STAND. COM. REP. NO.  212-10

Honolulu, Hawaii

                , 2010

RE:   H.B. No. 1921

      H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

Sir:

     Your Committee on Economic Revitalization, Business, & Military Affairs, to which was referred H.B. No. 1921 entitled:

"A BILL FOR AN ACT RELATING TO A CONTROLLING INTEREST TRANSFER TAX,"

begs leave to report as follows:

     The purpose of this bill is to capture taxes on certain conveyances of real property that currently escape the conveyance tax.  Specifically, this bill will establish a tax on transfers of real property that occur within the transfer of a controlling interest in a legal entity that owns the real property.

     The Department of Taxation supported the intent of this bill.  Land Use Research Foundation of Hawaii opposed this measure.  Tax Foundation of Hawaii submitted comments.

     Your Committee finds that the conveyance tax is imposed each time real property changes title or ownership.  However the tax does not apply when the controlling interest in an entity that owns real property is sold, such as a transfer of the stock in an entity that owns real property.  This bill seeks to close this loophole and capture these revenues.

     Your Committee has amended this bill by:

     (1)  Replacing the 1.11 percent tax rate with the conveyance tax rate under section 247-2, Hawaii Revised Statutes;

     (2)  Ensuring that the exemptions to the conveyance tax apply to the new controlling interest tax;

     (3)  Adding a savings clause; and

     (4)  Making other technical, nonsubstantive amendments for clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Economic Revitalization, Business, & Military Affairs that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1921, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1921, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Revitalization, Business, & Military Affairs,

____________________________

ANGUS L.K. MCKELVEY, Chair