Ensures that counties that levy a county surcharge on state tax by ordinance to fund public transportation systems shall be responsible for administration of the surcharge.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to amend Act 247 (2005) to authorize a county electing to exercise the authority to adopt a county surcharge on state tax to collect the county surcharge on state tax, and to make other clarifying amendments to the Hawaii Revised Statutes.

SECTION 2. Section 46-16.8, Hawaii Revised Statutes, is amended to read as follows:

"§46-16.8 County surcharge on state tax. (a) Each county may establish a surcharge on state tax at the rates enumerated in sections 237-8.6 and 238-2.6. A county electing to establish this surcharge shall do so by ordinance; provided that:

Notice of the public hearing required under paragraph (1) shall be published in a newspaper of general circulation within the county at least twice within a period of thirty days immediately preceding the date of the hearing.

(b) A county electing to exercise the authority granted under this section shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance and, beginning no earlier than January 1, 2007, the [director of taxation] county shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

(c) Each county with a population greater than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to subsection (a) shall use the surcharges [received from the State] for:

The county surcharge on state tax shall not be used to build or repair public roads or highways, bicycle paths, or support public transportation systems already in existence prior to the effective date of this Act.

(d) Each county with a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to subsection (a) shall use the surcharges received [from the State] for:

(e) As used in this section, "capital costs" means nonrecurring costs required to construct a transit facility or system, including debt service, costs of land acquisition and development, acquiring of rights-of-way, planning, design, and construction, and including equipping and furnishing the facility or system."

SECTION 3. Section 237-8.6, Hawaii Revised Statutes, is amended by to read as follows:

"§237-8.6 County surcharge on state tax; administration. (a) The county surcharge on state tax, upon the adoption of county ordinances and in accordance with the requirements of section 46-16.8, shall be levied, assessed, and collected as provided in this section on all gross proceeds and gross income taxable under this chapter. No county shall set the surcharge on state tax at a rate greater than one-half per cent of all gross proceeds and gross income 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 of taxation 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 is engaged in business and, in the case of a person engaged in business in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge on state tax attributable to business conducted in each county.

(b) Each county surcharge on state tax that may be adopted pursuant to section 46-16.8(a) shall be levied beginning in the taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied prior to January 1, 2007.

(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 state tax becomes effective, regardless of whether the contract allows for the passing on of any tax or any tax increases.

(d) No county surcharge on state tax shall be established on any:

(e) The director of taxation shall revise the general excise tax forms to provide for the clear and separate designation of the imposition and payment of the county surcharge on state tax.

(f) The taxpayer shall designate the taxation district to which the county surcharge on state tax is assigned in accordance with rules adopted by the director of taxation under chapter 91. The taxpayer shall file a schedule with the taxpayer's periodic and annual general excise tax returns summarizing the amount of taxes assigned to each taxation district.

(g) The penalties provided by section 231-39 for failure to file a tax return shall be imposed on the amount of surcharge due on the return being filed for the failure to file the schedule required to accompany the return. In addition, there shall be added to the tax an amount equal to [ten] five per cent of the amount of the surcharge and tax due on the return being filed for the failure to file the schedule or the failure to correctly report the assignment of the general excise tax by taxation district on the schedule required under this subsection.

(h) All taxpayers who file on a fiscal year basis whose fiscal year ends after December 31 of the year prior to the taxable year in which the taxes become effective, shall file a short period annual return for the period preceding January 1 of the taxable year in which the taxes become effective. Each fiscal year taxpayer shall also file a short period annual return for the period starting on January 1 of the taxable year in which the taxes become effective, and ending before January 1 of the following year."

SECTION 4. 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 5. Section 248-2.6, Hawaii Revised Statutes, is amended to read as follows:

"§248-2.6 County Surcharge on state tax; disposition of proceeds. (a) If adopted by county ordinance, all county surcharges on state tax [collected by the director of taxation shall be paid into the state treasury quarterly, within ten working days after collection, and shall be placed by the director of finance in special accounts. Out of the revenues generated by county surcharges on state tax paid into each respective state treasury special account, the director of finance shall deduct ten per cent of the gross proceeds of a respective county's surcharge on state tax to reimburse the State for the costs of assessment, collection, and disposition of the county surcharge on state tax incurred by the State. Amounts retained shall be general fund realizations of the State.

(b) The amounts deducted for costs of assessment, collection, and disposition of county surcharges on state tax shall be withheld from payment to the counties by the State out of the county surcharges on state tax collected for the current calendar year.

(c) For the purpose of this section, the costs of assessment, collection, and disposition of the county surcharges on state tax shall include any and all costs, direct or indirect, that are deemed necessary and proper to effectively administer this section and sections 237-8.6 and 238-2.6.

(d) After the deduction and withholding of the costs under subsections (a) and (b), the director of finance shall pay the remaining balance on quarterly basis to the director of finance of each county that has adopted a county surcharge on state tax under section 46-16.8. The quarterly payments shall be made after the county surcharges on state tax have been paid into the state treasury special accounts or after the disposition of any tax appeal, as the case may be. All county surcharges on state tax collected shall be distributed by the director of finance to the county in which the county surcharge on state tax is generated and shall be a general fund realization of the county, to be used for the purposes specified in section 46-16.8 by each of the counties.]shall be collected by the department of finance of the county electing to exercise the authority to adopt a county surcharge on state tax. Out of the revenues generated by county surcharges on state tax paid, a county that has imposed a county surcharge on state tax may use up to ten per cent of the gross proceeds of a respective county's surcharge on state tax to pay for the costs of assessment, collection, and disposition of the county surcharge on state tax.

(b) For the purpose of this section, the costs of assessment, collection, and disposition of the county surcharges on state tax shall include any and all costs, direct or indirect, that are deemed necessary and proper to effectively administer this section and sections 237-8.6 and 238-2.6.

(c) After the deduction of the costs under subsection (a), the county surcharges on state tax collected shall be a general fund realization of the county, to be used for the purposes specified in section 46-16.8 by each of the counties.

(d) A county imposing a county surcharge on state tax pursuant to sections 237-8.6 and 238-2.6 may contract with a private entity for the collection of such surcharges."

SECTION 6. Section 235-116, Hawaii Revised Statutes, is amended to read as follows:

"§235-116 Disclosure of returns unlawful; penalty. All tax returns and return information required to be filed under this chapter shall be confidential, including any copy of any portion of a federal return which may be attached to a state tax return, or any information reflected in the copy of such federal return. It shall be unlawful for any person, or any officer or employee of the State or county to make known intentionally information imparted by any income tax return or estimate made under sections 235-92, 235-94, 235-95, and 235-97 or wilfully to permit any income tax return or estimate so made or copy thereof to be seen or examined by any person other than the taxpayer or the taxpayer's authorized agent, persons duly authorized by the State in connection with their official duties, persons duly authorized by a county in connection with their official duties relating to a county surcharge on state tax pursuant to section 46-16.8, Hawaii Revised Statutes, the Multistate Tax Commission or the authorized representative thereof, except as provided by law, and any offense against the foregoing provisions shall be punished by a fine not exceeding $500 or by imprisonment not exceeding one year, or both."

SECTION 7. Section 237-34, Hawaii Revised Statutes, is amended to read as follows:

"§237-34 Filing of returns; disclosure of returns unlawful, penalty; destruction of returns. (a) All monthly and annual returns shall be transmitted to the office of the taxation district or in the case of a county surcharge on state tax, to the county department of finance in the county or the director’s designee in which the privilege upon which the tax accrued is exercised. Where the privilege is exercised in more than one taxation district the returns shall be transmitted to the office of the first district.

(b) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person, or any officer or employee of the State or county to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any such return, return information, or report so made, or any copy thereof, to be seen or examined by any person; provided that for tax purposes only the taxpayer, the taxpayer's authorized agent, or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall include:

Any violation of this subsection shall be a misdemeanor.

(c) The department may destroy the monthly returns filed pursuant to section 237-30, or any of them, upon the expiration of three years after the end of the calendar year in which the taxes so returned accrued."

SECTION 8. Section 237-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

""Department of taxation" or "department" means the department of taxation or a county department of finance of a county electing to exercise the authority to adopt a county surcharge on state tax, unless otherwise indicated. A county department of finance may only exercise the powers in this chapter with respect to a county surcharge on state tax."

""Director of taxation" or "director" means the director of the department of taxation or the director of a county department of finance of a county electing to exercise the authority to adopt a county surcharge on state tax, unless otherwise indicated. A director of a county department of finance may only exercise the powers in this chapter with respect to a county surcharge on state tax."

SECTION 9. Section 238-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

""Department of taxation" or "department" means the department of taxation or a county department of finance of a county electing to exercise the authority to adopt a county surcharge on state tax, unless otherwise indicated. A county department of finance may only exercise the powers in this chapter with respect to a county surcharge on state tax."

""Director of taxation" or "director" means the director of the department of taxation or the director of a county department of finance of a county electing to exercise the authority to adopt a county surcharge on state tax, unless otherwise indicated. A director of a county department of finance may only exercise the powers in this chapter with respect to a county surcharge on state tax."

SECTION 10. 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, or in the case of a county surcharge on state tax, to the county department of finance or the department’s designee 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, or in the case of a county department of finance, into the county treasury as a county realization, to be kept and accounted for as provided by law; provided that:

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect upon its approval.