Bill Text: HI SB1107 | 2012 | Regular Session | Amended
Bill Title: Related Entity; GET Exemption
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Engrossed - Dead) 2012-04-13 - (H) Received notice of all Senate conferees being discharged (Sen. Com. No. 747). [SB1107 Detail]
Download: Hawaii-2012-SB1107-Amended.html
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THE SENATE |
S.B. NO. |
1107 |
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TWENTY-SIXTH LEGISLATURE, 2011 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 1 |
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A BILL FOR AN ACT
RELATING TO THE GENERAL EXCISE TAX.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. The purpose of this part is to expand the general excise exemption for related entities.
SECTION 2. Section 237-24.7, Hawaii Revised Statutes, is amended to read as follows:
"§237-24.7 Additional amounts not taxable. In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:
(1) Amounts received by the operator of a hotel from the owner of the hotel or from a time share association, and amounts received by the suboperator of a hotel from the owner of the hotel, from a time share association, or from the operator of the hotel, in amounts equal to and which are disbursed by the operator or suboperator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:
"Employee" means employees directly engaged in the day-to-day operation of the hotel and employed by the operator or suboperator.
"Hotel" means an operation as defined in section 445-90 or a time share plan as defined in section 514E-1.
"Operator" means any person who, pursuant to a written contract with the owner of a hotel or time share association, operates or manages the hotel for the owner or time share association.
"Owner" means the fee owner or lessee under a recorded lease of a hotel.
"Suboperator" means any person who, pursuant to a written contract with the operator, operates or manages the hotel as a subcontractor of the operator.
"Time share association" means an "association" as that term is defined in section 514E-1;
(2) Amounts received by the operator of a county transportation system operated under an operating contract with a political subdivision, where the political subdivision is the owner of the county transportation system. As used in this paragraph:
"County transportation system" means a mass transit system of motorized buses providing regularly scheduled transportation within a county.
"Operating contract" or "contract" means a contract to operate and manage a political subdivision's county transportation system, which provides that:
(A) The political subdivision shall exercise substantial control over all aspects of the operator's operation;
(B) The political subdivision controls the development of transit policy, service planning, routes, and fares; and
(C) The operator develops in advance a draft budget in the same format as prescribed for agencies of the political subdivision. The budget must be subject to the same constraints and controls regarding the lawful expenditure of public funds as any public sector agency, and deviations from the budget must be subject to approval by the appropriate political subdivision officials involved in the budgetary process.
"Operator" means any person who, pursuant to an operating contract with a political subdivision, operates or manages a county transportation system.
"Owner" means a political subdivision that owns or is the lessee of all the properties and facilities of the county transportation system (including buses, real estate, parking garages, fuel pumps, maintenance equipment, office supplies, etc.), and that owns all revenues derived therefrom;
(3) Surcharge taxes on rental motor vehicles imposed by chapter 251 and passed on and collected by persons holding certificates of registration under that chapter;
(4) Amounts received by the operator of orchard properties from the owner of the orchard property in amounts equal to and which are disbursed by the operator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:
"Employee" means an employee directly engaged in the day-to-day operations of the orchard properties and employed by the operator.
"Operator" means a producer who, pursuant to a written contract with the owner of the orchard property, operates or manages the orchard property for the owner where the property contains an area sufficient to make the undertaking economically feasible.
"Orchard property" means any real property that is used to raise trees with a production life cycle of fifteen years or more producing fruits or nuts having a normal period of development from the initial planting to the first commercially saleable harvest of not less than three years.
"Owner" means a fee owner or lessee under a recorded lease of orchard property;
(5) Taxes on nursing facility income imposed by chapter 346E and passed on and collected by operators of nursing facilities;
(6) Amounts received under property and casualty insurance policies for damage or loss of inventory used in the conduct of a trade or business located within the State or a portion thereof that is declared a natural disaster area by the governor pursuant to section 209-2;
(7) Amounts received as compensation by community organizations, school booster clubs, and nonprofit organizations under a contract with the chief election officer for the provision and compensation of precinct officials and other election-related personnel, services, and activities, pursuant to section 11-5;
(8) Interest received by a person domiciled outside the State from a trust company (as defined in section 412:8-101) acting as payment agent or trustee on behalf of the issuer or payees of an interest bearing instrument or obligation, if the interest would not have been subject to tax under this chapter if paid directly to the person domiciled outside the State without the use of a paying agent or trustee; provided that if the interest would otherwise be taxable under this chapter if paid directly to the person domiciled outside the State, it shall not be exempt solely because of the use of a Hawaii trust company as a paying agent or trustee;
(9) Amounts received by a management company from related entities engaged in the business of selling interstate or foreign common carrier telecommunications services in amounts equal to and which are disbursed by the management company for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:
"Employee" means employees directly engaged in the day-to-day operation of related entities engaged in the business of selling interstate or foreign common carrier telecommunications services and employed by the management company.
"Management company" means any person who, pursuant to a written contract with a related entity engaged in the business of selling interstate or foreign common carrier telecommunications services, provides managerial or operational services to that entity.
"Related entities" means:
(A) An affiliated group of corporations within the meaning of section 1504 (with respect to affiliated group defined) of the federal Internal Revenue Code of 1986, as amended;
(B) A controlled group of corporations within the meaning of section 1563 (with respect to definitions and special rules) of the federal Internal Revenue Code of 1986, as amended;
(C) Those entities connected through ownership of at least eighty per cent of the total value and at least eighty per cent of the total voting power of each such entity (or combination thereof), including partnerships, associations, trusts, S corporations, nonprofit corporations, limited liability partnerships, or limited liability companies; and
(D) Any group or combination of the entities described in paragraph (C) constituting a unitary business for income tax purposes;
whether or
not the entity is located within or without the State or licensed under this
chapter; [and]
(10) Amounts received by a related entity, as defined under section 237-23.5, taking into account the attribution rules under Section 267, Internal Revenue Code, as amended, including salaries, wages and related taxes, vacation pay, sick pay, and pensions and insurance paid out to or on behalf of employees of the related management company and reimbursed by the related company for those operating expenses; and
[(10)] (11) Amounts
received as grants under section 206M-15."
PART II
SECTION 3. The purpose of this part is to clarify the department of taxation's subpoena authority for civil and criminal tax investigations.
SECTION 4. Section 231-7, Hawaii Revised Statutes, is amended to read as follows:
"§231-7 [Hearings] Inquiries, investigations, hearings,
and subpoenas. (a) The director of taxation, and any
representative of the director duly authorized by the director, may conduct any
civil inquiry, investigation, or hearing, relating to any assessment, or
the amount of any tax, or the collection of any delinquent tax, including any
inquiry [or], investigation, or hearing into the financial
resources of any delinquent taxpayer or the collectability of any delinquent
tax.
[(b)] The director or other person conducting inquiries,
investigations, or hearings may administer oaths and take testimony under
oath relating to the matter of inquiry [or], investigation, or
hearing, and subpoena witnesses and require the production of books,
papers, documents, [and records pertinent] or other objects
designated therein or any other record however maintained, including those
electronically stored, that are relevant or material to [such] the
inquiry[.], investigation, or hearing.
[(c)] If any person disobeys any process or, having appeared in
obedience thereto, refuses to answer pertinent questions put to the person by
the director or other person conducting the inquiry, investigation, or
hearing, or to produce any books, papers, documents, objects, or records
pursuant thereto, the director or other person conducting the inquiry,
investigation, or hearing may apply to the circuit court of the circuit
wherein the inquiry [or], investigation, or hearing is
being conducted, or to any judge of the court, setting forth the disobedience
to process or refusal to answer, and the court or judge shall cite the person
to appear before the court or judge to answer the questions or to produce the
books, papers, documents, objects, or records, and upon the person's
refusal so to do commit the person to jail until the person testifies but not
for a longer period than sixty days. Notwithstanding the serving of the
term of commitment by any person, the director may proceed in all respects as
if the witness had not previously been called upon to testify. Witnesses
(other than the taxpayer or the taxpayer's or its officers, directors, agents,
and employees) shall be allowed their fees and mileage as in cases in the
circuit courts, to be paid on vouchers of the department of taxation, from any
moneys available for expenses of the department.
(b) The director of taxation, and any representative of the director duly authorized by the director, when conducting a criminal investigation, subject to the privileges enjoyed by all witnesses in this State, may subpoena witnesses, examine them under oath, and require the production of any books, papers, documents, or other objects designated therein or any other record however maintained, including those electronically stored, that are relevant or material to the investigation. A subpoena issued under this subsection:
(1) Shall state that the subpoena is issued by the department and shall command each person to whom it is directed to attend and give testimony at the time and place specified therein, and may also command the person to whom it is directed to produce books, papers, documents, or other objects specifically designated therein;
(2) May be served at any place within the State by an investigator appointed pursuant to section 231-4.3 or any other law enforcement official with powers of a police officer;
(3) Shall require attendance of the witness only in the county wherein the witness is served with the subpoena or at any other place as is agreed upon by the witness and the department; provided that if the subpoena is served in a county other than that in which the witness resides or is employed or transacts the witness' business in person, the department shall bear the witness' expenses for travel to and attendance at the place named in the subpoena to the same extent as provided by the rules of court; and
(4) Shall contain a short, plain statement of the recipient's rights and the procedure for enforcing and contesting the subpoena.
Upon application by the director, a circuit court of the county wherein the witness resides or is found may compel obedience to the subpoena; provided that the court, on motion promptly made, may quash or modify the subpoena if compliance would be unreasonable or oppressive or violate any privilege the witness may be entitled to exercise in a court proceeding.
[(d)] (c) Any subpoena issued under this section that does
not identify the person with respect to whose liability, inquiry, or
investigation the subpoena is issued may be served on any person only after a
court proceeding in which the director or another person establishes that:
(1) The subpoena relates to the liability, inquiry, or investigation of a particular person or ascertainable group or class of persons;
(2) There is a reasonable basis for believing that the person or group or class of persons may fail or may have failed to comply with any provision of title 14; and
(3) The information sought to be obtained from the examination of records or testimony and the identity of the person or persons with respect to whose liability the subpoena is issued is not readily available from other sources.
(d) The department shall pay to a financial institution that is served a subpoena issued under this section a fee for reimbursement of costs as are necessary and that have been directly incurred in searching for, reproducing, or transporting books, papers, documents, or other objects designated by the subpoena. Reimbursement shall be paid at the rate of $15 per hour for research time and 50 cents per page for reproduction.
(e) Compliance with a subpoena issued pursuant to this section shall not give rise to a civil action for damages by an individual or entity as to whom testimony has been given or documents or other things provided in compliance with the subpoena.
[(e)] (f) The provisions of this section are in addition to
all other provisions of law, and apply to any tax within the jurisdiction of
the department."
PART III
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2112; provided that:
(1) The amendment made to section 237-24.7, Hawaii Revised Statutes, by section 2 of this Act shall not be repealed when that section is reenacted on December 31, 2014, by section 1 of Act 91, Session Laws of Hawaii 2010; and
(2) Part II shall apply to subpoenas issued on or after the effective date of this Act.
Report Title:
Related Entity; GET Exemption; Department of Taxation; Subpoena
Description:
Exempts from the general excise tax amounts received by a related entity. Clarifies subpoena authority of the Department of Taxation. Effective July 1, 2112. (SB1107 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
