Legislative Update: Highlights After First Decking
In our legislative session, bills introduced in one house need to be finished by that house. In other words, the final committee needs to have reported the bill out so that it can cross over to the other house. This year there has been a proliferation of bills introduced. What follows is a selection of bills that are still alive.
Choo-Choo-Choo! Are We Really Reaching the End of the Track?In Honolulu, the 0.5% GET surcharge that is imposed in the City & County of Honolulu is set to expire in 2027, after having received a five-year extension in 2015. The City is back, citing massive cost overruns and asking once again for an extension of the surcharge to forever. The current version of the bill, as reported out by the Senate Ways and Means committee, says, “We’ll stop the 10% skim that the State now takes. That’ll help pay for your overruns. But you get no extension. Deal with it.” Previous versions of SB 1183 and its House counterpart HB 349 have put in play everything including the kitchen sink, such as a perpetual extension, requiring the City to take title to disputed “roads in limbo,” requiring the City to give up land on which State schools now sit, enacting a low-income tax credit, and hoisting the GET from 4% to 4.5%.
SB 1183 Status: SD2 Pending Third Reading
HB 349 Status: Dead
Income Tax Poverty Relief, “Robin Hood” Style, RevisitedCurrently, the Hawaii income tax has brackets that haven’t been adjusted since the 1960’s. Now a single person making the same as the federal poverty line for Hawaii is taxed in not the lowest or second lowest, but the fourth tax bracket. To deal with the poor people who are getting taxed anyway, we offer a low-income household renters credit and a food/excise tax credit.
Do you remember the top tax rates of 9%, 10%, and 11%, which expired at the end of last year? HB 209 and SB 648 would bring those back to pay for an extended low-income household renters credit, a renewed food/excise tax credit, and a new earned income tax credit based on a fraction of the federal EITC. HB 375 would lop off the lower brackets but leave the top rate at 8.25%. HB 670 would adopt the EITC only. HB 207 would expand the low-income household renters credit only.
HB 209 Status: HD1 Pending Third Reading
SB 648 Status: SD1 Pending Third Reading
HB 375 Status: HD1 Pending Third Reading
HB 670 Status: HD1 Pending Third Reading
HB 207 Status: HD2 Pending Third Reading
We Love Obamacare So Much, Let’s Clone ItWith Republicans in control of both houses of Congress and the White House, many believe that the end is near for what we now know as the Affordable Care Act or Obamacare. HB 552 and SB 403 will make sure that Obamacare lives on in Hawaii by requiring Hawaii health care policies to conform to Obamacare standards, and by requiring individuals to buy minimum essential coverage for themselves and their dependents. The latter requirement, the “individual mandate,” will be enforced through our individual income tax system. As always, the devil is in the details. Cloning an immensely complex national Act to apply at the state level is never an easy process.
HB 552 Status: HD1 Pending Third Reading
SB 403 Status: SD2 Pending Third Reading
Real Property Taxes Are Too Low, So Surcharge Them to Fund EducationHawaii has the lowest real property tax in the nation. Many see that as a good thing; the teachers’ union sees it as an opportunity. SB 686 would impose a hefty surcharge for education on any residential realty that doesn't have a home exemption and is valued at $2 million or more. Another surcharge affects transient accommodations; the surcharge would be $3 a day or $5 a day, but would be imposed whether the unit is occupied or not. Because our state constitution now gives all the real property tax to the counties, constitutional changes are needed. SB 683 would put the question on the ballot for voters in 2018. A prior version of the bill required state government to provide “sufficient sums” for DoE, thereby allowing a lawsuit against the state if the department and the legislature don't agree on what those sums are.
SB 686 Status: SD2 Pending Third Reading
SB 683 Status: SD2 Pending Third Reading
The Counties Are Here…What, Them Again?Prior to 2009, the TAT was levied at the rate of 7.25% on most transient accommodations. Once collected, the tax, after satisfying specified earmarks, was distributed 44.8% to the counties. A 2009 law jacked up the TAT to 9.25% on a “temporary basis.” A 2013 law made the higher 9.25% rate permanent, but also changed the county share from a percentage to a fixed $93 million amount. After the counties complained about their allocations, a 2014 law required a state-county functions working group to be convened to evaluate the division of duties and responsibilities between the State and counties relating to the provision of public services and to recommend an appropriate allocation of the transient accommodations tax revenues between the State and counties, and in the meantime hoisted the fixed dollar amount to $103 million. The working group’s report recommended a straight 55%-45% allocation, just about the same as it was in 2008, but the report fell on deaf ears. There were a few bills addressing the issue, but there is one survivor, SB 1290, which hoists the cap to $108 million for now…kicking the can down the road yet again.
SB 1290 Status: SD2 Pending Third Reading
Lights, Camera, Five More Years of Action! (But Be Culturally Sensitive)Act 88, SLH 2006, enacted the motion picture, digital media, and film production credit of 15% of qualified spending on Oahu and 20% on the other islands. The credit was increased in 2013 to 20% on Oahu and 25% on the other islands. It currently expires at the beginning of 2019. In the aftermath of a scathing Legislative Auditor’s report criticizing DOTAX’s handling of the credit, this year’s extender bills, HB 423 and SB 1086, extend the credit’s sunset to 2024 but enact a slew of verification and reporting requirements. The House bill gives production companies the option to take a credit based on local payroll. The Senate bill adds cultural sensitivity requirements and requires a production getting more than $8 million of credit to agree to provide an advanced screening of the finished product in the county of the island in which most of the production took place.
HB 423 Status: HD2 Pending Third Reading
SB 1086 Status: SD2 Pending Third Reading
Batteries: Solar Industry, Hold On to Your JuiceHawaii now offers a 35% state credit for the actual cost of a solar or wind energy system. The utilities are worried about interconnecting to such systems because their output is not 24/7 while demand is. Energy storage devices can smooth out the peaks and valleys of solar or wind power production. SB 665 would replace the current renewable energy technology credit with one that offers credit for energy storage property in addition to solar and wind property. The credit percentage would phase down over time and sunset at the end of 2035.
SB 665 Status: SD2 Pending Third Reading
Let’s Bring the Vapers Under the Tobacco Tax, and Increase Everyone’s FeesSB 404 brings electronic smoking devices within the reach of the tobacco tax. And, lest anyone think that the bill drafters forgot the folks dealing with real tobacco, the bill increases the annual license fee for a wholesaler or dealer from $2.50 to $250 (a raise of 9900%, which sounds like a record in terms of percentage increase) and increases the annual retail tobacco permit fee from $20 to $50. In the meantime, just as in prior years, there is a bill, SB 871, that caps the tobacco tax on large cigars at 50 cents.
SB 404 Status: SD2 Pending Third Reading
SB 871 Status: Crossed Over to House, Referred to CPC
Want to Collect Tax for Transient Vacation Rentals? Pay MeHB 1471 requires large transient accommodations brokers, and permits all other transient accommodations brokers, to register as tax collection agents to collect and remit general excise and transient accommodations taxes on behalf of operators and plan managers using their services. It also imposes a surcharge on brokers equal to __% of the gross proceeds derived from rental of transient accommodations, which would then go to the rental housing trust fund. That may sound good in theory, but most of the brokers are out of state. Many won’t have sufficient connections with Hawaii to establish Hawaii taxing jurisdiction. What then happens if the larger companies’ customers jump ship and sign up with other brokers? Then we are back at square one.
HB 1471 Status: HD3 Pending Third Reading
Lots more tax bills and tax-related bills are out there, so stay tuned for updates!