Imposes a luxury tax on real property classified as improved residential but not having a homeowners exemption and not used as a permanent residence or rented. Appropriates funds to counties.

A BILL FOR AN ACT

SECTION 1. The legislature finds that sufficient affordable housing in Hawaii is a persistent problem. The problem is a shortage of units deemed affordable. In some instances, the purchase of condominiums and houses by individuals or entities from outside of the State contributes to the affordable housing shortage, especially if the property is bought for investment purposes or as a "trophy" property. Inasmuch as the amount of land in an island state is finite, the land must be devoted as much as possible to providing affordably priced homes and rentals for people who live here.

The legislature further finds that condominiums and single-family dwellings that are used for investment properties are generally luxury vacation properties that are owned by the wealthy. Many of these properties are uninhabited most of the year except for vacation visits. This situation exacerbates the affordable housing problem because the properties are taken out of the residential property marketplace.

The purpose of this Act is to establish a luxury tax on investment properties that are not used as permanent residences.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

§   -1 Definitions. As used in this chapter:

"Luxury real property" means real property that:

"Real property" or "property" means all land and appurtenances thereof and the buildings, structures, fences and improvements erected on or affixed to the same, and any fixture which is erected on or affixed to the land, buildings, structures, fences and improvements, including all machinery and other mechanical or other allied equipment and the foundations thereof, whose use is necessary to the utility of the land, buildings, structures, fences and improvements, or whose removal cannot be accomplished without substantial damage to the land, buildings, structures, fences and improvements.

§   -2 Imposition of tax; rates (a) The tax imposed under this section shall be based upon the value of the luxury real property based on the most recent assessment by the county that imposes the real property tax on that property.

(b) There is established a luxury real property tax to be assessed, levied, and collected annually from the owner of record of the property in an amount of twenty-five per cent on the value in excess of an assessed valuation of $          , rounded to the nearest hundredth.

§   -3 Collection; deposit. (a) The luxury real property tax shall be paid to and collected by the county that imposes the real property tax on that property.

(b) Realizations from the luxury real property tax shall be paid by the county into the housing finance revolving fund under section 201G-170.

§   -4 Not deemed real property tax. The luxury real property tax shall not be deemed a real property tax for purposes of Article VIII, section 3, of the State Constitution."

SECTION 3. Section 201G-170, Hawaii Revised Statutes, is amended to read as follows:

"§201G-170 Housing finance revolving fund; housing project bond special funds. (a) There is created a housing finance revolving fund to be administered by the corporation. Notwithstanding sections 36-21 and 201G-411, the proceeds in the fund shall be used for long-term and other special financings of the corporation and for the necessary expenses in administering this part.

(b) All moneys received and collected by the corporation, not otherwise pledged or obligated nor required by law to be placed in any other special fund, shall be deposited in the housing finance revolving fund.

(c) A separate special fund shall be established for each housing project or projects or loan program financed from the proceeds of bonds secured under the trust indenture. Each fund shall be designated "housing project bond special fund" or "housing loan program revenue bond special fund", as appropriate, and shall bear additional designation as the corporation deems appropriate to properly identify the fund.

(d) A separate special fund shall be established into which shall be deposited moneys collected from the luxury real property tax under chapter    . The moneys in the special fund shall be expended for:

[(d)] (e) Notwithstanding any other law to the contrary, all revenues, income, and receipts derived from a housing project or projects or loan program financed from the proceeds of bonds or pledged to the payment of principal of and interest and premium on bonds, shall be paid into the housing project bond special fund established for the housing project or projects or loan program and applied as provided in the proceedings authorizing the issuance of the bonds."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the following sums, or so much thereof as may be necessary for fiscal year 2005-2006, to assist the counties in implementing this Act:

City and County of Honolulu $          

County of Kauai $          

County of Maui $          

County of Hawaii State Senate $          

SECTION 5. The sums appropriated shall constitute the State's share of the cost of mandated programs under article VIII, section 5, of the State Constitution.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2005.