THE SENATE	S.B. NO.	2048
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII

A BILL FOR AN ACT

relating to transient accommodations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that there are communities in Hawaii that are zoned as residential that have become transient accommodation communities.  There is an abundance of web listings on the Internet for vacation rentals throughout the State, and the owners and operators of some of these vacation rentals are not paying transient accommodations taxes or general excise taxes, resulting in a loss of state revenue.  Counties are also losing revenue when an owner of a vacation rental receives "home owners" discounts on property taxes paid for a residential home that is used for commercial purposes without a commercial property rate.  The Hawaii Visitors and Convention Bureau reports that at least forty per cent of all visitors to the islands are now staying in vacation rentals.  The increase in vacation rentals is creating negative impacts on the State.  The number of long-term rental units has decreased because owners see greater profit in vacation rentals, the cost of housing is increasing because houses are being purchased specifically to be used as vacation rentals and not as primary residences, and there is a loss of revenue to permitted hotels, lodges, and bed and breakfast establishments that pay transient accommodations taxes and general excise taxes.

     The legislature further finds that visitors who stay in vacation rentals may not be getting what is advertised, which can be detrimental to Hawaii's reputation.  Visitors are not receiving personal services that are provided by hotels, lodges, and bed and breakfast establishments that ensure quality and safety.  Visitors also are receiving less information concerning where to hike and not, where it is safe to swim, and other safety information regarding weather, rips and undertows, and surf conditions.

     The purpose of this Act is to establish additional registration requirements and other regulations for transient vacation rentals to ensure that these commercial enterprises contribute the proper amount of tax moneys to state and county revenue streams, verify that transient vacation rentals are abiding by all county zoning ordinances, and guarantee quality experiences to visitors that are safe and contribute positively to the State's reputation as a prime tourist destination.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

TRANSIENT VACATION RENTALS

     §   -1  Definitions.  As used in this chapter:

     "Application" or "app" means a type of software that allows access to an online rental service provider.

     "Bed and breakfast establishment" or "bed and breakfast home" means a single-family dwelling occupied by an owner or a guest house let for consideration for less than thirty days.

     "Department" means the department of commerce and consumer affairs.

     "Director" means the director of commerce and consumer affairs.

     "Dwelling" means:

     (1)  A single-family dwelling unit;

     (2)  A multi-family dwelling unit;

     (3)  A bed and breakfast establishment or bed and breakfast home; or

     (4)  An "apartment" defined in section 514A-3 or "unit" defined in section 514B-3 that is not part of a hotel-condominium defined in section 486K-1.

     "Enforcement agent" means a qualified person, agent, or officer, including an investigator, with whom the director contracts, who shall be exempt from chapter 76, or a delegate of the agency charged with the administration of county zoning laws designated by the director to enforce this chapter.

     "Lease", "let", or "rental" means the leasing or rental of lodgings in a transient vacation rental for compensation or fees, including club fees.

     "Local contact" means an individual residing on the same island as the transient vacation rental or an entity with a place of business and at least one employee, officer, partner, member, or other person working on behalf of the company who is residing on the same island as the transient vacation rental who shall be available on a twenty-four-hour, seven-days-per-week basis.

     "Lodging" means temporary sleeping accommodations in a dwelling or portion of a dwelling.

     "Nongovernmental entity" includes an association of homeowners, a community association, association of apartment owners as defined in section 514A-3, and board or board of directors as defined in section 514B-3.

     "Online rental service provider" means any company, organization, club, group, or application that offers a transient vacation rental service via the Internet.

     "Operator" means any person operating a transient vacation rental, whether as owner or proprietor or as lessee, sublessee, mortgagee in possession, licensee, or otherwise, or engaging or continuing in any service business which involves the actual furnishing of a transient vacation rental.

     "Owner" means the grantee in the deed and instrument for the transient vacation rental recorded in the bureau of conveyances.

     "Transient vacation rental" means a dwelling or lodging located in the State let by an owner, operator, or lessee for less than one hundred eighty days. Transient vacation rental does not include any facility owned or used by a government agency or a tenement home, group home, group residence, group living arrangement, boarding house, or rooming house certified pursuant to section 445-94.

     §   -2  Powers and duties of the director.  In addition to any other powers and duties authorized by law, the director may:

     (1)  Grant licenses to transient vacation rental owners and operators pursuant to this chapter;

     (2)  Adopt, amend, or repeal rules as the director deems proper to fully effectuate this chapter;

     (3)  Fine, suspend, terminate, or revoke any license for any cause prescribed by this chapter, or for any violation of the rules, and refuse to grant any license for any cause which would be grounds for revocation, termination, or suspension of a license; and

     (4)  Investigate the actions of any unlicensed person acting or alleged to be acting in the capacity of a licensee under this chapter.

     §   -3  License; requirements; renewal.  (a)  Beginning January 1, 2017, no owner or operator of a transient vacation rental shall operate or do business in this State without a license granted by the director under this chapter.  The application for a license shall be submitted on forms prescribed by the director and with the appropriate fees, prescribed by the director, which shall be deposited into the compliance resolution fund under section 26-9(o).

     (b)  The application shall include:

     (1)  The address and tax map key number of the transient vacation rental;

     (2)  The name, address, and contact information of the owner or operator of the transient vacation rental;

     (3)  The name, address, and contact information of the local contact for the transient vacation rental;

     (4)  The name, address, and contact information of any nongovernmental entity with authority over the property on which the transient vacation rental is located, along with a copy of the covenants, by-laws, and administrative provisions with which compliance of the transient vacation rental is required;

     (5)  Proof of compliance with all county ordinances relating to the regulation of transient vacation rentals, including any registration number, license, permit, special use permit, or non-conforming use permit required by the county;

     (6)  Submission of:

         (A)  The general excise tax license number issued pursuant to chapter 237;

         (B)  The transient accommodations tax registration number issued pursuant to chapter 237D; and

         (C)  The general excise tax and transient accommodations tax filings for the previous two years, for any transient vacation rental existing on the effective date of Act      , Session Laws of Hawaii 2016, for which the applicant is the owner or operator; and

     (7)  The name of the application or app, name of the online rental service provider or providers, the address of any website on the Internet, or other means of mass communications utilized for advertisements or solicitations of the transient vacation rental.

The owner or operator shall notify the department within sixty days of any change in the information required by this subsection.

     (c)  The owner or operator of a transient vacation rental shall renew the license each year on or before December 31 on a form provided by the department.  The owner or operator shall verify and update the information required in subsection (b) if necessary upon renewal.

     (d)  No license may be assigned, sold, leased, encumbered, or otherwise transferred, except upon the written application to and approval by the director.

     §   -4  Issuance of license and seal; provision of information to the county.  (a)  Each license shall be in a form prescribed and signed by the director and issued in the name of the department with an official seal as evidence of the validity of the license.

     (b)  The department shall maintain and annually update a list of the licensed transient vacation rentals, and shall provide the county agency charged with the administration of county zoning laws all the information required by section    -3 regarding the transient vacation rentals licensed in the county.

§   -5  Transient vacation rentals; requirements.  (a) The owner or operator of a transient vacation rental shall:

     (1)  Prominently post the name and phone number of the local contact in the transient vacation rental, and include the information in any transient vacation rental contract or rental agreement; and

     (2)  Include the license number and official seal of the transient vacation rental in any advertisements or solicitations of the transient vacation rental through an online rental service provider, an application or app, or other means of mass communication.

     (b)  The owner or operator shall submit to the applicable nongovernmental entity all covenants, bylaws, and administrative provisions with which compliance is required for the property on which the transient vacation rental is located, along with the following:

     (1)  The address of the transient vacation rental;

     (2)  The name, address, and contact information of the owner or operator of the transient vacation rental;

     (3)  The name, address, and contact information of the local contact;

     (4)  The general excise tax license number issued pursuant to chapter 237;

     (5)  The transient accommodations tax registration number issued pursuant to chapter 237D; and

     (6)  The license number of the transient vacation rental.

The owner or operator shall notify and provide updated information to the nongovernmental entity within sixty calendar days of any change in the required information.

     (c)  The owner or operator shall comply with all county ordinances relating to the posting of information in the transient vacation rental, posting of signs, provision of safety information, parking, notification of neighbors, and other requirements established by the county.

     §   -6  Prohibited acts; penalty.  (a)  No owner or operator of a transient vacation rental shall:

     (1)  Operate or conduct the business of a transient vacation rental located in the State without a license granted by the director under this chapter;

     (2)  Sell or advertise a transient vacation rental located in the State without a license granted by the director under this chapter or fail to include the license number and official seal in any advertisement or solicitation of the transient vacation rental; or

     (3)  Otherwise violate any provision of this chapter or rules adopted pursuant to this chapter.

     (b)  Any advertisement or written, graphic, or oral statement in connection with the solicitation of business for a transient vacation rental through an online rental service provider, an application or app, or other means of mass communication is prima facie evidence of the selling, advertising, operation, or conducting of business of a transient vacation rental.

     (c)  Any owner or operator of a transient vacation rental who sells, advertises, operates, or conducts the business of a transient vacation rental without a license granted by the director under this chapter shall pay a civil penalty of $1,000 for each separate offense.

     (d)  All penalties collected by the department shall be deposited into the compliance resolution fund under section 26‑9(o) for the purpose of enforcing this chapter.

     §   -7  Enforcement; inspection.  (a)  The director may contract with qualified persons, including investigators, who shall be exempt from chapter 76, or delegate the agency charged with the administration of county zoning laws to enforce this chapter as enforcement agents.

     (b)  An enforcement agent shall have the power to serve and execute warrants or issue citations to enforce any of the provisions of this chapter.

     (c)  Any enforcement agent, upon written notification to the owner, operator, or local contact for the transient vacation rental, may enter upon, cross over, be upon, or remain upon privately owned land for the purpose of:

     (1)  Investigating and enforcing the compliance of the transient vacation rental with this chapter; and

     (2)  Investigating and enforcing the compliance of the vacation rental with the ordinances of the county in which the transient vacation rental is located.

     (d)  The enforcement agent shall have the powers and duties deemed necessary for the efficient and effective enforcement of this chapter.  Whenever the enforcement agent is refused entry upon land or to a building for the purpose of inspection under this section, the department or county may make a complaint to the district judge in whose circuit the land or building is located, and the district judge may thereupon issue a warrant, directed to any police officer of the circuit, commanding the police officer to render sufficient assistance to the employee or agent.  Whenever the existence of an illegal operation is discovered by an inspection under this section, the judge in whose circuit the land or building is located shall allow a writ of injunction to abate and prevent the continuance of the illegal operation.

     (e)  The owner or operator shall be required to pay an amount estimated to be necessary to cover the actual expenses of the inspection.  The department or the county agency delegated to enforce this chapter shall establish by rule a fee schedule of reasonable expenses, which may include expenses for travel time and costs, time for the inspection of transient vacation rentals, and administrative costs for the enforcement of compliance with applicable state and county laws and ordinances.

     (f)  The penalties and fees for expenses collected by a county agency delegated by the department to enforce this chapter shall be realizations of the county enforcing this chapter to be deposited into a fund established by the county agency delegated by the department to enforce this chapter for the purpose of enforcing this chapter.  The revenues from the penalties and fees collected by the county enforcing this chapter shall be deemed to satisfy article VIII, section 5, of the state constitution."

     SECTION 3.  Section 87A-42, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

     "(d)  In any fiscal year subsequent to the 2017-2018 fiscal year in which a county public employer's contributions into the fund are less than the amount of the annual required contribution, the amount that represents the excess of the annual required contribution over the county public employer's contributions shall be deposited into the fund from a portion of all transient accommodations tax revenues collected by the department of taxation under section [237D-6.5(b)(4).] 237D‑6.5(b)(5).  The director of finance shall deduct the amount necessary to meet the county public employer's annual required contribution from the revenues derived under section [237D‑6.5(b)(4)] 237D-6.5(b)(5) and transfer the amount to the board for deposit into the appropriate account of the separate trust fund."

     SECTION 4.  Section 171-19, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There is created in the department a special fund to be designated as the "special land and development fund".  Subject to the Hawaiian Homes Commission Act of 1920, as amended, and section 5(f) of the Admission Act of 1959, all proceeds of sale of public lands, including interest on deferred payments; all moneys collected under section 171-58 for mineral and water rights; all rents from leases, licenses, and permits derived from public lands; all moneys collected from lessees of public lands within industrial parks; all fees, fines, and other administrative charges collected under this chapter and chapter 183C; a portion of the highway fuel tax collected under chapter 243; all moneys collected by the department for the commercial use of public trails and trail accesses under the jurisdiction of the department; transient accommodations tax revenues collected pursuant to section [237D-6.5(b)(5);] 237D-6.5(b)(6); and private contributions for the management, maintenance, and development of trails and accesses shall be set apart in the fund and shall be used only as authorized by the legislature for the following purposes:

     (1)  To reimburse the general fund of the State for advances made that are required to be reimbursed from the proceeds derived from sales, leases, licenses, or permits of public lands;

     (2)  For the planning, development, management, operations, or maintenance of all lands and improvements under the control and management of the board pursuant to title 12, including but not limited to permanent or temporary staff positions who may be appointed without regard to chapter 76; provided that transient accommodations tax revenues allocated to the fund shall be expended as provided in section [237D‑6.5(b)(5);] 237D-6.5(b)(6);

     (3)  To repurchase any land, including improvements, in the exercise by the board of any right of repurchase specifically reserved in any patent, deed, lease, or other documents or as provided by law;

     (4)  For the payment of all appraisal fees; provided that all fees reimbursed to the board shall be deposited in the fund;

     (5)  For the payment of publication notices as required under this chapter; provided that all or a portion of the expenditures may be charged to the purchaser or lessee of public lands or any interest therein under rules adopted by the board;

     (6)  For the management, maintenance, and development of trails and trail accesses under the jurisdiction of the department;

     (7)  For the payment to private land developers who have contracted with the board for development of public lands under section 171-60;

     (8)  For the payment of debt service on revenue bonds issued by the department, and the establishment of debt service and other reserves deemed necessary by the board;

     (9)  To reimburse the general fund for debt service on general obligation bonds issued to finance departmental projects, where the bonds are designated to be reimbursed from the special land and development fund;

    (10)  For the protection, planning, management, and regulation of water resources under chapter 174C; and

    (11)  For other purposes of this chapter."

     SECTION 5.  Section 201B-10, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There is established outside the state treasury a tourism emergency special fund to be administered by the board, into which shall be deposited the revenues prescribed by [section 237D‑6.5(b).] section 237D-6.5(b)(4)(C).  All investment earnings from moneys in the special fund shall be credited to the tourism special fund established pursuant to section 201B-11."

     SECTION 6.  Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b) Revenues collected under this chapter shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) Fifty per cent shall be allocated to the counties with established county regulations for transient vacation rentals under chapter    ; provided that an additional five per cent shall be allocated to the department of commerce and consumer affairs for enforcement of chapter    ;

    [(1)] (2)  $1,500,000 shall be allocated to the Turtle Bay conservation easement special fund beginning July 1, 2015, for the reimbursement to the state general fund of debt service on reimbursable general obligation bonds, including ongoing expenses related to the issuance of the bonds, the proceeds of which were used to acquire the conservation easement and other real property interests in Turtle Bay, Oahu, for the protection, preservation, and enhancement of natural resources important to the State, until the bonds are fully amortized;

    [(2)] (3)  $26,500,000 shall be allocated to the convention center enterprise special fund established under section 201B-8;

    [(3)] (4)  $82,000,000 shall be allocated to the tourism special fund established under section 201B-11; provided that:

         (A)  Beginning on July 1, 2012, and ending on June 30, 2015, $2,000,000 shall be expended from the tourism special fund for development and implementation of initiatives to take advantage of expanded visa programs and increased travel opportunities for international visitors to Hawaii;

         (B)  Of the $82,000,000 allocated:

              (i)  $1,000,000 shall be allocated for the operation of a Hawaiian center and the museum of Hawaiian music and dance at the Hawaii convention center; and

             (ii)  0.5 per cent of the $82,000,000 shall be transferred to a sub-account in the tourism special fund to provide funding for a safety and security budget, in accordance with the Hawaii tourism strategic plan 2005-2015; and

         (C)  Of the revenues remaining in the tourism special fund after revenues have been deposited as provided in this paragraph and except for any sum authorized by the legislature for expenditure from revenues subject to this paragraph, beginning July 1, 2007, funds shall be deposited into the tourism emergency special fund, established in section 201B-10, in a manner sufficient to maintain a fund balance of $5,000,000 in the tourism emergency special fund;

    [(4)] (5)  $103,000,000 for fiscal year 2014-2015, $103,000,000 for fiscal year 2015-2016, and $93,000,000 for each fiscal year thereafter shall be allocated as follows:  Kauai county shall receive 14.5 per cent, Hawaii county shall receive 18.6 per cent, city and county of Honolulu shall receive 44.1 per cent, and Maui county shall receive 22.8 per cent; provided that commencing with fiscal year 2018-2019, a sum that represents the difference between a county public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the county public employer's contributions into that trust fund shall be retained by the state director of finance and deposited to the credit of the county public employer's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42, if the respective county fails to remit the total amount of the county's required annual contributions, as required under section 87A-43; and

    [(5)] (6)  $3,000,000 shall be allocated to the special land and development fund established under section 171-19; provided that the allocation shall be expended in accordance with the Hawaii tourism authority strategic plan for:

         (A)  The protection, preservation, maintenance, and enhancement of natural resources, including beaches, important to the visitor industry;

         (B)  Planning, construction, and repair of facilities; and

         (C)  Operation and maintenance costs of public lands, including beaches, connected with enhancing the visitor experience.

     All transient accommodations taxes shall be paid into the state treasury each month within ten days after collection and shall be kept by the state director of finance in special accounts for distribution as provided in this subsection.

     As used in this subsection, "fiscal year" means the twelve-month period beginning on July 1 of a calendar year and ending on June 30 of the following calendar year."

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

     SECTION 8.  This Act shall take effect on July 1, 2016.

INTRODUCED BY:

_____________________________

Report Title:

Department of Commerce and Consumer Affairs; Transient Vacation Rentals; Licensing

Description:

Proscribes licensing requirements and enforcement provisions for transient vacation rentals under the department of commerce and consumer affairs.  Requires license beginning on 1/1/2017.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.