Requires owner-builders to file an information return with the Department of Taxation to qualify for the general excise tax exemption. Establishes a lien if the property is sold and taxes are not paid. Exempts the Department of Hawaiian Home Land and Housing and Community Development Corporation of Hawaii. (SB1870 HD1)

A BILL FOR AN ACT

SECTION 1. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237-   Filing of information return; owner-builders. (a) Every person who claims to be exempt from the tax imposed under section 237-13(3), or who claims to be an owner-builder under section 444-2(7), shall file an information return on forms prescribed by the department.

(b) The information return shall be filed with the department no later than thirty calendar days after the actual completion of the improvement.

(c) Immediately upon the sale or disposition of the land or improvements subject to subsection (a), there shall arise a lien in favor of the State for the amount of the tax due calculated as set forth in section 237-13(3)(D). The lien shall be extinguished upon payment of all amounts due under section 237-13(3)(D), including any applicable penalties and interest.

(d) This section shall not apply to the department of Hawaiian home lands and housing and community development corporation of Hawaii."

SECTION 2. Section 507-43, Hawaii Revised Statutes, is amended by amending subsections (f) and (g) to read as follows:

"(f) Date of completion, notice of. The term "date of completion" as used in this section means the time when the owner or the general contractor for the improvement files the information return with the department of taxation, as set forth in section 237- and completes the publication of a notice that the improvement has been completed or has been abandoned and an affidavit of the publication, together with a copy of the notice has been filed in the office of the clerk of the circuit court where the property involved is situated; provided that notice of completion shall not be effective for any purpose unless prior to the notice there has been substantial completion of the improvement or the improvement has been actually abandoned; and provided further that the notice shall not be published by the contractor until after the contractor has first made written demand upon the owner to publish the notice and the owner has failed to publish the notice within five days from the date of the demand. The publication of the notice by the contractor or the owner shall not be construed as an admission by either that the improvement has been satisfactorily completed. The notice required herein shall be published twice, seven days apart, in a newspaper of general circulation, printed and published in the county in which the property involved is situated, and the publishing newspaper shall promptly file the affidavit of publication above mentioned in the office of the clerk.

(g) Failure to file or publish notice. If the information return, as set forth in section 237- , is not filed with the department of taxation and a valid notice of completion is not published and filed within one year after the actual completion or abandonment of the improvement the "date of completion" shall be deemed to be one year after actual completion or abandonment."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2005, and shall apply to building permits issued on or after January 1, 2006.