Status of 2018 Legislative Tax Measures

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Below is our list of 2018 Legislative Tax Measures.

The first page of the list is the list of bills introduced by the Executive Branch.  These are organized by agency:

  • BED = Dept. of Business, Economic Development, and Tourism
  • BUF = Dept. of Budget and Finance
  • CCA = Dept. of Commerce and Consumer Affairs
  • PSD = Dept. of Public Safety
  • TAX = Dept. of Taxation
  • TRN = Dept. of Transportation

Subsequent pages in the list are organized by tax type, and within tax type by bill number.

Numbers in strikethrough text are measures that appear to be dead, either because they missed a deadline or because they were deferred by a committee hearing the measure.  However, no measure is permanently dead until the legislative session adjourns.

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SB 3077, CD-1

Net Income (HRS 235)

SUBJECT:  INCOME, Make Renewable Fuels Production Credit Permanent, Increase Cap, Apply to More Types of Biofuel

BILL NUMBER:  SB 3077, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  Increases the renewable fuel production tax credit cap to $3,500,000 and makes the tax credit permanent. A direct appropriation would be preferable as it would provide some accountability for the taxpayer funds being utilized to support this effort.  Meaning, we as taxpayers know what we’re getting and we know how much we’re paying for it.

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SB 2868, SD-3, HD-1

Transient Accommodations Tax (HRS 237D)

SUBJECT:  TRANSIENT ACCOMMODATIONS, Require Brokers, Travel Agencies, and Tour Operators to Register

BILL NUMBER:  SB 2868, SD-3, HD-1

INTRODUCED BY:  House Committee on Tourism

EXECUTIVE SUMMARY:  Attempts to require those transient accommodations brokers, travel agencies, and tour packagers to register with the Department of Taxation before they may enter into an arrangement to furnish transient accommodations at noncommissioned negotiated contract rates.  Those who are required to register also will need to pay tax on their share of receipts for those accommodations.  The biggest problem, however, is acquiring jurisdiction over those brokers who might not have a physical presence in Hawaii.  The Committee may consider adding “economic nexus” provisions to address this problem.

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SB 2821, CD-1

Estate & Generation Skipping Transfer ( HRS 236E), Net Income (HRS 235)

SUBJECT:  INCOME, ESTATE, Conformity to Internal Revenue Code

BILL NUMBER:  SB 2821, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  Conforms the Hawaii income tax and estate and generation-skipping transfer taxes to federal changes adopted through February 9, 2018.  Decouples from the federal Tax Cuts and Jobs Act in several key areas.

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SB 2801, CD-1

Miscellaneous

SUBJECT:  MISCELLANEOUS, Diversion of Penalties to Create a DLIR Special Fund

BILL NUMBER:  SB 2801, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  The bill as introduced mandates that the collections of civil fines and penalties be deposited into a new enforcement special fund.  This would reduce transparency and accountability by bypassing the normal appropriations process.

SYNOPSIS:  Adds a new section to HRS chapter 371 to establish the labor law enforcement special fund.  States that the purpose of the fund is to provide for sufficient operating costs to collect penalties assessed by the department, and that moneys in the fund may be used for:  (1) Personnel and operating expenses; (2) Staff development, training, fees, and expenses; and (3) Litigation expenses, including but not limited to transcript costs, and interpretation and translation services.  Provides that the unencumbered balance of the fund exceeding $500,000 at the end of every fiscal year shall go to the general fund.

Amends sections 388-10 and 396-10, HRS, to redirect the civil fines and penalties imposed under those sections to the new special fund.

EFFECTIVE DATE:  July 1, 2018.

STAFF COMMENTS:  This bill is part of the Administration package and is sponsored by the Department of Labor and Industrial Relations.  It is designated LBR-01 (18).

In 2002, the Legislature set requirements for establishing and continuing special and revolving funds.  Sections 37-52.3 and 37-52.4, HRS, now state that the criteria used to review special and revolving funds are the extent to which each fund:

  • Serves a need, as demonstrated by the purpose of the program to be supported by the fund; the scope of the program, including financial information on fees to be charged, sources of projected revenue, and costs; and an explanation of why the program cannot be implemented successfully under the general fund appropriation process;

 

  • Reflects a clear nexus between the benefits sought and charges made upon the program users or beneficiaries, or a clear link between the program and the sources of revenue—as opposed to serving primarily as a means to provide the program or users with an automatic means of support, removed from the normal budget and appropriation process;

 

  • Provides an appropriate means of financing for the program or activity, that is used only when essential to the successful operation of the program or activity; and

 

  • Demonstrates the capacity to be financially self-sustaining.

We are concerned that the diversion of civil fines and penalties from the general fund to the new special fund to support additional positions subverts the appropriation process.  DLIR explained, in the justification sheet submitted with SB 2801, that it now has a backlog of cases and more than $2.7 million in accounts receivable; however, it did collect $5.1 million in Occupational Safety and Health penalties over a two-year period.  Thus, DLIR reasons that if it can just scoop the penalties, its enforcement function will be self-sustaining.

News flash to DLIR, as well as the Department of the Attorney General:  Enforcing the labor laws is your job.  It always has been your job.  The backlog is a good argument for the Legislature to appropriate more money to support DLIR’s enforcement responsibilities.  It is not a good argument for using a special funding mechanism as opposed to the normal general fund appropriations process.

The bill relies upon earmarking civil fine moneys for its success.  As with any earmarking of revenues, the legislature will be preapproving each of the programs fed by the fund into which the monies are diverted, expenses from the funds largely avoid legislative scrutiny, and the effectiveness of the programs funded becomes harder to ascertain. It is also difficult to determine whether the fund (or the departments involved) has too little or too much revenue.

Next, we expect our departments and agencies to enforce the laws fairly and impartially.  How impartial can a DLIR enforcement employee be if:  (1) his (or her) job is funded by the special fund, (2) the fund is fed by fines and penalties, and therefore (3) if the fines and penalties don’t come in, the employee’s job may be in jeopardy?

The fact that this type of bill is being introduced, furthermore, raises questions about how DLIR has been managed.  Its enforcement cases have been allowed to back up, so has it really been giving sufficient priority and resources to enforcing the laws over which it now has responsibility?

Digested 5/17/2018

SB 2714, CD-1

Motor Vehicle (HRS 249)

SUBJECT:  MOTOR VEHICLE, Exempt Lifts and Ramps for Disabled from Vehicle Weight Tax

BILL NUMBER:  SB 2714, CD-1

INTRODUCED BY: Conference Committee

EXECUTIVE SUMMARY:  Excludes the weight of lifts and ramps, motors to operate them, and vehicle chassis reinforcements, from the determination of net weight for non-commercial vehicles for purposes of levying the state and county motor vehicle weight tax.

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SB 2699, CD-1

Transient Accommodations Tax (HRS 237D)

SUBJECT:  TRANSIENT ACCOMMODATIONS, Applies Tax to Resort Fees

BILL NUMBER:  SB 2699, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  Imposes the transient accommodations tax on additional hotel resort fees that are calculated separately from the advertised transient accommodation’s rate.  Because of additional language in the “gross rental” definition excluding fees unrelated to the transient accommodations, this appears to be a technical clarification.

Clarifies that the transient accommodations tax shall be calculated based on the gross rental price paid by a visitor.  Specifies that the transient accommodations tax is to be collected from operators or transient accommodations intermediaries that collect whole or partial payment for transient accommodations.  Trying to expand the tax base in such a manner may have the unintended effect of discouraging those who would like to bring tourists to Hawaii and take care of them here.

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SB 2514, CD-1

General Excise (HRS 237)

SUBJECT:  GENERAL EXCISE, Sellers Without Physical Presence; Economic Nexus

BILL NUMBER:  SB 2514, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  States that the seller with more than $100,000 in in-state sales or 200 transactions into the state shall be deemed to be doing business in the state for purposes of the GET law.  This provision is similar to South Dakota legislation now being challenged in the U.S. Supreme Court in South Dakota v. Wayfair, Inc., No. 17-494 (U.S., argued Apr. 17, 2018).

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SB 2298, CD-1

Net Income (HRS 235)

SUBJECT:  INCOME, Healthcare Preceptor Tax Credits

BILL NUMBER:  SB 2298, CD-1

INTRODUCED BY:  Conference Committee

EXECUTIVE SUMMARY:  This bill provides a credit for doctors who teach other doctors.  It is much simpler and much less expensive in administrative costs for the preceptor credit assurance committee, or the agency to which it is attached, to cut a check to any qualifying physician.

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