Establishes Integrated Tax Information Management Systems Special Fund (Fund) to receive revenues from the integrated tax information management systems post-implementation revenue-generating initiatives. Provides that moneys in the fund will be used to pay for the integrated tax information management systems. (SD1)

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to provide revenue generating initiatives that will be benefits-funded, meaning the vendor will only be paid when measurable increases in revenues resulting from the initiatives are collected by the State. The revenues will be used by the department of taxation to enhance its computer system, called the integrated tax information management system, and to streamline related operational procedures. This Act shall be known as the "Integrated Tax Information Management System Post-Implementation Revenue-Generating Initiatives Act of 2006."

SECTION 2. (a) The department of taxation shall enter into performance-based contracts to enhance or acquire automated tax systems, or both, including computer hardware and software, for the implementation and administration of the amendments to the taxes imposed under title 14 of the Hawaii Revised Statutes to conform to the Streamlined Sales and Use Tax Agreement identified in chapter 255D, Hawaii Revised Statutes, and for the implementation and administration of the city and county of Honolulu surcharge authorized under section 46-16.8, Hawaii Revised Statutes, and adopted by ordinance.

(b) For the purposes of this Act:

"Performance-based contract" means a contract under which compensation to the vendor shall be computed according to performance standards established by the department of taxation. Any performance-based contract entered into by the department of taxation for the purposes established under subsection (a) shall provide for the payment of fees:

(c) The State shall receive a permanent license to use the enhanced or automated tax systems upon full payment to the vendor.

(d) Notwithstanding any other law to the contrary, the department shall award the performance-based contract pursuant to the requirements of chapter 103D, Hawaii Revised Statutes.

SECTION 3. The director of taxation shall report to the legislature no later than twenty days prior to the convening of every regular session with respect to the status of the performance-based contract and shall provide an accounting of all moneys appropriated. The report shall include:

The report shall also include information from the preceding fiscal year, beginning with the fiscal year immediately preceding the fiscal year commencing on the effective date of this Act, and shall continue until two complete fiscal years have elapsed following the full implementation of the integrated tax information management system post-implementation revenue-generating initiatives.

SECTION 4. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§231- Integrated tax information management systems special fund. (a) There is established in the state treasury the integrated tax information management systems special fund, into which shall be deposited appropriations made by the legislature to the special fund each fiscal year.

(b) Notwithstanding any other law to the contrary, the source of funding of any appropriations to the integrated tax information management systems special fund shall come from the tax revenues collected pursuant to chapters 235, 237, and 238 that represent the increase over the average of the total amount of tax revenues collected under each of those respective chapters in each of the three years preceding the execution of the performance based contract.

(c) Moneys in the special fund shall be expended by the department to pay for the integrated tax information management systems performance-based contracts and administrative and operating expenses related to the integrated tax information management system post-implementation revenue-generating initiatives; provided that any unexpended moneys shall lapse to the credit of the general fund at the end of each fiscal year."

SECTION 5. Section 36-27, Hawaii Revised Statutes, is amended to read as follows:

"§36-27 Transfers from special funds for central service expenses. Except as provided in this section, and notwithstanding any other law to the contrary, from time to time, the director of finance, for the purpose of defraying the prorated estimate of central service expenses of government in relation to all special funds, except the:

shall deduct five per cent of all receipts of all other special funds, which deduction shall be transferred to the general fund of the State and become general realizations of the State. All officers of the State and other persons having power to allocate or disburse any special funds shall cooperate with the director in effecting these transfers. To determine the proper revenue base upon which the central service assessment is to be calculated, the director shall adopt rules pursuant to chapter 91 for the purpose of suspending or limiting the application of the central service assessment of any fund. No later than twenty days prior to the convening of each regular session of the legislature, the director shall report all central service assessments made during the preceding fiscal year."

SECTION 6. Section 36-30, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each special fund, except the:

shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned."

SECTION 7. Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The county surcharge on state tax, if adopted, shall be imposed on the gross proceeds or gross income of all written contracts [that require the passing on of the taxes imposed under this chapter; provided that if the gross proceeds or gross income are received as payments beginning in the taxable year in which the taxes become effective, on contracts entered into before June 30 of the year prior to the taxable year in which the taxes become effective, and the written contracts do not provide for the passing on of increased rates of taxes, the county surcharge on state tax shall not be imposed on the gross proceeds or gross income covered under the written contracts. The county surcharge on state tax shall be imposed on the gross proceeds or gross income from all contracts entered into on or after June 30 of the year prior to the taxable year in which the taxes become effective,], including written contracts in effect at the time the county surcharge on the state general excise tax becomes effective, regardless of whether the contract allows for the passing on of any tax or any tax increases."

SECTION 8. Section 237-31, Hawaii Revised Statutes, is amended to read as follows:

"§237-31 Remittances. All remittances of taxes imposed by this chapter shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that:

SECTION 9. Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The county surcharge on state tax, upon the adoption of a county ordinance and in accordance with the requirements of section 46-16.8, shall be levied, assessed, and collected as provided in this section on the value of property [and], services, and contracting taxable under this chapter. No county shall set the surcharge on state tax at a rate greater than one-half per cent of the value of property taxable under this chapter. All provisions of this chapter shall apply to the county surcharge on state tax. With respect to the surcharge, the director shall have all the rights and powers provided under this chapter. In addition, the director of taxation shall have the exclusive rights and power to determine the county or counties in which a person imports or purchases tangible personal property and, in the case of a person importing or purchasing tangible property in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge on state tax attributable to the importation or purchase in each county."

SECTION 10. Section 231-3.2, Hawaii Revised Statutes, is repealed.

["§231-3.2 Integrated tax information management systems special fund. (a) There is established in the state treasury the integrated tax information management systems special fund into which shall be deposited general excise tax revenues as provided by section 237-31. The director of taxation may retain and deposit the amounts necessary to meet the obligations of the integrated tax information management systems performance-based contract. The amounts transferred by the director of taxation to the integrated tax information management systems special fund for a fiscal year shall be limited to the amounts appropriated by the legislature.

(b) Moneys in the fund shall be expended by the department to pay for the integrated tax information management systems performance-based contracts authorized by Act 273, Session Laws of Hawaii 1996.

(c) The department shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session, providing an accounting of the receipts of, and expenditures from, the fund.

(d) This section shall be repealed on July 1, 2005."]

SECTION 11. Act 273, Session Laws of Hawaii 1996, is repealed.

SECTION 12. The department of taxation shall execute its performance-based contracts and work assignments authorized under this Act as follows:

SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 14. This Act shall take effect upon its approval, and shall be repealed on June 30, 2011; provided that sections 36-27, 36-30, 237-8.6(c), 237-31, and 238-2.6, Hawaii Revised Statutes, shall be reenacted in the form in which they existed on June 30, 2006.