HB2597.DOC

SECTION 1. The legislature notes that section 5-7.5, Hawaii Revised Statutes, encourages state government officials to exercise their duties and responsibilities in consideration of the Aloha Spirit. The Aloha Spirit is the coordination of the mind and heart within each person, which brings each person to the self. The traits of character emblematic of the Aloha Spirit, ahakai, lokahi, oluolu, haahaa, and ahonui, are also the traits of character that express the charm, warmth, and sincerity of Hawaii's people. These principles are important in how visitors are welcomed to Hawaii. These principles are also important for the maintenance of good health, education, clean air, safe streets, and nurtured families within Hawaii's communities.

The intent of this Act is to begin to apply the Aloha Spirit to the visitor accommodations industry through increased data reporting and transparency with respect to transient accommodations and to mitigate the impact of certain transient accommodations on Hawaii's communities by dedicating some of the tax revenue they generate to services and initiatives for the homeless. These innovations will aid the counties with enforcement of local land use regulations, protect the health of Hawaii's communities, and preserve affordable housing for Hawaii's residents. This Act recognizes that, under certain circumstances, allowing a transient accommodations broker to act as a tax collection agent will ease the State's burden of collecting taxes and increase tax revenues.

Section 237-9, Hawaii Revised Statutes, allows a person engaged in network marketing, multi-level marketing, or other similar business to enter into an agreement with the department of taxation to act as a tax collection agent on behalf of its direct sellers. The legislature finds that similarly allowing a transient accommodations broker to act as a tax collection agent on behalf of providers of transient accommodations that utilize the services of the transient accommodations broker will facilitate the collection of transient accommodations taxes and general excise taxes.

The legislature further finds that, to increase transparency and ensure the veracity of the taxes being collected, transient accommodations brokers acting as tax collectors must provide pertinent information to the department of taxation about the operators and plan managers on whose behalf they collect taxes.

The purpose of this Act is to implement innovative solutions to mitigate community and social impacts of certain transient accommodations in the state by:

(1) Allowing transient accommodations brokers to register to act as tax collection agents with respect to transient accommodations taxes and general excise taxes for its operators and plan managers in a manner that recognizes the dynamic changes that are occurring in the transient accommodations business; and

(2) Dedicating the transient accommodations tax revenues derived from these transient accommodations to the counties for enforcement of their own land use laws and to initiatives to help the homeless statewide.

This Act is not intended to preempt or otherwise limit the authority of the counties to adopt, monitor, and enforce local land use regulations, nor is this Act intended to transfer the authority to monitor and enforce such regulations away from the counties.

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

"§237- Transient accommodations broker as tax collection agent. (a) The director may permit a transient accommodations broker to register as a tax collection agent on behalf of all of its operators and plan managers by entering into a tax collection agreement with the director or by submitting a transient accommodations broker tax collection agent registration statement to the director. Any tax collection agreement entered into pursuant to this section shall be subject to and in accordance with all applicable provisions of state and local law and shall not permit a transient accommodations broker tax collection agent, nor any operator or plan manager conducting business through the transient accommodations broker tax collection agent, to opt out of any requirements or obligations under state or local law.

The director may deny an application for registration as a transient accommodations broker tax collection agent under this section for any cause authorized by law, including but not limited to any violation of this chapter, chapter 237D, or rules adopted pursuant thereto, violation of any prior tax collection agreement, or failure to meet minimum criteria that may be set forth by the department in rules adopted pursuant to chapter 91.

The director shall issue a certificate of registration or letter of denial within thirty days after a transient accommodations broker submits to the director a completed and signed transient accommodations broker tax collection agent registration statement, in a form prescribed by the department. The registration shall be valid only for the transient accommodations broker tax collection agent in whose name it is issued, and for the website or platform designated therein, and shall not be transferable.

(b) In addition to its own responsibilities under this chapter, a registered transient accommodations broker tax collection agent shall report, collect, and pay over the taxes due under this chapter on behalf of all of its operators and plan managers from the date of registration until the registration is canceled as provided in subsection (h); provided that the registered transient accommodations broker tax collection agent's obligation to report, collect, and pay taxes on behalf of all of its operators and plan managers shall apply solely to transient accommodations in the State arranged or booked directly through the registered transient accommodations broker tax collection agent.

(c) The registered transient accommodations broker tax collection agent's operators and plan managers shall obtain licensure under this chapter and remain subject to the requirements of title 14; provided that the registered transient accommodations broker tax collection agent shall report, collect, and pay the taxes under this chapter on behalf of the operators and plan managers for business activity conducted directly through the agent as set forth in this section, from the date of registration until the registration is canceled as provided in subsection (h). For purposes of any other business activity, the operators and plan managers shall be subject to all requirements of title 14 and all local laws, ordinances, and rules regulating short-term rentals, vacation rentals, or bed and breakfast lodging within their jurisdiction as if this section did not exist.

A registered transient accommodations broker tax collection agent shall be issued separate licenses under this chapter with respect to taxes payable on behalf of its operators and plan managers in its capacity as a registered transient accommodations broker tax collection agent and, if applicable, with respect to any taxes payable under this chapter for its own business activities.

(d) If the registered transient accommodations broker tax collection agent fails to report or pay the taxes under this chapter on behalf of its operators and plan managers, as set forth in this section, the registered transient accommodations broker tax collection agent and the operator or plan manager shall be jointly and severally liable for the taxes due under this chapter including penalties and interest as provided by law with respect to business activities conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h).

(e) A registered transient accommodations broker tax collection agent shall be personally liable for the taxes imposed by this chapter that are due and collected on behalf of operators and plan managers if taxes are collected but not reported or paid, together with penalties and interest as provided by law.

(f) Except as provided in subsection (g), all returns and other information provided by a registered transient accommodations broker tax collection agent, including the application for registration as a transient accommodations broker tax collection agent or any tax collection agreement, shall be confidential, and disclosure thereof shall be prohibited as provided in section 237-34.

(g) A registered transient accommodations broker tax collection agent shall file periodic returns in accordance with section 237-30 and annual returns in accordance with section 237-33. Each periodic return required pursuant to section 237‑30 shall be accompanied by an electronic cover sheet, in a form prescribed by the department, that includes the following information:

(1) For each operator and plan manager on whose behalf the registered transient accommodations broker tax collection agent is required to report, collect, and pay over taxes due under this chapter, the operator's or plan manager's name, address, and license identification number; and

(2) For each transient accommodation rented through the registered transient accommodations broker tax collection agent or the website or platform designated in the certificate of registration issued pursuant to chapter 237D and for which taxes are being remitted pursuant to this chapter:

(A) The address of the transient accommodation;

(B) The number of nights for which each transient accommodation was rented, the number of visitors per night, and the rate or price per night at which each transient accommodation was rented; and

(C) The amount of tax being remitted pursuant to this chapter and the amount of any federal form 1099 income that was derived from each transient accommodation.

Upon request by the director or the mayor of the applicable county, a registered transient accommodations broker tax collection agent shall disclose any of the information contained in the returns or cover sheets required by this subsection to the director or any county official designated by the mayor to receive such information. Notwithstanding any law to the contrary, including section 237-34, the director and county official designated to receive information pursuant to this subsection may examine and copy the returns and cover sheets to ensure compliance with this section, state and local tax laws and ordinances, and any applicable land use laws and ordinances.

(h) The registration provided for under this section shall be effective until canceled in writing.

A registered transient accommodations broker tax collection agent may cancel its registration under this section by delivering written notice of cancellation to the director and each of its operators and plan managers furnishing transient accommodations in the State not later than ninety days prior to the effective date of cancellation.

The director may cancel or suspend a transient accommodations broker tax collection agent's registration under this section for any cause, including but not limited to any violation of this chapter, chapter 237D, or rules adopted pursuant thereto, or for violation of any applicable tax collection agreement, by delivering written notice of cancellation to the transient accommodations broker tax collection agent not later than ninety days prior to the effective date of cancellation.

(i) All registered transient accommodations broker tax collection agents, prior to facilitating any booking or reservation of a transient accommodation or placing an advertisement, including an online advertisement, on the availability of a property for lease or rent, on behalf of an operator or plan manager:

(1) Shall notify the operator or plan manager that the subject property is required to be in compliance with applicable state and county land use laws prior to retaining the services of the transient accommodations broker;

(2) Shall require the operator or plan manager to provide the transient accommodations broker with the operator or plan manager's transient accommodation tax registration identification number and local contact information required under section 237D-4;

(3) Shall require the operator or plan manager to provide the transient accommodations broker with verification of compliance with state and county land use laws in the form of a written certification, verification, or permit issued by the appropriate county agency; and

(4) Shall require the operator or plan manager to provide a statement confirming compliance with all applicable land use laws.

A transient accommodations broker shall not facilitate the booking or reservation of a transient accommodation located in the State, and shall remove any advertisement, including an online advertisement, for a transient accommodation located in the State, for which the operator or plan manager fails to comply with paragraph (2), (3), or (4), or for which the transient accommodations broker has received written notice from a state or local governmental authority that the operator or plan manager has failed to comply with applicable land use, zoning, or tax requirements.

(j) Each county shall establish a process for verifying operators and plan managers' compliance with county land use ordinances and rules to be approved by the director. After approval, the director shall transfer to the county per cent of general excise tax revenue collected each fiscal year from transient accommodations subject to this section in the applicable county to offset the cost to the county of establishing and maintaining the verification process.

(k) Nothing in this section shall be construed to preempt or prohibit the authority of a unit of local government in the State, including counties and any other political subdivisions of the State, to adopt, monitor, and enforce local land use and transient accommodations regulations, nor to transfer the authority to monitor and enforce such regulations away from the counties.

(l) For the purposes of this section:

"Director" means the director of taxation.

"Operator" has the same meaning as in section 237D-1.

"Plan manager" has the same meaning as in section 237D-1.

"Transient accommodation" has the same meaning as in section 237D-1.

"Transient accommodations broker" has the same meaning as in section 237D-1."

SECTION 3. Chapter 237D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237D- Transient accommodations broker as tax collection agent. (a) The director may permit a transient accommodations broker to register as a tax collection agent on behalf of all of its operators and plan managers by entering into a tax collection agreement with the director or by submitting a transient accommodations broker tax collection agent registration statement to the director. Any tax collection agreement entered into pursuant to this section shall be subject to and in accordance with all applicable provisions of state and local law and shall not permit a transient accommodations broker tax collection agent, nor any operator or plan manager conducting business through the transient accommodations broker tax collection agent, to opt out of any requirements or obligations under state or local law.

The director may deny an application for registration as a transient accommodations broker tax collection agent under this section for any cause authorized by law, including but not limited to any violation of this chapter, chapter 237, or rules adopted pursuant thereto, violation of any prior tax collection agreement, or failure to meet minimum criteria that may be set forth by the department in rules adopted pursuant to chapter 91.

A registered transient accommodations broker tax collection agent shall be issued separate certificates of registration under this chapter with respect to taxes payable on behalf of its operators and plan managers in its capacity as a registered transient accommodations broker tax collection agent and, if applicable, with respect to any taxes payable under this chapter for its own business activities.

(c) The registered transient accommodations broker tax collection agent's operators and plan managers shall obtain registration under this chapter and remain subject to the requirements of title 14; provided that the registered transient accommodations broker tax collection agent shall report, collect, and pay the taxes under this chapter on behalf of the operators and plan managers for business activity conducted directly through the agent as set forth in this section, from the date of registration until the registration is canceled as provided in subsection (h). For purposes of any other business activity, the operators and plan managers shall be subject to all requirements of title 14 and all local laws, ordinances, and rules regulating short-term rentals, vacation rentals, or bed and breakfast lodging within their jurisdiction as if this section did not exist.

(d) If the registered transient accommodations broker tax collection agent fails to report or pay the taxes under this chapter on behalf of its operators and plan managers, as set forth in this section, the registered transient accommodations broker tax collection agent and the operator or plan manager shall be jointly and severally liable for the taxes due under this chapter including penalties and interest as provided by law with respect to their business activities conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h).

(g) A registered transient accommodations broker tax collection agent shall file periodic returns in accordance with section 237D-6 and annual returns in accordance with section 237D-7. Each periodic return required pursuant to section 237D‑6 shall be accompanied by an electronic cover sheet, in a form prescribed by the department, that includes the following information:

(2) For each transient accommodation rented through the registered transient accommodations broker tax collection agent or the website or platform designated in the certificate of registration issued pursuant to subsection (a) and for which taxes are being remitted pursuant to this chapter:

(A) The address of the transient accommodation;

(B) The number of nights for which each transient accommodation was rented, the number of visitors per night, and the rate or price per night at which each transient accommodation was rented; and

(C) The amount of tax being remitted pursuant to this chapter and the amount of any federal form 1099 income that was derived from each transient accommodation.

Upon request by the director or the mayor of the applicable county, a registered transient accommodations broker tax collection agent shall disclose any of the information contained in the returns or cover sheets required by this subsection to the director or any county official designated by the mayor to receive such information. Notwithstanding any law to the contrary, including section 237D-13, the director and county official designated to receive information pursuant to this subsection may examine and copy the returns and cover sheets to ensure compliance with this section, state and local tax laws and ordinances, and any applicable land use laws and ordinances.

(h) The registration provided for under this section shall be effective until canceled in writing.

The director may cancel or suspend a transient accommodations broker tax collection agent's registration under this section for any cause, including but not limited to any violation of this chapter, chapter 237, or rules adopted pursuant thereto, or for violation of any applicable tax collection agreement, by delivering written notice of cancellation to the transient accommodations broker tax collection agent not later than ninety days prior to the effective date of cancellation.

(4) Shall require the operator or plan manager to provide a statement confirming compliance with all applicable land use laws.

(j) Each county shall establish a process for verifying operators and plan managers' compliance with county land use ordinances and rules to be approved by the director. After approval, the director shall transfer to the county per cent of transient accommodations tax revenue collected each fiscal year from transient accommodations subject to this section in the applicable county to offset the cost to the county of establishing and maintaining the verification process.

SECTION 4. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§346 Transient accommodations homeless initiative special fund. There is established in the state treasury the transient accommodations homeless initiative special fund, into which shall be deposited a percentage of revenues collected pursuant to section 237D- , as specified in section 237D‑65(b)(7). Moneys in the transient accommodations homeless initiative special fund shall be used by the department for the development and implementation of homeless initiatives."

SECTION 5. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Except for the revenues collected pursuant to section 237D-2(e), revenues collected under this chapter shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) $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) $26,500,000 shall be allocated to the convention center enterprise special fund established under section 201B-8;

(3) $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) $103,000,000 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) $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[.];

(6) Beginning on January 1, 2019, per cent of revenues collected pursuant to section 237D- , each fiscal year shall be distributed to each county that establishes a process, approved by the director, to verify operators' and plan managers' compliance with county land use ordinances and rules pursuant to section 237D- (j); and

(7) Beginning on January 1, 2019, per cent of the revenues collected pursuant to section 237D- , shall be allocated to the transient accommodations homeless initiative special fund established under section 346‑ .

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 6. By January 1, 2019, the director of taxation shall make available to transient accommodations brokers a form of application for registration as a transient accommodations broker tax collection agent under the new section of chapter 237, Hawaii Revised Statutes, added by section 3 of this Act, and under the new section of chapter 237D, Hawaii Revised Statutes, added by section 4 of this Act.

SECTION 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2018, and shall apply to taxable years beginning after December 31, 2018.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2597
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII