HB2884.DOC

SECTION 1. The purpose of this Act is to temporarily impose the general excise tax on the death benefit or other gross income derived by a provider of a life settlement contract. This Act takes effect on July 1, 2010 and sunsets on June 30, 2015.

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

"§237- Tax on provider of life settlement contract. (a) For the purpose of this section:

(1) The definitions under section 431E-2 shall apply;

(2) "Gross income" includes any compensation or thing of value derived by a provider from the transfer of a life settlement contract from the owner or trust or other entity who owned the contract to the provider; and

(3) "Transfer" includes the assignment, sale, gift, devise, or bequest of a settled policy.

(b) There is hereby levied, and shall be assessed and collected annually, a general excise tax against a provider of a life settlement contract. The tax shall be equal to four per cent of the death benefit or other gross income derived by the provider upon:

(1) The death of the owner of the life settlement contract;

(2) The transfer to the provider of the life settlement contract from the owner or trust or other entity who owned the contract; or

(3) Both.

SECTION 3. Section 237-24, Hawaii Revised Statutes, is amended to read as follows:

"§237-24 Amounts not taxable. This chapter shall not apply to the following amounts:

(1) [~~Amounts~~] Except as otherwise provided under section 237- for a provider of a life settlement contract, amounts received under life insurance policies and contracts paid by reason of the death of the insured;

(2) [~~Amounts~~] Except as otherwise provided under section 237- for a provider of a life settlement contract, amounts received (other than amounts paid by reason of death of the insured) under life insurance, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract;

(3) Amounts received under any accident insurance or health insurance policy or contract or under workers' compensation acts or employers' liability acts, as compensation for personal injuries, death, or sickness, including also the amount of any damages or other compensation received, whether as a result of action or by private agreement between the parties on account of the personal injuries, death, or sickness;

(4) [~~The~~] Except as otherwise provided under section 237‑ for a provider of a life settlement contract, the value of all property of every kind and sort acquired by gift, bequest, or devise, and the value of all property acquired by descent or inheritance;

(5) Amounts received by any person as compensatory damages for any tort injury to the person, or to the person's character reputation, or received as compensatory damages for any tort injury to or destruction of property, whether as the result of action or by private agreement between the parties (provided that amounts received as punitive damages for tort injury or breach of contract injury shall be included in gross income);

(6) Amounts received as salaries or wages for services rendered by an employee to an employer;

(7) Amounts received as alimony and other similar payments and settlements;

(8) Amounts collected by distributors as fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts collected by such distributors as a fuel tax imposed by any Act of the Congress of the United States;

(9) Taxes on liquor imposed by chapter 244D on dealers holding permits under that chapter;

(10) The amounts of taxes on cigarettes and tobacco products imposed by chapter 245 on wholesalers or dealers holding licenses under that chapter and selling the products at wholesale;

(11) Federal excise taxes imposed on articles sold at retail and collected from the purchasers thereof and paid to the federal government by the retailer;

(12) The amounts of federal taxes under chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on sugar manufactured in the State, paid by the manufacturer to the federal government;

(13) An amount up to, but not in excess of, $2,000 a year of gross income received by any blind, deaf, or totally disabled person engaging, or continuing, in any business, trade, activity, occupation, or calling within the State; a corporation all of whose outstanding shares are owned by an individual or individuals who are blind, deaf, or totally disabled; a general, limited, or limited liability partnership, all of whose partners are blind, deaf, or totally disabled; or a limited liability company, all of whose members are blind, deaf, or totally disabled;

(14) Amounts received by a producer of sugarcane from the manufacturer to whom the producer sells the sugarcane, where:

(A) The producer is an independent cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of 1948 (61 Stat. 922, Chapter 519) as the Act may be amended or supplemented;

(B) The value or gross proceeds of the sale of the sugar, and other products manufactured from the sugarcane, are included in the measure of the tax levied on the manufacturer under section 237-13(1) or (2);

(C) The producer's gross proceeds of sales are dependent upon the actual value of the products manufactured therefrom or the average value of all similar products manufactured by the manufacturer; and

(D) The producer's gross proceeds of sales are reduced by reason of the tax on the value or sale of the manufactured products;

(15) Money paid by the State or eleemosynary child-placing organizations to foster parents for their care of children in foster homes;

(16) Amounts received by a cooperative housing corporation from its shareholders in reimbursement of funds paid by the corporation for lease rental, real property taxes, and other expenses of operating and maintaining the cooperative land and improvements; provided that the cooperative corporation is a corporation:

(A) Having one and only one class of stock outstanding;

(B) Each of the stockholders of which is entitled solely by reason of the stockholder's ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building owned or leased by the corporation; and

(C) No stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except in a complete or partial liquidation of the corporation; and

(17) Amounts received by a managed care support contractor of the TRICARE program that is established under Title 10 United States Code chapter 55, as amended, for the actual cost or advancement to third party health care providers pursuant to a contract with the United States."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2010, and shall be repealed on June 30, 2015; provided that:

(1) Section 237-24(1), (2), and (4), Hawaii Revised Statutes, shall be reenacted in the form in which they read on June 30, 2010;

(2) Section 2 of this Act shall not be:

(A) Repealed when section 431E-2, Hawaii Revised Statutes is repealed on June 16, 2010 pursuant to Act 177, Session Laws of Hawaii 2008; and

(B) Reenacted after June 30, 2015; and

(3) The amendments made to section 237-24, Hawaii Revised Statutes, by this Act shall not be repealed when that section is repealed and reenacted on December 31, 2013, pursuant to Act 70, Session Laws of Hawaii 2009.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2884
TWENTY-FIFTH LEGISLATURE, 2010
STATE OF HAWAII