REPORT TITLE:
GET; Public School Exemptions


DESCRIPTION:
Exempts from the general excise tax fundraising amounts raised by
certain nonprofit groups, such as the PTA and PSTA, and purchases
made by such groups for public schools, such as public school
equipment.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2334
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO GENERAL EXCISE TAX.


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

 1      SECTION 1.  The legislature finds that the shortfalls of the
 
 2 educational budgets in the public schools of Hawaii are often
 
 3 compensated by support groups who assist the public schools.  The
 
 4 fundraising projects of these groups that use the funds for
 
 5 educational equipment, programs, and supplies should not be
 
 6 subject to the imposition of the general excise tax.
 
 7      The purpose of this Act is to exempt certain activities of
 
 8 these groups from the general excise tax law.
 
 9      SECTION 2.  Section 237-24.7, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "237-24.7  Additional amounts not taxable.  In addition to
 
12 the amounts not taxable under section 237-24, this chapter shall
 
13 not apply to:
 
14      (1)  Amounts received by the operator of a hotel from the
 
15           owner of the hotel in amounts equal to and which are
 
16           disbursed by the operator for employee wages, salaries,
 
17           payroll taxes, insurance premiums, and benefits,
 
18           including retirement, vacation, sick pay, and health
 
19           benefits.  As used in this paragraph:
 
20                "Employee" means employees directly engaged in the
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1           day-to-day operation of the hotel and employed by the
 
 2           operator.
 
 3                "Hotel" means an operation licensed under section
 
 4           445-92.
 
 5                "Operator" means any person who, pursuant to a
 
 6           written contract with the owner of a hotel, operates or
 
 7           manages the hotel for the owner.
 
 8                "Owner" means the fee owner or lessee under a
 
 9           recorded lease of a hotel;
 
10      (2)  Amounts received by the operator of a county
 
11           transportation system operated under an operating
 
12           contract with a political subdivision, where the
 
13           political subdivision is the owner of the county
 
14           transportation system.  As used in this paragraph:
 
15                "County transportation system" means a mass
 
16           transit system of motorized buses providing regularly
 
17           scheduled transportation within a county.
 
18                "Operating contract" or "contract" means a
 
19           contract to operate and manage a political
 
20           subdivision's county transportation system, which
 
21           provides that:
 
22                (A)  The political subdivision shall exercise
 
23                     substantial control over all aspects of the
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1                     operator's operation;
 
 2                (B)  The political subdivision controls the
 
 3                     development of transit policy, service
 
 4                     planning, routes, and fares; and
 
 5                (C)  The operator develops in advance a draft
 
 6                     budget in the same format as prescribed for
 
 7                     agencies of the political subdivision.  The
 
 8                     budget must be subject to the same
 
 9                     constraints and controls regarding the lawful
 
10                     expenditure of public funds as any public
 
11                     sector agency, and deviations from the budget
 
12                     must be subject to approval by the
 
13                     appropriate political subdivision officials
 
14                     involved in the budgetary process.
 
15                "Operator" means any person who, pursuant to an
 
16           operating contract with a political subdivision,
 
17           operates or manages a county transportation system.
 
18                "Owner" means a political subdivision that owns or
 
19           is the lessee of all the properties and facilities of
 
20           the county transportation system (including buses, real
 
21           estate, parking garages, fuel pumps, maintenance
 
22           equipment, office supplies, etc.), and that owns all
 
23           revenues derived therefrom;
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1      (3)  Surcharge taxes on rental motor vehicles imposed by
 
 2           chapter 251 and passed on and collected by persons
 
 3           holding certificates of registration under that
 
 4           chapter;
 
 5      (4)  Amounts received by the operator of orchard properties
 
 6           from the owner of the orchard property in amounts equal
 
 7           to and which are disbursed by the operator for employee
 
 8           wages, salaries, payroll taxes, insurance premiums, and
 
 9           benefits, including retirement, vacation, sick pay, and
 
10           health benefits.  As used in this paragraph:
 
11                "Employee" means an employee directly engaged in
 
12           the day-to-day operations of the orchard properties and
 
13           employed by the operator.
 
14                "Operator" means a producer who, pursuant to a
 
15           written contract with the owner of the orchard
 
16           property, operates or manages the orchard property for
 
17           the owner where the property contains an area
 
18           sufficient to make the undertaking economically
 
19           feasible.
 
20                "Orchard property" means any real property that is
 
21           used to raise trees with a production life cycle of
 
22           fifteen years or more producing fruits or nuts having a
 
23           normal period of development from the initial planting
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1           to the first commercially saleable harvest of not less
 
 2           than three years.
 
 3                "Owner" means a fee owner or lessee under a
 
 4           recorded lease of orchard property;
 
 5      (5)  Taxes on nursing facility income imposed by chapter
 
 6           346E and passed on and collected by operators of
 
 7           nursing facilities;
 
 8      (6)  Amounts received under property and casualty insurance
 
 9           policies for damage or loss of inventory used in the
 
10           conduct of a trade or business located within the State
 
11           or a portion thereof that is declared a natural
 
12           disaster area by the governor pursuant to section
 
13           209-2;
 
14      (7)  Amounts received as compensation by community
 
15           organizations, school booster clubs, and nonprofit
 
16           organizations under a contract with the chief election
 
17           officer for the provision and compensation of precinct
 
18           officials and other election-related personnel,
 
19           services, and activities, pursuant to section 11-5;
 
20      (8)  Interest received by a person domiciled outside the
 
21           State from a trust company (as defined in section
 
22           412:8-101) acting as payment agent or trustee on behalf
 
23           of the issuer or payees of an interest bearing
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1           instrument or obligation, if the interest would not
 
 2           have been subject to tax under this chapter if paid
 
 3           directly to the person domiciled outside the State
 
 4           without the use of a paying agent or trustee; provided
 
 5           that if the interest would otherwise be taxable under
 
 6           this chapter if paid directly to the person domiciled
 
 7           outside the State, it shall not be exempt solely
 
 8           because of the use of a Hawaii trust company as a
 
 9           paying agent or trustee;
 
10      (9)  Amounts received by a management company from related
 
11           entities engaged in the business of selling interstate
 
12           or foreign common carrier telecommunications services
 
13           in amounts equal to and which are disbursed by the
 
14           management company for employee wages, salaries,
 
15           payroll taxes, insurance premiums, and benefits,
 
16           including retirement, vacation, sick pay, and health
 
17           benefits.  As used in this paragraph:
 
18                "Employee" means employees directly engaged in the
 
19           day-to-day operation of related entities engaged in the
 
20           business of selling interstate or foreign common
 
21           carrier telecommunications services and employed by the
 
22           management company.
 
23                "Management company" means any person who,
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1           pursuant to a written contract with a related entity
 
 2           engaged in the business of selling interstate or
 
 3           foreign common carrier telecommunications services,
 
 4           provides managerial or operational services to that
 
 5           entity.
 
 6                "Related entities" means:
 
 7                (A)  An affiliated group of corporations within
 
 8                     the meaning of section 1504 (with respect to
 
 9                     affiliated group defined) of the federal
 
10                     Internal Revenue Code of 1986, as amended;
 
11                (B)  A controlled group of corporations within the
 
12                     meaning of section 1563 (with respect to
 
13                     definitions and special rules) of the federal
 
14                     Internal Revenue Code of 1986, as amended;
 
15                (C)  Those entities connected through ownership of
 
16                     at least eighty per cent of the total value
 
17                     and at least eighty per cent of the total
 
18                     voting power of each such entity (or
 
19                     combination thereof), including partnerships,
 
20                     associations, trusts, S corporations,
 
21                     nonprofit corporations, limited liability
 
22                     partnerships, or limited liability companies;
 
23                     and
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1                (D)  Any group or combination of the entities
 
 2                     described in paragraph (C) constituting a
 
 3                     unitary business for income tax purposes;
 
 4           whether or not the entity is located within or without
 
 5           the State or licensed under this chapter; [and]
 
 6     (10)  Amounts received as grants under section 206M-15[.];
 
 7           and
 
 8     (11)  Amounts received from fundraising by nonprofit groups,
 
 9           which are exempt from taxation under section 501(c)(3)
 
10           of the Internal Revenue Code of 1986, as amended, where
 
11           the amounts received are used, to exclusively benefit
 
12           and assist a public school as defined under section
 
13           302A-101; and amounts received from these groups by a
 
14           taxpayer licensed under this chapter for purchases made
 
15           by these groups for public schools for public school
 
16           equipment and supplies."
 
17      SECTION 3.  Statutory material to be repealed is bracketed.
 
18 New statutory material is underscored.
 
19      SECTION 4.  This Act shall take effect on July 1, 2000.
 
20 
 
21                           INTRODUCED BY:  _______________________