STAND.
COM. REP. NO. 1147-24
Honolulu, Hawaii
, 2024
RE: S.B. No. 2044
S.D. 2
H.D. 1
Honorable Scott K. Saiki
Speaker, House of Representatives
Thirty-Second State Legislature
Regular Session of 2024
State of Hawaii
Sir:
Your Committee on Housing, to which was referred S.B. No. 2044, S.D. 2, entitled:
"A BILL FOR AN ACT RELATING TO THE CONTROLLING INTEREST TRANSFER TAX,"
begs leave to report as follows:
The purpose of this measure is to:
(1) Specify that the transfer or acquisition of a controlling interest in an entity that owns real property in the State is subject to the conveyance tax; and
(2) Require an unspecified amount of conveyance tax revenue to be deposited into the Dwelling Unit Revolving Fund.
Your Committee received testimony in support of this measure from the Department of Land and Natural Resources; Office of Planning and Sustainable Development; Hawaii Housing Finance and Development Corporation; Partners In Care; Land Use Research Foundation of Hawaii; Hawaii Appleseed Center for Law & Economic Justice; and one individual. Your Committee received testimony in opposition to this measure from the Hawai‘i Association of REALTORS; NAIOP Hawaii; Grassroot Institute of Hawaii; and one individual. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.
Your Committee finds that existing conveyance tax laws inadvertently enable parties, who are typically large investors and corporate entities, to avoid paying conveyance tax by transferring real property through entity-level transactions. Your Committee further finds that instead of conveying the real property directly, one party acquires the entity that owns the real property from another party, thereby avoiding the conveyance tax. This measure will close a loophole in existing conveyance tax laws to ensure that the State receives its fair share of tax revenue from certain entities.
Your Committee notes the concerns raised in testimony by the Department of Taxation regarding the difficulty of identifying and verifying when transfers of controlling interest occur, as records from entity transfers are not publicly available or reported to the Bureau of Conveyances. Your Committee respectfully requests your Committee on Consumer Protection & Commerce, should it deliberate on this measure, to work with pertinent state agencies to establish a reporting procedure that addresses the concerns of the Department of Taxation to ensure this measure is enforceable.
Your Committee has amended this measure by:
(1) Repealing the dollar cap amounts of conveyance tax collections paid into the Land Conservation Fund and Rental Housing Revolving Fund;
(2) Specifying that ten percent of conveyance tax collections are to be paid into the Dwelling Unit Revolving Fund for purposes of funding infrastructure programs in transit-oriented development areas;
(3) Changing the effective date to January 1, 3000, to encourage further discussion; and
(4) Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.
As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2044, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2044, S.D. 2, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.
Respectfully submitted on behalf of the members of the Committee on Housing,
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____________________________ LUKE A. EVSLIN, Chair |
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