FACT.



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

 1      SECTION 1.  The legislature finds that there is a need to
 
 2 clarify the tax treatment accorded reciprocal insurers under the
 
 3 State general excise tax law.
 
 4      Reciprocal insurers generally do business in all 50 states.
 
 5 Unlike stock or mutual insurance companies, which have internal
 
 6 management and operations departments and staff to perform the
 
 7 management and administrative functions required of an insurer,
 
 8 reciprocal insurance companies must by law, operate through an
 
 9 attorney-in-fact for these functions.
 
10      Under section 237-29.7, Hawaii Revised Statutes, insurance
 
11 companies authorized to do business under chapter 431, Hawaii
 
12 Revised Statutes, are exempted from the general excise tax.
 
13 Section 237-29.7 is unclear, however, as to whether the attorney-
 
14 in-fact for a reciprocal insurance company authorized to do
 
15 business under chapter 431, is included within the definition of
 
16 an insurance company for purposes of that exemption.
 
17      The legislature finds that in enacting section 237-29.7 in
 
18 Act 286, Session Laws of Hawaii 1991, the legislature intended to
 
19 exempt all insurance companies authorized to do business under
 

 
Page 2                                                     350
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 chapter 431 from the general excise tax law, including the
 
 2 attorney-in-fact of a reciprocal insurer.  Act 286 was not
 
 3 intended to discriminate against reciprocal insurers or their
 
 4 attorneys-in-fact.
 
 5      SECTION 2.  Section 237-29.7, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]237-29.7[]]  Exemption of insurance companies.  This
 
 8 chapter shall not apply to the gross income or gross proceeds of
 
 9 insurance companies authorized to do business under chapter 431;
 
10 except this exemption shall not apply to any gross income or
 
11 gross proceeds received after December 31, 1991, as rents from
 
12 investments in real property in this State; provided that gross
 
13 income or gross proceeds from investments in real property
 
14 received by insurance companies after December 31, 1991, under
 
15 written contracts entered into before January 1, 1992, that do
 
16 not provide for the passing on of taxes or tax increases shall
 
17 not be taxed until the contracts are renegotiated, renewed, or
 
18 extended.
 
19      For purposes of this section, "insurance company" includes a
 
20 reciprocal insurer's bona fide attorney-in-fact with respect to
 
21 income derived from the attorney-in-fact's principal business as
 
22 corporate attorney for the reciprocal insurer."
 

 
 
 
Page 3                                                     350
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 3.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 4.  This Act, upon its approval, shall take effect
 
 4 retroactively to January 1, 1992; provided that this Act and the
 
 5 legislative intent expressed in section 1 may be cited for any
 
 6 currently pending disputes related to section 237-29.5, Hawaii
 
 7 Revised Statutes.