REPORT TITLE:
Taxation; Single Rate


DESCRIPTION:
Replaces all state taxes except alcohol, cigarette and tobacco
and fuel with a comprehensive gross state income tax with a
single rate for all taxpayers.  Allows deductions only for
purchases made by one business from another that pays the tax on
the goods or services purchased or traded.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                             
HOUSE OF REPRESENTATIVES                H.B. NO.871        
TWENTIETH LEGISLATURE, 1999                                     
STATE OF HAWAII                                                 
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO COMPREHENSIVE STATE TAX REFORM.



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

 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5                         COMPREHENSIVE TAX
 
 6           PART I.  PURPOSE; DEFINITIONS; ADMINISTRATION
 
 7      §   -1 Purpose.  The purpose of the tax imposed by this
 
 8 chapter is to simplify the existing state tax structure so
 
 9 completely that it:
 
10      (1)  Dramatically reduces both the costs to the State of
 
11           administrating and collecting taxes, and the costs of
 
12           operating a business--especially those associated with
 
13           documenting and calculating tax liability;
 
14      (2)  Removes all artificial incentives and disincentives
 
15           which affect behavior as to generate inequity amongst
 
16           taxpayers, market distortions, and their resulting
 
17           operating inefficiency, and penalties for work, saving,
 
18           and investment;
 
19      (3)  Replaces almost all existing state taxes with those
 

 
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 1           which would be deductible against federal income tax
 
 2           liability;
 
 3      (4)  Promotes the purchase of products and services from
 
 4           businesses in Hawaii;
 
 5      (5)  Eliminates the inflation generated by the pyramiding of
 
 6           wholesale costs inherent in Hawaii's existing general
 
 7           excise and use taxes; and
 
 8      (6)  Allows taxpayers to understand exactly what is being
 
 9           taxed, how the burden of taxation is distributed, and
 
10           the actual tax revenue implications of any policy
 
11           decisions affecting the size and functions of state
 
12           government.
 
13      This transforms Hawaii's tax environment into a magnet,
 
14 competitive with other jurisdictions, for the kind of financial
 
15 and human capital which can trigger a wide-ranging economic and
 
16 social renaissance benefiting all the people of Hawaii.
 
17      § -2 Definitions.  When used in this chapter, unless
 
18 otherwise required by the context:
 
19      "Comptroller" means the comptroller of the State.
 
20      "Corporation" means the same as in the Internal Revenue
 
21 Code.  A "domestic corporation" is one organized under the laws
 
22 of the State.  A "foreign corporation" is any other corporation.
 
23      "Department" means the director of taxation.
 

 
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 1      "Director" means the director of taxation.
 
 2      "Dividend" means any distribution by a corporation to its
 
 3 shareholders or holders on an interest therein which is treated
 
 4 as a dividend by the Internal Revenue Code.
 
 5      "Employee" means the same as in the Internal Revenue Code.
 
 6      "Estimated wages" means the aggregate amount which the
 
 7 employee reasonably expects will constitute wages for the
 
 8 estimation year;
 
 9      "Estimation year", in the case of an employee who files the
 
10 employee's return on the basis of a calendar year, means the
 
11 calendar year in which the wages are paid; provided that in the
 
12 case of an employee who files the employee's return on a basis
 
13 other than the calendar year, the employee's estimation year, and
 
14 the amounts deducted and withheld to be governed by the
 
15 estimation year, shall be determined under rules prescribed by
 
16 the director of taxation.
 
17      "Fiduciary" means the same as in the Internal Revenue Code
 
18 of 1954, as amended.
 
19      "Fiscal year" means the same as in the Internal Revenue Code
 
20 of 1954, as amended.
 
21      "Gross income" and "taxable income"  mean the same as gross
 
22 income income as defined in section    -7.
 
23      "Husband and wife" means the same as in the Internal Revenue
 

 
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 1 Code.
 
 2      "Includes" and "including" when used in a definition shall
 
 3 not be deemed to exclude other things otherwise within the
 
 4 meaning of the term defined.
 
 5      "Individual" means a person other than a trust, estate,
 
 6 partnership, or corporation, as defined.
 
 7      "Internal Revenue Code of 1954, as amended" includes the
 
 8 Internal Revenue Code of 1986 and the Internal Revenue Code of
 
 9 1986, as amended.
 
10      "Nonresident" means every individual other than a resident.
 
11      "Nonresident estate" or "nonresident trust" means one other
 
12 than resident.
 
13      "Paid or incurred, paid or accrued" means the same as in the
 
14 Internal Revenue Code.
 
15      "Partnership" means the same as in the Internal Revenue
 
16 Code.
 
17      "Penalty" or "penalties", when used in connection with the
 
18 additions to the tax imposed for delinquency in payment, includes
 
19 interest as well.
 
20      "Person" or "corporation" includes every individual,
 
21 partnership, society, unincorporated association, joint
 
22 adventure, group, hui, joint stock company, corporation, trustee,
 
23 personal representative, trust estate, decedent's estate, trust,
 

 
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 1 trustee in bankruptcy, or other entity, whether such persons are
 
 2 doing business for themselves or in a fiduciary capacity, or as
 
 3 employees or employers and whether the individuals are residents
 
 4 or nonresidents of the State, and whether the corporation or
 
 5 other association is created or organized under the laws of the
 
 6 State or of another jurisdiction.  Any person who has in the
 
 7 person's possession, for sale in the State, the property of a
 
 8 nonresident owner, other than as an employee of such owner, shall
 
 9 be deemed the seller of the property, when sold.
 
10      "Resident" means (1) every individual domiciled in the
 
11 State, and (2) every other individual whether domiciled in the
 
12 State or not, who resides in the State.  To "reside" in the State
 
13 means to be in the State for other than a temporary or transitory
 
14 purpose.  Every individual who is in the State more than two
 
15 hundred days of the taxable year in the aggregate shall be
 
16 presumed to be a resident of the State.  This presumption may be
 
17 overcome by evidence satisfactory to the department of taxation
 
18 that the individual maintains a permanent place of abode outside
 
19 of the State and is in the State for a temporary or transitory
 
20 purpose.  No person shall be deemed to have gained or lost a
 
21 residence simply because of the person's presence or absence in
 
22 compliance with military or naval orders of the United States, or
 
23 while engaged in aviation or navigation, or while a student at
 

 
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 1 any institution of learning.
 
 2      "Resident estate" means an estate of a resident decedent the
 
 3 fiduciary of which was appointed by a court of this State and the
 
 4 administration of which is carried on in this State, and
 
 5 "resident trust" means a trust of which the fiduciary is a
 
 6 resident of the State or the administration of which is carried
 
 7 on in the State.
 
 8      "Sale" or "sales" includes the exchange of properties as
 
 9 well as the sale thereof for money.
 
10      "Shareholder" means the same as in the Internal Revenue Code
 
11 of 1954, as amended.
 
12      "Stock" means the same as in the Internal Revenue Code of
 
13 1954, as amended.
 
14      "Taxable year" means the calendar year or the fiscal year
 
15 ending during such calendar year upon the basis of which income
 
16 is computed under this chapter.  "Taxable year" includes, in the
 
17 case of a return made for a fractional part of a year under this
 
18 chapter or under rules prescribed by the department of taxation,
 
19 the period for which such return is made, and in cases where the
 
20 department terminates the taxable year in accordance with section
 
21 231-24 and levies a jeopardy assessment on income for such
 
22 portion or period of a year under section    -109, then the
 
23 period or portion of the year for which the jeopardy assessment
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 is made.
 
 2      "Taxpayer" means a person subject to the tax imposed by this
 
 3 chapter.
 
 4      "Trade or business" includes the performance of the
 
 5 functions of a public office.
 
 6      "Uniformed services of the United States" means the Army,
 
 7 Navy, Air Force, Marine Corps, Coast Guard, Coast and Geodetic
 
 8 Survey, and Public Health Service, and all regular and reserve
 
 9 components thereof, including the national guard.  The term
 
10 "uniformed services of the United States" applies only to persons
 
11 who are deemed members thereof under the laws of the United
 
12 States relating to pay and allowances.  Services as a member of
 
13 the uniformed services includes inactive duty training.
 
14      "Without regard to source in the State" shall mean income
 
15 derived or earned from all sources whether from sources located
 
16 within or from sources located without the State.
 
17      § -3 Administration and enforcement by department.  The
 
18 administration of this chapter is vested in and shall be
 
19 exercised by the department of taxation, which shall prescribe
 
20 forms and reasonable rules of procedure in conformity with this
 
21 chapter for the making of returns and for the ascertainment,
 
22 assessment, and collection of the taxes imposed hereunder.  The
 
23 forms and rules, when prescribed by the department and printed
 

 
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 1 and published in the manner provided by law shall have the force
 
 2 and effect of law.  The enforcement of this chapter in any of the
 
 3 courts of the State is under the exclusive jurisdiction of the
 
 4 department, which shall require the assistance of the attorney
 
 5 general of the State, the respective county attorneys and the
 
 6 prosecuting attorney of the counties where suit is brought; but
 
 7 these attorneys shall receive no fees or compensation for
 
 8 services rendered in enforcing this chapter in addition to the
 
 9 respective salaries paid by law to them. 
 
10      The department shall have, in addition to all of the duties
 
11 and powers herein prescribed or granted, all the duties and
 
12 powers prescribed or granted by the existing or future tax laws
 
13 of the State so far as the same may be applicable to the
 
14 administration of this chapter and are not contrary to the
 
15 express provisions hereof.
 
16      § -4 Income taxes by the State; residents, nonresidents,
 
17 corporations, estates, and trusts.(a)  The tax imposed by this
 
18 chapter applies to the entire income of a resident, computed
 
19 without regard to source in the State. 
 
20      (b)  In the case of a nonresident, the tax applies to the
 
21 income received or derived from property owned, personal services
 
22 performed, trade, or business carried on, and any and every other
 
23 source in the State. 
 

 
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 1      In the case of a nonresident spouse filing a joint return
 
 2 with a resident spouse, the tax applies to the entire income of
 
 3 the nonresident spouse computed without regard to source in the
 
 4 State. 
 
 5      (c)  Except where a joint return is filed, when the status
 
 6 of a taxpayer changes during the taxable year from resident to
 
 7 nonresident, or from nonresident to resident, the tax imposed by
 
 8 this chapter applies to the entire income earned during the
 
 9 period of residence in the manner provided in subsection (a) and
 
10 during the period of nonresidence the tax shall apply upon the
 
11 income received or derived as a nonresident in the manner
 
12 provided in subsection (b); provided that if it cannot be
 
13 determined whether income was received or derived during the
 
14 period of residence or during the period of nonresidence, there
 
15 shall be attributed to the State such portion of the income as is
 
16 determined by applying to such income for the whole taxable year
 
17 the ratio which the period of residence in the State bears to the
 
18 whole taxable year, unless the taxpayer shows to the satisfaction
 
19 of the department of taxation that the result is to attribute to
 
20 the state income, dependent upon residence, received or derived
 
21 during the period of nonresidence, in which event the amount of
 
22 income as to which such showing is made shall be excluded.
 
23      The apportionment of income provided by this subsection
 

 
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 1 shall not apply where one spouse is a resident of this State and
 
 2 a joint return is filed with the nonresident spouse in which
 
 3 event the tax shall be computed on their aggregate income without
 
 4 regard to source in the State.  Where, however, both spouses
 
 5 change their status from resident to nonresident or from
 
 6 nonresident to resident, their income shall be apportioned in the
 
 7 manner provided in this subsection. 
 
 8      (d)  A corporation, foreign or domestic, is taxable upon the
 
 9 income received or derived from property owned, trade or business
 
10 carried on, and any and every other source in the State.  In
 
11 addition, a domestic corporation is taxable upon its income from
 
12 property owned, trade or business carried on, and any and every
 
13 other source outside the State, unless subjected to income tax in
 
14 any other jurisdiction.  Subjection to federal tax does not
 
15 constitute subjection to income tax in another jurisdiction.
 
16 "Corporation" includes any professional corporation incorporated
 
17 pursuant to chapter 415A or 416. 
 
18      (e)  (1)  The income of a resident estate or trust shall be
 
19           computed without regard to source in the State.  The
 
20           income of a nonresident estate or trust shall be that
 
21           received or derived from sources in the State. 
 
22      (2)  A beneficiary of an estate or trust, or person treated
 
23           as the owner of any portion of a trust, who is taxable
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           upon income thereof under the Internal Revenue Code of
 
 2           1954, as amended, shall be taxed thereon as herein
 
 3           provided, irrespective of the taxability of the estate
 
 4           or trust or whether it is required to make a fiduciary
 
 5           return under this chapter.  If all such income consists
 
 6           of income which would be taxable under this chapter if
 
 7           received directly by the beneficiary or person, the
 
 8           beneficiary or person shall be taxed upon all of it.
 
 9           If some of it consists of income which would not be
 
10           taxable if received directly by the beneficiary or
 
11           person, then unless the trust instrument provides
 
12           otherwise the income of each such beneficiary or person
 
13           shall be conclusively presumed to have been received or
 
14           derived out of each class of income of the estate or
 
15           trust, and the beneficiary or person shall be taxed
 
16           upon such part of it as would be taxable if received
 
17           directly by the beneficiary or person. 
 
18      (3)  Each estate or trust shall include in its return all of
 
19           the information necessary to determine the taxability
 
20           of the income of the estate or trust, regardless of
 
21           source.  Only in the case of a nonresident estate or
 
22           trust of which all the beneficiaries are nonresidents
 
23           and no part of which is treated as owned by a resident
 

 
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 1           shall the return be confined to income from sources in
 
 2           the State.  This paragraph shall not cause income to be
 
 3           taxed to an estate or trust that otherwise would not
 
 4           have been so taxed.
 
 5      § -5 Allocation of income of persons not taxable upon
 
 6 entire income.(a)  This section applies to income not subject
 
 7 to part II, including nonbusiness income and certain section
 
 8    -22 income.
 
 9      (b)  Income (including gains), also losses, from property
 
10 owned in the State and from any other source in the State shall
 
11 be determined by an allocation and separate accounting so far as
 
12 practicable.  Losses from property owned outside the State and
 
13 from other sources outside the State shall not be deducted.
 
14      (c)  Deductions connected with income taxable under this
 
15 chapter shall not be allowed, and  deductions connected with
 
16 income not taxable under this chapter shall not be allowed.
 
17 Deductions from gross income shall not be allowed except if
 
18 allowed under    -7 and only to the extent of the ratio of the
 
19 gross income attributed to this State to the entire gross income
 
20 computed without regard to source in the State.
 
21      Deductions by individual taxpayers from gross income shall
 
22 not be allowed; provided that as used in this sentence "gross
 
23 income" means gross income as defined in the Internal Revenue
 

 
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 1 Code.
 
 2      (d)  If in the opinion of the department the allocations
 
 3 hereinabove provided do not clearly and accurately reflect the
 
 4 actual amount of the gross income and taxable income received or
 
 5 derived from all property owned and any and every other source in
 
 6 the State, or if any person shows that the allocations
 
 7 hereinabove provided result in adjusted gross income or taxable
 
 8 income being attributed to the State in a larger amount than is
 
 9 just and equitable, then the same shall be determined, allocated,
 
10 and apportioned under such rules, processes, and formulas as the
 
11 department prescribes as being just and equitable.
 
12      § -6 Foreign manufacturing corporation; warehousing of
 
13 products.(a)  For the purposes of sections    -21 to    -39, a
 
14 foreign corporation engaged in the business of manufacturing
 
15 without the State, having its manufactured products warehoused in
 
16 this State by another person who is engaged in the business of
 
17 warehousing in this State and whose compensation for providing
 
18 the warehousing is included in the measure of the tax imposed by
 
19 this chapter, shall not be deemed to be carrying on a trade or
 
20 business in this State if all of the following requirements are
 
21 met:
 
22      (1)  Every delivery of sale of such products so warehoused
 
23           is made at the warehouse to fill an order for such
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           property procured by a representative (as defined in
 
 2           subsection (b)) from a seller subject to the tax under
 
 3           this chapter and purchasing such property for purposes
 
 4           of resale;
 
 5      (2)  Every order so procured was made subject to acceptance
 
 6           and was accepted by the corporation at an office
 
 7           located out of this State;
 
 8      (3)  No collection for the payment of the products delivered
 
 9           as described in paragraph (1) is made in this State by
 
10           any of its employees or agents or by any
 
11           representative; and
 
12      (4)  Except as provided in this section, it is not carrying
 
13           on a trade or business in this State within the meaning
 
14           of sections    -21 to    -39.
 
15      (b)  "Representative" means a salesperson, commission agent,
 
16 broker, or other person who is authorized or employed as an
 
17 independent contractor and not as an employee by the foreign
 
18 manufacturing corporation described in subsection (a) to assist
 
19 the manufacturer in selling its products in this State, by
 
20 procuring orders for such sale, and who carries on such
 
21 activities in this State (it being immaterial whether such
 
22 activities are regular or intermittent), but whose functions and
 
23 authority do not include the accepting of orders for, or the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 making of deliveries of, or the collecting of payment for
 
 2 deliveries of such products.
 
 3      §   -7 Gross income.  (a)  There is imposed on every person
 
 4 a comprehensive tax on the total amount of gross income, gross
 
 5 proceeds of the sale of goods or services, and the value of
 
 6 products or services traded.  For the purposes of this chapter
 
 7 "gross income, gross proceeds of the sale of goods or services,
 
 8 and the value of goods or services traded" shall include:
 
 9      (1)  The gross receipts, cash or accrued, and the cash value
 
10           of benefits and bartered goods and services of the
 
11           taxpayer received for wages, as compensation for
 
12           personal services, and the gross receipts, including
 
13           cash, or the equivalent in bartered goods and services
 
14           of the taxpayer derived from trade, business, commerce,
 
15           or sales and the value proceeding or accruing from the
 
16           sale of tangible personal property, or service, or
 
17           both, and all receipts, actual or accrued as
 
18           hereinafter provided, by reason of the investment of
 
19           the capital of the business engaged in or individual
 
20           investments, including interest, discount, rentals,
 
21           royalties, fees, or other emoluments however designated
 
22           and without any deductions on account of the cost of
 
23           property sold, the cost of materials used, labor cost,
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           taxes, royalties, interest, or discount paid or any
 
 2           other expenses whatsoever; provided that the cost basis
 
 3           of property held for investment or a principal
 
 4           residence shall be deducted from any income generated
 
 5           by the sale of that property or the sale of a principal
 
 6           residence.  Every taxpayer shall be presumed to be
 
 7           dealing on a cash basis unless the taxpayer proves to
 
 8           the satisfaction of the department of taxation that the
 
 9           taxpayer is dealing on an accrual basis and the
 
10           taxpayer's books are so kept, or unless the taxpayer
 
11           employs or is required to employ the accrual basis for
 
12           the purposes of the tax imposed by this chapter for any
 
13           taxable year in which event the taxpayer shall report
 
14           the taxpayer's gross income for the purposes of this
 
15           chapter on the accrual basis for the same period.
 
16      (2)  "Gross proceeds of sale" means the value actually
 
17           proceeding from the sale of tangible personal property
 
18           without any deduction on account of the cost of
 
19           property sold or expenses of any kind.
 
20      (b)  No adjustments, exemptions or deductions from gross
 
21 income, gross proceeds of sale or the value of goods and services
 
22 traded shall be allowed except a taxpayer engaged in business may
 
23 deduct the amount or value of goods or services purchased from
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 another business; provided that those goods or services are
 
 2 subject to the tax imposed by this chapter under the tax
 
 3 liability of the taxpayer selling those goods and services.
 
 4      (c)  Groups organized for purposes of non-profit activity,
 
 5 and recognized under section 501(c) of the Internal Revenue Code
 
 6 of 1954, as amended, shall be allowed to deduct any income:
 
 7      (1)  Received as a result of an activity from which no
 
 8           profit inures to the benefit of any private stockholder
 
 9           or individual, except for death or other benefits to
 
10           members of fraternal societies; and
 
11      (2)  The primary purpose of the activity was not to produce
 
12           income even if the income is to be used for or in
 
13           furtherance of the non-profit purpose.
 
14      §   -8 Conformity to Constitution, etc.  In computing the
 
15 amounts of any tax imposed under this chapter, there shall be
 
16 excepted or deducted from the values, gross proceeds of sales, or
 
17 gross income so much thereof as, under the Constitution and laws
 
18 of the United States, the State is prohibited from taxing, but
 
19 only so long as and only to the extent that the State is so
 
20 prohibited.
 
21               PART II.  UNIFORM DIVISION OF INCOME
 
22                         FOR TAX PURPOSES
 
23      § -21  Definitions.  As used in this part, unless the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 context otherwise requires: 
 
 2      "Business income" means income arising from transactions and
 
 3 activity in the regular course of the taxpayer's trade or
 
 4 business and includes income from tangible and intangible
 
 5 property if the acquisition, management, and disposition of the
 
 6 property constitute integral parts of the taxpayer's regular
 
 7 trade or business operations. 
 
 8      "Commercial domicile" means the principal place from which
 
 9 the trade or business of the taxpayer is directed or managed. 
 
10      "Compensation" means wages, salaries, commissions, and any
 
11 other form of remuneration paid to employees for personal
 
12 services. 
 
13      "Nonbusiness income" means all income other than business
 
14 income. 
 
15      "Public utility" has the meaning given that term in section
 
16 269-1. 
 
17      "Sales" means all gross receipts of the taxpayer not
 
18 allocated under sections    -24 to    -28. 
 
19      "State" means any state of the United States, the District
 
20 of Columbia, the Commonwealth of Puerto Rico, any territory or
 
21 possession of the United States, and any foreign country or
 
22 political subdivision thereof.
 
23      § -22  Taxpayers affected.  Any taxpayer having income
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 from business activity which is taxable both within and without
 
 2 this State, other than activity as a public utility or the
 
 3 rendering of purely personal services by an individual, shall
 
 4 allocate and apportion the taxpayer's net income as provided in
 
 5 this part.
 
 6      § -23  Taxable in another state.  For purposes of
 
 7 allocation and apportionment of income under this part, a
 
 8 taxpayer is taxable in another state if: 
 
 9      (1)  In that state the taxpayer is subject to a net income
 
10           tax, a franchise tax measured by net income, a
 
11           franchise tax for the privilege of doing business, or a
 
12           corporate stock tax, or 
 
13      (2)  That state has jurisdiction to subject the taxpayer to
 
14           a net income tax regardless of whether, in fact, the
 
15           state does or does not.
 
16      § -24  Specified nonbusiness income.  Rents and royalties
 
17 from real or tangible personal property, capital gains, interest,
 
18 dividends, or patent or copyright royalties, to the extent that
 
19 they constitute nonbusiness income, shall be allocated as
 
20 provided in sections    -25 to    -27.
 
21      § -25  Rents; royalties.(a)  Net rents and royalties
 
22 from real property located in this State are allocable to this
 
23 State. 
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (b)  Net rents and royalties from tangible personal property
 
 2 are allocable to this State: 
 
 3      (1)  If and to the extent that the property is utilized in
 
 4           this State, or 
 
 5      (2)  In their entirety if the taxpayer's commercial domicile
 
 6           is in this State and the taxpayer is not organized
 
 7           under the laws of or taxable in the state in which the
 
 8           property is utilized. 
 
 9      (c)  The extent of utilization of tangible personal property
 
10 in a state is determined by multiplying the rents and royalties
 
11 by a fraction, the numerator of which is the number of days of
 
12 physical location of the property in the state during the rental
 
13 or royalty period in the taxable year and the denominator of
 
14 which is the number of days of physical location of the property
 
15 everywhere during all rental or royalty periods in the taxable
 
16 year.  If the physical location of the property during the rental
 
17 or royalty period is unknown or unascertainable by the taxpayer,
 
18 tangible personal property is utilized in the state in which the
 
19 property was located at the time the rental or royalty payer
 
20 obtained possession.
 
21      § -26  Allocation of capital gains and losses.(a)
 
22 Capital gains and losses from sales of real property located in
 
23 this State are allocable to this State.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (b)  Capital gains and losses from sales of tangible
 
 2 personal property are allocable to this State if:
 
 3      (1)  The property had a situs in this State at the time of
 
 4           the sale; or
 
 5      (2)  The taxpayer's commercial domicile is in this State and
 
 6           the taxpayer is not taxable in the state in which the
 
 7           property had a situs.
 
 8      (c)  Except in the case of the sale of a partnership
 
 9 interest, capital gains and losses from sales of intangible
 
10 personal property are allocable to this State if the taxpayer's
 
11 commercial domicile is in this State.
 
12      (d)  Gain or loss from the sale of a partnership interest is
 
13 allocable to this State in the ratio of the original cost of
 
14 partnership tangible property in the State to the original cost
 
15 of partnership tangible property everywhere, determined at the
 
16 time of the sale.  If more than fifty per cent of the value of a
 
17 partnership's assets consists of intangibles, gain or loss from
 
18 the sale of the partnership interest shall be allocated to this
 
19 State in accordance with the sales factor of the partnership for
 
20 its first full tax period immediately preceding its tax period
 
21 during which the partnership interest was sold.
 
22      § -27  Allocation of interest and dividends.  Interest and
 
23 dividends are allocable to this State if the taxpayer's
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 commercial domicile is in this State.
 
 2      § -28  Allocation of patent and copyright royalties.(a)
 
 3 Patent and copyright royalties are allocable to this State: 
 
 4      (1)  If and to the extent that the patent or copyright is
 
 5           utilized by the payer in this State, or 
 
 6      (2)  If and to the extent that the patent or copyright is
 
 7           utilized by the payer in a state in which the taxpayer
 
 8           is not taxable and the taxpayer's commercial domicile
 
 9           is in this State. 
 
10      (b)  A patent is utilized in a state to the extent that it
 
11 is employed in production, fabrication, manufacturing, or other
 
12 processing in the state or to the extent that a patented product
 
13 is produced in the state.  If the basis of receipts from patent
 
14 royalties does not permit allocation to states or if the
 
15 accounting procedures do not reflect states of utilization, the
 
16 patent is utilized in the state in which the taxpayer's
 
17 commercial domicile is located. 
 
18      (c)  A copyright is utilized in a state to the extent that
 
19 printing or other publication originates in the state.  If the
 
20 basis of receipts from copyright royalties does not permit
 
21 allocation to states or if the accounting procedures do not
 
22 reflect states of utilization, the copyright is utilized in the
 
23 state in which the taxpayer's commercial domicile is located.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      § -29  Apportionment of business income; percentage.  All
 
 2 business income shall be apportioned to this State by multiplying
 
 3 the income by a fraction, the numerator of which is the property
 
 4 factor plus the payroll factor plus the sales factor, and the
 
 5 denominator of which is three.
 
 6      § -30  Apportionment; property factor.  The property
 
 7 factor is a fraction, the numerator of which is the average value
 
 8 of the taxpayer's real and tangible personal property owned or
 
 9 rented and used in this State during the tax period and the
 
10 denominator of which is the average value of all the taxpayer's
 
11 real and tangible personal property owned or rented and used
 
12 during the tax period.
 
13      § -31  Apportionment; property factor; owned and used
 
14 property.  Property owned by the taxpayer is valued at its
 
15 original cost.  Property rented by the taxpayer is valued at
 
16 eight times the net annual rental rate.  Net annual rental rate
 
17 is the annual rental rate paid by the taxpayer less any annual
 
18 rental rate received by the taxpayer from subrentals.
 
19      § -32  Apportionment; property factor; average value.  The
 
20 average value of property shall be determined by averaging the
 
21 values at the beginning and ending of the tax period but the
 
22 director of taxation may require the averaging of monthly values
 
23 during the tax period if reasonably required to reflect properly
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 the average value of the taxpayer's property.
 
 2      § -33  Apportionment; payroll factor.  The payroll factor
 
 3 is a fraction, the numerator of which is the total amount paid in
 
 4 this State during the tax period by the taxpayer for
 
 5 compensation, and the denominator of which is the total
 
 6 compensation paid everywhere during the tax period.
 
 7      § -34  Compensation; where paid.  Compensation is paid in
 
 8 this State if: 
 
 9      (1)  The individual's service is performed entirely within
 
10           the State; or 
 
11      (2)  The individual's service is performed both within and
 
12           without the State, but the service performed without
 
13           the State is incidental to the individual's service
 
14           within the State; or 
 
15      (3)  Some of the service is performed in the State and (A)
 
16           the base of operations or, if there is no base of
 
17           operations, the place from which the service is
 
18           directed or controlled is in the State, or (B) the base
 
19           of operations or the place from which the service is
 
20           directed or controlled is not in any state in which
 
21           some part of the service is performed, but the
 
22           individual's residence is in this State.
 
23      § -35  Apportionment; sales factor.  The sales factor is a
 

 
Page 25                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 fraction, the numerator of which is the total sales of the
 
 2 taxpayer in this State during the tax period, and the denominator
 
 3 of which is the total sales of the taxpayer everywhere during the
 
 4 tax period.
 
 5      § -36  Apportionment; sales factor; tangible personalty.
 
 6 Sales of tangible personal property are in this State if:
 
 7      (1)  The property is delivered or shipped to a purchaser,
 
 8           other than the United States government, within this
 
 9           State regardless of the f.o.b. point or other
 
10           conditions of the sale; or
 
11      (2)  The property is shipped from an office, store,
 
12           warehouse, factory, or other place of storage in this
 
13           State and (A) the purchaser is the United States
 
14           government or (B) the taxpayer is not taxable in the
 
15           state of the purchaser.
 
16      § -37  Apportionment; sales factor; nontangible
 
17 personalty.  Sales, other than sales of tangible personal
 
18 property, are in this State if:
 
19      (1)  The income-producing activity is performed in this
 
20           State; or
 
21      (2)  The income-producing activity is performed both in and
 
22           outside this State and a greater proportion of the
 
23           income-producing activity is performed in this State
 

 
Page 26                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1           than in any other state, based on costs of performance.
 
 2      § -38  Equitable adjustment of formula.  If the allocation
 
 3 and apportionment provisions of this part do not fairly represent
 
 4 the extent of the taxpayer's business activity in this State, the
 
 5 taxpayer may petition for or the director of taxation may
 
 6 require, in respect to all or any part of the taxpayer's business
 
 7 activity, if reasonable:
 
 8      (1)  Separate accounting;
 
 9      (2)  The exclusion of any one or more of the factors;
 
10      (3)  The inclusion of one or more additional factors which
 
11           will fairly represent the taxpayer's business activity
 
12           in this State; or 
 
13      (4)  The employment of any other method to effectuate an
 
14           equitable allocation and apportionment of the
 
15           taxpayer's income.
 
16      § -38.5  Application.  It is the intent of the legislature
 
17 that in administering this chapter, this part, and sections 235-4
 
18 and 235-5, or as a member of or administering the multistate tax
 
19 compact under chapter 255, the department of taxation shall not
 
20 use or allow the use of the worldwide method of unitary taxation
 
21 upheld in Container Corporation of America v. The Franchise Tax
 
22 Board, 463 U.S. 159.  It is the intent of the legislature that
 
23 the department of taxation shall continue to apply this chapter,
 

 
Page 27                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 part, sections    -4 and    -5, and chapter 255 as they were
 
 2 applied before the above case was decided.
 
 3      § -39  Citation of section.  This section may be cited as
 
 4 the "Uniform Division of Income for Tax Purposes Act".
 
 5                PART III.  TAX RATE AND WITHHOLDING
 
 6      §   -51  Tax imposed; rates.  There is hereby imposed on
 
 7 every person a comprehensive tax on the total amount of gross
 
 8 income, gross proceeds of sale, and value of goods or services
 
 9 traded, as defined in    -7, at the rate of         per cent.
 
10      §   -52 to §   -60  Reserved.
 
11                 WITHHOLDING AND COLLECTION OF TAX
 
12                             AT SOURCE
 
13      § -61  Withholding of tax on wages.  (a)  As used in this
 
14 section:
 
15      "Employee" includes an officer or elected official, or any
 
16 other employee.
 
17      "Employer" means (A) the person or government for whom an
 
18 individual performs or performed any service, of whatever nature,
 
19 as the employee of such person or government, and (B) the person
 
20 having control of the payment of the wages if the employer as
 
21 heretofore defined does not have control thereof, and (C) any
 
22 person subject to the jurisdiction of the State and paying wages
 
23 on behalf of an employer as heretofore defined if the employer is
 

 
Page 28                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 not subject to the jurisdiction of the State; provided that the
 
 2 term employer shall not include any government that is not
 
 3 subject to the laws of the State except as, and to the extent
 
 4 that, it consents to the application of sections    -61 to    -67
 
 5 to it.
 
 6      "Wages" means wages, commissions, fees, salaries, bonuses,
 
 7 and every and all other kinds of remuneration for, or
 
 8 compensation attributable to, services performed by an employee
 
 9 for the employee's employer, including the cash value of all
 
10 remuneration paid in any medium other than cash and the cost-of-
 
11 living allowances and other payments included in gross income by
 
12 section    -7.
 
13      (b)  Every employer, as defined herein, making payment of
 
14 wages, as herein defined, to employees, shall deduct and withhold
 
15 from such wages an amount of tax determined as provided in this
 
16 section.
 
17      (c)  For each withholding period (whether weekly, biweekly,
 
18 monthly, or otherwise) the amount of tax to be withheld under
 
19 this section shall be at a rate which, for the taxable year, will
 
20 yield the tax imposed by section    -51 upon each employee's
 
21 annual wage, as estimated from the employee's current wage in any
 
22 withholding period, but (for the purposes of this subsection of
 
23 the rates provided by section    -51 the maximum to be taken into
 

 
Page 29                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 consideration shall be            per cent.  The tax for the
 
 2 taxable year shall be calculated upon the following assumptions:
 
 3      (1)  That the employee's annual wage, as estimated from the
 
 4           employee's current wage in the withholding period, will
 
 5           be the employee's sole income for the taxable year;
 
 6      (2)  That there will be no deductions therefrom in
 
 7           determining gross income; and
 
 8      (3)  If it appears from the certificate filed pursuant to
 
 9           subsection (f) that the employee, under section    -93,
 
10           is entitled to make a joint return, that the employee
 
11           and the employee's spouse will so elect.
 
12      (d)  Alternatively, at the election of the employer, the
 
13 employer may deduct and withhold from each employee an amount of
 
14 tax determined on the basis of tables to be prepared and
 
15 furnished by the department of taxation, which amount of tax
 
16 shall be substantially equivalent to the amount of tax provided
 
17 by subsection (c) hereof.
 
18      (e)  The department, by rule, may require the deduction and
 
19 withholding of tax from any remuneration or compensation paid for
 
20 or attributable to services, whether or not such withholding is
 
21 provided for hereinabove.  Every person so required to deduct and
 
22 withhold tax, or from whom tax is required to be deducted and
 
23 withheld, shall be subject to sections    -61 to    -67, and
 

 
Page 30                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 every person so required to deduct and withhold tax shall be
 
 2 deemed an employer for the purposes of this chapter.
 
 3      The department, by rule, may exempt any employer from the
 
 4 requirement of deduction and withholding of taxes, even though
 
 5 the requirement is imposed by this section, if and to the extent
 
 6 that the department finds the requirement unduly onerous or
 
 7 impracticable of enforcement.
 
 8      (f)  On or before the date of the commencement of employment
 
 9 with an employer, the employee shall furnish the employer with a
 
10 signed certificate showing whether the employee is married and
 
11 is, under section    -93, entitled to make a joint return.  The
 
12 certificate shall be in such form and contain such information as
 
13 may be prescribed by the department.
 
14      If, on any day during the calendar year, there is a change
 
15 in the employee's marital status and the employee no longer is
 
16 entitled to make a joint return, the employee shall within ten
 
17 days thereafter furnish the employer with a new certificate
 
18 showing the employee's present marital status.  If, on any day
 
19 during the calendar year, there is a change in the employee's
 
20 marital status and though previously not entitled to make a joint
 
21 return the employee now is so entitled, the employee may furnish
 
22 the employer with a new certificate showing the employee's
 
23 present marital status, to which the employee is entitled on the
 

 
Page 31                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 basis of the existing facts.
 
 2      Such certificate shall take effect at the times set forth in
 
 3 the Internal Revenue Code of 1954, as amended.
 
 4      (g)  The director of taxation may adopt by rule under
 
 5 chapter 91 the regulations published by the United States
 
 6 Secretary of Treasury or a delegate of the Secretary relating to
 
 7 the provisions of subtitle C, chapter 24 of the Internal Revenue
 
 8 Code of 1954, as amended, operative in this section.
 
 9      § -62  Return and payment of withheld taxes.  Every
 
10 employer required by this chapter to withhold taxes on wages paid
 
11 in any month shall make a return of such wages to the department
 
12 on or before the fifteenth day of the calendar month following
 
13 the month for which the taxes have been withheld; provided that
 
14 each employer required to make a return under this section whose
 
15 liability for taxes withheld exceeds $100,000 a year, shall make
 
16 a return of wages and taxes withheld to the department on or
 
17 before the tenth day of the calendar month following the month
 
18 for which the taxes have been withheld.  The return shall be in
 
19 such form, including computer printouts and the like, and contain
 
20 such information as may be prescribed by the director of
 
21 taxation.  The return shall be filed with the collector of the
 
22 taxation district in which the employer has the employer's
 
23 principal place of business or with the director at Honolulu if
 

 
Page 32                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 the employer has no place of business in the State.  Every return
 
 2 required under this section shall be accompanied by a remission
 
 3 of the complete amount of tax withheld, as reported in the
 
 4 return.  If the director believes collection of the tax may be in
 
 5 jeopardy, the director may require any person required to make a
 
 6 return under this section to make such return and pay such tax at
 
 7 any time.  The director may grant permission to employers, whose
 
 8 liability to pay over the taxes withheld as provided in this
 
 9 section shall not exceed $1,000 a year, to make returns and
 
10 payments of the taxes due on a quarterly basis during the
 
11 calendar year, the returns and payments to be made on or before
 
12 the fifteenth day of the calendar month after the close of each
 
13 quarter, to wit, on or before April 15, July 15, October 15, and
 
14 January 15.  The director may grant permission to employers to
 
15 make monthly payments based on an estimated quarterly liability;
 
16 provided that the employer files a reconciliation return on or
 
17 before the fifteenth day of the calendar month after the close of
 
18 each quarter during the calendar year as provided by this
 
19 section.  The director, for good cause, may extend the time for
 
20 making returns and payments, but not beyond the fifteenth day of
 
21 the second month following the regular due date of the return.
 
22 With respect to wages paid out of public moneys, the director, in
 
23 the director's discretion, may prescribe special forms for, and
 

 
Page 33                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 different procedures and times for the filing of, the returns by
 
 2 employers paying the wages, or may waive the filing of any
 
 3 returns upon the conditions and subject to rules the director may
 
 4 prescribe.
 
 5      § -63  Statements to employees.  Every employer required
 
 6 to deduct and withhold any tax on the wages of any employee shall
 
 7 furnish to each employee in respect of the employee's employment
 
 8 during the calendar year, on or before January 31 of the
 
 9 succeeding year, or if the employee's employment is terminated
 
10 before the close of a calendar year, within thirty days after the
 
11 date of receipt of a written request from the employee if such
 
12 thirty-day period ends before January 31, a written statement,
 
13 showing the period covered by the statement, the wages paid by
 
14 the employer to the employee during such period, and the amount
 
15 of the tax deducted and withheld or paid in respect of such
 
16 wages.  Each such employer shall file on or before the last day
 
17 of February following the close of the calendar year a duplicate
 
18 copy of each such statement.  The department may grant to any
 
19 employer a reasonable extension of time, not in excess of sixty
 
20 days, with respect to any statement required by this section to
 
21 be furnished to an employee or filed, and may by regulation
 
22 provide for the furnishing or filing of statements at such other
 
23 times and containing such other information as may be required
 

 
Page 34                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 for the administration of this chapter.  The department shall
 
 2 prescribe the form of the statement required by this section and
 
 3 may adopt any federal form appropriate for the purpose.
 
 4      § -64  Taxes withheld by employer held in trust;
 
 5 employer's liability.(a)  All taxes withheld by any employer
 
 6 under section    -61 shall be held in trust by the employer for
 
 7 the State and for the payment of the same to the collector in the
 
 8 manner and at the time required by this chapter.  If any employer
 
 9 fails, neglects, or refuses to deduct and withhold from the wages
 
10 paid to an employee, or to pay over, the amount of tax required,
 
11 the employer shall be liable to pay to the State the amount of
 
12 the tax.  An employer may recover from an employee any amount
 
13 which the employer should have withheld but did not withhold from
 
14 the employee's wages, if the employer has been required to pay
 
15 and has paid the amount to the State out of the employer's own
 
16 funds pursuant to this section.
 
17      (b)  In addition to the liability imposed by subsection (a)
 
18 if any employer which is a corporation fails, neglects, or
 
19 refuses to deduct and withhold from the wages paid to any
 
20 employee, or to pay over, the amount of tax required, any person
 
21 or corporate officer excluding those who have only ministerial
 
22 duties, who is under a duty to the corporation to deduct and
 
23 withhold or to pay over, the amount of tax required, and who
 

 
Page 35                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 wilfully fails to perform such duty, shall be liable to the State
 
 2 for the amount of the tax.  The liability may be assessed and
 
 3 collected in the same manner as the liability imposed by
 
 4 subsection (a); provided that two or more persons may be assessed
 
 5 under this subsection jointly or in the alternative, but the tax
 
 6 shall be collected only once with respect to the same wages.  The
 
 7 voluntary or involuntary dissolution of the corporation, or the
 
 8 withdrawal and surrender of its right to engage in business
 
 9 within this State shall not discharge the liability hereby
 
10 imposed.
 
11      §   -65  Reserved.
 
12      §   -66  Further withholdings at source; crediting of
 
13 withheld taxes.(a)  The department by rule, may require the
 
14 deduction and withholding of tax from any gross income or
 
15 adjusted gross income of a nonresident, in order to collect the
 
16 tax imposed by this chapter on the nonresident.
 
17      (b)  Income upon which any tax has been withheld at the
 
18 source under sections    -61 to    -64, or under rules adopted
 
19 pursuant to subsection (a), shall be included in the return of
 
20 the recipient of that income, but any amount of tax so withheld
 
21 shall be credited against the amount of income tax as computed in
 
22 the return, and if in excess of the tax due for the taxable year
 
23 shall be refunded as provided in section    -110.
 

 
Page 36                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1      § -67  Indemnity of withholder.  Every person required to
 
 2 withhold a tax under sections    -61 to    -64, or under rules
 
 3 adopted pursuant to section    -66(a), is made liable for such
 
 4 tax and is relieved of liability for or upon the claim or demand
 
 5 of any other person for the amount of any payments to the
 
 6 department of taxation made in accordance with such sections.
 
 7      § -68  Withholding of tax on the disposition of real
 
 8 property by nonresident persons.  (a)  As used in this section:
 
 9      "Nonresident person" means every person other than a
 
10 resident person.
 
11      "Property" or "real property" has the meaning as the same
 
12 term is defined in section 231-1.
 
13      "Resident person" means any individual included in the
 
14 definition of resident in section    -1; any corporation
 
15 incorporated or granted a certificate of authority under chapter
 
16 415, 415A, or 415B; any partnership formed or registered under
 
17 chapter 425 or 425D; any foreign partnership qualified to
 
18 transact business pursuant to chapter 425 or 425D; or any trust
 
19 included in the definition of resident trust in section    -2; or
 
20 any estate included in the definition of resident estate in
 
21 section    -2.
 
22      "Transferee" means any person, the State and the counties
 
23 and their respective subdivisions, agencies, authorities, and
 

 
Page 37                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 boards, acquiring real property which is located in Hawaii.
 
 2      "Transferor" means any person disposing real property which
 
 3 is located in Hawaii.
 
 4      (b)  Unless otherwise provided in this section, every
 
 5 transferee shall deduct and withhold a tax equal to           per
 
 6 cent of the amount realized on the disposition of Hawaii real
 
 7 property.  Every person required to withhold a tax under this
 
 8 section is made liable for the tax and is relieved of liability
 
 9 for or upon the claim or demand of any other person for the
 
10 amount of any payments to the department made in accordance with
 
11 this section.
 
12      (c)  Every transferee required by this section to withhold
 
13 tax under subsection (b) shall make a return of the amount
 
14 withheld to the department of taxation not more than twenty days
 
15 following the transfer date.
 
16      (d)  No person shall be required to deduct and withhold any
 
17 amount under subsection (b), if the transferor furnishes to the
 
18 transferee an affidavit by the transferor stating the
 
19 transferor's taxpayer identification number and the transferor is
 
20 a resident person. This subsection shall not apply if the
 
21 transferee has actual knowledge that the affidavit referred to in
 
22 this subsection is false.
 
23      (e)  An application for a withholding certificate may be
 

 
Page 38                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 submitted by the transferor to the department setting forth:
 
 2      (1)  The name, address, and taxpayer identification number,
 
 3           if any, of the parties to the transaction and the
 
 4           location and general description of the real property
 
 5           to be transferred; and
 
 6      (2)  A calculation and written justification showing that
 
 7           the transferor will not realize any gain with respect
 
 8           to the transfer; or
 
 9      (3)  A calculation and written justification showing that
 
10           there will be insufficient proceeds to pay the
 
11           withholding required under subsection (b) after payment
 
12           of all costs, including selling expenses and the amount
 
13           of any mortgage or lien secured by the property.
 
14      Upon receipt of the application, the department shall
 
15 determine whether the transferor has realized or will realize any
 
16 gain with respect to the transfer, or whether there will be
 
17 insufficient proceeds to pay the withholding.  If the department
 
18 is satisfied that no gain will be realized or that there will be
 
19 insufficient proceeds to pay the withholding, it shall issue a
 
20 withholding certificate stating the amount to be withheld, if
 
21 any.
 
22      The submission of an application for a withholding
 
23 certificate to the department does not relieve the transferee of
 

 
Page 39                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 its obligation to withhold or to make a return of the tax under
 
 2 subsections (b) and (c).
 
 3      (f)  No person shall be required to deduct and withhold any
 
 4 amount under subsection (b) if one or more individual transferors
 
 5 furnishes to the transferee an affidavit by the transferor
 
 6 stating the transferor's taxpayer identification number, that for
 
 7 the year preceding the date of the transfer the property has been
 
 8 used by the transferor as a principal residence, and that the
 
 9 amount realized for the property does not exceed $300,000.
 
10      (g)  The department may enter into written agreements with
 
11 persons who engage in more than one real property transaction in
 
12 a calendar year or other persons to whom meeting the withholding
 
13 requirements of this section are not practicable.  The written
 
14 agreements may allow the use of a withholding method other than
 
15 that prescribed by this section or may waive the withholding
 
16 requirement under this section.
 
17                  PART IV.  RETURNS AND PAYMENTS
 
18      §   -91  Reserved.
 
19      §   -92  Returns, who shall make.  For each taxable year,
 
20 returns shall be made by the following persons to the department
 
21 of taxation in such form and manner as it shall prescribe:
 
22      (1)  Every person doing business in the State during the
 
23           taxable year, whether or not the person derives any
 

 
Page 40                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1           taxable income therefrom.  As used in this paragraph
 
 2           "doing business" includes all activities engaged in or
 
 3           caused to be engaged in with the object of gain or
 
 4           economic benefit, direct or indirect, except personal
 
 5           services performed as an employee under the direction
 
 6           and control of an employer.  Every person receiving
 
 7           rents from property owned in the State is classed as
 
 8           "doing business" and shall make a return whether or not
 
 9           the person derives taxable income therefrom.
 
10      (2)  Every corporation having for the taxable year gross
 
11           income subject to taxation under this chapter; provided
 
12           that an affiliated group of domestic corporations may
 
13           make and file a consolidated return for the taxable
 
14           year in lieu of separate tax returns in the manner and
 
15           to the extent, so far as applicable, set forth in
 
16           sections 1501 through 1505 and 1552 of the Internal
 
17           Revenue Code of 1954, as amended.
 
18      (3)  Every individual, estate, or trust having for the
 
19           taxable year gross income subject to taxation under
 
20           this chapter, except as exempted from the filing of a
 
21           return by regulations of the department.
 
22      The department by rule may excuse the filing of a return by
 
23 an individual, estate, or trust in cases not coming within
 

 
Page 41                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 paragraph (1), where the gross income is exempt under section
 
 2    -7 and no tax is expected to accrue under this chapter, or are
 
 3 such that substantially all the tax will have been collected
 
 4 through tax withholdings or at the source.
 
 5      § -93  Joint returns.  A husband and wife, having that
 
 6 status for purposes of the Internal Revenue Code of 1954, as
 
 7 amended, and entitled to make a joint federal return for the
 
 8 taxable year, may make a single return jointly of taxes under
 
 9 this chapter for the taxable year.  In that case the tax shall be
 
10 computed on their aggregate income and the liability with respect
 
11 to the tax shall be joint and several.  For purposes of this
 
12 chapter "aggregate income" means the income of both spouses
 
13 without regard to source in the State. 
 
14      If an individual has filed a separate return for a taxable
 
15 year for which a joint return could have been made by the
 
16 taxpayer and the taxpayer's spouse, an election thereafter to
 
17 make a joint return for the taxable year shall be made only upon
 
18 compliance with rules of the department, which may limit the
 
19 election and prescribe the terms and provisions applicable in
 
20 such cases as nearly as may be in conformity with the Internal
 
21 Revenue Code of 1954, as amended.
 
22      § -94  Returns by agent, guardian, etc.; liability of
 
23 fiduciaries.(a)  Returns of decedents.  If an individual is
 

 
Page 42                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 deceased, the return of the individual required under section
 
 2    -92 shall be made by the individual's personal representative
 
 3 or other person charged with the care of property of the
 
 4 decedent.
 
 5      (b)  Persons under a disability.  If an individual is unable
 
 6 to make a return required under section    -92 or    -97, the
 
 7 return of the individual shall be made by a duly authorized
 
 8 agent, the individual's committee, guardian, fiduciary, or other
 
 9 person charged with the care of the person or property of the
 
10 individual.  The preceding sentence shall not apply in the case
 
11 of a receiver appointed by authority of law in possession of only
 
12 a part of the property of an individual. 
 
13      (c)  Receivers, trustees, and assignees for corporations.
 
14 In a case where a receiver, trustee in bankruptcy, or assignee,
 
15 by order of a court of competent jurisdiction, by operation of
 
16 law, or otherwise, has possession of or holds title to all or
 
17 substantially all the property or business of a corporation,
 
18 whether or not the property or business is being operated, such
 
19 receiver, trustee, or assignee shall make the return of income
 
20 for the corporation in the same manner and form as corporations
 
21 are required to make such returns.
 
22      (d)  Returns of estates and trusts.  Returns of an estate or
 
23 a trust shall be made by the fiduciary thereof.
 

 
Page 43                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1      (e)  Joint fiduciaries.  Under such regulations as the
 
 2 department may prescribe, a return made by one of two or more
 
 3 joint fiduciaries shall be sufficient compliance with the
 
 4 requirement of this section.  A return made pursuant to this
 
 5 subsection shall contain a statement that the fiduciary has
 
 6 sufficient knowledge of the affairs of the person for whom the
 
 7 return is made to enable the fiduciary to make the return, and
 
 8 the return is, to the best of the fiduciary's knowledge and
 
 9 belief, true and correct.
 
10      (f)  Liability of fiduciaries.  A tax imposed upon a
 
11 fiduciary shall be a charge upon the property held by the
 
12 fiduciary in that capacity.
 
13      § -95  Partnership returns.  Every partnership shall make
 
14 a return for each taxable year upon forms prescribed by the
 
15 department of taxation, itemizing its gross income and allowable
 
16 deductions and including the names and addresses of the persons
 
17 who would be entitled to share in the income if distributed and
 
18 the amount of each distributive share.  The return shall be
 
19 authenticated by the signature of any one of the partners, under
 
20 the penalties provided by section 231-36, and the fact that a
 
21 partner's name is signed on the return shall be prima facie
 
22 evidence that such partner is authorized to sign the return on
 
23 behalf of the partnership.  All provisions of this chapter
 

 
Page 44                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 relating to returns shall be applicable to partnership returns
 
 2 except as specifically otherwise stated in this section.
 
 3      §   -95.5  S corporation returns; shareholder agreements;
 
 4 mandatory payments. (a)  An S corporation which engages in
 
 5 activities in this State which would subject a C corporation to
 
 6 the requirement to file a return under section    -92 shall file
 
 7 with the department an annual return, in the form prescribed by
 
 8 the department, on or before the due date prescribed for the
 
 9 filing of C corporation returns by section    -97.
 
10      Every S corporation shall make a return for each taxable
 
11 year, stating specifically the items of its gross income and the
 
12 deductions allowable by this chapter, the name, address, and
 
13 social security or federal identification number of each person
 
14 owning stock in the corporation at any time during the taxable
 
15 year, the number of shares of stock owned by each shareholder at
 
16 all times during the taxable year, the income attributable to the
 
17 State and income not attributable to the State with respect to
 
18 each shareholder as determined under this part, the amount of
 
19 money and other property distributed by the corporation during
 
20 the taxable year to each shareholder, the date of each such
 
21 distribution, and such other information as the department may by
 
22 form or rule prescribe.
 
23      The S corporation, on or before the day on which such return
 

 
Page 45                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 is filed, shall furnish to each person who was a shareholder
 
 2 during the year a copy of the information shown on the return as
 
 3 the department may by form or rule prescribe.  Any return filed
 
 4 pursuant to this section, shall be treated as a return filed by
 
 5 the corporation under section    -92.  The S corporation shall
 
 6 also maintain the accumulated adjustments account.
 
 7      (b)  The department shall permit S corporations to file
 
 8 composite returns and to make composite payments of tax on behalf
 
 9 of some or all of its nonresident shareholders.  The department
 
10 may permit composite returns and payments to be made on behalf of
 
11 resident shareholders.
 
12      (c)  An S corporation shall file with the department, in the
 
13 form prescribed by the department, the agreement of each
 
14 nonresident shareholder of the corporation:
 
15      (1)  To file a return and make timely payment of all taxes
 
16           imposed by this State on the shareholder with respect
 
17           to the income of the S corporation; and
 
18      (2)  To be subject to personal jurisdiction in this State
 
19           for purposes of the collection of unpaid income tax,
 
20           together with related interest and penalties.
 
21      If the corporation fails to timely file the agreements
 
22 required by paragraphs (1) and (2) on behalf of each of its
 
23 nonresident shareholders, then the corporation, at the times set
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 forth in subsection (d), shall pay to this State on behalf of
 
 2 each nonresident shareholder in respect of whom an agreement has
 
 3 not been timely filed an amount equal to the rate in effect under
 
 4 section    -51 multiplied by the amount of the shareholder's pro
 
 5 rata share of the income attributable to the State reflected on
 
 6 the corporation's return for the taxable period.  An S
 
 7 corporation shall be entitled to recover a payment made pursuant
 
 8 to the preceding sentence from the shareholder on whose behalf
 
 9 the payment was made.
 
10      (d)  The agreements required to be filed pursuant to
 
11 subsection (c) shall be filed at the following times:
 
12      (1)  At the time the annual return is required to be filed
 
13           for the first taxable period for which the S
 
14           corporation became subject to this part, and
 
15      (2)  At the time the annual return is required to be filed
 
16           for any taxable period in which the corporation had a
 
17           nonresident shareholder on whose behalf such an
 
18           agreement has not been previously filed.
 
19      (e)  Any amount paid by the corporation to this State
 
20 pursuant to subsection (b) or (c) shall be considered to be a
 
21 payment by the shareholder on account of the income tax imposed
 
22 on the shareholder for the taxable period.
 
23      (f)  Any officer of any S corporation who wilfully fails to
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 provide any information, file any return or agreement, make any
 
 2 payment, or maintain any account as required by this section or
 
 3 by section 231-15.6 shall be guilty of a misdemeanor.
 
 4      § -96  Returns by persons making payments.  By duly
 
 5 adopted rules, the department may require that any individual,
 
 6 partnership, corporation, joint stock company, association,
 
 7 insurance company, or other person, being a resident or having a
 
 8 place of business in this State, in whatever capacity acting,
 
 9 including lessees or mortgagors of real and personal property,
 
10 fiduciaries, employers, and all officers and employees of the
 
11 State or of any political subdivision thereof, having the
 
12 control, receipt, custody, disposal, or payment of any annuity or
 
13 interest on deposits or funds held in trust, including taxable
 
14 income from endowment policies, other interest (except interest
 
15 coupons payable to bearer), dividends, wages, rentals, royalties,
 
16 premiums, or other emoluments, gains, profits, and income, paid
 
17 or payable during any year to any person, shall, on such date or
 
18 dates as the department shall from time to time designate, make a
 
19 return to the department furnishing the information required by
 
20 the rules.
 
21      § -96.5  Returns relating to unemployment.(a)  The state
 
22 department of labor and industrial relations shall submit a
 
23 return to the department according to the forms or rules
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 prescribed by the director setting forth the aggregate amounts of
 
 2 payments of unemployment compensation and the name and address of
 
 3 the individual to whom paid under chapters 383 to 385.
 
 4      (b)  The department of labor and industrial relations shall
 
 5 furnish to each individual whose name is set forth in such return
 
 6 a written statement showing:
 
 7      (1)  The name and address of the department of labor and
 
 8           industrial relations; and
 
 9      (2)  The aggregate amount of payments to the individual as
 
10           shown on such return. 
 
11 The written statement required by this subsection shall be
 
12 furnished to the individual on or before January 31 of the year
 
13 following the calendar year for which the return under subsection
 
14 (a) was made.  No statement shall be required to be furnished to
 
15 any individual under this subsection if the aggregate amount of
 
16 payments to such individual shown on the return made under
 
17 subsection (a) is less than $10.
 
18      § -97  Estimates; tax payments; returns.
 
19      (a)  (1)  Individuals, corporations (including S
 
20           corporations), estates, and trusts, shall annually
 
21           furnish the department of taxation with a declaration
 
22           of estimated tax for the current taxable year.
 
23           Declarations of estimated tax, except as otherwise
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           provided by rule, shall be governed by the provisions
 
 2           as to returns contained in sections    -94,    -95.5,
 
 3              -98, and    -99.  The declarations shall be made on
 
 4           estimated tax payment voucher forms.  The payment
 
 5           voucher shall be filed, in the case of taxpayers on the
 
 6           calendar year basis, on or before April 20.  In the
 
 7           case of a husband and wife who are entitled to submit a
 
 8           joint payment voucher for federal purposes, a single
 
 9           payment voucher may be submitted by them jointly, in
 
10           which case the liability with respect to the estimated
 
11           tax shall be joint and several; if a joint payment
 
12           voucher is submitted but a joint income tax return is
 
13           not made for the taxable year, the estimated tax for
 
14           the year may be treated as the estimated tax of either
 
15           the husband or the wife or may be divided between them.
 
16      (2)  Each taxpayer shall transmit, with the payment voucher,
 
17           payment of one-quarter of the estimated tax for the
 
18           current taxable year.  In determining this quarterly
 
19           payment and all other installments, there first shall
 
20           be deducted from the total estimated tax the amount of
 
21           estimated tax withholding or collection at source for
 
22           the taxable year.  Thereafter, on the twentieth day of
 
23           June and September, the taxpayer shall transmit with
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           the payment voucher, payment of one-quarter of the
 
 2           estimated tax.  The fourth quarter payment of the
 
 3           estimated tax shall be transmitted with the payment
 
 4           voucher by January 20 of the year following the taxable
 
 5           year for which the estimate was made.
 
 6      (3)  Taxpayers operating on a fiscal year basis shall make
 
 7           similar estimates and tax payments, on or before the
 
 8           twentieth day of the fourth month of the fiscal year
 
 9           and periodically thereafter so as to conform to the
 
10           payments and returns required in the case of those on a
 
11           calendar year basis.
 
12      (4)  The department by rule may excuse individuals from
 
13           filing an estimate in those cases where the gross
 
14           income and exemptions are such that no tax is expected
 
15           to accrue under this chapter, or are such that
 
16           substantially all the tax will be collected through tax
 
17           withholding or at the source.
 
18      (5)  In the case of a foreign corporation, the department
 
19           may excuse the filing of an estimate and the payment of
 
20           estimated tax if it is satisfied that less than fifteen
 
21           per cent of the corporation's business for the taxable
 
22           year will be attributable to the State.  For the
 
23           purposes of this paragraph, fifteen per cent of a
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           corporation's business shall be deemed attributable to
 
 2           the State if fifteen per cent or more of the entire
 
 3           gross income of the corporation (which for the purposes
 
 4           of this paragraph means gross income computed without
 
 5           regard to source in the State) is attributable to the
 
 6           State under sections    -21 to    -39 or other
 
 7           provisions of this chapter.
 
 8      (6)  In the case of a taxpayer whose tax liability is less
 
 9           than $500, the filing of an estimate and the payment of
 
10           estimated tax shall not be required.
 
11      (b)  Net income returns for the taxable year shall be filed
 
12 with the department on or before the twentieth day of the fourth
 
13 month following the close of the taxable year, and shall be
 
14 accompanied by payment of the balance of the tax for the taxable
 
15 year, or the entire tax for the taxable year, as the case may be.
 
16 These returns shall be filed both by persons required to make
 
17 declarations of estimated tax pursuant to this section and by
 
18 persons not required to make declarations of estimated tax.
 
19      (c)  At the election of the taxpayer, any installment of the
 
20 estimated tax may be paid prior to the date prescribed for its
 
21 payment.
 
22      (d)  A person who, under the rules of the department adopted
 
23 pursuant to subsection (a)(4), is relieved of filing an estimate,
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 shall if the rules cease to apply by reason of a change of
 
 2 circumstances during the taxable year, file the required estimate
 
 3 on the first quarterly payment date prescribed for payment of
 
 4 estimated taxes, following such change of circumstances, and pay
 
 5 the estimated tax in equal installments computed by allocating
 
 6 the entire amount shown by the estimate for the current taxable
 
 7 year to the remaining quarterly payment dates.
 
 8      (e)  An amendment of an estimate may be filed, under rules
 
 9 prescribed by the department.  If an amendment is filed, the
 
10 remaining installments, if any, shall be ratably increased or
 
11 decreased to reflect the increase or decrease in the estimate.
 
12 The amended estimate may be accompanied by payment of the amount
 
13 of underpayment, if any, and if so this shall be considered in
 
14 determining the period of the underpayment as provided in
 
15 subsection (g).
 
16      (f)  In the case of any underpayment of estimated tax,
 
17 except as provided by this subsection, there shall be added to
 
18 the tax for the taxable year an amount determined at the rate of
 
19 two-thirds of one per cent a month or fraction of a month upon
 
20 the amount of the underpayment for the period of the
 
21 underpayment.
 
22      (1)  The amount of the underpayment shall be the excess of:
 
23           (A)  The required installment, over
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           (B)  The amount, if any, of the installment paid on or
 
 2                before the due date for the installment.
 
 3      (2)  The period of the underpayment shall run from the due
 
 4           date for the installment to whichever of the following
 
 5           dates is the earlier:
 
 6           (A)  The twentieth day of the fourth month following
 
 7                the close of the taxable year, or
 
 8           (B)  With respect to any portion of the underpayment,
 
 9                the date on which the portion is paid.  For
 
10                purposes of this paragraph, a payment of estimated
 
11                tax on any installment date shall be credited
 
12                against unpaid required installments in the order
 
13                in which the installments are required to be paid.
 
14      (3)  For the purposes of this section, the term "tax" means
 
15           the tax imposed under this chapter reduced by any
 
16           credits available to the taxpayer other than the credit
 
17           for amounts withheld from the taxpayer's wages or taxes
 
18           withheld at the source, if any, for the taxable year.
 
19      (4)  Sections 6654(d), (e)(2), (e)(3), (h), (i), (j), (k),
 
20           and (l), (with respect to failure by an individual to
 
21           pay estimated income tax), and 6655(d), (e), (g)(2),
 
22           (g)(3), (g)(4), and (i) (with respect to failure by a
 
23           corporation to pay estimated income tax) of the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           Internal Revenue Code of 1954, as amended, shall be
 
 2           operative for the purposes of this section; provided
 
 3           that the due dates contained in any of the preceding
 
 4           Internal Revenue Code if 1954, as amended, sections
 
 5           shall be deemed to be the twentieth day of the
 
 6           applicable month.
 
 7      (g)  The amounts of taxes withheld from wages or collected
 
 8 at source shall be deemed payments of estimated tax, and an equal
 
 9 part of any such amount shall be deemed paid on each installment
 
10 date for the taxable year, unless the taxpayer establishes the
 
11 dates on which all amounts were actually withheld or collected,
 
12 in which case the amounts so withheld or collected shall be
 
13 deemed payments of estimated tax on the dates on which such
 
14 amounts were actually withheld or collected.
 
15      § -98  Returns; form, verification and authentication,
 
16 time of filing.  Returns shall be in such form as the department
 
17 may prescribe from time to time and shall be verified by written
 
18 declarations that the statements therein made are subject to the
 
19 penalties prescribed in section 231-36.  Corporate returns shall
 
20 be authenticated by the signature of the president, vice
 
21 president, treasurer, assistant treasurer, chief accounting
 
22 officer, or any other officer duly authorized so to act, under
 
23 the penalties prescribed by section 231-36.  The fact that an
 

 
Page 55                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 individual's name is signed on the corporation return shall be
 
 2 prima facie evidence that the individual is authorized to sign
 
 3 the return on behalf of the corporation.
 
 4      The department may grant a reasonable extension of time for
 
 5 filing returns under such rules and regulations as it shall
 
 6 prescribe.  Except in the case of persons who are outside the
 
 7 United States, no extension shall be for more than six months.
 
 8      § -99  Same; place for filing.  Returns shall be filed
 
 9 with the collector for the taxation district in which is located
 
10 the legal residence or principal place of business of the person
 
11 making the return, or, if such person has no legal residence or
 
12 principal place of business in the State, then with the collector
 
13 at Honolulu.
 
14      § -100  Persons in military service.  The collection from
 
15 any person in the military service of any tax on the income of
 
16 such person, whether falling due prior to or during the person's
 
17 period of military service (which term, as used in this section,
 
18 shall have the same meaning as in the Soldiers' and Sailors'
 
19 Civil Relief Act of 1940, as amended), shall be deferred for a
 
20 period extending not more than six months after the termination
 
21 of the person's period of military service if such person's
 
22 ability to pay such tax is materially impaired by reason of such
 
23 service.  No interest on any amount of tax, collection of which
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 is deferred for any period under this section, and no penalty for
 
 2 nonpayment of such amount during such period, shall accrue for
 
 3 such period of deferment by reason of such nonpayment.  The
 
 4 running of any statute of limitations against the collection of
 
 5 such tax by distraint or otherwise shall be suspended for the
 
 6 period of military service of any individual the collection of
 
 7 whose tax is deferred under this section, and for an additional
 
 8 period of nine months beginning with the day following the period
 
 9 of military service.
 
10      § -100.5  Abatement of income taxes of members of armed
 
11 forces on death.  Section 692 (with respect to income taxes of
 
12 members of armed forces on death) of the Internal Revenue Code of
 
13 1954, as amended, shall be operative for the purposes of this
 
14 chapter and the department shall have the authority to abate
 
15 income taxes as provided in section 692.
 
16      For the purposes of this section "member of the Armed Forces
 
17 of the United States" shall have the same meaning as provided by
 
18 section 7701(a)(15) of the Internal Revenue Code of 1954, as
 
19 amended.
 
20      § -102  Records and special returns.(a)  Records.  Every
 
21 person liable to any tax imposed by this chapter or for the
 
22 collection or deduction thereof at source, shall keep full,
 
23 complete, regular, and accurate books of account in which all the
 

 
Page 57                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 person's transactions shall be entered in regular order; provided
 
 2 that the director, by rule, may provide for the keeping of
 
 3 simpler accounts in cases where, by reason of the smallness of
 
 4 the income or otherwise, undue hardship or expense will be caused
 
 5 by the keeping of full books of account.  All books of account
 
 6 required to be kept by this chapter shall be preserved for a
 
 7 period of three years, except that the director may, in writing,
 
 8 consent to their destruction within such period or may require
 
 9 that they be kept longer.
 
10      (b)  Special returns and statements.  Whenever it is
 
11 necessary, in the judgment of the director, the director may
 
12 require any taxpayer, or person liable for the collection or
 
13 deduction of tax at source, by notice served upon the taxpayer or
 
14 other person, to make such returns or render such signed
 
15 statements as the director deems sufficient to show whether or
 
16 not the taxpayer or other person is liable under this chapter.
 
17      § -102.5  Income check-off authorized.  Any individual
 
18 whose state tax liability for any taxable year is $2 or more may
 
19 designate $2 of the liability to be paid over to the Hawaii
 
20 election campaign fund, any other law to the contrary
 
21 notwithstanding, when submitting a state tax return to the
 
22 department.  In the case of a joint return of a husband and wife
 
23 having a state tax liability of $4 or more, each spouse may
 

 
Page 58                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 designate that $2 be paid to the fund.  The director shall revise
 
 2 the individual state tax form to allow the designation of
 
 3 contributions to the fund on the face of the tax return and
 
 4 immediately above the signature lines.  An explanation shall be
 
 5 included which clearly states that the check-off does not
 
 6 constitute an additional tax liability.  If no designation was
 
 7 made on the original tax return when filed, a designation may be
 
 8 made by the individual on an amended return filed within twenty
 
 9 months and ten days after the due date for the original return
 
10 for such taxable year.  A designation once made whether by an
 
11 original or amended return may not be revoked.
 
12      § -103  Distortion of income.  When a taxpayer so conducts
 
13 business as either directly or indirectly to benefit stockholders
 
14 thereof, or any other person interested therein, by selling
 
15 products or the goods or commodities in which the taxpayer deals
 
16 at less than the fair price that could be obtained for them, or
 
17 where a corporation, a substantial portion of the capital stock
 
18 of which is owned either directly or indirectly by another
 
19 corporation, acquires or disposes of the products of the
 
20 corporation so owning a substantial portion of its stock in such
 
21 manner as to create a loss or improper income to either of the
 
22 corporations, or where a partnership or individual owns an
 
23 interest in another corporation or business either directly or
 

 
Page 59                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 indirectly and acquires and disposes of the products of such
 
 2 other business in such manner as to create a loss or improper
 
 3 income to either of the businesses, and generally in all cases
 
 4 where different forms of business enterprise are used in
 
 5 conjunction with one another for the purpose, among others, of
 
 6 diverting profits reasonably and properly made by one factor
 
 7 agency or segment of the business to another, the director may
 
 8 determine the amount of tax upon either or both of the
 
 9 enterprises for the taxable year, having due regard to the
 
10 reasonable profits which but for such arrangement, understanding,
 
11 business device, or organization might or could have accrued to
 
12 either or both of the enterprises.
 
13      § -104  Penalties.  Penalties and interest shall be added
 
14 to and become part of the tax, when and as provided by section
 
15 231-39.  The penalties and interest provided by section 231-39
 
16 shall apply to employers as well as taxpayers.
 
17      § -105  Failure to keep records, render returns, or make
 
18 reports by responsible persons.  The penalties provided by
 
19 sections 231-34, 231-35, and 231-36 shall apply to any person,
 
20 whether acting as principal, agent, officer, or director for
 
21 oneself, itself, or another person and shall apply to each single
 
22 violation.  These penalties shall be in addition to other
 
23 penalties provided by law.
 

 
Page 60                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1      § -106  Reserved.
 
 2      § -107  Procedure upon failure to file return.  If any
 
 3 taxpayer or employer liable to make and file a return under this
 
 4 chapter fails, neglects, or refuses to make and file a return as
 
 5 required within the time prescribed, or declines to authenticate
 
 6 a return if made, the department shall make a return for the
 
 7 taxpayer or employer from the best information obtainable and
 
 8 shall levy and assess against the taxpayer or employer the tax
 
 9 upon the amount of taxable income, or the tax required to be
 
10 withheld from wages and paid over, as shown by such return, to
 
11 which shall be added the penalties and interest provided by
 
12 section 231-39.  The assessment shall be presumed to be correct
 
13 until and unless, upon an appeal duly taken as provided in this
 
14 chapter, the contrary shall be clearly proved by the taxpayer or
 
15 employer and the burden of proof upon appeal shall be upon the
 
16 taxpayer or employer to disprove the correctness of the
 
17 assessment.  Notice of the assessment shall be given, and an
 
18 appeal therefrom may be taken, in the manner and within the time
 
19 provided in section    -108(b) and section    -114.
 
20      § -108  Audit of return; procedure; additional taxes.(a)
 
21 The director or a responsible person designated by the director
 
22 to act in the premises for the purpose of verification or audit
 
23 of a return made by the taxpayer or employer, or for the purpose
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 of making a return where none has been made, is authorized and
 
 2 empowered to examine all account books, bank books, bank
 
 3 statements, records, vouchers, copies of federal tax returns, and
 
 4 any and all other documents and evidences having any relevancy to
 
 5 the determination of the income or wages as required to be
 
 6 returned under this chapter, and the director may employ the
 
 7 director's powers under section 231-7 for such purposes.
 
 8      (b)  If the department discovers from the examination of the
 
 9 return or otherwise that income, or the liability of an employer
 
10 in respect of wages, or any portion thereof, has not been
 
11 assessed, it may assess the same and give notice to the taxpayer
 
12 or employer of the assessment, and the taxpayer or employer shall
 
13 thereupon have an opportunity within thirty days to confer with
 
14 the department as to the proposed assessment.  After the
 
15 expiration of thirty days from such notification the department
 
16 shall assess the income of the taxpayer, or the liability of the
 
17 employer in respect of wages, or any portion thereof which it
 
18 believes has not heretofore been assessed, and shall give notice
 
19 to the taxpayer or employer of the amount of the tax and interest
 
20 and penalties if any, and the amount thereof shall be paid within
 
21 twenty days after the date the notice was mailed, properly
 
22 addressed to the taxpayer or employer at the taxpayer's or
 
23 employer's last known address or place of business.
 

 
Page 62                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1      § -109  Jeopardy assessments, security for payment, etc.
 
 2 Section 231-24 shall apply to the taxes imposed by this chapter,
 
 3 both in respect of taxpayers and employers.
 
 4      § -110  Credits and refunds.(a)  If the taxpayer has
 
 5 paid as an installment of the tax more than the amount determined
 
 6 to be the correct amount of such installment, the overpayment
 
 7 shall be credited against the unpaid installments, if any.  If
 
 8 the amount already paid, whether or not on the basis of
 
 9 installments, exceeds the amount determined to be the correct
 
10 amount of the tax, the amount of the credit shall be refunded in
 
11 the manner provided in section 231-23(c).  Within the meaning of
 
12 this subsection, each amount of tax deducted and withheld from a
 
13 taxpayer's wages is an installment of taxes paid by the taxpayer.
 
14 A refund or credit shall be made to an employer only to the
 
15 extent that the amount of overpayment claimed by the employer as
 
16 a credit or refund was not deducted and withheld by the employer.
 
17      (b)  This section does not apply in the case of a payment
 
18 made pursuant to an assessment by the department under section
 
19    -107 or    -108(b).  No refund or overpayment credit may be
 
20 had under this section in any event unless the original payment
 
21 of the tax was due to the law having been interpreted or applied
 
22 in respect of the taxpayer concerned differently than in respect
 
23 of the taxpayers generally.  As to all tax payments for which a
 

 
Page 63                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 refund or credit is not authorized by this section (including
 
 2 without prejudice to the generality of the foregoing cases of
 
 3 unconstitutionality) the remedies provided by appeal or under
 
 4 section 40-35 are exclusive.  However, nothing in this subsection
 
 5 shall be deemed applicable to a credit or refund authorized by
 
 6 section    -66 or resulting from the tax as returned being less
 
 7 than the tax as estimated; in any of these cases a credit or
 
 8 refund is authorized even though the tax for the taxable year
 
 9 remains subject to determination by the department and assessment
 
10 as provided by law.
 
11      (c)  Any refund earned under this section shall be made in
 
12 the manner provided in section 231-23(c). 
 
13                              APPEAL
 
14      § -114  Appeals.  Any person aggrieved by any assessment
 
15 of the tax or liability imposed by this chapter may appeal from
 
16 the assessment in the manner and within the time hereinafter set
 
17 forth; provided the tax so assessed shall have been paid.  Appeal
 
18 may be made either to the district board of review or to the tax
 
19 appeal court.
 
20      If the appeal is first made to the board, the appeal shall
 
21 either be heard by the board or be transferred to the tax appeal
 
22 court for hearing at the election of the taxpayer or employer.
 
23 If heard by the board, an appeal shall lie from the decision
 

 
Page 64                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 thereof to the tax appeal court and to the supreme court in the
 
 2 manner and with the costs provided by chapter 232.  The supreme
 
 3 court shall prescribe forms to be used in the appeals.  The forms
 
 4 shall show the amount of taxes or liability upon the basis of the
 
 5 taxpayer's computation of the taxpayer's taxable income or the
 
 6 employer's computation of the employer's liability, the amount
 
 7 upon the basis of the assessor's computation, the amount upon the
 
 8 basis of the decisions of the board of review and tax appeal
 
 9 court, if any, and the amount in dispute.  If or when the appeal
 
10 is filed with or transferred to the tax appeal court, the court
 
11 shall proceed to hear and determine the appeal, subject to appeal
 
12 to the supreme court as is provided in chapter 232.
 
13      Any taxpayer or employer appealing from any assessment of
 
14 income taxes or liability shall lodge with the assessor or
 
15 assistant assessor a notice of the appeal in writing, stating the
 
16 ground of the taxpayer's or employer's objection to the
 
17 additional assessment or any part thereof.  The taxpayer or
 
18 employer shall also file the notice of appeal with the board or
 
19 the tax appeal court at any time within thirty days subsequent to
 
20 the date when the notice of assessment was mailed properly
 
21 addressed to the taxpayer or employer at the taxpayer's or
 
22 employer's last known residence or place of business.  Except as
 
23 otherwise provided, the manner of taking the appeal, the costs
 

 
Page 65                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 applicable thereto, and the hearing and disposition thereof,
 
 2 including the distribution of costs and of taxes paid by the
 
 3 taxpayer pending the appeal, shall be as provided in chapter 232.
 
 4      The board or the tax appeal court may allow an individual
 
 5 taxpayer to file an appeal without payment of the net income tax
 
 6 in cases where the total tax liability does not exceed $50,000 in
 
 7 the aggregate for all tax years, upon proof that the taxpayer
 
 8 would be irreparably injured by payment of the tax.
 
 9                        GENERAL PROVISIONS
 
10      § -115  Assessments, etc., prima facie proof.  The effect
 
11 of the notices of assessments and records prepared by or under
 
12 the authority of the department of taxation shall be as set forth
 
13 in sections 231-20 and    -107.
 
14      § -116  Disclosure of returns unlawful; penalty.  All tax
 
15 returns and return information required to be filed under this
 
16 chapter shall be confidential, including any copy of any portion
 
17 of a federal return which may be attached to a state tax return,
 
18 or any information reflected in the copy of such federal return.
 
19 It shall be unlawful for any person, or any officer or employee
 
20 of the State to make known intentionally information imparted by
 
21 any income tax return or estimate made under sections    -92,
 
22    -94,    -95, and    -97 or wilfully to permit any tax return
 
23 or estimate so made or copy thereof to be seen or examined by any
 

 
Page 66                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 person other than the taxpayer or the taxpayer's authorized
 
 2 agent, persons duly authorized by the State in connection with
 
 3 their official duties, the Multistate Tax Commission or the
 
 4 authorized representative thereof, except as provided by law, and
 
 5 any offense against the foregoing provisions shall be punished by
 
 6 a fine not exceeding $500 or by imprisonment not exceeding one
 
 7 year, or both.
 
 8      § -117  Reciprocal supplying of tax information.
 
 9 Notwithstanding section    -116, the department of taxation may
 
10 permit the Secretary of the Treasury of the United States, the
 
11 Commissioner of Internal Revenue, the Multistate Tax Commission,
 
12 or the proper officer of any state or territory imposing an
 
13 income tax upon incomes of persons taxable under this chapter, or
 
14 the authorized representatives thereof to inspect the income tax
 
15 returns and estimates of any such person for tax purposes only.
 
16 The department may also furnish to such authorized persons an
 
17 abstract of an income tax return or estimate or supply such
 
18 persons with information concerning any item of income contained
 
19 in a return or disclosed by the report of an investigation of the
 
20 income or return of a taxpayer.  The Multistate Tax Commission
 
21 may make such information available to a duly accredited tax
 
22 official of the United States or to a duly accredited tax
 
23 official of any state or territory, or the authorized
 

 
Page 67                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 representative thereof, for tax purposes only.
 
 2      § -118  Rules.  Except as otherwise provided in this
 
 3 chapter, the department of taxation shall prescribe and have
 
 4 printed all needful rules for the enforcement of this chapter and
 
 5 the rules so made shall have the force and effect of law if they
 
 6 be not in conflict with the express statutory provisions to which
 
 7 the same are applicable.
 
 8      § -119  Remittances; state realizations.(a)  All
 
 9 remittances shall be made by money, bank draft, check, cashier's
 
10 check, money order, or certificate of deposit to the office of
 
11 the department of taxation to which the return was transmitted.
 
12 The department shall issue its receipts therefor to the taxpayer
 
13 and shall pay the moneys into the state treasury as a state
 
14 realization, to be kept and accounted for as provided by law;
 
15 provided that the sum from all comprehensive tax revenues
 
16 realized by the State that represents the difference between
 
17 $90,000,000 and the proceeds from the sale of any general
 
18 obligation bonds authorized for that fiscal year for the purposes
 
19 of the state educational facilities improvement special fund
 
20 shall be deposited in the state treasury in each fiscal year to
 
21 the credit of the state educational facilities improvement
 
22 special fund; provided further that a sum, not to exceed
 
23 $5,000,000, from all general excise tax revenues realized by the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 State shall be deposited in the state treasury in each fiscal
 
 2 year to the credit of the compound interest bond reserve fund.
 
 3      (b)  For the fiscal year beginning July 1, 1998, and for
 
 4 each fiscal year thereafter,           per cent of the revenues
 
 5 collected under this chapter shall be distributed as follows:
 
 6      (1)  One-sixth shall be deposited into the convention center
 
 7           capital and operations special fund;
 
 8      (2)  Of the five-sixths remainder of the designated per
 
 9           cent, Kauai county shall receive 14.5 per cent; Hawaii
 
10           county shall receive 18.6 per cent; city and county of
 
11           Honolulu shall receive 44.1 per cent; and Maui county
 
12           shall receive 22.8 per cent.
 
13      (c)  On or before January or July 1 of each year or after
 
14 the disposition of any tax appeal with respect to an assessment
 
15 for periods after December 30, 1997, the state director of
 
16 finance shall compute and pay the amount due as provided in
 
17 subsection (b) to the director of finance of each county to
 
18 become a general realization of the county expendable as such,
 
19 except as otherwise provided by law."
 
20      SECTION 2.  Section 11-217, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "§11-217  Hawaii election campaign fund; creation.  The
 
23 Hawaii election campaign fund is created as a trust fund within
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 the state treasury.  The fund shall consist of all moneys
 
 2 collected from persons who have designated a portion of their
 
 3 income tax liability to the fund as provided in section
 
 4 [235-102.5,]    -102.5, any general fund revenues appropriated,
 
 5 as well as all other moneys collected pursuant to this subpart.
 
 6 Payment to each candidate from the fund shall be by the
 
 7 comptroller in the manner prescribed in section 11-222.  Moneys
 
 8 from this fund may also be used for the operating expenses of the
 
 9 commission, including staff salaries and fringe benefits."
 
10      SECTION 3.  Section 36-32, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "(a)  There is created in the treasury of the State the
 
13 state educational facilities improvement special fund, into which
 
14 shall be deposited a portion of all [general excise] tax revenues
 
15 collected by the department of taxation under section [237-31.]
 
16    -119.  The special fund shall be used solely to plan, design,
 
17 acquire lands for and to construct public school facilities and
 
18 to provide equipment and technology infrastructure to improve
 
19 public schools and other facilities under the jurisdiction of the
 
20 department of education, except public libraries.  In addition,
 
21 activities of the department of education intended to eliminate
 
22 the gap between the facility needs of schools and available
 
23 resources shall be eligible for funding from the special fund.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 Expenditures from the special fund shall be limited to projects
 
 2 authorized by the legislature and shall be subject to sections
 
 3 37-31, and 37-33 through 37-40.  Appropriations or authorizations
 
 4 from the special fund shall be expended by the comptroller." 
 
 5      SECTION 4.  Section 39-151, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a)  There is hereby established the Hawaii compound
 
 8 interest bond reserve fund, as a trust fund in the state treasury
 
 9 for the benefit of the State, to be held and administered by the
 
10 department of budget and finance.  The director, from time to
 
11 time, may transfer a portion of [general excise] tax revenues
 
12 collected pursuant to section [237-31]    -119 to the credit of
 
13 the compound interest bond reserve fund, up to but not in excess
 
14 of $5,000,000 during any fiscal year.  Not fewer than thirty days
 
15 before the convening of each regular session of the legislature,
 
16 the director shall submit to the legislature a report of all
 
17 funds transferred to the credit of the compound interest bond
 
18 reserve fund.
 
19      SECTION 5.  Section 46-4, Hawaii Revised Statutes, is
 
20 amended by amending subsection (d) to read as follows:
 
21      "(d)  Neither this section nor any other law, county
 
22 ordinance, or rule shall prohibit group living in facilities with
 
23 eight or fewer residents and which are licensed by the State as
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 provided for under section 321-15.6 or in an intermediate care
 
 2 facility/mental retardation-community (ICF/MR-C) for persons,
 
 3 including the mentally ill, elders, the handicapped, the
 
 4 developmentally disabled, or totally disabled persons, who are
 
 5 not related to the home operator or facility staff; provided that
 
 6 those group living facilities meet all applicable county
 
 7 requirements, not inconsistent with the intent of this subsection
 
 8 and including building height, setback, maximum lot coverage,
 
 9 parking, and floor area requirements.  For purposes of this
 
10 section:
 
11      "Mentally ill person" means a mentally ill person as defined
 
12 under section 334-1.
 
13      "Elder" means an elder as defined under section 201E-2.
 
14      "Handicapped person" means an individual with a physical
 
15 handicap as defined under section 515-2.
 
16      "Developmentally disabled person" means a person suffering
 
17 from developmental disabilities as defined under section 333F-2.
 
18      "Totally disabled person" means a person who is totally and
 
19 permanently disabled [as defined under section 235-1.], either
 
20 physically or mentally, which results in the person's inability
 
21 to engage in any substantial gainful business or occupation.
 
22      The disability shall be certified to by (1) a physician
 
23 licensed under chapter 453 or 460, (2) a qualified out-of-state
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 physician who is currently licensed to practice in the state in
 
 2 which the physician resides, or (3) a commissioned medical
 
 3 officer in the United States Army, Navy, Marine Corps, or Public
 
 4 Health Service, engaged in the discharge of one's official duty.
 
 5 Certification shall be on forms prescribed by the department of
 
 6 taxation.
 
 7      "Intermediate care facility/mental retardation-community
 
 8 (ICF/MR-C)" is defined as an identifiable unit providing
 
 9 residence and care for eight or fewer mentally retarded
 
10 individuals.  Its primary purpose is the provision of health,
 
11 social, and rehabilitation services to the mentally retarded
 
12 through an individually designed active treatment program for
 
13 each resident.  No person who is predominantly confined to bed
 
14 shall be admitted as a resident of such a facility."
 
15      SECTION 6.  Section 46-15.1, Hawaii Revised Statutes, is
 
16 amended by amending subsection (a) to read as follows:
 
17      "(a)  Any law to the contrary notwithstanding, any county
 
18 shall have and may exercise the same powers, subject to
 
19 applicable limitations, as those granted the housing and
 
20 community development corporation of Hawaii pursuant to chapter
 
21 201G insofar as such powers may be reasonably construed to be
 
22 exercisable by a county for the purpose of developing,
 
23 constructing, and providing low and moderate income housing;
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 provided that no county shall be empowered to cause the State to
 
 2 issue general obligation bonds to finance a project pursuant to
 
 3 this section; [provided further that county projects shall be
 
 4 granted an exemption from general excise or receipts taxes in the
 
 5 same manner as projects of the housing and community development
 
 6 corporation of Hawaii pursuant to section [201G-116];] and
 
 7 provided further that the provisions of section 201G-15 shall not
 
 8 apply to this section unless federal guidelines specifically
 
 9 provide local governments with that authorization and the
 
10 authorization does not conflict with any state laws.  The powers
 
11 shall include the power, subject to applicable limitations, to:
 
12      (1)  Develop and construct dwelling units, alone or in
 
13           partnership with developers;
 
14      (2)  Acquire necessary land by lease, purchase, exchange, or
 
15           eminent domain;
 
16      (3)  Provide assistance and aid to a public agency or person
 
17           in developing and constructing new housing and
 
18           rehabilitating old housing for elders of low and
 
19           moderate income, other persons of low and moderate
 
20           income, and persons displaced by any governmental
 
21           action, by making long-term mortgage or interim
 
22           construction loans available;
 
23      (4)  Contract with any eligible bidders to provide for
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           construction of urgently needed housing for persons of
 
 2           low and moderate income;
 
 3      (5)  Guarantee the top twenty-five per cent of the principal
 
 4           balance of real property mortgage loans, plus interest
 
 5           thereon, made to qualified borrowers by qualified
 
 6           lenders;
 
 7      (6)  Enter into mortgage guarantee agreements with
 
 8           appropriate officials of any agency or instrumentality
 
 9           of the United States in order to induce those officials
 
10           to commit to insure or insure mortgages under the
 
11           provisions of the National Housing Act, as amended;
 
12      (7)  Make a direct loan to any qualified buyer for the
 
13           downpayment required by a private lender to be made by
 
14           the borrower as a condition of obtaining a loan from
 
15           the private lender in the purchase of residential
 
16           property;
 
17      (8)  Provide funds for a share, not to exceed fifty per cent
 
18           of the principal amount of a loan made to a qualified
 
19           borrower by a private lender who is unable otherwise to
 
20           lend the borrower sufficient funds at reasonable rates
 
21           in the purchase of residential property; and
 
22      (9)  Sell or lease completed dwelling units.
 
23      For purposes of this section, a limitation is applicable to
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 the extent that it may reasonably be construed to apply to a
 
 2 county."
 
 3      SECTION 7.  Section 46-16.7, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (b)  to read as follows:
 
 5      "(b)  Each county shall notify the director of taxation
 
 6 within ten days after the county has adopted a general excise and
 
 7 use tax surcharge ordinance, and the director of taxation shall
 
 8 levy, assess, collect, and otherwise administer the general
 
 9 excise and use tax surcharge for the taxable year beginning
 
10 January 1, 1993, and for taxable years thereafter through
 
11 December 31, 2002, as provided by [chapters 237 and 238.] chapter
 
12    ."
 
13      SECTION 8.  Section 102-14, Hawaii Revised Statutes, is
 
14 amended by amending subsection (a) to read as follows:
 
15      "(a)  For the purpose of providing blind or visually
 
16 handicapped persons, as defined in sections [235-1,] 347-1[,] and
 
17 347-2 with remunerative employment, enlarging their economic
 
18 opportunities and stimulating them to greater efforts in striving
 
19 to make themselves self-supporting, blind or visually handicapped
 
20 persons registered by the department of human services under
 
21 section 347-6 and issued permits under subsection (c) shall be
 
22 authorized to operate vending facilities and machines in any
 
23 state or county public building for the vending of newspapers,
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 periodicals, confections, tobacco products, foods, beverages, and
 
 2 such other articles or services prepared on or off the premises
 
 3 in accordance with all applicable laws."
 
 4      SECTION 9.  Section 103-53, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (d) to read as follows:
 
 6      "(d)  Any assignment of a contract shall require the
 
 7 assignee, as a condition precedent to the assignment, to first
 
 8 obtain a [bulk sales certificate if required under section
 
 9 237-43, and present the certificate, or] tax clearance as
 
10 provided under subsection (a) [if a bulk sales certificate is not
 
11 required,] to the state or county contracting officer or agent."
 
12      SECTION 10.  Section 111-2, Hawaii Revised Statutes, is
 
13 amended by amending the definition of "person" to read as
 
14 follows:
 
15      ""Person" means (1) any individual, partnership, or
 
16 corporation or association which is the owner of a business; (2)
 
17 any owner, part-owner, tenant, or sharecropper operating a farm;
 
18 (3) the head of a family; (4) an individual not a member of a
 
19 family; (5) a nonprofit organization exempted from taxation as
 
20 allowed under section [235-9.]    -7.
 
21      SECTION 11.  Section 145D-1, Hawaii Revised Statutes, is
 
22 amended by amending the definition of "charitable, religious, or
 
23 non-profit organization" to read as follows:
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      "Charitable, religious, or nonprofit organization" means any
 
 2 organization which was organized and is operating in the State
 
 3 for charitable or religious purposes or to promote social
 
 4 welfare, which is exempt from [income] taxation under chapter
 
 5 [235,]    , and which distributes food products at no cost to
 
 6 needy persons."
 
 7      SECTION 12.  Section 182-16, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]§182-16[]]  Levy and assessment of [general excise] tax.
 
10 Notwithstanding any provision to the contrary, the levy and
 
11 assessment of the [general excise] comprehensive tax on the gross
 
12 proceeds from any manner of sale of (1) geothermal resources or
 
13 (2) electrical energy produced by the geothermal resources
 
14 producer from such geothermal resources, shall be made [only as a
 
15 tax on the business of a producer,] at the rate assessed
 
16 [producers,] under section [237-13(2)(A).]    -51."
 
17      SECTION 13.  Section 201B-11, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 
19      "(a)  There is established in the state treasury the tourism
 
20 special fund, into which shall be deposited:
 
21      (1)  A portion of the revenues from any transient
 
22           accommodations tax, as provided by section [237D-6.5;]
 
23              -119; and
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (2)  Appropriations by the legislature to the tourism
 
 2           special fund; and 
 
 3      (3)  Gifts, grants, and other funds accepted by the
 
 4           authority."
 
 5      SECTION 14.  Section 201G-14, Hawaii Revised Statutes, is
 
 6 amended by amending subsections (c) and (d) to read as follows:
 
 7      "(c)  The corporation shall adopt rules under chapter 91
 
 8 necessary to comply with federal and state requirements for
 
 9 determining the amount of the tax credit allowed under section 42
 
10 of the Internal Revenue Code of 1986, as amended [and section
 
11 235-110.8].  The corporation may establish and collect reasonable
 
12 fees for administrative expenses incurred in providing the
 
13 services required by this section, including fees for processing
 
14 developer applications for the credit.  All fees collected for
 
15 administering these provisions, including developer application
 
16 fees, shall be deposited into the corporation's housing finance
 
17 revolving fund to be used to cover the administrative expenses of
 
18 the corporation.
 
19      [(d)  All claims for allocation of the low-income housing
 
20 credit under section 235-110.8 shall be filed with the
 
21 corporation.  The corporation shall determine the amount of the
 
22 credit allocation, if necessary, and return the claim to the
 
23 taxpayer.  The taxpayer shall file the credit allocation with the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 taxpayer's tax return with the department of taxation.]"
 
 2      SECTION 15.  Section 201G-351, Hawaii Revised Statutes, is
 
 3 amended by amending subsection (b) to read as follows:
 
 4      "(b)  In establishing such a program, the corporation shall
 
 5 adopt rules pursuant to chapter 91 relating to establishing a
 
 6 savings program for participants based upon individual analyses
 
 7 of income and family expenses.  The rules may also provide for
 
 8 integration of the homebuyers' club program with other
 
 9 governmental programs including but not limited to [individual
 
10 housing accounts under section 235-5.5,] the state mortgage
 
11 guarantee program under part III.G, the downpayment loan program
 
12 established under part III.H, and the rent-to-own program
 
13 established under part [[]III.K[]]."
 
14      SECTION 16.  Section 201G-459, Hawaii Revised Statutes, is
 
15 amended by amending subsection (a) to read as follows:
 
16      "(a)  Any compensation received by a provider agency for
 
17 services rendered to homeless families or individuals, or in
 
18 operating or managing a homeless facility authorized by this
 
19 part, is exempt from taxes under chapter [237.]    ."
 
20      SECTION 17.  Section 206X-10.5, Hawaii Revised Statutes, is
 
21 amended by amending subsection (a) to read as follows:
 
22      "(a)  There is established in the state treasury the
 
23 convention center capital special fund, into which shall be
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 deposited:
 
 2      (1)  A portion of the revenues from the transient
 
 3           accommodations tax, as provided by section [237D-6.5;]
 
 4              -119;
 
 5      (2)  All proceeds from revenue bonds issued by the
 
 6           authority; and
 
 7      (3)  Appropriations by the legislature to the convention
 
 8           center capital special fund."
 
 9      SECTION 18.  Section 207-12, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§207-12  Exemptions and immunities.  A foreign lender which
 
12 (1) does not maintain a place of business in this State, (2)
 
13 conducts its principal activities outside this State, and (3)
 
14 complies with this part, does not by engaging in this State in
 
15 any or all of the activities specified in section 207-13, violate
 
16 the laws of this State relating to doing business or doing a
 
17 banking, trust, or insurance business, or become subject to
 
18 chapter 412, 415, or 431, or become subject to any taxation which
 
19 would otherwise be imposed for doing business in or doing a
 
20 banking, trust, or insurance business in, or having gross income
 
21 or receipts from sources in, property in, or the conduct of any
 
22 activity in, this State, or become subject to any taxation under
 
23 chapter [235, 237, or 241,]      and no income or receipts of any
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 foreign lender arising out of any of the activities specified in
 
 2 the following section shall constitute income from sources in,
 
 3 property in, or activities conducted in this State for the
 
 4 purposes of any tax imposed by this State; provided that nothing
 
 5 in this part shall be construed to exempt the real property of a
 
 6 foreign lender from taxation to the same extent, according to its
 
 7 value, as other real property is taxed, or to preclude the
 
 8 inclusion of the dividends or other income from foreign lenders
 
 9 in the income of individuals taxable under chapter [235]     to
 
10 the same extent as is included dividends and other income from
 
11 domestic lenders; and provided further that if any such foreign
 
12 lender shall acquire any property in this State in enforcement of
 
13 the rights of the foreign lender in the event of a default by any
 
14 borrower, as permitted by section 207-13(4), then commencing one
 
15 year after title to such property has vested in the foreign
 
16 lender, the rents or other receipts received by the foreign
 
17 lender from, and the proceeds of sale by the foreign lender of,
 
18 such property shall be subject to taxation under [chapters 235
 
19 and 237] chapter     in the same manner and to the same extent as
 
20 if the rents, other receipts, or proceeds were received by a
 
21 resident of this State; and provided further that if any such
 
22 foreign lender shall otherwise acquire any property in this State
 
23 or engage in any business or activities in this State not
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 specified in section 207-13, then the rents and other receipts
 
 2 received by the foreign lender from such property and the
 
 3 proceeds of sale by the foreign lender of such property and all
 
 4 income and receipts from the foreign lender's business or
 
 5 activities in this State not specified in section 207-13 shall be
 
 6 subject to taxation under [chapters 235 and 237] chapter     in
 
 7 the same manner and to the same extent as if such rents, other
 
 8 receipts, proceeds, and income were received by a resident of
 
 9 this State, but such other activities and business shall not
 
10 deprive the foreign lender of the immunities and exemptions from
 
11 taxation hereinabove stated with respect to the activities
 
12 specified in section 207-13."
 
13      SECTION 19.  Section 209E-2, Hawaii Revised Statutes, is
 
14 amended by amending the definitions of "qualified business" and
 
15 "taxes due the State" to read as follows:
 
16      ""Qualified business" means any corporation, partnership, or
 
17 sole proprietorship authorized to do business in the State which
 
18 is qualified under section 209E-9 and is[:
 
19      (1)  Subject] subject to the [state corporate or individual
 
20           income] comprehensive tax under chapter [235;
 
21      (2)  Engaged in manufacturing, the wholesale sale of
 
22           tangible personal property as defined in section 237-4,
 
23           or a service business as defined in this chapter; or
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (3)  Engaged in producing agricultural products where the
 
 2           business is a producer as defined in section 237-5.]
 
 3              .
 
 4      "Taxes due the State" means [income] comprehensive taxes due
 
 5 under chapter [235.]    ."
 
 6      SECTION 20.  Section 212-8, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "§212-8 Exemption from taxes.  Notwithstanding any law to
 
 9 the contrary, sales of all products which are categorized as
 
10 privileged foreign merchandise, nonprivileged foreign
 
11 merchandise, domestic merchandise, or zone-restricted
 
12 merchandise, and which are admitted into a foreign-trade zone, as
 
13 more specifically set forth in the Act of Congress, and any rules
 
14 and regulations promulgated thereunder, made directly to any
 
15 common carrier in interstate or foreign commerce, or both,
 
16 whether ocean-going or air, for consumption out-of-state by the
 
17 crew or passengers on the shipper's vessels or airplanes, or for
 
18 use out-of-state by the vessels or airplanes, shall be exempt
 
19 from those taxes imposed under chapters [237, 238,]    , 243,
 
20 244D, and 245."
 
21      SECTION 21.  Section 231-19.5, Hawaii Revised Statutes, is
 
22 amended by amending subsection (a) to read as follows:
 
23      " (a)  Written opinions shall be open to public inspection
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 and copying as provided in this section[, notwithstanding
 
 2 sections 235-116, 236D-15, 237-34, and 237D-13] and any other law
 
 3 restricting disclosure of tax returns or tax return information
 
 4 to the contrary.  Except as provided in subsection (f), regarding
 
 5 the disclosure of the text of written opinions, chapter 92F shall
 
 6 not apply to tax returns and tax return information.
 
 7      A written opinion may not be used or cited as precedent
 
 8 unless otherwise provided by department rules."
 
 9      SECTION 22.  Section 231-23, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§231-23  Adjustments and refunds.(a)  This subsection
 
12 shall apply to all taxes [except those collected under chapter
 
13 247] and those collected under a chapter containing a provision
 
14 for credit and refund of the amount of tax paid in excess of the
 
15 tax imposed by such chapter. As to all tax payments for which a
 
16 refund or credit is not authorized by this subsection (including
 
17 without prejudice to the generality of the cases of
 
18 unconstitutionality hereinafter mentioned in (1)(C)) the remedies
 
19 provided by appeal or under section 40-35 are exclusive.
 
20      (1)  If the amount already paid exceeds that which should
 
21           have been paid under the chapter imposing a particular
 
22           tax, or if the amount already paid results in
 
23           duplication of payment in whole or in part, the excess
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           so paid shall be refunded in the manner provided in
 
 2           subsection (c) subject however to the following
 
 3           limitations:
 
 4           (A)  No refund shall be made unless an application for
 
 5                the refund shall have been made within five years
 
 6                after the amount to be refunded was paid;
 
 7           (B)  No recourse may be had except under section 40-35
 
 8                or by appeal for refunds of taxes paid pursuant to
 
 9                an assessment by the director of taxation,
 
10                provided that if the assessment by the director
 
11                shall contain clerical errors, transposition of
 
12                figures, typographical errors, and errors in
 
13                calculation or if there shall be an illegal or
 
14                erroneous assessment, the usual refund procedures
 
15                shall apply; or
 
16           (C)  No refund or overpayment credit shall be made
 
17                unless the original payment of the tax was due to
 
18                the law having been interpreted or applied in
 
19                respect of the taxpayer concerned differently than
 
20                in respect of taxpayers generally.
 
21      (2)  In any case where a taxpayer is entitled to a refund,
 
22           the taxpayer, at the taxpayer's election, may apply the
 
23           amount of the refund as an overpayment credit to taxes
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           subsequently accruing under the same chapter as that
 
 2           under which the refundable amount was collected.
 
 3      [(b)  This subsection shall apply to the taxes collected
 
 4 under chapter 247.
 
 5      There may be refunded in the manner provided in subsection
 
 6 (c) such conveyance tax as has been erroneously or unjustly paid.
 
 7      (c)] (b)   This subsection shall apply to all taxes.
 
 8      (1)  All refunds shall be paid only upon a form to be known
 
 9           as a "refund voucher" prepared by the collector.  The
 
10           refund vouchers shall set forth all the details of each
 
11           transaction, shall be approved by the director, and
 
12           shall be forwarded to the comptroller from time to
 
13           time.  The comptroller shall issue a warrant, in the
 
14           form prescribed by section 40-52, for the payment of
 
15           any such refund out of the tax reserve fund hereinafter
 
16           created; provided that if the person entitled to the
 
17           refund is delinquent in the payment of any tax, the
 
18           comptroller, upon demand of the collector and after
 
19           notice to the delinquent taxpayer, shall withhold the
 
20           amount of the delinquent taxes, together with penalties
 
21           and interest thereon, from the amount of the refund and
 
22           pay the same to the collector.
 
23      (2)  There is hereby appropriated, from the general revenues
 

 
Page 87                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1           of the State not otherwise appropriated, the sum of
 
 2           $25,000 which shall be set aside as a special fund to
 
 3           be known as the tax reserve fund.  All refunds of taxes
 
 4           collected by the department under chapters of the law
 
 5           under title 14 administered by the department shall be
 
 6           made out of the tax reserve fund.  The director of
 
 7           taxation, from time to time, may deposit taxes
 
 8           collected under chapters of the law under title 14
 
 9           administered by the department in the state treasury to
 
10           the credit of the tax reserve fund so that there may be
 
11           maintained at all times a fund not exceeding $25,000.
 
12           The amounts deposited shall be made from the taxes with
 
13           respect to which a particular refund is made.
 
14      [(d)] (c)  This subsection shall apply to a refund for an
 
15 overpayment of a tax.
 
16      (1)  If the tax return as filed by a taxpayer shows the
 
17           amount already paid, whether or not on the basis of
 
18           installments, exceeds the amount determined to be the
 
19           correct amount of the tax due, and the taxpayer
 
20           requests a refund of the overpayment, the amount of
 
21           overpayment together with interest, if any, shall be
 
22           refunded in the manner provided in subsection (c).  The
 
23           interest shall be allowed and paid at the rate of two-
 

 
Page 88                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1           thirds of one per cent for each month or fraction
 
 2           thereof, beginning with the first calendar day after
 
 3           the due date of the return or, if the return is filed
 
 4           after the prescribed due date, the first month
 
 5           following the month the return is received, and
 
 6           continuing until the date that the director approves
 
 7           the refund voucher.  If the director approves the
 
 8           refund voucher within ninety days from the due date or
 
 9           the date the return is received, whichever is later,
 
10           and the comptroller of the State sends the taxpayer a
 
11           refund warrant within forty-five days from the date of
 
12           the director's approval, no interest on the overpayment
 
13           will be allowed or paid.  However, if either the
 
14           director or the comptroller exceeds the time allowed
 
15           herein, interest will be computed from the first
 
16           calendar day after the due date of the return or from
 
17           the first month following the month the return is
 
18           received by the director if the return is filed after
 
19           the prescribed due date, until the date that the
 
20           comptroller sends the refund warrant to the taxpayer.
 
21      (2)  If any overpayment of taxes results or arises from (A)
 
22           the taxpayer filing an amended return, or from (B) a
 
23           determination made by the director and such overpayment
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           is not shown on the original return as filed by the
 
 2           taxpayer, interest on the overpayment shall be allowed
 
 3           and paid from the first calendar day after the due date
 
 4           of the original return or, if the original return is
 
 5           filed after the prescribed due date, the first month
 
 6           following the month the return is received, to the date
 
 7           that the director signs the refund voucher.  If the
 
 8           comptroller does not send the refund warrant to the
 
 9           taxpayer within forty-five days after the director's
 
10           approval, interest will continue until the date that
 
11           the comptroller sends the refund warrant to the
 
12           taxpayer.
 
13      (3)  For purposes of a net income tax return, if any
 
14           overpayment of any taxes results from a carryback of a
 
15           net operating loss, the overpayment shall be deemed to
 
16           have been made at the close of the taxable year in
 
17           which the net operating loss arises.  To the extent
 
18           that the carryback of net operating loss results in
 
19           reducing the amount of underpayment of taxes for prior
 
20           taxable year or years, interest which would be
 
21           chargeable because of the underpayment shall not be
 
22           applicable with respect to that amount or amounts which
 
23           are carried back.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (4)  In the case of credit, interest shall be allowed and
 
 2           paid from the first calendar day after the due date of
 
 3           the return, the first month following the month the
 
 4           return is received by the director, or the date of
 
 5           payment, whichever is later, to the date the credit is
 
 6           taken; provided that the director may make a refund of
 
 7           any credit to a taxpayer where the taxpayer has no
 
 8           underpayment against which to apply the credit."
 
 9      SECTION 23.  Section 231-39, Hawaii Revised Statutes, is
 
10 amended by amending subsection (b) to read as follows:
 
11      "(b)  There shall be added to and become a part of the tax
 
12 imposed by such tax or revenue law, and collected as such:
 
13      (1)  Failure to file tax return.  In case of failure to file
 
14           any tax return required to be filed on the date
 
15           prescribed therefor (determined with regard to any
 
16           extension of time for filing), unless it is shown that
 
17           the failure is due to reasonable cause and not due to
 
18           neglect, there shall be added to the amount required to
 
19           be shown as tax on the return five per cent of the
 
20           amount of the tax if the failure is for not more than
 
21           one month, with an additional five per cent for each
 
22           additional month or fraction thereof during which the
 
23           failure continues, not exceeding twenty-five per cent
 

 
Page 91                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1           in the aggregate.  For purposes of this paragraph, the
 
 2           amount of tax required to be shown on the return shall
 
 3           be reduced by the amount of any part of the tax which
 
 4           is paid on or before the date prescribed for payment of
 
 5           the tax and by the amount of any credit against the tax
 
 6           which may be claimed upon the return.  This paragraph
 
 7           shall not apply to any failure to file a declaration of
 
 8           estimated tax required by section [235-97.]    -97.
 
 9      (2)  Failure to pay tax.
 
10           (A)  If any part of any underpayment is due to
 
11                negligence or intentional disregard of rules (but
 
12                without intent to defraud), there shall be added
 
13                to the tax an amount up to twenty-five per cent of
 
14                the underpayment as determined by the director.
 
15           (B)  If any part of any underpayment of tax required to
 
16                be shown on a return is due to fraud, there shall
 
17                be added to the tax an amount up to fifty per cent
 
18                of the underpayment as determined by the director.
 
19           (C)  If any penalty is assessed under subparagraph (B)
 
20                (relating to fraud) for an underpayment of tax
 
21                which is required to be shown on a return, no
 
22                penalty under paragraph (1) (relating to failure
 
23                to file the return) shall be assessed with respect
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1                to the same underpayment.
 
 2      (3)  Failure to pay tax after filing timely returns.  If a
 
 3           return is filed on or before the date prescribed
 
 4           therefor and the amount shown as tax on the return is
 
 5           not completely paid within sixty days of the prescribed
 
 6           filing date, there shall be added to the unpaid tax an
 
 7           amount up to twenty per cent as determined by the
 
 8           director.
 
 9      (4)  Interest on underpayment or nonpayment of tax.
 
10           (A)  If any amount of tax is not paid on or before the
 
11                last date prescribed for payment, interest on such
 
12                amount at the rate of two-thirds of one per cent a
 
13                month or fraction of a month shall be paid for the
 
14                period beginning with the first calendar day after
 
15                the date prescribed for payment, section 231-21 to
 
16                the contrary notwithstanding, to the date paid.
 
17           (B)  If the amount of any tax is reduced by reason of a
 
18                carryback of a net operating loss allowed under
 
19                chapter 235, such reduction in tax shall not
 
20                affect the computation of interest under this
 
21                paragraph for the period ending with the last day
 
22                of the taxable year in which the net operating
 
23                loss arises.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           (C)  Interest prescribed under this paragraph on any
 
 2                tax shall be paid upon notice and demand, and
 
 3                shall be assessed, collected, and paid in the same
 
 4                manner as taxes.
 
 5           (D)  No interest under this paragraph shall be imposed
 
 6                on interest provided by this paragraph.
 
 7           (E)  If any portion of a tax is satisfied by credit of
 
 8                any overpayment, then no interest shall be imposed
 
 9                under this paragraph on the portion of the tax so
 
10                satisfied for any period during which, if the
 
11                credit had not been made, interest would have been
 
12                allowable with respect to the overpayment.
 
13           (F)  Interest prescribed under this paragraph on any
 
14                tax may be assessed and collected at any time
 
15                during the period within which the tax to which
 
16                the interest relates may be collected.
 
17           (G)  This paragraph shall not apply to any failure to
 
18                pay estimated tax required by section [235-97.]
 
19                   -97."
 
20      SECTION 24.  Section 243-14, Hawaii Revised Statutes, is
 
21 amended by amending subsection (c) to read as follows:
 
22      "(c)  In the case of a false or fraudulent statement with
 
23 intent to evade tax or liability, or of a failure to file a
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 statement, the tax or liability may be assessed or levied at any
 
 2 time; provided that in the case of a statement claimed to be
 
 3 false or fraudulent with intent to evade tax or liability, the
 
 4 determination as to the claim shall first be made by a judge of
 
 5 the circuit court [as provided in section 235-111(c) which shall
 
 6 apply to the tax imposed by this chapter]."
 
 7      SECTION 25.  Section 243-14.5, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]§243-14.5[]]  Appeals.  Any person aggrieved by any
 
10 assessment of the tax imposed by this chapter may appeal from the
 
11 assessment in the manner and within the time and in all other
 
12 respects as provided in the case of income tax appeals by section
 
13 [235-114;]    -114; provided the tax so assessed shall have been
 
14 paid.  The hearing and disposition of the appeal, including the
 
15 distribution of costs and of taxes paid pending the appeal, shall
 
16 be as provided in chapter 232."
 
17      SECTION 26.  Section 244D-8, Hawaii Revised Statutes, is
 
18 amended by amending subsection (b) to read as follows:
 
19      "(b)  If it should appear upon such examination or
 
20 thereafter within five years after the filing of the return, or
 
21 at any time if no return has been filed, as a result of such
 
22 examination or as a result of any examination of the records of
 
23 the taxpayer or of any other inquiry or investigation, that the
 

 
Page 95                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 correct amount of the tax is greater than that shown on the
 
 2 return, or that any tax imposed by the chapter has not been paid,
 
 3 an assessment of such tax may be made in the manner provided in
 
 4 section [235-108(b).]    -108(b).  The amount of the tax for the
 
 5 period covered by the assessment shall not be reduced below the
 
 6 amount determined by an assessment so made, except upon appeal or
 
 7 in a proceeding brought pursuant to section 40-35."
 
 8      SECTION 27.  Section 244D-12, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "[[]§244D-12[]]  Appeals.  Any person aggrieved by any
 
11 assessment of the tax imposed by this chapter may appeal from the
 
12 assessment in the manner and within the time and in all other
 
13 respects as provided in the case of [income] tax appeals by
 
14 section [235-114,]    -114, provided the tax so assessed shall
 
15 have been paid.  The hearing and disposition of the appeal,
 
16 including the distribution of costs and of taxes paid pending the
 
17 appeal, shall be as provided in chapter 232."
 
18      SECTION 28.  Section 244D-13, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "§244D-13  Other provisions applicable.  All of the
 
21 provisions of [chapters 235 and 237] chapter     not inconsistent
 
22 with this chapter and which may appropriately be applied to the
 
23 taxes, persons, circumstances, and situations involved in this
 

 
Page 96                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 chapter, including (without prejudice to the generality of the
 
 2 foregoing) provisions as to penalties and interest, and
 
 3 provisions granting administrative powers to the director of
 
 4 taxation, and provisions for the assessment, levy, and collection
 
 5 of taxes, shall be applicable to the taxes imposed by this
 
 6 chapter, and to the assessment, levy, and collection thereof,
 
 7 except that returns, return information, or reports under this
 
 8 chapter and relating only to this chapter may be made known to
 
 9 the liquor commission by the department of taxation, if not in
 
10 conflict with section 231-18."
 
11      SECTION 29.  Section 245-3, Hawaii Revised Statutes, is
 
12 amended by amending subsection (a) to read as follows:
 
13      "(a)  Every wholesaler or dealer, in addition to any other
 
14 taxes provided by law, shall pay for the privilege of conducting
 
15 business and other activities in the State an:
 
16      (1)  Excise tax equal to:
 
17           (A)  4.00 cents for each cigarette sold, used, or
 
18                possessed by the wholesaler or dealer, after
 
19                August 31, 1997; and
 
20           (B)  5.00 cents for each cigarette sold, used, or
 
21                possessed by a wholesaler or dealer after June 30,
 
22                1998,
 
23           whether or not sold at wholesale, or if not sold then
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           at the same rate upon the use by the wholesaler or
 
 2           dealer; and
 
 3      (2)  Excise tax equal to forty per cent of the wholesale
 
 4           price of each article or item of tobacco products sold
 
 5           by the wholesaler or dealer, whether or not sold at
 
 6           wholesale, or if not sold then at the same rate upon
 
 7           the use by the wholesaler or dealer.
 
 8      Where the tax imposed has been paid on cigarettes or tobacco
 
 9 products which thereafter become the subject of a casualty loss
 
10 [deduction allowable under chapter 235], the tax paid shall be
 
11 refunded or credited to the account of the wholesaler or dealer.
 
12 In applying the tax, the tax shall be applied against the latest
 
13 of the activities of selling, using, or possessing.  The tax
 
14 shall be imposed at the time of the last of the following
 
15 activities to occur:  the sale; the use; or the possession of
 
16 cigarettes or tobacco products."
 
17      SECTION 30.  Section 245-7, Hawaii Revised Statutes, is
 
18 amended by amending subsection (b) to read as follows:
 
19      "(b)  If it should appear upon such examination or
 
20 thereafter within five years after the filing of the return, or
 
21 at any time if no return has been filed, as a result of the
 
22 examination or as a result of any examination of the records of
 
23 the licensee or of any other inquiry or investigation, that the
 

 
Page 98                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 correct amount of the taxes is greater than that shown on the
 
 2 return, or that any taxes imposed by this chapter have not been
 
 3 paid, an assessment of such taxes may be made, in the manner
 
 4 provided in section [235-108(b).]    -108(b).  The amount of the
 
 5 taxes for the period covered by the assessment shall not be
 
 6 reduced below the amount determined by an assessment so made,
 
 7 except upon appeal or in a proceeding brought pursuant to section
 
 8 40-35."
 
 9      SECTION 31.  Section 245-10, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§245-10  Appeals.  Any person aggrieved by any assessment
 
12 of the taxes imposed by this chapter may appeal from the
 
13 assessment in the manner and within the time and in all other
 
14 respects as provided in the case of [income] tax appeals by
 
15 section [235-114;]    -114; provided that the taxes so assessed
 
16 shall have been paid.  The hearing and disposition of the appeal,
 
17 including the distribution of costs and of taxes paid pending the
 
18 appeal shall be as provided in chapter 232."
 
19      SECTION 32.  Section 245-11, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§245-11  Chapter [235 and chapter 237]     applicable.  All
 
22 of the provisions of chapter [235 and chapter 237]     not
 
23 inconsistent with this chapter and which may appropriately be
 

 
Page 99                                                    
                                     H.B. NO.871        
                                                        
                                                        

 
 1 applied to the taxes, persons, circumstances, and situations
 
 2 involved in this chapter, including (without prejudice to the
 
 3 generality of the foregoing) provisions as to penalties and
 
 4 interest, and provisions granting administrative powers to the
 
 5 department of taxation, and provisions for the assessment, levy,
 
 6 and collection of taxes, shall be applicable to the taxes imposed
 
 7 by this chapter, and to the assessment, levy, and collection
 
 8 thereof."
 
 9      SECTION 33.  Section 248-2.5, Hawaii Revised Statutes, is
 
10 amended by amending subsection (b) to read as follows:
 
11      "(b)  The costs of assessment, collection, and disposition
 
12 of county general excise and use tax surcharges shall be withheld
 
13 from payment to the several counties by the State out of the
 
14 county general excise and use tax surcharges collected for the
 
15 current calendar year.
 
16      The costs of assessment, collection, and disposition of the
 
17 county general excise and use tax surcharges shall be borne by
 
18 each of the several counties in an amount proportional to the
 
19 total amount of surcharges allocated to that county divided by
 
20 the total amount of surcharges collected for the entire State for
 
21 the preceding calendar year.
 
22      For the purpose of this section, the costs of assessment,
 
23 collection, and disposition of the county general excise and use
 

 
Page 100                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 tax surcharges shall include any and all costs, direct or
 
 2 indirect, which are deemed necessary and proper to effectively
 
 3 administer this section [and sections 237-8.5 and 238-2.5.  Costs
 
 4 include refunds or reductions of income taxes under section
 
 5 235-110.7 attributable to the county general excise and use tax
 
 6 surcharge]."
 
 7      SECTION 34.  Section 269-17.5, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (a) to read as follows:
 
 9      "(a)  For purposes of this section "foreign corporation"
 
10 means a foreign corporation [as defined in section 235-1 or] is a
 
11 corporation in which a majority of the voting stock is held by a
 
12 single foreign corporation [as defined in section 235-1]."
 
13      SECTION 35.  Section 302A-412, Hawaii Revised Statutes, is
 
14 amended by amending subsection (a) to read as follows:
 
15      "(a)  Each secondary public school, upon the approval of the
 
16 principal and the district superintendent, may allow on the
 
17 premises vending machines operated as a concession; provided that
 
18 the concession shall be operated only by a blind or visually
 
19 handicapped person, as defined in sections [235-1,] 347-1[,] and
 
20 347-2.  The location and operation of the vending machines and
 
21 the items dispensed shall be approved by the department."
 
22      SECTION 36.  Section 321-15.6, Hawaii Revised Statutes, is
 
23 amended by amending subsection (b) to read as follows:
 

 
Page 101                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1      "(b)  The director shall adopt rules regarding adult
 
 2 residential care homes in accordance with chapter 91 which shall
 
 3 be designed to:
 
 4      (1)  Protect the health, safety, and civil rights of persons
 
 5           residing in facilities regulated;
 
 6      (2)  Provide for the licensing of adult residential care
 
 7           homes; provided that the rules shall allow group living
 
 8           in two categories of adult residential care homes as
 
 9           licensed by the department of health:
 
10           (A)  Type I allowing group living by five or fewer
 
11                unrelated persons; and
 
12           (B)  Type II allowing six or more persons including but
 
13                not limited to the mentally ill, elders, the
 
14                handicapped, the developmentally disabled, or
 
15                totally disabled persons who are not related to
 
16                the home operator or facility staff.
 
17           For purposes of this section:
 
18                "Mentally ill person" means a mentally ill person
 
19           as defined under section 334-1.
 
20                "Elder" means an elder as defined under sections
 
21           201G-1 and 201G-151.
 
22                "Handicapped person" means an individual with a
 
23           physical handicap as defined under section 515-2.
 

 
Page 102                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1                "Developmentally disabled person" means a person
 
 2           with developmental disabilities as defined under
 
 3           section 333F-1.
 
 4                "Totally disabled person" means a person who is
 
 5           totally and permanently disabled [as defined under
 
 6           section 235-1;], either physically or mentally, which
 
 7           results in the person's inability to engage in any
 
 8           substantial gainful business or occupation.
 
 9                The disability shall be certified to by (1) a
 
10           physician licensed under chapter 453 or 460, (2) a
 
11           qualified out-of-state physician who is currently
 
12           licensed to practice in the state in which the
 
13           physician resides, or (3) a commissioned medical
 
14           officer in the United States Army, Navy, Marine Corps,
 
15           or Public Health Service, engaged in the discharge of
 
16           one's official duty.  Certification shall be on forms
 
17           prescribed by the department of taxation;
 
18      (3)  Comply with applicable federal laws and regulations of
 
19           Title XVI of the Social Security Act, as amended; and
 
20      (4)  Provide penalties for the failure to comply with any
 
21           rule."
 
22      SECTION 37.  Section 346E-1, Hawaii Revised Statutes, is
 
23 amended by amending the definition of "nursing facility income"
 

 
Page 103                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 to read as follows:
 
 2      ""Nursing facility income" means the total compensation
 
 3 received for furnishing nursing facility services, including all
 
 4 receipts from "ancillary services" (as defined in 42 Code of
 
 5 Federal Regulations 413.53(b)) to the provision of nursing
 
 6 facility services, and receipts from items supplied in connection
 
 7 with these services.  "Nursing facility income" shall not include
 
 8 the following:  compensation received from services covered by
 
 9 Title XVIII of the federal Social Security Act (including
 
10 copayments and deductibles received from beneficiaries of the
 
11 Medicare program); income from an affiliated entity that operates
 
12 as a prepaid health maintenance organization; settlements from
 
13 third party payors for services delivered or items supplied prior
 
14 to the effective date of this Act (such as settlements of cost
 
15 reports or decisions on rate reconsideration requests); income
 
16 from services provided by separately licensed units (such as
 
17 distinct part intermediate care facilities for the mentally
 
18 retarded); income from the provision of adult day health and
 
19 adult day care programs; income from the provision of home health
 
20 agency services; income from the provision of "nursing homes
 
21 without walls" programs; income from the provision of inpatient
 
22 hospital services; income from grants, bequests, donations,
 
23 endowments, or investments; or amounts of taxes imposed by
 

 
Page 104                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 [chapter 237 or this] chapter     and passed on, collected, and
 
 2 received from the consumer as part of nursing facility income."
 
 3      SECTION 38.  Section 346E-3, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (a) to read as follows:
 
 5      "(a)  The director shall administer and enforce this
 
 6 chapter.  With respect to:
 
 7      (1)  The examinations of books and records, and operators
 
 8           and other persons;
 
 9      (2)  Procedures and powers upon failure or refusal by an
 
10           operator to make a return or proper return; and
 
11      (3)  The general administration of this chapter;
 
12 the director shall have all rights, powers, and duties conferred
 
13 by chapters 231 and [237]     with respect to powers and duties
 
14 or with respect to taxes imposed under chapter [237.]    .
 
15 Without restriction upon these rights and powers, section [237-8]
 
16    -3 and sections [237-36 to 237-41]    -92 to    -110 are made
 
17 applicable to and with respect to taxes, operators, department
 
18 officers, and other persons, and the matters and things affected
 
19 or covered by this chapter, insofar as these sections are not
 
20 inconsistent with this chapter, in the same manner, as nearly as
 
21 may be, as in similar cases covered by chapter [237.]    ."
 
22      SECTION 39.  Section 346E-8, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
Page 105                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1      "[[]§346E-8[]]  Appeals.  Any operator aggrieved by any
 
 2 assessment of the tax imposed by this chapter for any quarter or
 
 3 any year, may appeal from the assessment in the manner and within
 
 4 the time and in all other respects, as provided in the case of
 
 5 [income] tax appeals by section [235-114;]    -114; provided the
 
 6 tax so assessed shall have been paid."
 
 7      SECTION 40.  Section 346E-13, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (a) to read as follows:
 
 9      "(a)  The director shall administer and enforce this
 
10 chapter.  With respect to:
 
11      (1)  The examinations of books and records, and operators
 
12           and other persons;
 
13      (2)  Procedures and powers upon failure or refusal by an
 
14           operator to make a return or proper return; and
 
15      (3)  The general administration of this chapter;
 
16 the director shall have all rights, powers, and duties conferred
 
17 by chapters 231 and [237]     with respect to powers and duties
 
18 or with respect to taxes imposed under chapter [237.]    .
 
19 Without restriction upon these rights and powers, section [237-8]
 
20    -3 and sections [237-36 to 237-41]    -92 to    -110 are made
 
21 applicable to and with respect to taxes, operators, department
 
22 officers, and other persons, and the matters and things affected
 
23 or covered by this chapter, insofar as these sections are not
 

 
Page 106                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 inconsistent with this chapter, in the same manner, as nearly as
 
 2 may be, as in similar cases covered by chapter [237.]    ."
 
 3      SECTION 41.  Section 349-10, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§349-10  Annual senior citizen's fair.  Each county may
 
 6 hold an annual senior citizen's fair in its respective county.
 
 7 The county shall be responsible for the planning, organizing, and
 
 8 coordinating of the fair in every respect.  The state policy
 
 9 advisory board for elder affairs may assist the county in any
 
10 aspect upon request.  [Proceeds earned from this fair are deemed
 
11 to be proceeds earned from casual sales as defined in chapter
 
12 237.] The county shall distribute such proceeds to the various
 
13 senior citizen organizations and individuals who participate in
 
14 the fair in accordance with appropriate methods of distribution
 
15 as determined by the county."
 
16      SECTION 42.  Section 383-163.6, Hawaii Revised Statutes, is
 
17 amended by amending the title and subsections (a), (b), and (c)
 
18 to read as follows:
 
19      "[[]§383-163.6[]]  Voluntary deduction and withholding of
 
20 federal income and state [income] comprehensive taxes.(a)  An
 
21 individual filing a new claim for unemployment compensation
 
22 shall, at the time of filing the claim, be advised that:
 
23      (1)  Unemployment compensation is subject to federal income
 

 
Page 107                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           and state [income] comprehensive tax;
 
 2      (2)  Requirements exist pertaining to estimated tax
 
 3           payments;
 
 4      (3)  The individual may elect to have federal income tax
 
 5           deducted and withheld from the individual's payment of
 
 6           unemployment compensation at the amount specified in
 
 7           the federal Internal Revenue Code;
 
 8      (4)  The individual may elect to have state [income]
 
 9           comprehensive tax deducted and withheld from the
 
10           individual's payment of unemployment compensation at
 
11           the amount specified in section [235-69;]    -69;
 
12      (5)  The individual may elect to have state and local income
 
13           taxes deducted and withheld from the individual's
 
14           payment of unemployment compensation for other states
 
15           and localities outside this State at the percentage
 
16           established by the state or locality, if the department
 
17           by agreement with the other state or locality is
 
18           authorized to deduct and withhold income tax; and
 
19      (6)  The individual shall be permitted to change a
 
20           previously elected withholding status no more than once
 
21           during a benefit year.
 
22      (b)  Amounts deducted and withheld from unemployment
 
23 compensation shall remain in the unemployment compensation fund
 

 
Page 108                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 until transferred to the federal, state, or local taxing
 
 2 authority as a payment of income or comprehensive tax.
 
 3      (c)  The director shall follow all procedures specified by
 
 4 the United States Department of Labor, the federal Internal
 
 5 Revenue Service, and the state department of taxation, pertaining
 
 6 to the deducting and withholding of income or comprehensive tax."
 
 7      SECTION 43.  Section 412:5-305, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (h) to read as follows:
 
 9      "(h)  To the extent specified herein, a bank may invest its
 
10 own assets in limited partnerships formed to invest in
 
11 residential properties which will qualify for the low income
 
12 housing tax credit under section 42 of the Internal Revenue Code
 
13 of 1986, as amended[, and under chapters 235 and 241]; provided
 
14 that the total amount invested by a bank under this subsection in
 
15 any one limited partnership shall not, without the prior approval
 
16 of the Commissioner, exceed two per cent of the bank's capital
 
17 and surplus and the aggregate amount invested under this
 
18 subsection shall not, without the prior approval of the
 
19 Commissioner, exceed five per cent of the bank's capital and
 
20 surplus.  In no case shall the aggregate amount invested by a
 
21 bank under this subsection exceed ten per cent of the bank's
 
22 capital and surplus."
 
23      SECTION 44.  Section 412:6-306, Hawaii Revised Statutes, is
 

 
Page 109                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 amended by amending subsection (h) to read as follows:
 
 2      "(h)  To the extent specified herein, a savings bank may
 
 3 invest its own assets in limited partnerships formed to invest in
 
 4 residential properties which will qualify for the low income
 
 5 housing tax credit under section 42 of the Internal Revenue Code
 
 6 of 1986, as amended[, and under chapters 235 and 241]; provided
 
 7 that the total amount invested by a savings bank under this
 
 8 subsection in any one limited partnership shall not, without the
 
 9 prior approval of the Commissioner, exceed two per cent of the
 
10 savings bank's capital and surplus and the aggregate amount
 
11 invested under this subsection shall not, without the prior
 
12 approval of the Commissioner, exceed five per cent of the savings
 
13 bank's capital and surplus.  In no case shall the aggregate
 
14 amount invested by a savings bank under this subsection exceed
 
15 ten per cent of the savings bank's capital and surplus."
 
16      SECTION 45.  Section 412:7-306, Hawaii Revised Statutes, is
 
17 amended by amending subsection (h) to read as follows:
 
18      "(h)  To the extent specified herein, a savings and loan
 
19 association may invest its own assets in limited partnerships
 
20 formed to invest in residential properties which will qualify for
 
21 the low income housing tax credit under section 42 of the
 
22 Internal Revenue Code of 1986, as amended[, and under chapters
 
23 235 and 241]; provided that the total amount invested by a
 

 
Page 110                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 savings and loan association under this subsection in any one
 
 2 limited partnership shall not, without the prior approval of the
 
 3 Commissioner, exceed two per cent of the savings and loan
 
 4 association's capital and surplus and the aggregate amount
 
 5 invested under this subsection shall not, without the prior
 
 6 approval of the Commissioner, exceed five per cent of the savings
 
 7 and loan association's capital and surplus.  In no case shall the
 
 8 aggregate amount invested by a savings and loan association under
 
 9 this subsection exceed ten per cent of the savings association's
 
10 capital and surplus."
 
11      SECTION 46.  Section 412:9-409 , Hawaii Revised Statutes, is
 
12 amended by amending subsection (i) to read as follows:
 
13      "(i)  To the extent specified herein, a depository financial
 
14 services loan company may invest its own assets in limited
 
15 partnerships formed to invest in residential properties which
 
16 will qualify for the low income housing tax credit under section
 
17 42 of the Internal Revenue Code of 1986, as amended[, and under
 
18 chapters 235 and 241]; provided that the total amount invested by
 
19 a depository financial services loan company under this
 
20 subsection in any one limited partnership shall not, without the
 
21 prior approval of the Commissioner, exceed two per cent of the
 
22 depository financial services loan company's capital and surplus
 
23 and the aggregate amount invested under this subsection shall
 

 
Page 111                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 not, without the prior approval of the Commissioner, exceed five
 
 2 per cent of the depository financial services loan company's
 
 3 capital and surplus.  In no case shall the aggregate amount
 
 4 invested by a depository financial services loan company under
 
 5 this subsection exceed ten per cent of the depository financial
 
 6 services loan company's capital and surplus."
 
 7      SECTION 47.  Section 421-23, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "§421-23  Taxation.  Domestic associations organized under
 
10 this chapter shall pay an annual license fee of $10 to the
 
11 director of commerce and consumer affairs [(and] which shall be a
 
12 general realization of the State[) which shall be in lieu of all
 
13 other corporation, franchise, and income taxes, and taxes and
 
14 charges upon reserves held by the association for distribution to
 
15 members, including without limitation upon the generality of the
 
16 foregoing any taxes imposed under chapter 235.
 
17      To obtain the exemptions from taxation granted by this
 
18 section or any other law, the].  The association annually shall
 
19 file with the director of taxation a copy of its report made
 
20 under section 421-22, and in addition thereto, within ninety days
 
21 after the close of its fiscal year, shall file with the tax
 
22 assessor of each district in which there are persons doing
 
23 business to whom it has paid, during the preceding fiscal year,
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 any proceeds of goods marketed, a report showing the name of each
 
 2 person to whom the proceeds were paid, the total proceeds of
 
 3 sales for which such person is taxable under chapter [237]    
 
 4 for the fiscal year[, and the rate or rates of such tax
 
 5 applicable thereto or to the several amounts thereof, as the case
 
 6 may be]."
 
 7      SECTION 48.  Section 421H-4, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (c) to read as follows:
 
 9      "(c)  The membership shares and cooperative fees are
 
10 interests in real property for purposes of[:
 
11      (1)  Cooperative] cooperative housing corporations under
 
12           section 216 of the federal Internal Revenue Code of
 
13           1954, as amended[; and
 
14      (2)  Exemption from state general excise tax under section
 
15           237-24(16)]."
 
16      SECTION 49.  Section 431-7-201, Hawaii Revised Statutes, is
 
17 amended by amending subsections (a) and (b) to read as follows:
 
18      "(a)  Each authorized insurer shall file with the
 
19 commissioner and the director of taxation annually, on or before
 
20 March 1 in each year, a statement signed by a duly authorized
 
21 person on its behalf, setting forth the total business
 
22 transacted, and the amount of gross premiums received by the
 
23 insurer during the year ending on the preceding December 31, from
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 all risks or property resident, situated, or located within this
 
 2 State, together with such other information as may be required by
 
 3 the commissioner in order to determine the taxability of
 
 4 premiums.  The term gross premiums as used in this part shall not
 
 5 include consideration paid for annuities.
 
 6      (b)  Each authorized insurer shall file with the
 
 7 commissioner and the director of taxation quarterly, on or before
 
 8 the last day of the calendar month following the quarter, a
 
 9 statement signed by a duly authorized person on its behalf,
 
10 setting forth the total business transacted and the amount of
 
11 gross premiums received by the insurer during the quarter from
 
12 all risks or property resident, situated, or located within this
 
13 State, together with other information as may be required by the
 
14 commissioner to determine the taxability of premiums."
 
15      SECTION 50.  Section 431:7-202, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "§431:7-202  Taxation.  [(a)]  Each authorized insurer,
 
18 [except with respect to all life insurance contracts, ocean
 
19 marine insurance contracts, and real property title insurance
 
20 contracts,] shall pay to the director of [finance through the
 
21 commissioner a tax of 4.265 per cent] taxation in accordance with
 
22 chapter     any tax due on the gross premiums received from all
 
23 risks or property resident, situated, or located within this
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 State, during the year ending on the preceding December 31[, less
 
 2 return premiums (but not including dividends paid or credited to
 
 3 policyholders), and less any reinsurance accepted (the tax upon
 
 4 such business being payable by the direct writing insurer)].
 
 5      All premiums written, procured, or received in the State
 
 6 shall be presumed to have been from risks or property resident,
 
 7 situated, or located within the State.  This presumption may be
 
 8 rebutted as to any premium:
 
 9      (1)  By showing that it has been properly allocated or
 
10           apportioned and reported as a taxable premium of
 
11           another state or other appropriate taxing authority; or
 
12      (2)  By facts as to the residence, situation, or location of
 
13           the risks or property, conclusively showing the
 
14           nontaxability of the premium.
 
15      [(b)  Each authorized insurer, with respect to life
 
16 insurance contracts, shall pay to the director of finance through
 
17 the commissioner a tax of 2.75 per cent on the gross premiums
 
18 received from all risks resident within this State, during the
 
19 year ending on the preceding December 31, less return premiums,
 
20 dividends paid or credited to policyholders, and reinsurance
 
21 accepted (the tax upon such business being payable by the direct
 
22 writing insurer).
 
23      The tax also shall apply to premiums for insurance written
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 on individuals residing outside the State unless the direct
 
 2 writing insurer shall show the payment of a comparable tax to
 
 3 another appropriate taxing authority.  Such showing may be
 
 4 required as to any premium written, procured, or received in the
 
 5 State.
 
 6      (c)  Each authorized insurer shall, with respect to all
 
 7 ocean marine insurance contracts written within the State, during
 
 8 the year ending on the preceding December 31, pay to the director
 
 9 of finance through the commissioner a tax of .8775 per cent on
 
10 its gross underwriting profit.  The gross underwriting profit
 
11 shall be ascertained by deducting from the net premiums (i.e.,
 
12 gross premiums less all return premiums and premiums for
 
13 reinsurance ceded) on such ocean marine insurance contracts, the
 
14 net losses paid (i.e., gross losses paid less salvage and
 
15 recoveries on reinsurance ceded) during such year under such
 
16 contracts.  In the case of an insurer issuing participating
 
17 contracts, the gross underwriting profit shall not include, for
 
18 computation of the tax prescribed by this subsection, the amount
 
19 refunded, or paid as participation dividends, by such insurer to
 
20 the holders of such contracts.
 
21      (d)  Each authorized insurer, with respect to real property
 
22 title insurance contracts written on real property situated
 
23 within this State during the year ending on the preceding
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 December 31, shall pay to the director of finance through the
 
 2 commissioner a tax of 4.265 per cent of the amount of the risk
 
 3 premium actually received by the authorized insurer for the
 
 4 provision of such insurance.  The amount of the risk premium
 
 5 received by the authorized insurer for the provision of real
 
 6 property title insurance shall be an amount equal to the amount
 
 7 actually received by the authorized insurer solely for the
 
 8 provision of real property title insurance coverage in accordance
 
 9 with the underwriting agreement or contract between the
 
10 authorized insurer and the underwritten title company.
 
11      (e)  No return premium shall be deductible unless the
 
12 original gross premium, or an adjustment thereof, in an amount
 
13 equal to or in excess of the return premium, has been
 
14 concurrently or previously reported as taxable under this section
 
15 or a prior similar law of the State.
 
16      (f)  The taxes imposed by subsections (a), (b), (c), and (d)
 
17 shall be paid quarterly.  The quarterly tax shall be due and
 
18 payable on or before the last day of the calendar month following
 
19 the quarter in which it accrues, coinciding with the filing of
 
20 the statement provided for in section 431:7-201.
 
21      In addition to the quarterly tax and quarterly tax
 
22 statement, the annual tax shall be due and payable on or before
 
23 March 1 coinciding with the filing of the statement provided for
 

 
Page 117                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 in section 431:7-201.
 
 2      All amounts paid under this subsection, other than fines,
 
 3 shall be allowed as a credit on the annual tax imposed by
 
 4 subsections (a), (b), (c), and (d).
 
 5      If the total amount of installment payments for any calendar
 
 6 year exceeds the amount of annual tax for that year, the excess
 
 7 shall be treated as an overpayment of the annual tax and be
 
 8 allowed as a refund under section 431:7-203.
 
 9      Any insurer failing or refusing to pay the required taxes
 
10 above stated when due and payable shall be liable for a fine of
 
11 $500 or ten per cent of the tax due, whichever is greater; plus
 
12 interest at a rate of twelve per cent per annum on the delinquent
 
13 taxes.  The taxes may be collected by distraint, or the taxes,
 
14 fine, and interest may be recovered by an action to be instituted
 
15 by the commissioner in the name of this State, in any court of
 
16 competent jurisdiction.  The commissioner may suspend the
 
17 certificate of authority of the delinquent insurer until the
 
18 taxes, fine, and interest, should any be imposed, are fully paid.
 
19      (g)  In establishing the prepayment amount of an insurer who
 
20 has acquired the business of another insurer, the amount of tax
 
21 liability of the acquiring insurer for the preceding calendar
 
22 year shall be deemed to include the amount of tax liability of
 
23 the acquired insurer for that year.]"
 

 
Page 118                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1      SECTION 51.  Section 431:7-204.5, Hawaii Revised Statutes,
 
 2 is amended to read as follows:
 
 3      "[[]§431:7-204.5[]]  Appeals.  Notwithstanding section
 
 4 431:2-308, any person aggrieved by any assessment of the tax for
 
 5 any month or any year may appeal from the assessment in the
 
 6 manner and within the time and in all other respects as provided
 
 7 in section [235-114,]    -114,  provided the tax so assessed
 
 8 shall have been paid."
 
 9      SECTION 52.  Section 432:2-503, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§432:2-503  Taxation.  Every society organized and
 
12 operating or licensed under this article shall be, from the time
 
13 of such organization, exempt from every [state,] county[,] and
 
14 municipal tax, except real property taxes and unemployment
 
15 compensation taxes; provided that nothing in this section shall
 
16 be deemed to exempt the association or society from liability to
 
17 withhold such taxes payable by its employees and pay the same to
 
18 the proper collection officers, and to keep such records and make
 
19 such returns and reports, as may be required in the case of other
 
20 corporations, associations, or societies similarly exempt from
 
21 the taxes hereinabove first mentioned[; provided further, that
 
22 the exemption hereby granted as to general excise taxes under
 
23 chapter 237 shall not apply to any activity the primary purpose
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 of which is to produce income]."
 
 2      SECTION 53.  Section 444-17, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "§444-17 Revocation, suspension, and renewal of licenses.
 
 5 In addition to any other actions authorized by law, the board may
 
 6 revoke any license issued pursuant to this section, or suspend
 
 7 the right of a licensee to use a license, or refuse to renew a
 
 8 license for any cause authorized by law, including but not
 
 9 limited to the following:
 
10      (1)  Any dishonest, fraudulent, or deceitful act as a
 
11           contractor that causes substantial damage to another;
 
12      (2)  Engaging in any unfair or deceptive act or practice as
 
13           prohibited by section 480-2;
 
14      (3)  Abandonment of any construction project or operation
 
15           without reasonable or legal excuse;
 
16      (4)  Wilful diversion of funds or property received for
 
17           prosecution or completion of a specific construction
 
18           project or operation, or for a specified purpose in the
 
19           prosecution or completion of any construction project
 
20           or operation, and the use thereof for any other
 
21           purpose;
 
22      (5)  Wilful departure from, or wilful disregard of plans or
 
23           specifications in any material respect without consent
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           of the owner or the owner's duly authorized
 
 2           representative, that is prejudicial to a person
 
 3           entitled to have the construction project or operation
 
 4           completed in accordance with those plans and
 
 5           specifications;
 
 6      (6)  Wilful violation of any law of the State, or any
 
 7           county, relating to building, including any violation
 
 8           of any applicable rule of the department of health, or
 
 9           of any applicable safety or labor law;
 
10      (7)  Failure to make and keep records showing all contracts,
 
11           documents, records, receipts, and disbursements by a
 
12           licensee of all the licensee's transactions as a
 
13           contractor for a period of not less than three years
 
14           after completion of any construction project or
 
15           operation to which the records refer or to permit
 
16           inspection of those records by the board;
 
17      (8)  When the licensee being a partnership or a joint
 
18           venture permits any partner, member, or employee of the
 
19           partnership or joint venture who does not hold a
 
20           license to have the direct management of the
 
21           contracting business thereof;
 
22      (9)  When the licensee being a corporation permits any
 
23           officer or employee of the corporation who does not
 

 
Page 121                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           hold a license to have the direct management of the
 
 2           contracting business thereof;
 
 3     (10)  Misrepresentation of a material fact by an applicant in
 
 4           obtaining a license;
 
 5     (11)  Failure of a licensee to complete in a material respect
 
 6           any construction project or operation for the agreed
 
 7           price if the failure is without legal excuse;
 
 8     (12)  Wilful failure in any material respect to comply with
 
 9           this chapter or the rules adopted pursuant thereto;
 
10     (13)  Wilful failure or refusal to prosecute a project or
 
11           operation to completion with reasonable diligence;
 
12     (14)  Wilful failure to pay when due a debt incurred for
 
13           services or materials rendered or purchased in
 
14           connection with the licensee's operations as a
 
15           contractor when the licensee has the ability to pay or
 
16           when the licensee has received sufficient funds
 
17           therefor as payment for the particular operation for
 
18           which the services or materials were rendered or
 
19           purchased;
 
20     (15)  The false denial of any debt due or the validity of the
 
21           claim therefor with intent to secure for a licensee,
 
22           the licensee's employer, or other person, any discount
 
23           of the debt or with intent to hinder, delay, or defraud
 

 
Page 122                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           the person to whom the debt is due;
 
 2     (16)  Failure to secure or maintain workers' compensation
 
 3           insurance, unless the licensee is authorized to act as
 
 4           a self-insurer under chapter 386 or is excluded from
 
 5           the requirements of chapter 386;
 
 6     (17)  Entering into a contract with an unlicensed contractor
 
 7           involving work or activity for the performance of which
 
 8           licensing is required under this chapter;
 
 9     (18)  Performing service on a residential or commercial air
 
10           conditioner, utilizing CFCs, without using refrigerant
 
11           recovery and recycling equipment;
 
12     (19)  Performing service on any air conditioner after
 
13           January 1, 1994, without successful completion of an
 
14           appropriate training course in the recovery and
 
15           recycling of CFC and HCFC refrigerants, which included
 
16           instruction in the proper use of refrigerant recovery
 
17           and recycling equipment that is certified by
 
18           Underwriter Laboratories, Incorporated;
 
19     (20)  Violating chapter 342C; and
 
20     (21)  Failure to pay delinquent taxes, interest, and
 
21           penalties assessed under chapter [237]     that relate
 
22           to the business of contracting, or to comply with the
 
23           terms of a conditional payment plan with the department
 

 
Page 123                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           of taxation for the payment of such delinquent taxes,
 
 2           interest, and penalties."
 
 3      SECTION 54.  Section 480B-2, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (a) to read as follows:
 
 5      "(a)  The media shall submit to the attorney general, no
 
 6 later than thirty days after December 31 of the reporting year,
 
 7 [an income] a comprehensive tax return filed pursuant to section
 
 8 [235-4.]    -4."
 
 9      SECTION 55.  Section 481I-3, Hawaii Revised Statutes, is
 
10 amended by amending subsection (b) to read as follows:
 
11      "(b)  If the manufacturer, its agents, distributors, or
 
12 authorized dealers are unable to conform the motor vehicle to any
 
13 applicable express warranty by repairing or correcting any defect
 
14 or condition which substantially impairs the use, market value,
 
15 or safety of the motor vehicle after a reasonable number of
 
16 documented attempts, then the manufacturer shall provide the
 
17 consumer with a replacement motor vehicle or accept return of the
 
18 vehicle from the consumer and refund to the consumer the
 
19 following:  the full purchase price including, but not limited
 
20 to, charges for undercoating, dealer preparation, transportation
 
21 and installed options, and all collateral and incidental charges,
 
22 excluding finance and interest charges, and less a reasonable
 
23 offset for the consumer's use of the motor vehicle.
 

 
Page 124                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1      If either a replacement motor vehicle or a refund is
 
 2 awarded, an "offset" may be made for damage to the vehicle not
 
 3 attributable to normal wear and tear, if unrelated to the
 
 4 nonconformity.  [Refunds made pursuant to this subsection shall
 
 5 be deemed to be refunds of the sales price and treated as such
 
 6 for purposes of section 237-3.] Refunds shall be made to the
 
 7 consumer and lienholder, if any, as their interests may appear on
 
 8 the records of ownership.  If applicable, refunds shall be made
 
 9 to the lessor and lessee pursuant to rules adopted by the
 
10 department of commerce and consumer affairs."
 
11      SECTION 56.  Section 486K-1, Hawaii Revised Statutes, is
 
12 amended by amending the definition of "hotel/hotel-condo" to read
 
13 as follows:
 
14      ""Hotel/hotel-condo" means an establishment consisting of
 
15 any building or structure used primarily for the business of
 
16 providing for consideration transient accommodation lodging
 
17 facilities and that furnishes, as part of its routine operations,
 
18 one or more customary lodging services, other than living
 
19 accommodations and the use of furniture and fixtures, including,
 
20 but not limited to, restaurant facilities, or room attendant,
 
21 bell, telephone switchboard, laundering, or concierge services[,
 
22 and is subject to the transient accommodations tax under chapter
 
23 237D]."
 

 
Page 125                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1      SECTION 57.  Section 515-3, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§515-3 Discriminatory practices.  It is a discriminatory
 
 4 practice for an owner or any other person engaging in a real
 
 5 estate transaction, or for a real estate broker or salesperson,
 
 6 because of race, sex, color, religion, marital status, familial
 
 7 status, ancestry, disability, age, or HIV (human immunodeficiency
 
 8 virus) infection:
 
 9      (1)  To refuse to engage in a real estate transaction with a
 
10           person;
 
11      (2)  To discriminate against a person in the terms,
 
12           conditions, or privileges of a real estate transaction
 
13           or in the furnishing of facilities or services in
 
14           connection therewith;
 
15      (3)  To refuse to receive or to fail to transmit a bona fide
 
16           offer to engage in a real estate transaction from a
 
17           person;
 
18      (4)  To refuse to negotiate for a real estate transaction
 
19           with a person;
 
20      (5)  To represent to a person that real property is not
 
21           available for inspection, sale, rental, or lease when
 
22           in fact it is so available, or to fail to bring a
 
23           property listing to the person's attention, or to
 

 
Page 126                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           refuse to permit the person to inspect real property,
 
 2           or to steer a person seeking to engage in a real estate
 
 3           transaction;
 
 4      (6)  To print, circulate, post, or mail, or cause to be so
 
 5           published a statement, advertisement, or sign, or to
 
 6           use a form of application for a real estate
 
 7           transaction, or to make a record or inquiry in
 
 8           connection with a prospective real estate transaction,
 
 9           which indicates, directly or indirectly, an intent to
 
10           make a limitation, specification, or discrimination
 
11           with respect thereto;
 
12      (7)  To offer, solicit, accept, use, or retain a listing of
 
13           real property with the understanding that a person may
 
14           be discriminated against in a real estate transaction
 
15           or in the furnishing of facilities or services in
 
16           connection therewith;
 
17      (8)  To refuse to engage in a real estate transaction with a
 
18           person or to deny equal opportunity to use and enjoy a
 
19           housing accommodation due to a disability because the
 
20           person uses the services of a guide dog, signal dog, or
 
21           service animal; provided that reasonable restrictions
 
22           or prohibitions may be imposed regarding excessive
 
23           noise or other problems caused by those animals.  For
 

 
Page 127                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           the purposes of this paragraph:
 
 2                ""Blind" [shall be as defined in section 235-1;]
 
 3           means a person whose central visual acuity does not
 
 4           exceed 20/200 in the better eye with correcting lenses,
 
 5           or whose visual acuity is greater than 20/200 but is
 
 6           accompanied by a limitation in the field of vision such
 
 7           that the widest diameter of the visual field subtends
 
 8           an angle no greater than twenty degrees.  The
 
 9           impairment of sight shall be certified to on forms
 
10           prescribed by the department of taxation on the basis
 
11           of a written report on an examination performed by a
 
12           qualified ophthalmologist or qualified optometrist.
 
13                "Deaf" [shall be as defined in section 235-1;]
 
14           means a person whose average loss in the speech
 
15           frequencies (500-2000 Hertz) in the better ear is
 
16           eighty-two decibels, A.S.A., or worse.  The impairment
 
17           of deafness shall be certified to by a qualified
 
18           otolaryngologist on forms prescribed by the department
 
19           of taxation.
 
20                "Guide dog" means any dog individually trained by
 
21           a licensed guide dog trainer for guiding a blind person
 
22           by means of a harness attached to the dog and a rigid
 
23           handle grasped by the person;
 

 
Page 128                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1                "Reasonable restriction" shall not include any
 
 2           restriction that allows any owner or person to refuse
 
 3           to negotiate or refuse to engage in a real estate
 
 4           transaction; provided that as used in this paragraph,
 
 5           the "reasonableness" of a restriction shall be examined
 
 6           by giving due consideration to the needs of a
 
 7           reasonable prudent person in the same or similar
 
 8           circumstances.  Depending on the circumstances, a
 
 9           "reasonable restriction" may require the owner of the
 
10           service animal, guide dog, or signal dog to comply with
 
11           one or more of the following:
 
12           (A)  Observe applicable laws including leash laws and
 
13                pick-up laws;
 
14           (B)  Assume responsibility for damage caused by the
 
15                dog; or
 
16           (C)  Have the housing unit cleaned upon vacating by
 
17                fumigation, deodorizing, professional carpet
 
18                cleaning, or other method appropriate under the
 
19                circumstances.
 
20           The foregoing list is illustrative only, and neither
 
21           exhaustive nor mandatory;
 
22                "Service animal" means any animal that is trained
 
23           to provide those life activities limited by the
 

 
Page 129                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1           disability of the person;
 
 2                "Signal dog" means any dog that is trained to
 
 3           alert a deaf person to intruders or sounds;
 
 4      (9)  To solicit or require as a condition of engaging in a
 
 5           real estate transaction that the buyer, renter, or
 
 6           lessee be tested for human immunodeficiency virus
 
 7           infection (HIV), the causative agent of acquired
 
 8           immunodeficiency syndrome (AIDS);
 
 9     (10)  To refuse to permit, at the expense of a person with a
 
10           disability, reasonable modifications to existing
 
11           premises occupied or to be occupied by the person if
 
12           modifications may be necessary to afford the person
 
13           full enjoyment of the premises.  A real estate broker
 
14           or salesperson, where it is reasonable to do so, may
 
15           condition permission for a modification on the person
 
16           agreeing to restore the interior of the premises to the
 
17           condition that existed before the modification,
 
18           reasonable wear and tear excepted;
 
19     (11)  To refuse to make reasonable accommodations in rules,
 
20           policies, practices, or services, when the
 
21           accommodations may be necessary to afford a person with
 
22           a disability equal opportunity to use and enjoy a
 
23           housing accommodation;
 

 
Page 130                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1     (12)  In connection with the design and construction of
 
 2           covered multifamily housing accommodations for first
 
 3           occupancy after March 13, 1991, to fail to design and
 
 4           construct housing accommodations in such a manner that:
 
 5           (A)  The housing accommodations have at least one
 
 6                accessible entrance, unless it is impractical to
 
 7                do so because of the terrain or unusual
 
 8                characteristics of the site; and
 
 9           (B)  With respect to housing accommodations with an
 
10                accessible building entrance:
 
11                (i)  The public use and common use portions of the
 
12                     housing accommodations are accessible to and
 
13                     usable by disabled persons;
 
14               (ii)  Doors allow passage by persons in
 
15                     wheelchairs; and
 
16              (iii)  All premises within covered multifamily
 
17                     housing accommodations contain an accessible
 
18                     route into and through the housing
 
19                     accommodations; light switches, electrical
 
20                     outlets, thermostats, and other environmental
 
21                     controls are in accessible locations;
 
22                     reinforcements in the bathroom walls allow
 
23                     installation of grab bars; and kitchens and
 

 
Page 131                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1                     bathrooms are accessible by wheelchair; or
 
 2     (13)  To discriminate against or deny a person access to, or
 
 3           membership or participation in any multiple listing
 
 4           service, real estate broker's organization, or other
 
 5           service, organization, or facility involved either
 
 6           directly or indirectly in real estate transactions, or
 
 7           to discriminate against any person in the terms or
 
 8           conditions of such access, membership, or
 
 9           participation."
 
10      SECTION 58.  Section 516-27, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "§516-27  Compulsory or involuntary conversion.  It is the
 
13 intent of the legislature, within the meaning of section 1033 or
 
14 section 1231 of the Internal Revenue Code [or the applicable
 
15 provisions of chapter 235, Hawaii Revised Statutes,] as well as
 
16 all other statutes, rules, regulations, administrative orders,
 
17 and legal interpretations within the federal and state
 
18 governments relating to taxation, that any conveyance of title to
 
19 property by a fee owner to the corporation under this part shall
 
20 constitute a compulsory or involuntary conversion (as a result of
 
21 the exercise of the power of condemnation or the threat of
 
22 imminence thereof), and that such fee owner shall not be deemed,
 
23 by reason, in whole or in part, of any provision of this part or
 

 
Page 132                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 by reason of the execution by the fee owner of leases to the
 
 2 property and other properties subsequent to June 24, 1967, to
 
 3 hold the property primarily for sale to customers in the ordinary
 
 4 course of trade or business."
 
 5      SECTION 59.  Section 560:3-910, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "§560:3-910  Purchasers from distributees protected.  If
 
 8 property distributed in kind or a security interest therein is
 
 9 acquired for value by a purchaser from or lender to a distributee
 
10 who has received an instrument or deed of distribution from the
 
11 personal representative, or is so acquired by a purchaser from or
 
12 lender to a transferee from such distributee, the purchaser or
 
13 lender takes title free of rights of any interested person in the
 
14 estate and incurs no personal liability to the estate, or to any
 
15 interested person, whether or not the distribution was proper or
 
16 supported by court order or the authority of the personal
 
17 representative was terminated before execution of the instrument
 
18 or deed.  This section protects a purchaser from or lender to a
 
19 distributee who, as personal representative, has executed a deed
 
20 of distribution to the distributee's self, as well as a purchaser
 
21 from or lender to any other distributee or the distributee's
 
22 transferee.  To be protected under this provision, a purchaser or
 
23 lender need not inquire whether a personal representative acted
 

 
Page 133                                                   
                                     H.B. NO.871        
                                                        
                                                        

 
 1 properly in making the distribution in kind, even if the personal
 
 2 representative and the distributee are the same person, or
 
 3 whether the authority of the personal representative had
 
 4 terminated before the distribution.  Any recorded instrument
 
 5 described in this section on which a state documentary fee is
 
 6 noted [pursuant to chapter 247] shall be prima facie evidence
 
 7 that such transfer was made for value."
 
 8      SECTION 60.  Section 560:6-108, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "§560:6-108  Financial institution protection; payment on
 
11 signature of one party.  Financial institutions may enter into
 
12 multiple-party accounts to the same extent that they may enter
 
13 into single-party accounts.  Subject to the provision of
 
14 [sections 236D-12 and] section 560:6-107, any multiple-party
 
15 account may be paid, on request and according to its terms, to
 
16 any one or more of the parties.  A financial institution shall
 
17 not be required to inquire as to the source of funds received for
 
18 deposit to a multiple-party account, or to inquire as to the
 
19 proposed application of any sum withdrawn from an account."
 
20      SECTION 61.  Section 560:6-109, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "§560:6-109  Financial institution protection; payment after
 
23 death or disability; joint account.  Subject to the provisions of
 

 
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 1 [sections 236D-12 and] section 560:6-107 any sums in a joint
 
 2 account may be paid, on request and according to its terms, to
 
 3 any party without regard to whether any other party is
 
 4 incapacitated or deceased at the time the payment is demanded;
 
 5 but payment may not be made to the personal representative or
 
 6 heirs of a deceased party unless proofs of death are presented to
 
 7 the financial institution showing that the decedent was the last
 
 8 surviving party or unless there is no right of survivorship under
 
 9 section 560:6-104."
 
10      SECTION 62.  Section 612-11, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "(a)  Each year the clerk for each circuit shall compile a
 
13 master list.  The master list shall consist of all voter
 
14 registration lists for the circuit, which shall be supplemented
 
15 with names from other lists of persons resident therein such as
 
16 lists of taxpayers and drivers' licenses.  This includes names,
 
17 addresses, and social security numbers taken from [income]
 
18 comprehensive tax returns and estimates notwithstanding section
 
19 [235-116.]    -116.  Each person's name shall appear only once on
 
20 the master list."
 
21      SECTION 63.  Section 657D-43, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "[[]§657D-43[]  Income] Comprehensive taxes; collection
 

 


 

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 1 deferred; interest; statute of limitations.  The collection from
 
 2 any person in the state military forces of any tax on the income
 
 3 or gross proceeds, or value of goods traded, of such person
 
 4 pursuant to chapter [235,]    , whether falling due prior to or
 
 5 during the person's period of military service, shall be deferred
 
 6 for a period of not more than sixty days after the termination of
 
 7 the person's period of military service if such person's ability
 
 8 to pay such tax is materially impaired by reason of the service.
 
 9 No interest on any amount of tax, collection of which is deferred
 
10 for any period under this section, and no penalty for nonpayment
 
11 of such amount during such period, shall accrue for such period
 
12 of deferment by reason of nonpayment.  The running of any statute
 
13 of limitations against the collection of such tax by distraint or
 
14 otherwise shall be suspended for the period of military service
 
15 of any person whose tax collection is deferred under this
 
16 section, and for an additional period of sixty days beginning
 
17 with the day following the period of military service.
 
18      The provisions of this section shall not apply to the
 
19 retention or recovery of debt under sections 231-51 to 231-59."
 
20      SECTION 64.  Section 842-11, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "§842-11  Failure to report income[;], gross proceeds or
 
23 value of goods and services traded; penalty.  Any law to the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 contrary notwithstanding, no person shall willfully fail to
 
 2 report income, gross proceeds or value of goods and services
 
 3 traded, or to pay the taxes due thereon as provided by [chapters
 
 4 235 or 237.] chapter    .  Whoever violates this section shall be
 
 5 fined not more than $10,000 or imprisoned not more than ten
 
 6 years, or both, in addition to any assessment and collection of
 
 7 taxes, penalties and interest to which the State may be entitled
 
 8 under [chapters 235 and 237.] chapter    ."
 
 9      SECTION 65.  Section 11-226, Hawaii Revised Statutes, is
 
10 repealed.
 
11      ["§11-226  Tax deductions.(a)  As a condition of allowing
 
12 an individual to take a tax deduction for campaign contributions
 
13 to a candidate pursuant to section 235-7(g)(2), a candidate shall
 
14 have filed an affidavit with the commission prior to or
 
15 simultaneous with the filing of the candidate's organizational
 
16 report stating that the candidate shall not exceed the
 
17 expenditure limit for the candidate's respective office as set
 
18 forth in section 11-209.
 
19      (b)  The affidavit shall remain effective until the
 
20 termination of the central committee of the candidate or the
 
21 opening of filing for the next succeeding election for the office
 
22 held or sought at the time of filing of the affidavit whichever
 
23 occurs first.  An affidavit filed under this section may not be
 

 
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 1 rescinded.
 
 2      (c)  The director of taxation shall not allow any individual
 
 3 or married couple filing jointly to take a deduction against any
 
 4 tax due, pursuant to section 235-7(g)(2), for any contribution to
 
 5 a candidate for statewide or county office, who has not filed an
 
 6 affidavit as provided in this section.
 
 7      (d)  The commission shall forward a certified copy of any
 
 8 affidavit filed under this section to the director of taxation.
 
 9      (e)  The director of taxation shall only allow an individual
 
10 or married couple filing jointly to take an income tax deduction,
 
11 pursuant to section 235-7(g)(2), for any contribution to a
 
12 candidate for a statewide or county office, if a receipt is
 
13 attached to the state income tax return.  Canceled checks or
 
14 copies of the same shall be considered adequate receipt forms.
 
15      (f)  If a candidate has not filed an affidavit pursuant to
 
16 this section, the candidate shall inform all contributors to the
 
17 candidate's campaign in writing immediately upon receipt of the
 
18 contribution that they are not entitled to count their
 
19 contributions to the candidate for purposes of taking a tax
 
20 deduction under this section."]
 
21      SECTION 66.  Section 201G-116, Hawaii Revised Statutes, is
 
22 repealed.
 
23      ["§201G-116  Exemption from general excise taxes.(a)  In
 

 
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 1 accordance with section 237-29, the corporation may approve and
 
 2 certify for exemption from general excise taxes any qualified
 
 3 person or firm involved with a newly constructed, or moderately
 
 4 or substantially rehabilitated project:
 
 5      (1)  Developed under this subpart;
 
 6      (2)  Developed under a government assistance program
 
 7           approved by the corporation, including but not limited
 
 8           to, the United States Department of Agriculture 502
 
 9           program and Federal Housing Administration 235 program;
 
10           or
 
11      (3)  Developed under the sponsorship of a private nonprofit
 
12           corporation providing home rehabilitation or new homes
 
13           for qualified families in need of decent, low-cost
 
14           housing.
 
15      (b)  All claims for exemption under this section shall be
 
16 filed with and certified by the corporation and forwarded to the
 
17 department of taxation.  Any claim for exemption that is filed
 
18 and approved, shall not be considered a subsidy for the purpose
 
19 of this subpart.
 
20      (c)  For the purposes of this section, "moderate
 
21 rehabilitation" means rehabilitation to upgrade a unit to a
 
22 decent, safe, and sanitary condition, or to repair or replace
 
23 major building systems or components in danger of failure.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 "Substantial rehabilitation" means the improvement of a property
 
 2 to a decent, safe, and sanitary condition that requires more than
 
 3 routine or minor repairs or improvements and may include, but is
 
 4 not limited to, the gutting and extensive reconstruction of a
 
 5 unit or cosmetic improvements coupled with the curing of a
 
 6 substantial accumulation of deferred maintenance.  "Substantial
 
 7 rehabilitation" also includes renovation, alteration, or
 
 8 remodeling to convert or adapt structurally sound property to the
 
 9 design and condition required for a specific use (e.g.,
 
10 conversion of a hotel to housing for elders)."]
 
11      SECTION 67.  Section 431:7-203, Hawaii Revised Statutes, is
 
12 repealed.
 
13      ["§431:7-203  Administrative refunds.(a)  In the event any
 
14 person has paid to the commissioner any tax, fee, or other charge
 
15 in error or in excess of that which the person is lawfully
 
16 obligated to pay under this code, the commissioner, upon written
 
17 request made by the person to the commissioner within the time
 
18 set forth in section 431:7-204.6, shall authorize a refund
 
19 thereof out of the general funds of this State by submitting a
 
20 voucher therefor to the comptroller of this State subject to the
 
21 following limitations:
 
22      (1)  No recourse may be had except under section 40-35 or by
 
23           appeal for refunds of taxes paid pursuant to an
 

 
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 1           assessment by the commissioner; provided that if the
 
 2           assessment by the commissioner shall contain clerical
 
 3           errors, transposition of figures, typographical errors,
 
 4           and errors in calculation or if there shall be an
 
 5           illegal or erroneous assessment because the assessment
 
 6           is not in accordance with this code, the refund
 
 7           procedures in subsection (a) shall apply; and
 
 8      (2)  No refund or overpayment credit shall be made unless
 
 9           the original payment of the tax was due to the law
 
10           having been interpreted or applied in respect to the
 
11           taxpayer concerned differently than in respect of
 
12           taxpayers generally.
 
13      As to all tax payments for which a refund or credit is not
 
14 authorized by this subsection (including, without prejudice to
 
15 the generality of the foregoing, cases of unconstitutionality),
 
16 the remedies provided by appeal or under section 40-35 are
 
17 exclusive.
 
18      (b)  Where a taxpayer is entitled to a refund, the taxpayer,
 
19 at the taxpayer's election, may apply the amount of the refund as
 
20 an overpayment credit to taxes subsequently accruing under this
 
21 code.
 
22      (c)  This subsection shall apply to a refund for an
 
23 overpayment of tax.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      (1)  If the tax return as filed by a taxpayer shows the
 
 2           amount already paid, whether or not on the basis of
 
 3           installments, exceeds the amount determined to be the
 
 4           correct amount of the tax due, and the taxpayer
 
 5           requests a refund of the overpayment, the amount of
 
 6           overpayment together with interest, if any, shall be
 
 7           refunded in the manner provided in subsection (a).  The
 
 8           interest shall be allowed and paid at the rate of two-
 
 9           thirds of one per cent for each calendar month or
 
10           fraction thereof, beginning with the first calendar day
 
11           after the due date of the return or, if the return is
 
12           filed after the prescribed due date, the first month
 
13           following the month the return is received, and
 
14           continuing until the date that the commissioner
 
15           approves the refund voucher.  If the commissioner
 
16           approves the refund voucher within ninety days from the
 
17           due date or the date the return is received, whichever
 
18           is later, and the comptroller of the State sends the
 
19           taxpayer a refund warrant within forty-five days from
 
20           the date of the commissioner's approval, no interest on
 
21           the overpayment will be allowed or paid.  However, if
 
22           either the commissioner or the comptroller exceeds the
 
23           time allowed herein, interest will be computed from the
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           first calendar day after the due date of the return or
 
 2           from the first month following the month the return is
 
 3           received by the commissioner if the return is filed
 
 4           after the prescribed due date, until the date that the
 
 5           comptroller sends the refund warrant to the taxpayer.
 
 6      (2)  If any overpayment of taxes results or arises from
 
 7           (A)  The taxpayer filing an amended return, or from
 
 8           (B)  A determination made by the commissioner and such
 
 9                overpayment is not shown on the original return as
 
10                filed by the taxpayer, interest on the overpayment
 
11                shall be allowed and paid from the first calendar
 
12                day after the due date of the original return or,
 
13                if the original return is filed after the
 
14                prescribed due date, the first month following the
 
15                month the return is received, to the date that the
 
16                commissioner signs the refund voucher.  If the
 
17                comptroller does not send the refund warrant to
 
18                the taxpayer within forty-five days after the
 
19                commissioner's approval, interest will continue
 
20                until the date that the comptroller sends the
 
21                refund warrant to the taxpayer.
 
22      (3)  In the case of credit, interest shall be allowed and
 
23           paid from the first calendar day after the due date of
 

 
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 1           the return, the first month following the month the
 
 2           return is received by the commissioner, or the date of
 
 3           payment, whichever is later, to the date the credit is
 
 4           taken; provided that the commissioner may make a refund
 
 5           of any credit to a taxpayer where the taxpayer has no
 
 6           underpayment against which to apply the credit."]
 
 7      SECTION 68.  Section 431:7-204, Hawaii Revised Statutes, is
 
 8 repealed.
 
 9      ["§431:7-204  In lieu provision.  As to insurers, the taxes
 
10 and fees imposed by section 431:7-201 to section 431:7-204, and
 
11 the fees imposed by this code, when paid shall be in settlement
 
12 of and in lieu of all demands for taxes, licenses, or fees of
 
13 every character imposed by the laws of this State, the ordinances
 
14 or other laws, rules, or regulations of any county of this State,
 
15 except:
 
16      (1)  As expressly otherwise provided;
 
17      (2)  Taxes on real property;
 
18      (3)  Taxes on the purchase, use, or ownership of tangible
 
19           personal property; and
 
20      (4)  Taxes on gross income, gross proceeds, gross rental, or
 
21           gross rental proceeds under chapter 237 or 237D.
 
22 Nothing in this section shall be deemed to exempt insurers from
 
23 liability for withholding taxes payable by their employees and
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 paying the same to the proper collection officers, or from
 
 2 keeping such records, and making such returns and reports, as may
 
 3 be required in the case of other persons enjoying tax
 
 4 exemption."]
 
 5      SECTION 69.  Section 431:7-204.6, Hawaii Revised Statutes,
 
 6 is repealed.
 
 7      ["[§431:7-204.6]  Limitation period for assessment, levy,
 
 8 collection, or refund.(a)  The amount of insurance taxes
 
 9 imposed by this chapter shall be assessed or levied within three
 
10 years after the annual return was filed, or within three years of
 
11 the due date prescribed for the filing of the return, whichever
 
12 is later, and no proceeding in court without assessment for the
 
13 collection of any such taxes shall be begun after the expiration
 
14 of the period.
 
15      (b)  In the case of a false or fraudulent return with intent
 
16 to evade tax, or of a failure to file the annual return, the tax
 
17 may be assessed or levied at any time.
 
18      (c)  Where, before the expiration of the period prescribed
 
19 in subsection (a) or (d), both the commissioner and the taxpayer
 
20 have consented in writing to the assessment or levy of the tax
 
21 after the date fixed by subsection (a) or the credit or refund of
 
22 the tax after the date fixed by subsection (d), the tax may be
 
23 assessed or levied, or the overpayment, if any, may be credited
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 or refunded, at any time prior to the expiration of the period
 
 2 agreed upon.  The period so agreed upon may be extended by
 
 3 subsequent agreements in writing made before the expiration of
 
 4 the period previously agreed upon.
 
 5      (d)  No credit or refund shall be allowed for any tax
 
 6 imposed by this chapter, unless a claim for such credit or refund
 
 7 shall be filed as follows:
 
 8      (1)  If an annual return is timely filed, or is filed within
 
 9           three years after the date prescribed for filing the
 
10           annual return, then the credit or refund shall be
 
11           claimed within three years after the date the annual
 
12           return was filed or the date prescribed for filing the
 
13           annual return, whichever is later.
 
14      (2)  If an annual return is not filed, or is filed more than
 
15           three years after the date prescribed for filing the
 
16           annual return, a claim for credit or refund shall be
 
17           filed within:
 
18           (A)  Three years after payment of the tax; or
 
19           (B)  Three years after the date prescribed for the
 
20                filing of the annual return, whichever is later.
 
21 Paragraphs (1) and (2) are mutually exclusive.  The limitation
 
22 shall not apply to a credit or refund pursuant to an appeal
 
23 provided for by section 431:7-204.5, or to a payment under
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 protest as provided in section 40-35."]
 
 2      SECTION 70.  Section 431:7-205, Hawaii Revised Statutes, is
 
 3 repealed.
 
 4      ["§431:7-205  Reports to department of taxation.  The
 
 5 commissioner shall promptly report to the department of taxation
 
 6 all amounts of taxes collected under section 431:7-201 to section
 
 7 431:7-204 and section 431:8-315 and all amounts of refunds of
 
 8 such taxes made under section 431:7-203."]
 
 9      SECTION 71.  Section 431:7-206, Hawaii Revised Statutes, is
 
10 repealed.
 
11      ["§431:7-206  Domestic company credit for retaliatory taxes
 
12 paid other states.  If by the laws of any state other than this
 
13 State, or by the action of any public official of another state,
 
14 any insurer or company, as defined in section 431:1-202,
 
15 organized or domiciled in this State, shall be required to pay
 
16 taxes for the privilege of doing business in the other state, and
 
17 the amounts are imposed or assessed so that the taxes which are
 
18 or would be imposed against Hawaii domestic insurance companies
 
19 are greater than those taxes required of insurers organized or
 
20 domiciled in the other state, to the extent the amounts are
 
21 legally due to the other states, an insurer or company organized
 
22 or domiciled in this State may claim a credit against the tax
 
23 payable pursuant to this article of a sum not to exceed one
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1 hundred per cent of the amount.  The credit shall not be greater
 
 2 than the tax payable pursuant to this article during the taxable
 
 3 year."]
 
 4      SECTION 72.  Section 431:7-207, Hawaii Revised Statutes, is
 
 5 repealed.
 
 6      ["§431:7-207  Tax credit to facilitate regulatory oversight.
 
 7 (a)  Each authorized insurer that meets the requirements of
 
 8 subsection (b) may claim a tax credit under this section against
 
 9 the tax imposed by section 431:7-202(a) or (b) for the taxable
 
10 year for which the credit is properly claimed.  The tax credit
 
11 shall be an amount equal to one per cent of the premiums taxed by
 
12 section 431:7-202(a) and (b).
 
13      (b)  An insurer may claim the credit only if, at all times
 
14 during the taxable year, the insurer:
 
15      (1)  Maintains in Hawaii books and records required by the
 
16           commissioner sufficient to conduct the examination
 
17           authorized by section 431:2-302;
 
18      (2)  Employs in Hawaii personnel knowledgeable about the
 
19           insurer's financial operations and who are authorized
 
20           to represent the insurer in all matters pertaining to
 
21           examination; and
 
22      (3)  Maintains in Hawaii a customer service center with
 
23           employees authorized to promptly adjust, settle, and
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1           pay claims and to promptly answer all questions from
 
 2           customers regarding their insurance policies.
 
 3      (c)  The commissioner shall prepare the forms necessary to
 
 4 claim a credit under this section, may require proof of the claim
 
 5 for the tax credit, and may adopt rules pursuant to chapter 91.
 
 6      (d)  All claims for the tax credit under this section,
 
 7 including any amended claims, must be filed on or before the end
 
 8 of the twelfth month following the close of the taxable year for
 
 9 which the credit may be claimed.  Failure to comply with the
 
10 foregoing provision shall constitute a waiver of the right to
 
11 claim the credit.
 
12      (e)  The tax credit allowed by subsection (a) may be claimed
 
13 on the interim returns required by section 431:7-202(g)."]
 
14      SECTION 73.  Chapter 235, Hawaii Revised Statutes, is
 
15 repealed.
 
16      SECTION 74.  Chapter 236D, Hawaii Revised Statutes, is
 
17 repealed.
 
18      SECTION 75.  Chapter 237, Hawaii Revised Statutes, is
 
19 repealed.
 
20      SECTION 76.  Chapter 237D, Hawaii Revised Statutes, is
 
21 repealed.
 
22      SECTION 77.  Chapter 238, Hawaii Revised Statutes, is
 
23 repealed.
 

 
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                                     H.B. NO.871        
                                                        
                                                        

 
 1      SECTION 78.  Chapter 239, Hawaii Revised Statutes, is
 
 2 repealed.
 
 3      SECTION 79.  Chapter 240, Hawaii Revised Statutes, is
 
 4 repealed.
 
 5      SECTION 80.  Chapter 241, Hawaii Revised Statutes, is
 
 6 repealed.
 
 7      SECTION 81.  Chapter 246A, Hawaii Revised Statutes, is
 
 8 repealed.
 
 9      SECTION 82.  Chapter 247, Hawaii Revised Statutes, is
 
10 repealed.
 
11      SECTION 83.  Chapter 251, Hawaii Revised Statutes, is
 
12 repealed.
 
13      SECTION 84.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 85.  This Act shall take effect on January 1, 2000.
 
16 
 
17                           INTRODUCED BY:_________________________