REPORT TITLE:
Public Service Company Tax


DESCRIPTION:
Clarifies that the statutory imposition of the public service
company tax on public utilities is not a real property tax.

 
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                                                        2944
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC SERVICE COMPANY TAX.



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

 1      SECTION 1.  Section 239-4, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§239-4 Returns.  Each public service company, on or before
 
 4 the twentieth day of the fourth month following the close of the
 
 5 taxable year, shall file with the office of the department of
 
 6 taxation for the district within which the principal office of
 
 7 the public service company is maintained a return in such form as
 
 8 the department may prescribe, showing its taxable gross income
 
 9 for the preceding taxable year.  In case any public service
 
10 company engages in lines of business other than its public
 
11 service company business, the receipts therefrom shall not be
 
12 subject to tax under this chapter, but the same tax liabilities
 
13 shall attach to the public service company on account of the
 
14 other lines of business as would exist if no public service
 
15 company business were engaged in.  [In the case of a public
 
16 utility subject to the rate of tax imposed by section 239-5(a) or
 
17 (b), if the public utility engages in lines of business other
 
18 than its public utility business the real property used in
 
19 connection with the other lines of business shall be taxed the
 

 
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 1 same as if no public utility business were done.]"
 
 2      SECTION 2.  Section 239-5, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "(a)  There shall be levied and assessed upon each public
 
 5 utility, except airlines, motor carriers, common carriers by
 
 6 water, and contract carriers taxed by section 239-6, a tax of
 
 7 such rate per cent of its gross income each year from its public
 
 8 utility business as shall be determined in the manner hereinafter
 
 9 provided.  The tax imposed by this section is in lieu of all
 
10 taxes other than those below set out, and is a means of taxing
 
11 [the real property (owned by the public utility or leased to it
 
12 by a lease under which the public utility is required to pay the
 
13 taxes upon the property), and] the personal property of the
 
14 public utility, tangible and intangible, including going concern
 
15 value.  In addition to the tax imposed by this chapter there also
 
16 are imposed income taxes, the specific taxes imposed by chapter
 
17 249, the fees prescribed by chapter 269, any tax specifically
 
18 imposed by the terms of the public utility's franchise or under
 
19 chapter 240, the use or consumption tax imposed by chapter 238,
 
20 and employment taxes.
 
21      The rate of the tax upon the gross income of the public
 
22 utility shall be determined as follows:
 
23      If the ratio of the net income of the company to its gross
 

 
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 1 income is fifteen per cent or less, the rate of the tax on gross
 
 2 income shall be 5.885 per cent; for all companies having net
 
 3 income in excess of fifteen per cent of the gross, the rate of
 
 4 the tax on gross income shall increase continuously in proportion
 
 5 to the increase in ratio of net income to gross, at such rate
 
 6 that for each increase of one per cent in the ratio of net income
 
 7 to gross, there shall be an increase of .2675 per cent in the
 
 8 rate of the tax.
 
 9      The following formula may be used to determine the rate, in
 
10 which formula the term "R" is the ratio of net income to gross
 
11 income, and "X" is the required rate of the tax on gross income
 
12 for the utility in question:
 
13                        X=(1.8725+26.75R)%;
 
14 provided that in no case governed by the formula shall "X" be
 
15 less than 5.885 per cent or more than 8.2 per cent.
 
16      However, if the gross income is apportioned under section
 
17 239-8(b) or (c), there shall be no adjustment of the rate of tax
 
18 on the amount of gross income so apportioned to the State on
 
19 account of the ratio of the net income to the gross income being
 
20 in excess of fifteen per cent, and it shall be assumed in such
 
21 case that the ratio is fifteen per cent or less.
 
22      (b)  Notwithstanding subsection (a), the rate of the tax
 
23 upon the portion of the gross income of a carrier of passengers
 

 
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 1 by land which consists in passenger fares for transportation
 
 2 between points on a scheduled route, shall be 5.35 per cent.
 
 3 However, if the carrier has other public utility gross income the
 
 4 fares nevertheless shall be included in applying subsection (a)
 
 5 in determining the rate of tax upon the other public utility
 
 6 gross income.
 
 7      (c)  Notwithstanding subsection (a), the rate of tax upon
 
 8 the portion of the gross income of a public utility which
 
 9 consists of the receipts from the sale of its products or
 
10 services to another public utility which resells such products or
 
11 services shall be one-half of one per cent, provided that the
 
12 resale is subject to taxation under this section[, and provided
 
13 further that the public utility's exemption from real property
 
14 taxes imposed by chapter 246 shall be reduced by the proportion
 
15 that its public utility gross income described herein bears to
 
16 its total public utility gross income].  Whenever the public
 
17 utility has other public utility gross income the gross income
 
18 from the sale of its products or services to another public
 
19 utility shall be included in applying subsection (a) in
 
20 determining the rate of tax upon the other public utility gross
 
21 income."
 
22      SECTION 3.  Section 239-3, Hawaii Revised Statutes, is
 
23 repealed.
 

 
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 1      "[§239-3  Exemption from real property taxes.  In order to
 
 2 secure under this chapter an exemption of county real property
 
 3 taxes, a public utility shall annually file with the county in
 
 4 which the real property is situated, a claim for exemption in
 
 5 such manner and by such date as prescribed in the respective
 
 6 county ordinance.  The claim may include real property under
 
 7 lease to the public utility, under which lease the public utility
 
 8 is required to pay the taxes upon the property, and the claim to
 
 9 exemption shall be determined the same as if the public utility
 
10 were the owner of the property.]"
 
11      SECTION 4.  Statutory material to be repealed is bracketed.
 
12      SECTION 5.  This Act shall take effect upon its approval.
 
13 
 
14                           INTRODUCED BY:  _______________________
 

 
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