STAND

STAND. COM. REP. NO. 169

Honolulu, Hawaii

, 2005

RE: H.B. No. 1554

H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Water, Land, & Ocean Resources and Housing, to which was referred H.B. No. 1554 entitled:

"A BILL FOR AN ACT RELATING TO LEASEHOLD CONVERSION,"

beg leave to report as follows:

The purpose of this bill is to encourage fee owners to voluntarily sell their leased fee interest in a multi-family residential leasehold property to the lessee of the multi-family residential leasehold unit, by permitting fee owners to exclude from gross income, adjusted gross income, and taxable income half of the income derived from the sale.

The Hawaii Association of Realtors, Hawaii Independent Condominium & Cooperative Owners, and Monarch Properties, Inc., supported this bill with amendments. The Hawaii Council of Associations of Apartment Owners supported the intent of this measure. The Department of Taxation opposed this bill. The Tax Foundation of Hawaii offered comments.

Your Committees have amended this bill by:

(1) Increasing from fifty percent to seventy-five percent the amount of income derived from the sale of the leased fee interest that can be excluded;

(2) Including property or units within planned unit developments in the type of leased fee interests that a fee owner can sell and for which the fee owner can exclude a percentage of the resulting income;

(3) Changing the effective date to July 1, 2015, to encourage further discussion; and

(4) Making technical, nonsubstantive amendments for clarity, consistency, and style.

As affirmed by the records of votes of the members of your Committees on Water, Land, & Ocean Resources and Housing that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1554, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 1554, H.D. 1, and be referred to the Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committees on Water, Land, & Ocean Resources and Housing,

____________________________ MICHAEL P. KAHIKINA, Chair		____________________________ EZRA R. KANOHO, Chair