SB 310: RELATING TO TAXATION.

THE SENATE	S.B. NO.	310
THIRTY-THIRD LEGISLATURE, 2025
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 legislature finds that Act 247, Session Laws of Hawaii 2005, authorized the counties to adopt a surcharge of up to one-half of one per cent on state tax to support public transportation projects.  The law has been subsequently amended, including by Act 1, Special Session Laws of Hawaii 2017, and Act 11, Session Laws of Hawaii 2018,and Act 48, Session Laws of Hawaii 2023, to extend the time period in which a county may adopt and impose the surcharge on state tax.  The law currently authorizes a county that has previously adopted a surcharge on state tax to extend the surcharge through December 31, 2030.  Counties that had not previously adopted a surcharge on state tax had until December 31, 2023, to adopt a surcharge that could be imposed through December 31, 2030.  The legislature concludes that it is appropriate to authorize the counties to permanently adopt and impose a public transportation surcharge, which shall be at a lower rate of one-fourth of one per cent after December 31, 2030.

     The legislature further finds that a county with a population greater than five hundred thousand is currently restricted to using the surcharge revenues for capital costs of mass transit projects while smaller counties may use their surcharge for other purposes, including operational costs of public transportation systems and housing infrastructure, and that the restrictions on the larger counties should be amended to allow for wider use of the funds.

     The purpose of this Act is to further amend the county surcharge on state general excise and use taxes by:

     (1)  Authorizing a county with a pre-existing surcharge on state general excise and use taxes to permanently extend its surcharge to be imposed after December 31, 2030 at a lower rate of one-fourth of one per cent;

     (2)  Authorizing counties that have not previously adopted an ordinance to establish a surcharge on state general excise and use taxes to establish a surcharge at the rate of one-half of one per cent until December 31, 2030, and thereafter at a rate of one-fourth of one per cent; and

     (3)  For counties with a population greater than five hundred thousand, authorizing use of surcharge revenues for more than capital costs of mass transit systems, as smaller counties are not restricted to using those revenues only for capital costs of public transportation.

     SECTION 2.  Section 23-14, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Beginning on September 5, 2017, and ending on December 31, 2031, the auditor, on an annual basis, shall conduct a review of any rapid transportation authority in the State charged with the responsibility of constructing, operating, or maintaining a locally preferred alternative for a mass transit project that receives moneys from a surcharge on state tax established pursuant to section 46-16.8, transient accommodations tax revenues pursuant to section 237D-2(e), or both.  The annual review shall include a review of documents, including but not limited to invoices, contracts, progress reports, and time schedules, to determine that:

     (1)  Expenditures by the authority comply with the criteria established pursuant to section [46-16.8(f);] 46-16.8(g); and

     (2)  The authority follows accounting best practices for substantiating its expenditures."

     SECTION 3.  Section 40-81.5, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (a) to read:

     "(a)  Beginning on September 5, 2017, [and ending on December 31, 2031,] the comptroller, upon the request for payment by the rapid transportation authority, shall verify that the authority's invoices for the [capital] costs of a locally preferred alternative for a mass transit project comply with section [46‑16.8(f).] 46‑16.8(g)."

     2.  By amending subsection (c) to read:

     "(c)  After submission of invoices by the rapid transportation authority for capital costs of a locally preferred alternative for a mass transit project are verified by the comptroller as an acceptable use of funds received pursuant to a surcharge on state tax authorized pursuant to section 46-16.8, the comptroller shall submit a certification statement, including any appropriate supporting documents, to the department of budget and finance for the allocation of funds, if available, pursuant to sections 248-2.7 and 248-2.6(d).  The certification statement shall include, at a minimum, the total amount contained in the invoices for [capital] costs that are verified as an appropriate use of funds pursuant to section 46‑16.8(f)."

     SECTION 4.  Section 46-16.8, Hawaii Revised Statutes and Act 48 (2023), is amended to read as follows:

     "§46-16.8  County surcharge on state tax.  (a)  Each county may establish a surcharge on state tax at the rates enumerated in sections 237-8.6 and 238-2.6.  A county electing to establish this surcharge shall do so by ordinance; provided that:

     (1)  No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

     (2)  The ordinance shall be adopted before December 31, 2005; and

     (3)  No county surcharge on state tax that may be authorized under this subsection shall be levied before January 1, 2007[, or after December 31, 2022, unless extended pursuant to subsection (b)].

Notice of the public hearing required under paragraph (1) shall be published in a newspaper of general circulation within the county at least twice within a period of thirty days immediately preceding the date of the hearing.

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance and, beginning no earlier than January 1, 2007, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

     (b)  Each county that has established a surcharge on state tax before July 1, 2015, under authority of subsection (a) may extend the surcharge [until December 31, 2030,] at the [same] rates[.] enumerated in sections 237-8.6 and 238-2.6.  A county electing to extend this surcharge shall do so by ordinance; provided that[:

     (1)  No] no ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance[; and 

     (2)  The ordinance shall be adopted prior to January 1, 2018].

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted an ordinance extending the surcharge on state tax.  The director of taxation shall levy, assess, collect, and otherwise administer the extended surcharge on state tax.

     (c)  Each county that has not established a surcharge pursuant to subsection (a) on state tax before July 1, 2015, may establish the surcharge at the rates enumerated in sections 237‑8.6 and 238‑2.6.  A county electing to establish this surcharge shall do so by ordinance; provided that:

     (1)  No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

     (2)  The ordinance shall be adopted before December 31, 2023; and

     (3)  No county surcharge on state tax that may be authorized under this subsection shall be levied before January 1, 2019[, or after December 31, 2030].

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance.  Beginning on January 1, 2019, January 1, 2020, January 1, 2024, or January 1, 2025, as applicable pursuant to sections 237-8.6 and 238-2.6, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

     (d)  Each county that has established a surcharge on state tax before March 31, 2019, under subsection (a) or (c) may amend the surcharge ordinance to change the authorized uses of surcharge revenues, pursuant to subsection [(g)] (h); provided that:

     (1)  No ordinance shall be amended pursuant to this section until the county has conducted a public hearing on the proposed amendment; and

     (2)  The ordinance shall be amended before December 31, 2023.

     (e)  Each county that has not established a surcharge on state tax before July 1, 2025, may establish the surcharge at the rates enumerated in sections 237-8.6 and 238-2.6.  A county electing to establish this surcharge shall do so by ordinance; provided that no ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance.

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance.  The director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

     [(e)] (f)  Notice of the public hearing required under [subsection] subsections (b) [, (c) or] through (e), before adoption or amendment of an ordinance establishing or extending the surcharge on state tax shall be published in a newspaper of general circulation within the county at least twice within a period of thirty days immediately preceding the date of the hearing.

     [(f)] (g)  Each county with a population greater than five hundred thousand that adopts or extends a county surcharge on state tax ordinance pursuant to subsection (a) or (b) shall use the surcharge revenues received from the State for [capital]

     (1)  Capital, operating, or maintenance costs of a locally preferred alternative for a mass transit project; and

     (2)  Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1);

provided that revenues derived from the county surcharge on state tax shall not be used[:

     (1)  To] to build or repair public roads or highways, bicycle paths, or support public transportation systems already in existence prior to July 12, 2005;

    [(2)  For operating costs or maintenance costs of the mass transit project or any purpose not consistent with this subsection; or

     (3)  For administrative or operating, marketing, or maintenance costs, including personnel costs, of a rapid transportation authority charged with the responsibility for constructing, operating, or maintaining the mass transit project;]

provided further that nothing in this section shall be construed to prohibit a county from using county funds that are not derived from a surcharge on state tax for [a purpose described in paragraph (2) or (3).] the purposes described in paragraphs (1) or (2).

     [(g)] (h)  Each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section shall use the surcharges received from the State for:

     (1)  [Operating or capital] Capital, operating, or maintenance costs of public transportation within each county for public transportation systems, including: (A)  Public roadways or highways;

          (B)  Public buses;

          (C)  Trains;

          (D)  Ferries;

          (E)  Pedestrian paths or sidewalks; or

          (F)  Bicycle paths;

     (2)  Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1); and

     (3)  Housing infrastructure costs; provided that a county that uses surcharge revenues for housing infrastructure shall not pass on those housing infrastructure costs to the developer of a housing project; provided further that this paragraph shall apply only if a county amended its surcharge ordinance pursuant to subsection (d) or adopts a county surcharge on state tax ordinance after December 31, 2022;

provided that each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section after December 31, 2022, shall use the surcharge revenues received from the State only for the purposes described in paragraph (3) for county-appropriated housing infrastructure costs.

     [(h)] (i)  As used in this section:

     "Capital costs" means nonrecurring costs required to construct a transit facility or system, including debt service, costs of land acquisition and development, acquiring of rights-of-way, planning, design, and construction, and including equipping and furnishing the facility or system.  For a county with a population greater than five hundred thousand, capital costs also include non-recurring personal services and other overhead costs that are not intended to continue after completion of construction of the minimum operable segment of the locally preferred alternative for a mass transit project.

     "Housing infrastructure costs" includes pedestrian paths or sidewalks on a county road near or around a public school, and water, drainage, sewer, water reuse, waste disposal, and waste treatment systems that connect to the infrastructure of the county and shall include financing costs, including any related debt service and financing agreement costs."

     SECTION 5.  Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

     "(a)  The county surcharge on state tax, upon the adoption of county ordinances and in accordance with the requirements of section 46-16.8, shall be levied, assessed, and collected as provided in this section on all gross proceeds and gross income taxable under this chapter.  No county shall set the surcharge on state tax to be levied, assessed, or collected at a rate greater than [one-half]:

     (1)  One-half of one per cent if before January 1, 2031; and

     (2)  One-fourth of one per cent if after December 31, 2030,

of all gross proceeds and gross income taxable under this chapter.  All provisions of this chapter shall apply to the county surcharge on state tax.  With respect to the surcharge, the director of taxation shall have all the rights and powers provided under this chapter.  In addition, the director of taxation shall have the exclusive rights and power to determine the county or counties in which a person is engaged in business and, in the case of a person engaged in business in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge on state tax attributable to business conducted in each county.

     (b)  Each county surcharge on state tax that may be adopted, extended, or amended pursuant to section 46-16.8 shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied[:

     (1)  Before:

          (A)] before:

     (1)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

    [(B)] (2)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

    [(C)] (3)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

    [(D)] (4)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

    [(E)] (5)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

     (2)  After December 31, 2030]."

     SECTION 6.  Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

     "(a)  The county surcharge on state tax, upon the adoption of a county ordinance and in accordance with the requirements of section 46-16.8, shall be levied, assessed, and collected as provided in this section on the value of property and services taxable under this chapter.  No county shall set the surcharge

on state tax to be levied, assessed, or collected at a rate greater than [one-half]:

     (1)  One-half of one per cent if prior to January 1, 2031; and

     (2)  One-fourth of one per cent if after December 31, 2030,

of the value of property taxable under this chapter.  All provisions of this chapter shall apply to the county surcharge on state tax.  With respect to the surcharge, the director shall have all the rights and powers provided under this chapter.  In addition, the director of taxation shall have the exclusive rights and power to determine the county or counties in which a person imports or purchases property and, in the case of a person importing or purchasing property in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge on state tax attributable to the importation or purchase in each county.

     (b)  Each county surcharge on state tax that may be adopted, extended, or amended shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied[:

     (1)  Before:

          (A)] before:

     (1)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

    [(B)] (2)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018; or

    [(C)] (3)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

    [(D)] (4)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

    [(E)] (5)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023[;]

     (2)  After December 31, 2030]."

     SECTION 7.  Section 248-2.7, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

     "(b)  [For the period beginning] Beginning on January 1, 2018, [to December 31, 2030,] transient accommodations tax and surcharge on state tax revenues allocated to the mass transit special fund pursuant to sections 237D-2(e) and 248-2.6 shall be deposited into the special fund.  All interest earned on the moneys in the special fund shall be credited to the general fund.  The mass transit special fund shall be exempt from the central service expenses deduction under section 36-27 and departmental administrative expenses deduction under section 36‑30.

     (c)  Upon receiving a certification statement from the comptroller pursuant to section 40-81.5, the director of finance shall allocate and disburse moneys in the mass transit special fund to the director of finance of a county with a population greater than five hundred thousand; provided that the director of finance shall only disburse those amounts that are certified in the certification statement for that county for the purposes specified in section 46-16.8; [provided further that revenues allocated from the special fund shall not be used for:

     (1)  Operating or maintenance costs of the mass transit project or any purpose not consistent with section 46-16.8(f); or

     (2)  Administrative, operating, marketing, or maintenance costs, including personnel costs, of a rapid transportation authority charged with the responsibility for constructing, operating, or maintaining the mass transit project;]

provided further that the total amount of funds that are available, allocated, and disbursed by the director of finance pursuant to this section shall not be in excess of the total amount indicated on the certification statement.  The director of finance may allocate and disburse moneys pursuant to this section on a monthly basis.

     Any amounts allocated and disbursed pursuant to this section shall be subject to the availability of funds deposited and on balance in the special fund.  The director of finance shall not allocate or disburse any amounts from the special fund that are in excess of any amounts deposited and on balance in the special fund."

     SECTION 8.  Act 247, Session Laws of Hawaii 2005, as amended by Act 240, Session Laws of Hawaii 2015, as amended by Act 1, Special Session of 2017, is amended by amending section 9 to read as follows:

     "SECTION 9.  This Act shall take effect upon its approval[; provided that:

     (1)  If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D‑8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

     (2)  If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act; and

     (3)  If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

          (A)  The ordinance shall be repealed on December 31, 2022; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to an act of the legislature; and

          (B)  This Act shall be repealed on December 31, 2030, and section 437D‑8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed]."

     SECTION 10.  This Act shall not affect the validity or effect of any surcharge on state tax adopted pursuant to Act 247, Session Laws of Hawaii 2005; Act 240, Session Laws of Hawaii 2015; Act 137, Session Laws of Hawaii 2017; Act 1, Special Session Laws of Hawaii 2017; and Act 11, Session Laws of Hawaii 2018, and Act 48, Session Laws of Hawaii 2023, prior to the effective date of this Act.

     SECTION 11.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 12.  This Act shall take effect on July 1, 2025.

 

INTRODUCED BY:	_____________________________

 

 

 

Report Title:

General Excise Tax; County Surcharge; Tax Assessment; Use

 

Description:

Authorizes a county with a pre-existing surcharge to continue the surcharge after December 31, 2030, at a lower rate of one-fourth per cent.  Authorizes counties that have not adopted a surcharge ordinance on state tax to adopt a surcharge ordinance at the current rate of one-half of one per cent through December 31, 2030, and at a rate of one-fourth of one per cent after December 31, 2030.  Expands the authorized use of surcharge revenues to more than capital costs of a locally preferred alternative for a mass transit project for counties with a population greater than five hundred thousand.

 

 

 

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