HB 1437: General Excise Tax; Exemption; Nonprofit Schools

A BILL FOR AN ACT

RELATING TO GENERAL EXCISE TAX EXEMPTIONS.

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

     SECTION 1.  The purpose of this Act is to establish a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.

     SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-     Nonprofit schools; additional amounts not taxable.  (a)  In addition to the amounts exempt under section 237-24, this chapter shall not apply to the gross proceeds or gross income arising from a sale that benefits a nonprofit school, if the sale is made by either:

     (1)  A nonprofit school; or

     (2)  A nonprofit school-sponsored student activity group.

     (b)  As used in this section:

     "Nonprofit school" means an organization that is:

     (1)  Recognized by the Internal Revenue Service as a charitable organization that is organized and operated exclusively for educational purposes and is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and

     (2)  Registered with and in possession of a tax clearance certificate from the department of taxation and is exempt from the application of this chapter pursuant to section 237-23(a)(4).

     "Nonprofit school-sponsored student activity group" means a group connected to and under the control of a nonprofit school.  "Nonprofit school-sponsored student activity group" includes:

     (1)  Student government;

     (2)  Athletic, math, and debate teams;

     (3)  Band, orchestra, choir, drama, and other performing groups;

     (4)  Foreign language clubs;

     (5)  Honor societies;

     (6)  Pep squads; and

     (7)  Other student activity groups that come under the control of the nonprofit school.

     "Sale that benefits a nonprofit school" means a sale of a commodity or service from which all proceeds of the sale, less only the actual cost of the commodity or service to the nonprofit school or nonprofit school-sponsored student activity group, are donated to the nonprofit school and are used exclusively to further the nonprofit school's tax exempt purpose."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 3000.

Report Title:

General Excise Tax; Exemption; Nonprofit Schools

Description:

Establishes a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.  Effective 1/1/3000.  (HD2)

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

A BILL FOR AN ACT

RELATING TO GENERAL EXCISE TAX EXEMPTIONS.

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

     SECTION 1.  The purpose of this Act is to establish a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.

     SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-     Nonprofit schools; additional amounts not taxable.  (a) In addition to the amounts exempt under section 237-24, this chapter shall not apply to the gross proceeds or gross income arising from a sale that benefits a nonprofit school, if the sale is made by either:

     (1)  A nonprofit school; or

     (2)  A nonprofit school-sponsored student activity group.

     (b)  As used in this section:

     "Nonprofit school" means an organization that is:

     (1)  Recognized by the Internal Revenue Service as a charitable organization that is organized and operated exclusively for educational purposes and is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and

     (2)  Registered and in good standing with the department of taxation and is exempt from the application of this chapter pursuant to section 237-23(a)(4).

     "Sale that benefits a nonprofit school" means a sale of a commodity or service from which all proceeds of the sale, less only the actual cost of the commodity or service to the nonprofit school or nonprofit school-sponsored student activity group, are donated to the nonprofit school and are used exclusively to further the nonprofit school's tax exempt purpose.

     "Nonprofit school-sponsored student activity group" means a group connected to and under the control of a nonprofit school.  "Nonprofit school-sponsored student activity group" includes student government; athletic, math, and debate teams; band, orchestra, choir, drama, and other performing groups; foreign language clubs; honor societies; pep squads; and other student activity groups that come under the control of the nonprofit school."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 3000.

Report Title:

General Excise Tax Exemption; Nonprofit Schools

Description:

Establishes a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.  Effective 1/1/3000.  (HD1)

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

A BILL FOR AN ACT

relating to general excise tax exemptions.

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

     SECTION 1.  The purpose of this Act is to establish a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.

     SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-     Nonprofit schools; additional amounts not taxable.  (a) In addition to the amounts exempt under section 237-24, this chapter shall not apply to the gross proceeds or gross income arising from a sale that benefits a nonprofit school, if the sale is made by either:

     (1)  A nonprofit school; or

     (2)  A school-sponsored student activity group.

     (b)  As used in this section:

     "Nonprofit school" means an organization that is:

     (1)  Recognized by the Internal Revenue Service as a charitable organization that is organized and operated exclusively for educational purposes and is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and

     (2)  Registered and in good standing with the State and is exempt from the application of this chapter pursuant to section 237-23(a)(4).

     "Sale that benefits a nonprofit school" means a sale of a commodity or service from which all proceeds of the sale, less only the actual cost of the commodity or service to the nonprofit school or school-sponsored student activity group, are donated to the nonprofit school and are used exclusively to further the nonprofit school's tax exempt purpose.

     "School-sponsored student activity group" means a group connected to and under the control of a nonprofit school.  "School-sponsored student activity group" includes student government; athletic, math, and debate teams; band, orchestra, choir, drama, and other performing groups; foreign language clubs; honor societies; pep squads; and other student activity groups that come under the control of the nonprofit school."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 2026.

Report Title:

General Excise Tax Exemption; Nonprofit Schools

Description:

Establishes a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.  Effective 1/1/2026.

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

STAND. COM. REP. NO.  1027

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 1437

      H.D. 2

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 1437, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX EXEMPTIONS,"

begs leave to report as follows:

     The purpose of this measure is to establish a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.

     Your Committee received testimony in support of this measure from Maui Preparatory Academy; ʻIolani School; Hawaii Association of Independent Schools; Island School; Punahou School; Kauai Christian Academy; Waimea Country School; and three individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee has amended this measure by:

     (1)  Specifying that a nonprofit school be registered with and in possession of a tax clearance certificate from the Department of Taxation, rather than in good standing with the Department; and

     (2)  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 Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1437, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1437, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  755

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 1437

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Education, to which was referred H.B. No. 1437 entitled:

"A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX EXEMPTIONS,"

begs leave to report as follows:

     The purpose of this measure is to establish a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools.

     Your Committee received testimony in support of this measure from the Hawaii Association of Independent Schools; Le Jardin Academy; Kauai Christian Academy; Sacred Hearts Academy; Cavalry Chapel Christian School; Hongwanji Mission School; Montessori Community School; Hawaii Baptist Academy; Hanalani Schools; Holy Nativity School; Waimea Country School; ʻIolani School; and two individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that establishing a general excise tax exemption on the gross proceeds or gross income received from sales of commodities or services that benefit nonprofit schools will ensure that more resources remain within the educational community, ultimately benefiting students, teachers, and programs that enrich learning.  Your Committee further finds that alleviating financial burdens associated with fundraising efforts will support nonprofit schools continue their missions of preparing future generations for success.

     Your Committee has amended this measure by:

     (1)  Clarifying that the nonprofit school be registered with the Department of Taxation;

     (2)  Clarifying that the school-sponsored student activity group be a nonprofit school-sponsored activity group; and

     (3)  Changing the effective date to January 1, 3000.

     As affirmed by the record of votes of the members of your Committee on Education that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1437, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1437, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Education,