REPORT TITLE:
GET; County Transp. Exemption

DESCRIPTION:
Exempts gross proceeds from a county agency or transportation
instrumentality from the general excise tax.

 
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HOUSE OF REPRESENTATIVES                H.B. NO.1513       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  The purpose of this Act is to exempt from the
 
 2 general excise tax the gross proceeds or gross income derived
 
 3 from a county agency or county transportation instrumentality.
 
 4      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
 5 by adding a new section to be appropriately designated and to
 
 6 read as follows:
 
 7      "§237-    Exemption of gross proceeds of sales and gross
 
 8 income derived from county agency or county transportation
 
 9 instrumentality.  (a)  There shall be exempted from and excluded
 
10 from the measure of the taxes imposed by this chapter all gross
 
11 proceeds and gross income derived from business and sales
 
12 transactions with a county agency or county transportation
 
13 instrumentality.
 
14      (b)  This section shall apply to gross proceeds or gross
 
15 income derived by a taxpayer from a contract approved or order
 
16 made after June 30, 1999 by a county agency or county
 
17 transportation instrumentality.
 
18      This section shall also apply to gross proceeds or gross
 
19 income derived by a taxpayer from a contract approved or order
 

 
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 1 made before July 1, 1999 by a county agency or county
 
 2 transportation instrumentality, but only under the following
 
 3 conditions:
 
 4      (1)  The gross proceeds or gross income was accrued by the
 
 5           taxpayer after June 30, 1999; and
 
 6      (2)  The amount paid by the county agency or instrumentality
 
 7           under the contract or order reflected an appropriate
 
 8           adjustment for the exempted gross proceeds or gross
 
 9           income.
 
10      The department of taxation shall have the exclusive
 
11 authority to determine if gross proceeds or gross income are
 
12 subject to this section.
 
13      (c)  The exemption of this section shall be additional to
 
14 any other exemption for this chapter or other law, including
 
15 those under section 237-24.7(2) and section 237-27.6.  A taxpayer
 
16 may claim the exemption of this section in addition to or in lieu
 
17 of any other exemption.
 
18      (d)  For the purposes of this section:
 
19      (1)  "County agency" means an agency, department, office, or
 
20           other public entity under a county of the State of
 
21           Hawaii; and
 
22      (2)  "County transportation instrumentality" means a county
 
23           transportation system operator formed pursuant to
 

 
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 1           charter or ordinance as a private, nonprofit
 
 2           instrumentality of the county and qualified for the
 
 3           exemption under section 237-24.7(2)."
 
 4      SECTION 3.  Section 237-24.7, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "§237-24.7  Additional amounts not taxable.  In addition to
 
 7 the amounts not taxable under section 237-24, this chapter shall
 
 8 not apply to:
 
 9      (1)  Amounts received by the operator of a hotel from the
 
10           owner of the hotel in amounts equal to and which are
 
11           disbursed by the operator for employee wages, salaries,
 
12           payroll taxes, insurance premiums, and benefits,
 
13           including retirement, vacation, sick pay, and health
 
14           benefits.  As used in this paragraph:
 
15                "Employee" means employees directly engaged in the
 
16                day-to-day operation of the hotel and employed by
 
17                the operator.
 
18                "Hotel" means an operation licensed under section
 
19                445-92.
 
20                "Operator" means any person who, pursuant to a
 
21                written contract with the owner of a hotel,
 
22                operates or manages the hotel for the owner.
 
23                "Owner" means the fee owner or lessee under a
 

 
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 1                recorded lease of a hotel;
 
 2      (2)  Amounts received by the operator of a county
 
 3           transportation system operated under an operating
 
 4           contract with a political subdivision, where the
 
 5           political subdivision is the owner of the county
 
 6           transportation system.  As used in this paragraph:
 
 7                "County transportation system" means a county mass
 
 8                transit system of motorized buses or other
 
 9                vehicles providing regularly scheduled
 
10                transportation [within a county.] for the general
 
11                public, supplemental paratransit for persons with
 
12                disabilities, or both.
 
13                "Operating contract" or "contract" means a
 
14                contract to operate and manage a political
 
15                subdivision's county transportation system, which
 
16                provides that:
 
17           (A)  The political subdivision shall exercise
 
18                substantial control over all aspects of the
 
19                operator's operation;
 
20           (B)  The political subdivision controls the development
 
21                of transit policy, service planning, routes, and
 
22                fares; and
 
23           (C)  The operator develops in advance a draft budget in
 

 
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 1                the same format as prescribed for agencies of the
 
 2                political subdivision.  The budget must be subject
 
 3                to the same constraints and controls regarding the
 
 4                lawful expenditure of public funds as any public
 
 5                sector agency, and deviations from the budget must
 
 6                be subject to approval by the appropriate
 
 7                political subdivision officials involved in the
 
 8                budgetary process.
 
 9                "Operator" means any person who, pursuant to an
 
10                operating contract with a political subdivision,
 
11                operates or manages a county transportation
 
12                system.
 
13                "Owner" means a political subdivision that owns or
 
14                is the lessee of all the properties and facilities
 
15                of the county transportation system (including
 
16                buses, other vehicles, real estate, parking
 
17                garages, fuel pumps, maintenance equipment, office
 
18                supplies, etc.), and that owns all revenues
 
19                derived therefrom;
 
20      (3)  Surcharge taxes on rental motor vehicles imposed by
 
21           chapter 251 and passed on and collected by persons
 
22           holding certificates of registration under that
 
23           chapter;
 

 
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 1      (4)  Amounts received by the operator of orchard properties
 
 2           from the owner of the orchard property in amounts equal
 
 3           to and which are disbursed by the operator for employee
 
 4           wages, salaries, payroll taxes, insurance premiums, and
 
 5           benefits, including retirement, vacation, sick pay, and
 
 6           health benefits.  As used in this paragraph:
 
 7                "Employee" means an employee directly engaged in
 
 8                the day-to-day operations of the orchard
 
 9                properties and employed by the operator.
 
10                "Operator" means a producer who, pursuant to a
 
11                written contract with the owner of the orchard
 
12                property, operates or manages the orchard property
 
13                for the owner where the property contains an area
 
14                sufficient to make the undertaking economically
 
15                feasible.
 
16                "Orchard property" means any real property that is
 
17                used to raise trees with a production life cycle
 
18                of fifteen years or more producing fruits or nuts
 
19                having a normal period of development from the
 
20                initial planting to the first commercially
 
21                saleable harvest of not less than three years.
 
22                "Owner" means a fee owner or lessee under a
 
23                recorded lease of orchard property;
 

 
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 1      (5)  Taxes on nursing facility income imposed by chapter
 
 2           346E and passed on and collected by operators of
 
 3           nursing facilities;
 
 4      (6)  Amounts received under property and casualty insurance
 
 5           policies for damage or loss of inventory used in the
 
 6           conduct of a trade or business located within the State
 
 7           or a portion thereof that is declared a natural
 
 8           disaster area by the governor pursuant to section
 
 9           209-2;
 
10      (7)  Amounts received as compensation by community
 
11           organizations, school booster clubs, and nonprofit
 
12           organizations under a contract with the chief election
 
13           officer for the provision and compensation of precinct
 
14           officials and other election-related personnel,
 
15           services, and activities, pursuant to section 11-5;
 
16      (8)  Interest received by a person domiciled outside the
 
17           State from a trust company (as defined in section
 
18           412:8-101) acting as payment agent or trustee on behalf
 
19           of the issuer or payees of an interest bearing
 
20           instrument or obligation, if the interest would not
 
21           have been subject to tax under this chapter if paid
 
22           directly to the person domiciled outside the State
 
23           without the use of a paying agent or trustee; provided
 

 
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 1           that if the interest would otherwise be taxable under
 
 2           this chapter if paid directly to the person domiciled
 
 3           outside the State, it shall not be exempt solely
 
 4           because of the use of a Hawaii trust company as a
 
 5           paying agent or trustee;
 
 6      (9)  Amounts received by a management company from related
 
 7           entities engaged in the business of selling interstate
 
 8           or foreign common carrier telecommunications services
 
 9           in amounts equal to and which are disbursed by the
 
10           management company for employee wages, salaries,
 
11           payroll taxes, insurance premiums, and benefits,
 
12           including retirement, vacation, sick pay, and health
 
13           benefits.  As used in this paragraph:
 
14                "Employee" means employees directly engaged in the
 
15                day-to-day operation of related entities engaged
 
16                in the business of selling interstate or foreign
 
17                common carrier telecommunications services and
 
18                employed by the management company.
 
19                "Management company" means any person who,
 
20                pursuant to a written contract with a related
 
21                entity engaged in the business of selling
 
22                interstate or foreign common carrier
 
23                telecommunications services, provides managerial
 

 
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 1                or operational services to that entity.
 
 2                "Related entities" means:
 
 3                (A)  An affiliated group of corporations within
 
 4                     the meaning of section 1504 (with respect to
 
 5                     affiliated group defined) of the federal
 
 6                     Internal Revenue Code of 1986, as amended;
 
 7                (B)  A controlled group of corporations within the
 
 8                     meaning of section 1563 (with respect to
 
 9                     definitions and special rules) of the federal
 
10                     Internal Revenue Code of 1986, as amended; or
 
11                (C)  Those entities connected through ownership of
 
12                     at least eighty per cent of the total value
 
13                     of each such entity, including partnerships,
 
14                     associations, trusts, S corporations,
 
15                     nonprofit corporations, or any other group or
 
16                     combination of these or other tax entities
 
17                     acting as a business unit;
 
18                whether or not the entity is located within or
 
19                without the State or licensed under this chapter;
 
20                and
 
21     (10)  Amounts received as grants under section 206M-15."
 
22      SECTION 4.  Section 237-27.6, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "§237-27.6  Solid waste processing, disposal, and electric
 
 2 generating facility; certain amounts exempt.(a)  Any provision
 
 3 of the law to the contrary notwithstanding, there shall be
 
 4 exempted from, and excluded from the measure of, the taxes
 
 5 imposed by this chapter all of the amounts enumerated in
 
 6 subsection (b) arising from a transaction involving a sale and
 
 7 leaseback of a solid waste processing, disposal, and electric
 
 8 generating facility entered into by a political subdivision of
 
 9 the State under section 46-19.1 where the facility is owned or
 
10 under construction by the subdivision before May 10, 1988.
 
11      (b)  Amounts are exempted or excluded from taxation under
 
12 this chapter only to the extent that they:
 
13      (1)  Are received by an operator of a facility under an
 
14           operating contract with a political subdivision, where
 
15           the:
 
16           (A)  Operator, or its successor, entered into an
 
17                operating contract prior to May 10, 1988;
 
18           (B)  Operator enters into a lease of the facility from
 
19                the owner at a time that coincides with the time
 
20                the owner and the political subdivision entering
 
21                into a sale and leaseback transaction; and
 
22           (C)  Amounts are used by the operator to make rental
 
23                payments to the owner;
 

 
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 1      (2)  Are received as rental payments by the owner of the
 
 2           facility from the operator of the facility;
 
 3      (3)  Do not exceed the payments made by the owner of the
 
 4           facility under the sale and leaseback transaction to
 
 5           the political subdivision; and
 
 6      (4)  In no case exceed debt service costs incurred by the
 
 7           political subdivision for the construction of the
 
 8           facility.
 
 9      (c)  The exemption of this section shall be additional to
 
10 the exemption under section 237-  .  This section shall not
 
11 prevent an owner or operator of a facility from claiming an
 
12 exemption under section 237-   for amounts received from a
 
13 political subdivision, but not exempt under subsection (b).
 
14      (d)  For the purposes of this section:
 
15      "Debt service costs" means payments of principal and
 
16 interest on general obligation bonds issued at any time by a
 
17 political subdivision for the construction of the facility.
 
18      "Sale and leaseback" means a transaction in which a facility
 
19 is sold by a political subdivision to a private entity for cash,
 
20 under an installment sale, a financing lease, or similar
 
21 arrangement, or any combination thereof, where the political
 
22 subdivision has the right to repurchase the facility at a later
 
23 date, and where the facility is leased to an operator of the
 

 
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 1 facility.
 
 2      "Solid waste processing, disposal, and electric generating
 
 3 facility" or "facility" means a facility for the processing and
 
 4 disposal of solid waste or the generation of electric energy, or
 
 5 both, the construction of which has been financed pursuant to
 
 6 section 47-4 and constitutes an undertaking as defined in section
 
 7 49-1.
 
 8      "Operator" means a private entity who enters into an
 
 9 agreement or other arrangement with the owner of a solid waste
 
10 processing, disposal, and electric generating facility for the
 
11 purpose of operating such facility for a political subdivision of
 
12 the State.
 
13      "Owner" means any person who purchases a solid waste
 
14 processing, disposal, and electric generating facility under
 
15 section 46-19.1."
 
16      SECTION 5.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 6.  This Act shall take effect upon its approval.
 
19 
 
20                           INTRODUCED BY:  _______________________
 

 
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