STAND. COM. REP. NO. 859

Honolulu, Hawaii

RE: S.B. No. 712

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 712, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to exclude foreign partnerships, foreign limited liability partnerships, foreign limited partnerships, and foreign limited liability companies from the definition of "resident person" under the Hawaii Real Property Tax Act.

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

Your Committee finds that the Hawaii Real Property Tax Act, also known as HARPTA, requires every buyer of real property to withhold and pay to the Department of Taxation seven and one-quarter per cent of the amount realized on the disposition of Hawaii real property. However, section 235-68, Hawaii Revised Statutes, provides an exemption from this requirement when the seller of the real property is a "resident person". Removing foreign partnerships, foreign limited liability companies, and foreign limited liability partnerships from the definition of "resident person" would make them ineligible for the exemption from the withholding of tax on the disposition of Hawaii real property.

Your Committee has amended this measure by changing the effective date to January 1, 2020.

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. 712, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 712, S.D. 2.

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

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DONOVAN M. DELA CRUZ, Chair