Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2006

State of Hawaii

Sir:

Your Committee on Water, Land, and Agriculture, to which was referred H.B. No. 2803, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to provide a conveyance tax exemption for any document or instrument conveying real property from a testamentary trust to an entity owned by the trust for the purpose of distributing interests in the entity to beneficiaries under the trust.

Testimony in support of this measure was submitted by the Hawaii Bankers Association, the Land Use Research Foundation of Hawaii, and two individuals. Comments were also submitted by the Department of Taxation and the Tax Foundation of Hawaii.

Your Committee finds that the current law exempts the conveyance of real property from a testamentary trust to a beneficiary of the trust from the conveyance tax. However, the conveyance tax exemption is not applicable if the real property is transferred from the testamentary trust to another entity, even if the beneficiaries of the trust own the entity. This measure provides that any document or instrument conveying real property from a testamentary trust to an entity owned by the trust for the purpose of distributing interests in the entity to beneficiaries under the trust will also be exempt from the conveyance tax.

Your Committee has amended this measure by changing the effective date of the Act to July 1, 2050 to allow further discussion on the matter.

As affirmed by the record of votes of the members of your Committee on Water, Land, and Agriculture that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2803, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2803, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.