STAND. COM. REP. NO. 420

Honolulu, Hawaii

RE: S.B. No. 382

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Energy, Economic Development, and Tourism, to which was referred S.B. No. 382 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to update the formula for the transient accommodations tax collected from time shares by increasing the fair market rental value base on which a time share is taxed from fifty percent to an unspecified percent of the gross daily maintenance fees paid by the owner of the time share and attributable to the time share unit.

Your Committee received testimony in support of this measure from one member of the Maui County Council. Your Committee received testimony in opposition to this measure from the American Resort Development Association Hawai‘i; Marriott Vacations Worldwide Corporation; Maui Hotel & Lodging Association; and Soleil Management Hawaii, LLC. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that the tax formula for levying taxes on time share units has not been adjusted since the State began taxing time shares in 1998. The formula should be updated to better reflect economic and industry changes that have occurred since 1998. This measure updates the base of the transient accommodations tax by amending the definition of "fair market rental value" from fifty percent to an unspecified percentage of the gross daily maintenance fees, with the intent of ultimately establishing a more accurate tax assessment rate.

Your Committee has amended this measure by:

(1) Changing the effective date to January 1, 2020; and

(2) Making a technical, nonsubstantive amendment for the purpose of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Energy, Economic Development, and Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 382, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 382, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Energy, Economic Development, and Tourism,

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GLENN WAKAI, Chair