THE SENATE	S.B. NO.	1033
THIRTY-THIRD LEGISLATURE, 2025		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAXATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to title 14 to be appropriately designated and to read as follows:

"Chapter

excise tax on certain taxpayers failing to sell excess

single-family residences

§ -1 Definitions. As used in this chapter:

"Applicable date" means:

(1) The last day of the first full taxable year ending on or after the effective date of Act , Session Laws of Hawaii 2025; or

(2) In the case of any taxpayer that changes its status during a taxable year, the last day of the taxable year immediately preceding the taxable year in which the taxpayer changed its status.

"Applicable single-family residence" means any single‑family residence that was acquired on or before the applicable date.

"Applicable taxpayer" means a taxpayer, including a partnership, corporation, trust or other legal entity, that:

(1) Manages funds pooled from investors and is a fiduciary with respect to those investors;

(2) Is an asset manager in any of the following asset classes:

(A) Public equity or fixed-income securities;

(B) A hedge fund;

(C) A fund of hedge funds;

(D) Private equity (including venture capital);

(E) A fund of private equity funds;

(F) A real estate investment fund;

(G) A fund of real estate funds; or

(H) Any other asset class for which an applicable fiduciary-controlled entity engages external asset managers; and

(3) That has $50,000,000 or more in net value or assets under management on any day during the taxable year.

"Applicable taxpayer" shall not include:

(1) An organization that is described in section 501(c)(3) and exempt from tax under section 501(a) of the Internal Revenue Code; or

(2) An organization primarily engaged in the construction or rehabilitation of single-family residences.

"Disqualified sale" means any sale or transfer of a single‑family residence to:

(1) A corporation or other entity engaged in a trade or business; or

(2) An individual who owns any other single-family residence at the time of the sale or transfer.

"Newly acquired single-family residence" means any single‑family residence that was acquired by the taxpayer in any taxable year beginning after the effective date of Act , Session Laws of Hawaii 2025.

"Single-family residence" means a residential property consisting of one to four dwelling units; provided that the term shall not include:

(1) Any unoccupied single-family residence acquired through foreclosure;

(2) Any single-family residence that is:

(A) Not rented or leased, and

(B) Used as the principal residence of any person who has an ownership interest in the applicable taxpayer; or

(3) Any single-family residence constructed, acquired, or operated with federal appropriated funding sources.

"Trade or business" shall include any activity treated as a trade or business under section 469(c)(5) or (6) of the Internal Revenue Code (determined without regard to the phrase "To the extent provided in regulations" in section 469(c)(6)).

§ -2 Imposition of tax. (a) In the case of an applicable taxpayer, there is hereby imposed a tax on the acquisition of any newly acquired single-family residence equal to fifty per cent of the fair market value of the residence.

(b) In the case of an applicable taxpayer who fails to meet the requirements of subsection (c), there is hereby imposed a tax equal to the product of:

(1) $50,000; and

(2) The excess of the number of applicable single-family residences owned by the taxpayer as of the last day of the taxable year, over the maximum permissible units for the taxable year.

(c) An applicable taxpayer meets the requirement of this subsection for any taxable year if the number of applicable single-family residences owned by the taxpayer as of the last day of the taxable year is equal to or less than the maximum permissible units determined with respect to the taxpayer for the taxable year. For the purposes of this subsection, a single-family residence that is sold or transferred in a disqualified sale during the taxable year shall be treated as a single-family residence that is owned by the applicable taxpayer as of the last day of the taxable year.

§ -3 Maximum permissible units. The maximum permissible units with respect to any applicable taxpayer for any taxable year shall be determined as follows:

In the case of: The maximum permissible units

for an applicable taxpayer is:

The first full taxable Ninety per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The second full taxable Eighty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The third full taxable Seventy per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The fourth full taxable Sixty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The fifth full taxable Fifty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The sixth full taxable Forty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The seventh full taxable Thirty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The eighth full taxable Twenty per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

The ninth full taxable Ten per cent of the number of

year beginning after applicable single-family

the applicable date residences owned by the taxpayer

on the applicable date

Any taxable year Zero

beginning more than

nine years after

the applicable date

§ -4 Construction. (a) For purposes of this chapter, an applicable taxpayer shall be treated:

(1) As acquiring a single-family residence if the applicable taxpayer acquires a majority ownership interest in the single-family residence, regardless of the percentage of that ownership interest; and

(2) As owning a single-family residence if the applicable taxpayer owns a majority ownership interest in the single-family residence, regardless of the percentage of that ownership interest.

(b) For the purposes of this chapter, all persons or entities that are treated as a single employer under section 52(a) and (b) of the Internal Revenue Code shall be treated as a single person or entity.

§ -5 Reporting. (a) The director shall require any reporting as the director determines necessary or appropriate to carry out the purposes of this chapter, including reporting with respect to:

(1) The dates on which single-family residences owned by an applicable taxpayer were acquired by the taxpayer; and

(2) Whether any person acquiring a single-family residence from an applicable taxpayer owns any other single‑family residences at the time of the acquisition.

(b) Any person who fails to report information required under subsection (a) or who fails to include correct information in a report shall pay a penalty of $20,000; provided that no penalty shall be imposed with respect to any failure if it is shown that the failure is due to reasonable cause and not to wilful neglect. The penalty under this subsection shall be paid upon notice and demand by the director.

§ -6 Tax form. Not later than one hundred eighty days after the effective date of Act , Session Laws of Hawaii 2025, the department shall publish a form to be used for calculating the amount of tax owed under this chapter.

§ -7 Certification. (a) The reporting required under section -5(a)(2), shall include a certification from each individual to whom a single-family residence is sold or transferred from an applicable taxpayer.

(b) The certification required under this section shall be signed by the purchaser or transferee and state the following:

(1) The name and address of the purchaser or transferee;

(2) That the sale is not a disqualified sale; and

(3) That the purchaser or transferee will be subject to the penalty imposed under section -5(b) for any false certification.

§ -8 Disposition of tax revenues. All revenues from taxes collected under this chapter shall be deposited into the housing downpayment trust fund established under section 201H-   ."

SECTION 2. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new section to part III, subpart A, to be appropriately designated and to read as follows:

"§201H-   Housing downpayment trust fund. (a) There is established in the state treasury a fund to be known as the housing downpayment trust fund, which shall be administered by the corporation. The fund shall be held separate and apart from all other moneys, funds, and accounts in the state treasury.

(b) There shall be deposited into the fund the following:

(1) Excise tax revenues allocated to the housing downpayment trust fund pursuant to section -8;

(2) Gifts, bequests, appropriations, or other contributions of money received by the corporation for the purpose of providing downpayment assistance; and

(3) All interest earned or accrued on moneys in the fund.

(c) All moneys in the fund shall be expended by the corporation to establish new or supplement existing programs that provide downpayment assistance to families purchasing homes within the State. The corporation shall give priority to families seeking assistance to purchase any single-family residence that is sold or transferred by an applicable taxpayer, as defined in section -1.

(d) The corporation shall submit a report to the legislature, no later than twenty days prior to the convening of each regular session, providing an accounting of the receipts and expenditures of the fund."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2050 and shall apply to taxable years beginning after December 31, 2026.

Report Title:

Excise Tax; Failure to Sell Excess Single-Family Residences; Housing Downpayment Trust Fund; Reports

Description:

Establishes an excise tax on certain taxpayers who own excess single-family residences for failure to sell those residences. Establishes and allocates excise tax revenues to the Housing Downpayment Trust Fund. Requires annual reports to the Legislature. Applies to taxable years beginning after 12/31/2026. Effective 7/1/2050. (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.