REPORT TITLE:
Income Tax Law


DESCRIPTION:
Establishes a high-income surtax as a percentage of taxable
income; creates a stocks and bonds transfer tax; changes
conveyance tax to realty conveyance tax.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3187
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO COMPREHENSIVE ABILITY-TO-PAY TAX REFORM. 


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

 1      SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "235-     High-income surtax.  In addition to all other
 
 5 income taxes required by this chapter, there is imposed a
 
 6 high-income surtax on individuals with taxable incomes above an
 
 7 annually adjusted high-income index, which shall be indexed each
 
 8 taxable year to be equivalent to the current base state salary of
 
 9 the governor.  The high-income surtax shall be determined each
 
10 taxable year in accordance with the following table:
 
11 If taxable income is:                  The surtax is:
 
12 Not in excess of the index             No surtax
 
13 More than an amount equivalent to      .01% of taxable income
 
14    the index but not more than the
 
15    index plus $10,000
 
16 More than an amount equivalent to      .03% of taxable income
 
17    the index plus $10,000 but not
 
18    more than the index plus $20,000
 
19 More than an amount equivalent to      .09% of taxable income
 

 
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 1    the index plus $20,000 but not
 
 2    more than the index plus $30,000
 
 3 More than an amount equivalent to      .29% of taxable income
 
 4    the index plus $30,000 but not
 
 5    more than the index plus $50,000
 
 6 More than an amount equivalent to      .87% of taxable income
 
 7    the index plus $50,000 but not 
 
 8    more than the index plus $80,000
 
 9 More than an amount equivalent to      2.6% of taxable income
 
10    the index plus $80,000 but not
 
11    more than the index plus $130,000
 
12 More than an amount equivalent to      8.17% of taxable income
 
13    the index plus $130,000 but not
 
14    more than the index plus $210,000
 
15 More than an amount equivalent to      15% of taxable income
 
16    the index plus $210,000
 
17      SECTION 2.  Chapter 247, Hawaii Revised Statutes, is amended
 
18 by amending the title to read:
 
19                           "CHAPTER 247
 
20                 REALTY CONVEYANCE AND STOCKS AND
 
21                    BONDS TRANSFER [TAX] TAXES"
 
22      SECTION 3.  Section 247-1, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "247-1 Imposition of [tax.] taxes.  (a)  There is [hereby]
 
 2 imposed and shall be levied, collected, and paid, a realty
 
 3 conveyance tax as hereinafter provided, on all transfers or
 
 4 conveyances of realty or any interest therein, by way of deeds,
 
 5 leases, subleases, assignments of lease, agreements of sale,
 
 6 assignments of agreement of sale, instruments, writings, and any
 
 7 other document, whereby any lands, interests in land, tenements,
 
 8 or other realty sold shall be granted, assigned, transferred, or
 
 9 otherwise conveyed to, or vested in, the purchaser or purchasers,
 
10 lessee or lessees, sublessee or sublessees, assignee or
 
11 assignees, or any other person or persons, by the person's or
 
12 their direction.
 
13      (b)  There is imposed and shall be levied, collected, and
 
14 paid, a stocks and bonds transfer tax in an amount specified
 
15 section under 247-2(b) on all transfers or conveyances, and sales
 
16 or purchases, of corporate stocks and bonds or any interest in
 
17 stocks and bonds."
 
18      SECTION 4.  Section 247-2, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "247-2 [Basis] Bases and [rate] rates of [tax.] taxes.
 
21 (a)  The realty conveyance tax imposed by section 247-1(a) shall
 
22 be based on the actual and full consideration (whether cash or
 
23 otherwise, including any promise, act, forbearance, property
 

 
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 1 interest, value, gain, advantage, benefit, or profit) paid or to
 
 2 be paid, which shall include any liens or encumbrances thereon at
 
 3 the time of sale, lease, sublease, assignment, transfer, or
 
 4 conveyance, and shall be at the rate of 10 cents per $100 of such
 
 5 actual and full consideration; provided that in the case of a
 
 6 lease or sublease, this chapter shall apply only to a lease or
 
 7 sublease whose full unexpired term is for a period of five years
 
 8 or more, and in those cases, including (where appropriate) those
 
 9 cases where the lease has been extended or amended, the tax in
 
10 this chapter shall be based on the cash value of the lease
 
11 rentals discounted to present day value and capitalized at the
 
12 rate of six per cent, plus the actual and full consideration paid
 
13 or to be paid for any and all improvements, if any, which shall
 
14 include on-site as well as offsite improvements, applicable to
 
15 the leased premises; and provided further that the tax imposed
 
16 for each transaction shall be not less than $1.
 
17      (b)  The stocks and bonds transfer tax imposed by section
 
18 247-1(b) shall be based on the actual and full consideration paid
 
19 or to be paid, and shall be at the rate of 0.5 per cent for stock
 
20 transfers and 0.01 per cent multiplied by the years required for
 
21 the full maturity of the bond for bond transfers of the actual
 
22 and full consideration."
 
23      SECTION 5.  Section 247-3, Hawaii Revised Statutes, is
 

 
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 1 amended to read as follows:
 
 2      "247-3 Exemptions.  The [tax] taxes imposed by section
 
 3 247-1 shall not apply to:
 
 4      (1)  Any realty conveyance document or instrument that is
 
 5           executed prior to January 1, 1967[;], or to any stocks
 
 6           and bonds transfers executed prior to July 1, 1996;
 
 7      (2)  Any document or instrument that is given to secure a
 
 8           debt or obligation;
 
 9      (3)  Any document or instrument that only confirms or
 
10           corrects a deed, lease, sublease, assignment, transfer,
 
11           or conveyance previously recorded or filed;
 
12      (4)  Any document or instrument between husband and wife,
 
13           reciprocal beneficiaries, or parent and child, in which
 
14           only a nominal consideration is paid;
 
15      (5)  Any realty or conveyance document or instrument in
 
16           which there is a consideration of $100 or less paid or
 
17           to be paid;
 
18      (6)  Any document or instrument conveying real property that
 
19           is executed pursuant to an agreement of sale, and where
 
20           applicable, any assignment of the agreement of sale, or
 
21           assignments thereof; provided that the taxes under this
 
22           chapter have been fully paid upon the agreement of
 
23           sale, and where applicable, upon such assignment or
 

 
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 1           assignments of agreements of sale;
 
 2      (7)  Any realty or conveyance deed, lease, sublease,
 
 3           assignment of lease, agreement of sale, assignment of
 
 4           agreement of sale, instrument or writing in which the
 
 5           United States or any agency or instrumentality thereof
 
 6           or the State or any agency, instrumentality, or
 
 7           governmental or political subdivision thereof are the
 
 8           only parties thereto;
 
 9      (8)  Any document or instrument executed pursuant to a tax
 
10           sale conducted by the United States or any agency or
 
11           instrumentality thereof or the State or any agency,
 
12           instrumentality, or governmental or political
 
13           subdivision thereof for delinquent taxes or
 
14           assessments;
 
15      (9)  Any document or instrument conveying real property to
 
16           the United States or any agency or instrumentality
 
17           thereof or the State or any agency, instrumentality, or
 
18           governmental or political subdivision thereof pursuant
 
19           to the threat of the exercise or the exercise of the
 
20           power of eminent domain;
 
21     (10)  Any document or instrument that solely conveys or
 
22           grants an easement or easements;
 
23     (11)  Any document or instrument whereby owners partition
 

 
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 1           their property, whether by mutual agreement or judicial
 
 2           action; provided that the value of each owner's
 
 3           interest in the property after partition is equal in
 
 4           value to that owner's interest before partition;
 
 5     (12)  Any document or instrument between marital partners or
 
 6           reciprocal beneficiaries who are parties to a divorce
 
 7           action or termination of reciprocal beneficiary
 
 8           relationship that is executed pursuant to an order of
 
 9           the court in the divorce action or termination of
 
10           reciprocal beneficiary relationship;
 
11     (13)  Any document or instrument conveying real property from
 
12           a testamentary trust to a beneficiary under the trust;
 
13     (14)  Any document or instrument conveying real property from
 
14           a grantor to the grantor's revocable living trust, or
 
15           from a grantor's revocable living trust to the grantor
 
16           as beneficiary of the trust;
 
17     (15)  Any document or instrument conveying real property, or
 
18           any interest therein, from an entity that is a party to
 
19           a merger or consolidation under chapter 415, 415A,
 
20           415B, 421, 421C, or 428 to the surviving or new entity;
 
21           and
 
22     (16)  Any document or instrument conveying real property, or
 
23           any interest therein, from a dissolving limited
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1           partnership to its corporate general partner that owns,
 
 2           directly or indirectly, at least a ninety per cent
 
 3           interest in the partnership, determined by applying
 
 4           section 318 (with respect to constructive ownership of
 
 5           stock) of the federal Internal Revenue Code of 1986, as
 
 6           amended, to the constructive ownership of interests in
 
 7           the partnership."
 
 8      SECTION 6.  Section 247-4, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "247-4 Payment and liability of the tax.(a)  The realty
 
11 conveyance tax imposed by this chapter shall be paid by the
 
12 grantor, lessor, sublessor, assignor, transferor, seller,
 
13 conveyor, or any other person conveying realty, or any interest
 
14 therein, by a document or instrument subject to section 247-1;
 
15 except, however, in the case where the United States or any
 
16 agency or instrumentality thereof or the State or any agency,
 
17 instrumentality, or governmental or political subdivision thereof
 
18 is the grantor, lessor, sublessor, assignor, transferor, seller,
 
19 or conveyor, the tax shall be paid by the grantee, lessee,
 
20 sublessee, assignee, transferee, purchaser, or conveyee, as the
 
21 case may be.  The stocks and bonds transfer tax imposed by
 
22 section 247-1(b) shall be paid by Hawaii taxpayers who are the
 
23 sellers or purchasers of stocks and bonds at the filing of the
 

 
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 1 income tax returns.
 
 2      (b)  The realty conveyance tax imposed by this chapter shall
 
 3 be paid at such place or places as the director of taxation may
 
 4 direct and shall be due and payable no later than ninety days
 
 5 after the taxable transaction, and in any event prior to the
 
 6 imprinting of the seal or seals as provided by section 247-5.
 
 7 The stocks and bonds transfer tax imposed by section 247-1(b)
 
 8 shall be paid at the time and place as the director of taxation
 
 9 may direct and shall be payable not later than April 20 of the
 
10 following taxable year.  Penalties and interest shall be added to
 
11 and become a part of the [tax,] taxes imposed by this chapter,
 
12 when and as provided by section 231-39."
 
13      SECTION 7.  Section 247-5, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "247-5 Imprinting of seal.  The realty conveyance tax
 
16 shall be evidenced as paid by the imprinting of an appropriate
 
17 seal or seals on the document or instrument, which imprinting or
 
18 seal itself shall indicate on its face the amount of the tax
 
19 paid.  The seal or seals shall be so imprinted upon the payment
 
20 of the tax, together with the appropriate penalty and interest
 
21 where applicable, and, in any event, prior to the recordation or
 
22 filing of the document or instrument with the registrar of
 
23 conveyances or the assistant registrar of the land court. 
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1      For the purposes of this chapter, the director may require
 
 2 that the realty documents or instruments be brought to any of the
 
 3 various offices of the department of taxation for an examination
 
 4 of the instrument or document, or for the purpose of having the
 
 5 seal imprinted on the document or instrument."
 
 6      SECTION 8.  Section 247-6, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "247-6 Certificate of realty conveyance required.(a)
 
 9 Any party, with the exception of governmental bodies, agencies,
 
10 or officers, to a document or instrument subject to this chapter,
 
11 or the party's authorized representative, shall file, in the
 
12 manner and place which the director of taxation shall prescribe,
 
13 a certificate of realty conveyance setting forth the actual and
 
14 full consideration of the property transferred, including any
 
15 lien or encumbrance on the property, and such other facts as the
 
16 director may by rules prescribe.  The certificate of realty
 
17 conveyance shall be verified by a written declaration thereon
 
18 that the statements made therein are subject to the penalties in
 
19 section 231-36.  The certificate shall be appended to the
 
20 document or instrument made subject to this chapter and shall be
 
21 filed with the director simultaneously with the aforementioned
 
22 document or instrument for the imprinting of the required seal or
 
23 seals.
 

 
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 1      (b)  No certificate is required to be filed for any realty
 
 2 document or instrument made exempt by section 247-3, except that
 
 3 in the following situations, a certificate shall be filed in the
 
 4 manner and place which the director shall prescribe, within
 
 5 ninety days after the transaction or prior to the recordation or
 
 6 filing of the document or instrument with the registrar of
 
 7 conveyances or the assistant registrar of the land court or after
 
 8 such period, recordation, or filing as the director shall
 
 9 prescribe:
 
10      (1)  In the case of any document or instrument described
 
11           under section 247-3(3), any party to the document or
 
12           instrument shall file a certificate declaring that the
 
13           document or instrument merely confirms or corrects a
 
14           deed, lease, sublease, assignment, transfer, or
 
15           conveyance previously recorded or filed[.];
 
16      (2)  In the case of any document or instrument described
 
17           under section 247-3(4), any party to the document or
 
18           instrument shall file a certificate declaring the
 
19           amount of the nominal consideration paid and marital or
 
20           parental relationship of the parties[.];
 
21      (3)  In the case of any document or instrument described
 
22           under section 247-3(5), any party to the document or
 
23           instrument shall file a certificate declaring the
 

 
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 1           reasons why the consideration is $100 or less[.];
 
 2      (4)  In the case of any document or instrument described in
 
 3           section 247-3(6), any party to the document or
 
 4           instrument shall file a certificate declaring that the
 
 5           document or instrument is made pursuant to an agreement
 
 6           of sale, and where applicable, an assignment or
 
 7           assignments of agreements of sale[.];
 
 8      (5)  In the case of any document or instrument described
 
 9           under section 247-3(8), any person made a party to the
 
10           document or instrument as grantee, assignee, or
 
11           transferee shall file a certificate declaring the full
 
12           and actual consideration of the property
 
13           transferred[.];
 
14      (6)  In the case of any document or instrument described
 
15           under section 247-3(11), any party to the document or
 
16           instrument shall file a certificate declaring each
 
17           owner's:
 
18           (A)  Undivided interest in the real property and the
 
19                value of that interest before partition; and
 
20           (B)  Proportionate interest and the value of that
 
21                interest after partition[.];
 
22      (7)  In the case of any document or instrument described
 
23           under section 247-3(12), any party to the document or
 

 
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 1           instrument shall file a certificate declaring that the
 
 2           document or instrument is made pursuant to an order of
 
 3           the court and containing the court case number[.];
 
 4      (8)  In the case of any document or instrument described
 
 5           under section 247-3(13), any party to the document or
 
 6           instrument shall file a certificate declaring that the
 
 7           document or instrument conveys real property from a
 
 8           testamentary trust to a trust beneficiary[.]; and
 
 9      (9)  In the case of any document or instrument described
 
10           under section 247-3(14), any party to the document or
 
11           instrument shall file a certificate declaring that the
 
12           document or instrument conveys real property from the
 
13           grantor to a grantor's revocable living trust or from a
 
14           grantor's revocable living trust to the grantor.
 
15      (c)  The form of the certificate and the procedure to be
 
16 followed for the submission of the certificate shall be
 
17 prescribed by the director.
 
18      (d)  Notwithstanding the foregoing, where the director deems
 
19 it impracticable to require the filing of a certificate or
 
20 certificates or to obtain the signatures of any or all parties to
 
21 a certificate or certificates required under this section, the
 
22 director may, in the director's discretion, waive the requirement
 
23 of filing the certificate or certificates or of securing the
 

 
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                                     S.B. NO.           
                                                        
                                                        

 
 1 signature of any or all parties to the certificate or
 
 2 certificates.
 
 3      (e)  No document or instrument, on account of which a
 
 4 certificate is required to be filed with the office of the
 
 5 director under this section, shall be accepted for recordation or
 
 6 filing with the registrar of conveyances or the assistant
 
 7 registrar of the land court, unless the certificate has been duly
 
 8 filed."
 
 9      SECTION 9.  Section 247-13, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "247-13  Short title.  This chapter may be cited as the
 
12 "Realty Conveyance and Stocks and Bonds Transfer Tax [Law.]
 
13 Laws."
 
14      SECTION 10.  Statutory material to be repealed is bracketed.
 
15 New statutory material is underscored.
 
16      SECTION 11.  This Act shall take effect upon its approval.
 
17 
 
18                       INTRODUCED BY:  ___________________________