SB3165

SECTION 1. The legislature finds that whatever the form of mass transit adopted by the city and county of Honolulu, it will have an impact reaching far beyond transportation issues alone. Development of a new transportation system gives the State and the city and county of Honolulu the opportunity to maximize affordable housing facilities, and add to and improve eldercare and related public functions as mass transit development is planned between west Oahu and the University of Hawaii at Manoa.

The legislature further finds that in areas with a higher‑than‑average senior citizen population, which also lack adequate long-term care facilities, there is an opportunity to meet the objective of "aging‑in‑place" through creative distribution of services; for example, aggregating services among condominium building residents in close proximity to one another, etc.

In areas with limited recreational spaces and facilities for young people, public, private, and non-profit partnerships can stimulate development of additional services, programs, and facilities to serve at-risk youth, families with special needs, and others, in a school, park, or church setting.

The purpose of this Act is to provide the means for the State and the city and county of Honolulu to meet the needs for affordable housing, eldercare, and services to Hawaii's disadvantaged, which will be available as a result of mixed use transit oriented joint development project opportunities.

SECTION 2. Section 46-15.1, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Any law to the contrary notwithstanding, any county shall have and may exercise the same powers, subject to applicable limitations, as those granted the Hawaii housing finance and development corporation pursuant to chapter 201H insofar as those powers may be reasonably construed to be exercisable by a county for the purpose of developing, constructing, and providing low- and moderate-income housing; provided that no county shall be empowered to cause the State to issue general obligation bonds to finance a project pursuant to this section; provided further that county projects shall be granted an exemption from general excise or receipts taxes in the same manner as projects of the Hawaii housing finance and development corporation pursuant to section 201H-36[;], except that no county shall be empowered to grant an exemption for a mixed use transit oriented joint development project as defined in section 201H-36(c); and provided further that section 201H-16 shall not apply to this section unless federal guidelines specifically provide local governments with that authorization and the authorization does not conflict with any state laws. The powers shall include the power, subject to applicable limitations, to:

(1) Develop and construct dwelling units, alone or in partnership with developers;

(2) Acquire necessary land by lease, purchase, exchange, or eminent domain;

(3) Provide assistance and aid to a public agency or other person in developing and constructing new housing and rehabilitating existing housing for elders of low- and moderate-income, other persons of low- and moderate-income, and persons displaced by any governmental action, by making long-term mortgage or interim construction loans available;

(4) Contract with any eligible bidders to provide for construction of urgently needed housing for persons of low- and moderate-income;

(5) Guarantee the top twenty-five per cent of the principal balance of real property mortgage loans, plus interest thereon, made to qualified borrowers by qualified lenders;

(6) Enter into mortgage guarantee agreements with appropriate officials of any agency or instrumentality of the United States to induce those officials to commit to insure or to insure mortgages under the National Housing Act, as amended;

(7) Make a direct loan to any qualified buyer for the downpayment required by a private lender to be made by the borrower as a condition of obtaining a loan from the private lender in the purchase of residential property;

(8) Provide funds for a share, not to exceed fifty per cent, of the principal amount of a loan made to a qualified borrower by a private lender who is unable otherwise to lend the borrower sufficient funds at reasonable rates in the purchase of residential property; and

(9) Sell or lease completed dwelling units.

For purposes of this section, a limitation is applicable to the extent that it may reasonably be construed to apply to a county."

SECTION 3. Section 201H-36, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201H-36[]] Exemption from general excise taxes. (a) In accordance with section 237-29, the corporation may approve and certify for exemption from general excise taxes any qualified person or firm involved with a newly constructed, or moderately or substantially rehabilitated project:

(1) Developed under this part;

(2) Developed under a government assistance program approved by the corporation, including but not limited to the United States Department of Agriculture 502 program and Federal Housing Administration 235 program;

(3) Developed under the sponsorship of a private nonprofit organization providing home rehabilitation or new homes for qualified families in need of decent, low-cost housing; [or]

(4) Developed by a qualified person or firm to provide affordable rental housing where at least fifty per cent of the available units are for households with incomes at or below eighty per cent of the area median family income as determined by the United States Department of Housing and Urban Development, of which at least twenty per cent of the available units are for households with incomes at or below sixty per cent of the area median family income as determined by the United States Department of Housing and Urban Development[.];

(5) Developed by a qualified person or firm to provide affordable rental housing units within a mixed use transit oriented joint development project where at least:

(A) per cent of the eligible development costs are expended for rental housing units; and

(B) per cent of the available rental housing units are for households with incomes at or below eighty per cent of the area median family income as determined by the United States Department of Housing and Urban Development, of which at least per cent of the available rental housing units are for households with incomes at or below sixty per cent of the area median family income as determined by the United States Department of Housing and Urban Development; or

(6) Developed by a qualified person or firm to provide a community health care facility within a mixed use transit oriented joint development project approved by the corporation.

(b) All claims for exemption under this section shall be filed with and certified by the corporation and forwarded to the department of taxation. Any claim for exemption that is filed and approved, shall not be considered a subsidy for the purpose of this part.

"Community health care facility" means a health care facility as defined in section 323D-2, which is leased or sold to a person who is or who is controlled by:

(1) A person who has received recognition of tax exempt status or who is a subordinate person of a person who has received a group exemption letter under section 501(c)(3)of the Internal Revenue Code of 1986, as amended;

(2) The State;

(3) Any political subdivision of the State;

(4) A county;

(5) A state agency or any instrumentality of the State; or

(6) A county agency or any instrumentality of a county.

"Eligible development costs" means amounts incurred by a developer or a contractor for contracting, services, and materials that are used for the planning, development, and construction of a project approved and certified by the corporation.

"Mixed use transit oriented joint development project" means a transit oriented joint development project that:

(1) Combines residential development with any combination of commercial and industrial development, including the development of community health care facilities; and

(2) Is approved as a whole or in part as a transit oriented joint development project by the United States Department of Transportation Federal Transit Administration.

"Moderate rehabilitation" means rehabilitation to upgrade a dwelling unit to a decent, safe, and sanitary condition, or to repair or replace major building systems or components in danger of failure.

"Substantial rehabilitation":

(1) Means the improvement of a property to a decent, safe, and sanitary condition that requires more than routine or minor repairs or improvements. It may include but is not limited to the gutting and extensive reconstruction of a dwelling unit, or cosmetic improvements coupled with the curing of a substantial accumulation of deferred maintenance; and

(2) Includes renovation, alteration, or remodeling to convert or adapt structurally sound property to the design and condition required for a specific use, such as conversion of a hotel to housing for elders.

(d) The corporation may establish, revise, charge, and collect a reasonable service fee, as necessary, in connection with its approvals and certifications under this section. The fees shall be deposited into the dwelling unit revolving fund."

SECTION 4. Section 237-24.7, Hawaii Revised Statutes, is amended to read as follows:

"§237-24.7 Additional amounts not taxable. In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:

(1) Amounts received by the operator of a hotel from the owner of the hotel or from a time share association, and amounts received by the suboperator of a hotel from the owner of the hotel, from a time share association, or from the operator of the hotel, in amounts equal to and which are disbursed by the operator or suboperator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:

"Employee" means employees directly engaged in the day-to-day operation of the hotel and employed by the operator or suboperator.

"Hotel" means an operation as defined in section 445-90 or a time share plan as defined in section 514E-1.

"Operator" means any person who, pursuant to a written contract with the owner of a hotel or time share association, operates or manages the hotel for the owner or time share association.

"Owner" means the fee owner or lessee under a recorded lease of a hotel.

"Suboperator" means any person who, pursuant to a written contract with the operator, operates or manages the hotel as a subcontractor of the operator.

"Time share association" means an "association" as that term is defined in section 514E-1;

(2) Amounts received by the operator of a county bus transportation system operated under an operating contract with a political subdivision, where the political subdivision is the owner of the county bus transportation system. As used in this paragraph:

"County bus transportation system" means a mass transit system of motorized buses providing regularly scheduled transportation within a county.

"Operating contract" or "contract" means a contract to operate and manage a political subdivision's county bus transportation system, which provides that:

(A) The political subdivision shall exercise substantial control over all aspects of the operator's operation;

(B) The political subdivision controls the development of transit policy, service planning, routes, and fares; and

(C) The operator develops in advance a draft budget in the same format as prescribed for agencies of the political subdivision. The budget must be subject to the same constraints and controls regarding the lawful expenditure of public funds as any public sector agency, and deviations from the budget must be subject to approval by the appropriate political subdivision officials involved in the budgetary process.

"Operator" means any person who, pursuant to an operating contract with a political subdivision, operates or manages a county bus transportation system.

"Owner" means a political subdivision that owns or is the lessee of all the properties and facilities of the county bus transportation system (including buses, real estate, parking garages, fuel pumps, maintenance equipment, office supplies, etc.), and that owns all revenues derived therefrom;

(3) Surcharge taxes on rental motor vehicles imposed by chapter 251 and passed on and collected by persons holding certificates of registration under that chapter;

(4) Amounts received by the operator of orchard properties from the owner of the orchard property in amounts equal to and which are disbursed by the operator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:

"Employee" means an employee directly engaged in the day-to-day operations of the orchard properties and employed by the operator.

"Operator" means a producer who, pursuant to a written contract with the owner of the orchard property, operates or manages the orchard property for the owner where the property contains an area sufficient to make the undertaking economically feasible.

"Orchard property" means any real property that is used to raise trees with a production life cycle of fifteen years or more producing fruits or nuts having a normal period of development from the initial planting to the first commercially saleable harvest of not less than three years.

"Owner" means a fee owner or lessee under a recorded lease of orchard property;

(5) Taxes on nursing facility income imposed by chapter 346E and passed on and collected by operators of nursing facilities;

(6) Amounts received under property and casualty insurance policies for damage or loss of inventory used in the conduct of a trade or business located within the State or a portion thereof that is declared a natural disaster area by the governor pursuant to section 209‑2;

(7) Amounts received as compensation by community organizations, school booster clubs, and nonprofit organizations under a contract with the chief election officer for the provision and compensation of precinct officials and other election-related personnel, services, and activities, pursuant to section 11-5;

(8) Interest received by a person domiciled outside the State from a trust company (as defined in section 412:8-101) acting as payment agent or trustee on behalf of the issuer or payees of an interest bearing instrument or obligation, if the interest would not have been subject to tax under this chapter if paid directly to the person domiciled outside the State without the use of a paying agent or trustee; provided that if the interest would otherwise be taxable under this chapter if paid directly to the person domiciled outside the State, it shall not be exempt solely because of the use of a Hawaii trust company as a paying agent or trustee;

(9) Amounts received by a management company from related entities engaged in the business of selling interstate or foreign common carrier telecommunications services in amounts equal to and which are disbursed by the management company for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:

"Employee" means employees directly engaged in the day-to-day operation of related entities engaged in the business of selling interstate or foreign common carrier telecommunications services and employed by the management company.

"Management company" means any person who, pursuant to a written contract with a related entity engaged in the business of selling interstate or foreign common carrier telecommunications services, provides managerial or operational services to that entity.

"Related entities" means:

(A) 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;

(B) 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;

(C) 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

(D) Any group or combination of the entities described in paragraph (C) 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; and

(10) Amounts received as grants under section 206M-15."

SECTION 5. Section 237-24.75, Hawaii Revised Statutes, is amended to read as follows:

"§237-24.75 Additional exemptions. In addition to the amounts exempt under section 237-24, this chapter shall not apply to:

(1) Amounts received as a beverage container deposit collected under chapter 342G, part VIII;

(2) Amounts received by the operator of the Hawaii convention center for reimbursement of costs or advances made pursuant to a contract with the Hawaii tourism authority under section 201B‑7[[]; [~~and~~

[](3) Amounts received[]] by a professional employment organization from a client company equal to amounts that are disbursed by the professional employment organization for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick leave, health benefits, and similar employment benefits with respect to assigned employees at a client company; provided that this exemption shall not apply to a professional employment organization upon failure of the professional employment organization to collect, account for, and pay over any income tax withholding for assigned employees or any federal or state taxes for which the professional employment organization is responsible. As used in this paragraph, "professional employment organization", "client company", and "assigned employee" shall have the meanings provided in section 373K-1[.]; and

(4) Amounts received by the operator of a county fixed guideway transportation system operated under an operating contract with a county or political subdivision, where the county or the political subdivision is the owner of the county fixed guideway transportation system. As used in this paragraph:

"County fixed guideway transportation system" means a fixed guideway mass transit system providing regularly scheduled transportation within a county.

"Operating contract" or "contract" means a contract to operate and manage a county or political subdivision's county fixed guideway transportation system, which provides that:

(A) The county or political subdivision shall exercise substantial control over all aspects of the operator's operation;

(B) The county or political subdivision controls the development of transit policy, service planning, routes, and fares; and

(C) The operator develops in advance a draft budget in the same format as prescribed for agencies of the county or political subdivision. The budget must be subject to the same constraints and controls regarding the lawful expenditure of public funds as any public sector agency, and deviations from the budget must be subject to approval by the appropriate county or political subdivision officials involved in the budgetary process.

"Operator" means any person who, pursuant to an operating contract with a county or political subdivision, operates or manages a county fixed guideway transportation system.

"Owner" means a county or a political subdivision that owns or is the lessee of all the properties and facilities of the county fixed guideway transportation system (including transportation equipment, real estate, maintenance facilities and equipment, office supplies, etc.), and that owns all revenues derived therefrom."

SECTION 6. Section 237-29, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

"§237-29 Exemptions for certified or approved housing or community health care facility projects. (a) All gross income received by any qualified person or firm for the planning, design, financing, construction, sale, or lease in the State of a housing or community health care facility project that has been certified or approved under section 201H-36 shall be exempt from general excise taxes."

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2007; provided that when section 237-24.7, Hawaii Revised Statutes, is repealed and reenacted pursuant to Act 239, Session Laws of Hawaii 2007, the amendments made to that section by this Act shall not be repealed.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3165
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII