HOUSE OF REPRESENTATIVES

H.B. NO.

1900

TWENTY-SEVENTH LEGISLATURE, 2014

H.D. 1

STATE OF HAWAII

S.D. 1

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO THE TAXATION OF DESTINATION CLUBS.

 

 

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

 


SECTION 1. Section 237D-1, Hawaii Revised Statutes, is amended as follows:

1. By adding three new definitions to be appropriately inserted and to read:

""Destination club membership plan" means any plan or program, subject to terms and conditions of a membership agreement, that is not registered under chapter 514E, and in which members have no ownership interest in destination club units, but in which members pay annual membership dues in exchange for club benefits including, among other benefits, the right to use or occupy one of several destination club units, with locations inside and outside of the State.

"Destination club membership plan manager" means the person or entity who undertakes the duties, responsibilities, and obligations of managing a destination club membership plan or is required to act for a destination club membership plan under this chapter.

"Destination club unit" means the actual and promised accommodations and related facilities that are the subject of a destination club membership plan."

2. By amending the definition of "fair market rental value" to read:

""Fair market rental value" means an amount equal to one-half the gross daily maintenance fees that are paid by the owner, are attributable to the time share unit[,] or destination club unit, as applicable, and include maintenance costs, operational costs, insurance, repair costs, administrative costs, taxes, other than transient accommodations taxes, and other costs including payments required for reserves or sinking funds. The taxpayer shall use gross daily maintenance fees, unless the taxpayer proves or the director determines that the gross daily maintenance fees do not fairly represent fair market rental value taking into account comparable transient accommodation rentals or other appraisal methods. In addition to living accommodations, furniture, and fixtures, fair market rental value includes services included with the unit, including but not limited to laundry, transportation, and food services."

SECTION 2. Section 237D-2, Hawaii Revised Statutes, is amended to read as follows:

"237D-2 Imposition and rates. (a) There is levied and shall be assessed and collected each month a tax of:

(1) Five per cent for the period beginning on January 1, 1987, to June 30, 1994;

(2) Six per cent for the period beginning on July 1, 1994, to December 31, 1998;

(3) 7.25 per cent for the period beginning on January 1, 1999, to June 30, 2009;

(4) 8.25 per cent for the period beginning on July 1, 2009, to June 30, 2010; and

(5) 9.25 per cent for the period beginning on July 1, 2010, and thereafter;

on the gross rental or gross rental proceeds derived from furnishing transient accommodations.

(b) Every operator shall pay to the State the tax imposed by subsection (a), as provided in this chapter.

(c) There is levied and shall be assessed and collected each month, on the occupant of a resort time share vacation unit, and upon the destination club plan manager for each of its Hawaii destination club units occupied during the month, a transient accommodations tax of 7.25 per cent on the fair market rental value.

(d) Every plan manager shall be liable for and pay to the State the transient accommodations tax imposed by subsection (c) as provided in this chapter. Every resort time share vacation plan shall be represented by a plan manager who shall be subject to this chapter.

(e) Each destination club membership plan manager shall pay to the State the tax imposed by subsection (c), as provided in this chapter. Every destination club membership plan shall be represented by a destination club membership plan manager who shall be subject to this chapter."

SECTION 3. Section 237D-4, Hawaii Revised Statutes, is amended to read as follows:

"237D-4 Certificate of registration. (a) Each operator, destination club membership plan manager, or plan manager as a condition precedent to engaging or continuing in the business of furnishing transient accommodations [or], in business as a resort time share vacation plan, or in business as a destination club membership plan shall register with the director the name and address of each place of business within the State subject to this chapter. The operator, destination club membership plan manager, or plan manager shall make a one-time payment as follows:

(1) $5 for each registration for transient accommodations consisting of one to five units;

(2) $15 for each registration for transient accommodations consisting of six or more units; [and]

(3) $15 for each resort time share vacation plan within the State; and

(4) $15 for each destination club membership plan operating within the State;

upon receipt of which the director shall issue a certificate of registration in such form as the director determines, attesting that the registration has been made. The registration shall not be transferable and shall be valid only for the operator, destination club membership plan manager, or plan manager in whose name it is issued and for the transaction of business at the place designated therein.

The registration, or in lieu thereof a notice stating where the registration may be inspected and examined, shall at all times be conspicuously displayed at the place for which it is issued. Acquisition of additional transient accommodation units or destination club units after payment of the one-time fee shall not result in additional fees.

The registration provided for by this section shall be effective until canceled in writing. Any application for the reissuance of a previously canceled registration identification number shall be regarded as a new registration application and shall be subject to the payment of the one-time registration fee. The director may revoke or cancel any license issued under this chapter for cause as provided by rule under chapter 91.

(b) A destination club membership plan manager for a destination club membership plan that began operating in the State prior to October 1, 2014, shall register no later than December 31, 2014; provided that subsection (d) shall not apply to the destination club membership plan manager until January 1, 2015.

[(b)] (c) If the license fee is paid, the department shall not refuse to issue a registration or revoke or cancel a registration for the exercise of a privilege protected by the First Amendment of the Constitution of the United States, or for the carrying on of interstate or foreign commerce, or for any privilege the exercise of which, under the Constitution and laws of the United States, cannot be restrained on account of nonpayment of taxes, nor shall section 237D-14 be invoked to restrain the exercise of such a privilege, or the carrying on of such commerce.

[(c)] (d) Any person who may lawfully be required by the State, and who is required by this chapter, to register as a condition precedent to engaging or continuing in the business of furnishing transient accommodations, as a destination club membership plan manager, or as a plan manager subject to taxation under this chapter, who engages or continues in the business without registering in conformity with this chapter, shall be guilty of a misdemeanor. Any director, president, secretary, or treasurer of a corporation who permits, aids, or abets such corporation to engage or continue in business without registering in conformity with this chapter, shall likewise be guilty of a misdemeanor. The penalty for the misdemeanors shall be that prescribed by section 231-34 for individuals, corporations, or officers of corporations, as the case may be, for violation of that section."

SECTION 4. Section 237D-7, Hawaii Revised Statutes, is amended to read as follows:

"237D-7 Annual return. On or before the twentieth day of the fourth month following the close of the taxable year, every person who has become liable for the payment of the taxes under this chapter during the preceding tax year shall file a return summarizing that person's liability under this chapter for the year, in such form as the director prescribes. The operator or plan manager shall transmit with the return a remittance covering the residue of the tax chargeable to the operator or plan manager, if any, to the office of the appropriate state district tax assessor designated in section 237D-8. The destination club membership plan manager shall transmit with the return a remittance covering the full amount of the tax chargeable to the destination club membership plan manager, if any, to the office of the appropriate state district tax assessor designated in section 237D-8. The return shall be signed by the taxpayer, if made by an individual, or by the president, vice-president, secretary, or treasurer of a corporation, if made on behalf of a corporation. If made on behalf of a partnership, firm, society, unincorporated association, group, hui, joint adventure, joint stock company, corporation, trust estate, decedent's estate, trust, or other entity, any individual delegated by the entity shall sign the same on behalf of the taxpayer. If for any reason it is not practicable for the individual taxpayer to sign the return, it may be done by any duly authorized agent. The department, for good cause shown, may extend the time for making the return on the application of any taxpayer and grant [such] reasonable additional time within which to make the return as the department may deem advisable.

Section 232-2 applies to the annual return, but not to a monthly return."

SECTION 5. Section 237D-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If any operator, destination club membership plan manager, or plan manager fails to make a return as required by this chapter, the director shall make an estimate of the tax liability of the operator, destination club membership plan manager, or plan manager from any information the director obtains, and according to the estimate so made, assess the taxes, interest, and penalty due the State from the operator, destination club membership plan manager, or plan manager, give notice of the assessment to the operator, destination club membership plan manager, or plan manager, and make demand upon the operator, destination club membership plan manager, or plan manager for payment. The assessment shall be presumed to be correct until and unless, upon an appeal duly taken as provided in section 237D-11, the contrary shall be clearly proved by the person assessed, and the burden of proof upon [such] appeal shall be upon the person assessed to disprove the correctness of assessment."

SECTION 6. Section 237D-10, Hawaii Revised Statutes, is amended to read as follows:

"237D-10 Overpayment; refunds. Upon application by an operator, destination club membership plan manager, or plan manager, if the director determines that any tax, interest, or penalty has been paid more than once, or has been erroneously or illegally collected or computed, the tax, interest, or penalty shall be credited by the director on any taxes then due from the operator, destination club membership plan manager, or plan manager under this chapter. The director shall refund the balance to the operator, destination club membership plan manager, or plan manager or the operator's, destination club membership plan manager's, or plan manager's successors, administrators, executors, or assigns in accordance with section 231-23. No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for such credit or refund is filed as follows:

(1) If an annual return is timely filed, or is filed within three years after the date prescribed for filing the annual return, then the credit or refund shall be claimed within three years after the date the annual return was filed or the date prescribed for filing the annual return, whichever is later.

(2) If an annual return is not filed, or is filed more than three years after the date prescribed for filing the annual return, a claim for credit or refund shall be filed within:

(A) Three years after the payment of the tax; or

(B) Three years after the date prescribed for the filing of the annual return,

whichever is later.

Paragraphs (1) and (2) are mutually exclusive. The preceding limitation shall not apply to a credit or refund pursuant to an appeal, provided for in section 237D-11.

As to all tax payments for which a refund or credit is not authorized by this section (including, without prejudice to the generality of the foregoing, cases of unconstitutionality), the remedies provided by appeal or by section 40-35 are exclusive."

SECTION 7. Section 237D-12, Hawaii Revised Statutes, is amended to read as follows:

"237D-12 Records to be kept; examination. Every operator, destination club membership plan manager, and plan manager shall keep in the English language within the State, and preserve for a period of three years, suitable records of gross rental, gross rental proceeds, or fair market rental value relating to the business taxed under this chapter, and [such] any other books, records of account, and invoices as may be required by the department, and all [such] of the books, records, and invoices shall be open for examination at any time by the department or the Multistate Tax Commission pursuant to chapter 255, or the authorized representative thereof."

SECTION 8. Section 237D-14, Hawaii Revised Statutes, is amended to read as follows:

"237D-14 Collection by suit; injunction. The department may collect taxes due and unpaid under this chapter, together with all accrued penalties, by action in assumpsit or other appropriate proceedings in the circuit court of the judicial circuit in which the taxes arose. After delinquency shall have continued for sixty days, or if any person lawfully required [so to do] under this chapter shall fail to apply for and secure a certificate as provided by this chapter for a period of sixty days after the first date when the person was required under this chapter to secure the certificate, the department may proceed in the circuit court of the judicial circuit in which the transient accommodations, destination club membership plan, or in which occupants of resort time share vacation units are taxed, to obtain an injunction restraining the further furnishing of transient accommodations, operation of the destination club membership plan, or the operation of the resort time share vacation plan until full payment shall have been made of all taxes and penalties and interest due under this chapter, or until [such] the certificate is secured, or both, as the circumstances of the case may require."

SECTION 9. Chapter 237D, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"CHAPTER 237D

TRANSIENT ACCOMMODATIONS, RESORT TIME SHARES, AND DESTINATION CLUBS TAX"

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2030; provided that sections 1 and 2 shall take effect retroactive to January 1, 2014.



Report Title:

Destination Club Membership Plan; Taxation

 

Description:

Establishes a transient accommodations tax on annual destination club plan managers based on fair market rental value of destination club units. Requires destination club membership plan managers to register with the Department of Taxation and keep records of annual destination club dues apportioned to the State. Effective July 1, 2030. (SD1)

 

 

 

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