HB2394

SECTION 1. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§46- Additional county surcharge. (a) In addition to section 46-16.8, each county with a population greater than five hundred thousand may establish an additional surcharge on state tax not to exceed one per cent pursuant to sections 237- and 238- . A county electing to establish this additional surcharge shall do so by ordinance; provided that:

(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

(2) The ordinance shall be adopted prior to December 31, 2009;

(3) The additional county surcharge on state tax that may be authorized under this section shall not be levied prior to January 1, 2011; and

(4) The county repeals all ad valorem property tax ordinances with respect to improved residential and apartment tax categories, not including vacant land and other property tax categories.

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 an additional surcharge on state tax ordinance and, beginning no earlier than January 1, 2011, the director of taxation shall levy, assess, collect, and otherwise administer the additional county surcharge on state tax under this section.

(c) Counties complying with this section shall be credited with an amount equal to the additional surcharge collected in sections 237- and 238- .

(d) This section shall not apply to any period for which a county collects any property tax from improved residential or apartment properties except for collections due for periods prior to the effective date of this Act.

(e) On January 1, 2011, in counties subject to this section, all landlords with rental properties on which property tax was levied shall reduce rental rates by the amount necessary to offset any reduction in the amount of real property taxes assessed on such rental properties.

The reduced rental rate shall begin on January 1, 2011, and continue for a minimum of one year. Where there is more than one rental unit on a property, the amount of the previous year's property tax applicable to each rental unit shall be divided equally between the units or based on the square-footage of the property. Any amount applicable to common areas shall be applied equally to each unit.

(f) Each participating county shall provide and adopt rules for tenant complaints with respect to the amount of the rent reduction. The county may provide for appropriate penalties."

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Additional county surcharge on state tax; administration. (a) The additional county surcharge on state tax, upon the adoption of county ordinances and in accordance with the requirements of section 46- , 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 additional surcharge on state tax at a rate greater than one per cent of all gross proceeds and gross income taxable under this chapter. All provisions of this chapter shall apply to the additional county surcharge on state tax. With respect to the additional 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 additional surcharge on state tax attributable to business conducted in each county.

(b) Each additional county surcharge on state tax that may be adopted pursuant to section 46- shall be levied beginning in the taxable year after the adoption of the relevant county ordinance; provided that no additional surcharge on state tax may be levied prior to January 1, 2011.

(c) The additional 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 additional county surcharge on state tax shall not be imposed on the gross proceeds or gross income covered under the written contracts. The additional 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, regardless of whether the contract allows for the passing on of any tax or any tax increases.

(d) The additional county surcharge on state tax shall not be established on any:

(1) Gross income or gross proceeds taxable under this chapter at the one-half per cent tax rate;

(2) Gross income or gross proceeds taxable under this chapter at the 0.15 per cent tax rate; or

(3) Transactions, amounts, persons, gross income, or gross proceeds exempt from tax under this chapter.

(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 additional county surcharge on state tax.

(f) The taxpayer shall designate the taxation district to which the additional 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 the additional 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 per cent of the amount of the additional 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 3. Chapter 238, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§238- Additional county surcharge on state tax; administration. (a) The additional county surcharge on state tax, upon the adoption of a county ordinance and in accordance with the requirements of section 46- , shall be levied, assessed, and collected as provided in this section on the value of property and services taxable under this chapter. No county shall set the additional surcharge on state tax at a rate greater than one per cent of the value of property taxable under this chapter. All provisions of this chapter shall apply to the additional county surcharge on state tax. With respect to the additional 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 additional surcharge on state tax attributable to the importation or purchase in each county.

(b) Each additional county surcharge on state tax that may be adopted shall be levied beginning in the taxable year after the adoption of the relevant county ordinance; provided that no additional surcharge on state tax may be levied prior to January 1, 2011.

(c) The additional county surcharge on state tax shall not be established upon any use taxable under this chapter at the one-half per cent tax rate or upon any use that is not subject to taxation or that is exempt from taxation under this chapter.

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

(e) The taxpayer shall designate the taxation district to which the additional 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 use tax returns summarizing the amount of taxes assigned to each taxation district.

(f) The penalties provided by section 231-39 for failure to file a tax return shall be imposed on the amount of additional 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 per cent of the amount of the additional 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 use tax by taxation district on the schedule required under this subsection.

(g) 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. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2010.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2394
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII