STAND. COM. REP. NO. 2226

Honolulu, Hawaii

RE: S.B. No. 2506

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2506 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to promote tax compliance by increasing from five percent to nine percent the percentage of income tax withheld on the amount realized by nonresidents from the disposition of Hawaii real property.

Your Committee received testimony in support of this measure from the Hawaii Association of Public Accountants and two individuals.

Your Committee received testimony in opposition to this measure from one individual.

Your Committee received comments on this measure from the Department of Taxation, Tax Foundation of Hawaii, and one individual.

Your Committee finds that it is difficult and costly to collect unpaid taxes from nonresident sellers of Hawaii real estate. Your Committee further finds that this measure will allow the State to recover taxes from nonresident sellers who fail to file Hawaii tax returns and pay applicable taxes generated by income from the property sold.

Your Committee has amended this measure by:

(1) Changing the withholding rate from nine percent to 7.25 percent; and

(2) Providing that the Act shall apply to real estate dispositions that occur on or after September 15, 2018.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2506, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2506, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair