HB2339.DOC

SECTION 1. The legislature finds that the counties have not provided direct real property tax relief to renters in a practical and efficient manner.

The purpose of this Act is to allow the counties to provide direct relief to a renter of real property within a county by offering a renter's income tax credit funded by the county to offset a portion of the renter's real property tax burden.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Renter's tax credit. (a) If the State and a county agree in writing, there shall be allowed a renter's tax credit for each resident individual taxpayer who qualifies under subsection (b). The agreement shall require the State to provide the tax credit to a qualified taxpayer during a taxable year if the county agrees to pay or reimburse the State for the tax loss resulting from the credit and the cost to the State to administer the credit. The agreement shall be executed by the State and county at least one hundred eighty days before the taxable year in which the credit is to apply.

If an agreement is not executed in compliance with this section for the application of the tax credit in a taxable year, then the tax credit shall not be available to renters during that taxable year.

The tax credit shall be additional to the tax credit for low-income household renters under section 235-55.7.

(b) A resident individual taxpayer shall qualify for the tax credit made available during a taxable year if the taxpayer:

(1) Has rented and occupied real property within a county for a minimum of six months during the taxable year;

(2) Does not own real property in the State or receive a real property tax exemption; and

(3) Is not eligible to be claimed as a dependent for federal or state income taxes by another.

(c) The amount of the tax credit available during a taxable year shall be the amount agreed to by the county and the State. The amount may be a flat amount or vary according to the income of the taxpayer, rent paid by the taxpayer, or other factors.

(d) The tax credit shall be deductible from the qualified taxpayer's net income tax liability, if any, for the taxable year in which the credit is made available and properly claimed; provided that spouses filing separate returns for a taxable year for which a joint return could have been made by them shall claim only the tax credit to which they would have been entitled had a joint return been filed.

(e) If a rental unit is occupied by two or more individuals, and more than one individual qualifies for the tax credit, the claim for the credit shall be based on the actual share of the rent paid.

(f) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

(g) A claim for the tax credit under this section, including any amended claim, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(h) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish information to ascertain the validity of the claim for the credit made under this section; and

(3) May adopt rules in accordance with chapter 91 to implement this section.

(i) All refunds shall be paid only upon a form to be known as a "refund voucher" prepared by the director of taxation. The refund vouchers shall set forth all the details of each transaction, shall be approved by the director, and shall be forwarded to the comptroller from time to time. The comptroller shall issue a warrant, in the form prescribed by section 40-52, for the payment of the tax reserve fund created in section 231-23(c)(2)."

SECTION 3. Section 231-7, Hawaii Revised Statutes, is amended by amending subsections (a), (b), and (c) to read as follows:

"(a) The director of taxation, [~~and~~] any representative of the director duly authorized by the director, and any county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑A, may conduct any inquiry, investigation, or hearing, relating to any assessment, or the amount of any tax, or the collection of any delinquent tax, including any inquiry or investigation into the financial resources of any delinquent taxpayer or the collectability of any delinquent tax.

(b) The director [or], other person, or county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , conducting hearings may administer oaths and take testimony under oath relating to the matter of inquiry or investigation, and subpoena witnesses and require the production of books, papers, documents, and records pertinent to such inquiry.

(c) If any person disobeys any process or, having appeared in obedience thereto, refuses to answer pertinent questions put to the person by the director [or], other person conducting the hearing, or county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , or to produce any books, papers, documents, or records pursuant thereto, the director [or], other person, or county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , conducting the hearing may apply to the circuit court of the circuit wherein the inquiry or investigation is being conducted, or to any judge of the court, setting forth the disobedience to process or refusal to answer, and the court or judge shall cite the person to appear before the court or judge to answer the questions or to produce the books, papers, documents, or records, and upon the person's refusal so to do commit the person to jail until the person testifies but not for a longer period than sixty days. Notwithstanding the serving of the term of commitment by any person, the director or county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , may proceed in all respects as if the witness had not previously been called upon to testify. Witnesses (other than the taxpayer or the taxpayer's or its officers, directors, agents, and employees) shall be allowed their fees and mileage as in cases in the circuit courts, to be paid on vouchers of the department of taxation, from any moneys available for expenses of the department."

SECTION 4. Section 235-108, Hawaii Revised Statutes, is amended to read as follows:

"§235-108 Audit of return; procedure; additional taxes. (a) Audit. The director of taxation, a county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , or a responsible person designated by the director to act in the premises for the purpose of verification or audit of a return made by the taxpayer or employer, or for the purpose of making a return where none has been made, is authorized and empowered to examine all account books, bank books, bank statements, records, vouchers, copies of federal tax returns, and any and all other documents and evidences having any relevancy to the determination of the income or wages as required to be returned under this chapter, and the director and a county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235‑ , may employ the director's powers under section 231-7 for such purposes.

(b) Additional taxes. If the department of taxation discovers from the examination of the return or otherwise that income, or the liability of an employer in respect of wages, or any portion thereof, has not been assessed, it may assess the same and give notice to the taxpayer or employer of the assessment, and the taxpayer or employer shall thereupon have an opportunity within thirty days to confer with the department as to the proposed assessment. If a county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235- , discovers from an examination of the return or otherwise that income, or the liability of an employer in respect of wages, or any portion thereof, has not been assessed or reported, the county shall notify the director and the department shall assess the same and give notice to the taxpayer or employer of the assessment, and the taxpayer or employer shall thereupon have an opportunity with thirty days to confer with the department and the county as to the proposed assessment. After the expiration of thirty days from such notification, the department shall assess the income of the taxpayer, or the liability of the employer in respect of wages, or any portion thereof which [it] the department or the county, in connection with a taxpayer's claim for the renter's tax credit provided in section 235- , believes has not heretofore been assessed, and shall give notice to the taxpayer or employer of the amount of the tax and interest and penalties if any, and the amount thereof shall be paid within twenty days after the date the notice was mailed, properly addressed to the taxpayer or employer at the taxpayer's or employer's last known address or place of business."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2339
TWENTY-FIFTH LEGISLATURE, 2010
STATE OF HAWAII