Report Title:

Excise Tax; Related Entities; Rentals

Description:

Exempts real property rental transactions between related entities from the general excise tax.

HOUSE OF REPRESENTATIVES	H.B. NO.	2244
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAXATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 237-23.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  This chapter shall not apply to amounts received, charged, or attributable to services furnished or real property rental transactions by one related entity or related individual to another related entity or related individual or to imputed or stated interest attributable to loans, advances, or use of capital between related entities[.] or related individuals.

     As used in this subsection:

"Real property" means property consisting of land, buildings, crops, or other resources still attached to or within the land or improvements or fixtures permanently attached to the land or a structure on it.

     "Related entities" means:

     (1)  An affiliated group of corporations within the meaning of section 1504 (with respect to affiliated group defined) of the federal Internal Revenue Code of 1986, as amended;

     (2)  A controlled group of corporations within the meaning of section 1563 (with respect to definitions and special rules) of the federal Internal Revenue Code of 1986, as amended;

     (3)  Those entities connected through ownership of at least eighty per cent of the total value and at least eighty per cent of the total voting power of each such entity (or combination thereof), including partnerships, associations, trusts, S corporations, nonprofit corporations, limited liability partnerships, or limited liability companies; and

     (4)  Any group or combination of the entities described in paragraph (3) constituting a unitary business for income tax purposes;

whether or not the entity is located within or without the State or licensed under this chapter.

"Related individual" means an individual taxpayer who is closely related, including a spouse, or an entity or trust controlled by that individual.

     "Services" means legal and accounting services, the use of computer software and hardware, information technology services, database management, and those managerial and administrative services performed by an employee, officer, partner, trustee, sole proprietor, member, or manager in the person's capacity as an employee, officer, partner, trustee, sole proprietor, member, or manager of one of the related entities and shall include overhead costs attributable to those services."

     SECTION 2.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2008, and shall apply to gross proceeds or gross income received after June 30, 2008.

INTRODUCED BY:

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