Bill Text: HI SB2502 | 2016 | Regular Session | Introduced

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Bill Title: Taxation; construction projects; ERS

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Introduced - Dead) 2016-02-05 - Report adopted; Passed Second Reading and referred to WAM. [SB2502 Detail]

Download: Hawaii-2016-SB2502-Introduced.html

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THE SENATE	S.B. NO.	2502
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to taxation.

 

 

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

 

     SECTION 1.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-     Additional amounts not taxable for contractors.  In addition to the amounts not taxable under section 237-24, this chapter shall not apply to an amount received by a contractor that is not more than      per cent of the direct costs of construction and operation incurred by a contractor under a public-private partnership with the employees' retirement system to develop a construction project to implement clean energy technology, as that term is defined in section 269-121(b), or a construction project to improve the State's water supply, including projects defined as a water facility under section 167-2 or section 174-2, a wastewater treatment plant under section 340B-1, or a public water system under section 340E-1; provided that the income shall be excluded from gross income for each year of the anticipated useful life of the construction project."

     SECTION 2.  Section 88-119, Hawaii Revised Statutes, is amended to read as follows:

     "§88-119  Investments.  Investments may be made in:

     (1)  Real estate loans and mortgages.  Obligations (as defined in section 431:6-101) of any of the following classes:

         (A)  Obligations secured by mortgages of nonprofit corporations desiring to build multirental units (ten units or more) subject to control of the government for occupancy by families displaced as a result of government action;

         (B)  Obligations secured by mortgages insured by the Federal Housing Administration;

         (C)  Obligations for the repayment of home loans made under the Servicemen's Readjustment Act of 1944 or under Title II of the National Housing Act;

         (D)  Other obligations secured by first mortgages on unencumbered improved real estate owned in fee simple; provided that the amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the real estate and improvements mortgaged to secure it, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the real estate and improvements mortgaged to secure it; provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the real estate and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the real estate and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board.  Real estate shall not be deemed to be encumbered within the meaning of this subparagraph by reason of the existence of any of the restrictions, charges, or claims described in section 431:6-308;

         (E)  Other obligations secured by first mortgages of leasehold interests in improved real estate; provided that:

              (i)  Each leasehold interest at the time shall have a current term extending at least two years beyond the stated maturity of the obligation it secures; and

             (ii)  The amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the respective leasehold interest and improvements, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the leasehold interest and improvements mortgaged to secure it;

              provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the leasehold interest and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the leasehold interest and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board;

         (F)  Obligations for the repayment of home loans guaranteed by the department of Hawaiian home lands pursuant to section 214(b) of the Hawaiian Homes Commission Act, 1920; and

         (G)  Obligations secured by second mortgages on improved real estate for which the mortgagor procures a second mortgage on the improved real estate for the purpose of acquiring the leaseholder's fee simple interest in the improved real estate; provided that any prior mortgage shall not contain provisions that might jeopardize the security position of the retirement system or the borrower's ability to repay the mortgage loan.

          The board may retain or dispose of the real estate, including leasehold interests therein, as it may acquire by foreclosure of mortgages or in enforcement of security, or as may be conveyed to it in satisfaction of debts previously contracted in the same manner as other investments in interest in real property authorized by this section;

     (2)  Government obligations, etc.  Obligations of any of the following classes:

         (A)  Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that principal of and interest on the obligations are payable in currency of the United States; or sovereign debt instruments issued by agencies of, or guaranteed by foreign governments;

         (B)  Revenue bonds, whether or not permitted by any other provision hereof, of the State or any municipal or political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and

         (C)  Obligations issued or guaranteed by any federal home loan bank, including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;

     (3)  Corporate obligations.  Below investment grade or nonrated debt instruments, foreign or domestic, in accordance with investment guidelines adopted by the board;

     (4)  Preferred and common stocks.  Shares of preferred or common stock of any corporation created or existing under the laws of the United States or of any state or district thereof or of any country;

     (5)  Obligations eligible by law for purchase in the open market by federal reserve banks;

     (6)  Obligations issued or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, or the African Development Bank;

     (7)  Obligations secured by collateral consisting of any of the securities or stock listed above and worth at the time the investment is made at least fifteen per cent more than the amount of the respective obligations;

     (8)  Insurance company obligations.  Contracts and agreements supplemental thereto providing for participation in one or more accounts of a life insurance company authorized to do business in Hawaii, including its separate accounts, and whether the investments allocated thereto are comprised of stocks or other securities or of real or personal property or interests therein;

     (9)  Interests in real property.  Interests in improved or productive real property in which, in the informed opinion of the board, it is prudent to invest funds of the system.  For purposes of this paragraph, "real property" includes any property treated as real property either by local law or for federal income tax purposes.  Investments in improved or productive real property may be made directly or through pooled funds, including common or collective trust funds of banks and trust companies, group or unit trusts, limited partnerships, limited liability companies, investment trusts, title-holding corporations recognized under section 501(c) of the Internal Revenue Code of 1986, as amended, similar entities that would protect the system's interest, and other pooled funds invested on behalf of the system by investment managers retained by the system;

    (10)  Other securities and futures contracts.  Securities and futures contracts in which in the informed opinion of the board, it is prudent to invest funds of the system, including currency, interest rate, bond, and stock index futures contracts and options on the contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the system's securities portfolios; covered put and call options on securities; and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of any of the foregoing paragraphs (including paragraph (4)); [and]

    (11)  Private placements.  Investments in institutional blind pool limited partnerships, limited liability companies, or direct investments that make private debt and equity investments in privately held companies, including but not limited to investments in Hawaii high technology businesses or venture capital investments that, in the informed opinion of the board, are appropriate to invest funds of the system.  In evaluating venture capital investments, the board shall consider, among other things, the impact an investment may have on job creation in Hawaii and on the state economy.  The board shall report annually to the legislature on any Hawaii venture capital investments it has made; provided that if the board determines it is not prudent to invest in any Hawaii venture capital investments the board shall report the rationale for the decision.  The board, by January 1, 2008, shall develop criteria to determine the amount of funds that may be prudently invested in Hawaii private placement investments[.]; and

    (12)  Public-private partnerships to develop construction projects to implement clean energy technology, as that term is defined in section 269-121(b), or a construction project to improve the State's water supply, including projects defined as a water facility under section 167-2 or section 174-2, a wastewater treatment plant under section 340B-1, or a public water system under section 340E-1.

     SECTION 3.  Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There shall be excluded from gross income, adjusted gross income, and taxable income:

     (1)  Income not subject to taxation by the State under the Constitution and laws of the United States;

     (2)  Rights, benefits, and other income exempted from taxation by section 88-91, having to do with the state retirement system, and the rights, benefits, and other income, comparable to the rights, benefits, and other income exempted by section 88-91, under any other public retirement system;

     (3)  Any compensation received in the form of a pension for past services;

     (4)  Compensation paid to a patient affected with Hansen's disease employed by the State or the United States in any hospital, settlement, or place for the treatment of Hansen's disease;

     (5)  Except as otherwise expressly provided, payments made by the United States or this State, under an act of Congress or a law of this State, which by express provision or administrative regulation or interpretation are exempt from both the normal and surtaxes of the United States, even though not so exempted by the Internal Revenue Code itself;

     (6)  Any income expressly exempted or excluded from the measure of the tax imposed by this chapter by any other law of the State, it being the intent of this chapter not to repeal or supersede any express exemption or exclusion;

     (7)  Income received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii National Guard as compensation for performance of duty, equivalent to pay received for forty-eight drills (equivalent of twelve weekends) and fifteen days of annual duty, at an:

         (A)  E-1 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2004;

         (B)  E-2 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2005;

         (C)  E-3 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2006;

         (D)  E-4 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2007; and

         (E)  E-5 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2008;

     (8)  Income derived from the operation of ships or aircraft if the income is exempt under the Internal Revenue Code pursuant to the provisions of an income tax treaty or agreement entered into by and between the United States and a foreign country; provided that the tax laws of the local governments of that country reciprocally exempt from the application of all of their net income taxes, the income derived from the operation of ships or aircraft that are documented or registered under the laws of the United States;

     (9)  The value of legal services provided by a legal service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

    (10)  Amounts paid, directly or indirectly, by a legal service plan to a taxpayer as payment or reimbursement for the provision of legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

    (11)  Contributions by an employer to a legal service plan for compensation (through insurance or otherwise) to the employer's employees for the costs of legal services incurred by the employer's employees, their spouses, and their dependents;

    (12)  Amounts received in the form of a monthly surcharge by a utility acting on behalf of an affected utility under section 269-16.3; provided that amounts retained by the acting utility for collection or other costs shall not be included in this exemption;

    (13)  Amounts received in the form of a cable surcharge by an electric utility company acting on behalf of a certified cable company under section 269‑134; provided that any amounts retained by that electric utility company for collection or other costs shall not be included in this exemption; [and]

    (14)  One hundred per cent of the gain realized by a fee simple owner from the sale of a leased fee interest in units within a condominium project, cooperative project, or planned unit development to the association of owners under chapter 514A or 514B, or the residential cooperative corporation of the leasehold units.

          For purposes of this paragraph:

              "Fee simple owner" shall have the same meaning as provided under section 516-1; provided that it shall include legal and equitable owners;

              "Legal and equitable owner", and "leased fee interest" shall have the same meanings as provided under section 516-1; and

              "Condominium project" and "cooperative project" shall have the same meanings as provided under section 514C‑1[.]; and

    (15)  Income in an amount not more than     per cent of the direct costs of construction and operation incurred by a person under a public-private partnership with the employees' retirement system to develop a construction project to implement clean energy, as that term is defined in section 269-121(b), or a construction project to improve the State's water supply, including projects defined as a water facility under section 167-2 or section 174-2, a wastewater treatment plant under section 340B-1, or a public water system under section 340E-1; provided that the income shall be excluded from gross income, adjusted income, and taxable income for each year of the anticipated useful life of the construction project."

     SECTION 4.  Section 238-3, Hawaii Revised Statutes, is amended to read as follows:

     "§238-3  Application of tax, etc.  (a)  The tax imposed by this chapter shall not apply to any property, services, or contracting or to any use of the property, services, or contracting that cannot legally be so taxed under the Constitution or laws of the United States, but only so long as, and only to the extent to which the State is without power to impose the tax.

     To the extent that any exemption, exclusion, or apportionment is necessary to comply with the preceding sentence, the director of taxation shall:

     (1)  Exempt or exclude from the tax under this chapter, property, services, or contracting or the use of property, services, or contracting exempted under chapter 237; or

     (2)  Apportion the gross value of services or contracting sold to customers within the State by persons engaged in business both within and without the State to determine the value of that portion of the services or contracting that is subject to taxation under chapter 237 for the purposes of section 237-21.

     (b)  The tax imposed by this chapter shall not apply to any use of property, services, or contracting the transfer of which property, services, or contracting to, or the acquisition of which by, the person so using the same, has actually been or actually is taxed under chapter 237.

     (c)  The tax imposed by this chapter shall be paid only once upon or in respect of the same property, services, or contracting; provided that nothing in this chapter contained shall be construed to exempt any property, services, or contracting, or the use thereof from taxation under any other law of the State.

     (d)  The tax imposed by this chapter shall be in addition to any other taxes imposed by any other laws of the State, except as otherwise specifically provided herein; provided that if it be finally held by any court of competent jurisdiction, that the tax imposed by this chapter may not legally be imposed in addition to any other tax or taxes imposed by any other law or laws with respect to the same property, services, or contracting, or the use thereof, then this chapter shall be deemed not to apply to the property, services, or contracting, or the use thereof under such specific circumstances, but such other laws shall be given full effect with respect to the property, services, or contracting, or use.

     (e)  The tax imposed by this chapter shall not apply to any use of property exempted by section 238-4.

     (f)  The tax imposed by this chapter shall not apply to any use or consumption of aircraft and vessels, the transfer of which aircraft or vessel to, or the acquisition of which by, the person so using or consuming the same, or the rental for the use of the aircraft or vessel, has actually been or actually is taxed under chapter 237.

     (g)  The tax imposed by this chapter shall not apply to any intoxicating liquor as defined in chapter 244D and cigarettes and tobacco products as defined in chapter 245, imported into the State and sold to any person or common carrier in interstate commerce, whether ocean-going or air, for consumption out-of-state by the person, crew, or passengers on the shipper's vessels or airplanes.

     (h)  The tax imposed by this chapter shall not apply to any use of vessels constructed under section 189-25 prior to July 1, 1969.

     (i)  Each taxpayer liable for the tax imposed by this chapter on tangible personal property, services, or contracting shall be entitled to full credit for the combined amount or amounts of legally imposed sales or use taxes paid by the taxpayer with respect to the same transaction and property, services, or contracting to another state and any subdivision thereof, but such credit shall not exceed the amount of the use tax imposed under this chapter on account of the transaction and property, services, or contracting.  The director of taxation may require the taxpayer to produce the necessary receipts or vouchers indicating the payment of the sales or use tax to another state or subdivision as a condition for the allowance of the credit.

     (j)  The tax imposed by this chapter shall not apply to any use of property, services, or contracting exempted by section 237-26 or section 237-29.

     (k)  The tax imposed by this chapter shall not apply to any use of air pollution control facility exempted by section 237-27.5.

     (l)  The tax imposed by this chapter shall not apply to income in an amount not more than     per cent of the direct costs of construction and operation incurred by a person described in section 238-2(2)(C) or 238-2.3(2)(C) under a public-private partnership with the employees' retirement system to develop a construction project that is intended to implement clean energy, as that term is defined in section 269-121(b), or a construction project to improve the State's water supply, including projects defined as a water facility under section 167-2 or section 174-2, a wastewater treatment plant under section 340B-1, or a public water system under section 340E-1; provided that the income shall be excluded from gross income for each year of the anticipated useful life of the construction project."

     SECTION 5.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2015; provided that the amendment to section 235-7(a), Hawaii Revised Statutes, made under section 3 of this Act, shall not be repealed when section 235-7(a), Hawaii Revised Statutes, is repealed and reenacted on January 1, 2018, pursuant to section 5 of Act 220, Session Laws of Hawaii 2012.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Taxation; construction projects; ERS

 

Description:

Exempts personal income tax income, general excise tax income, and use tax income in an amount up to an unspecified percentage of the costs of construction and operation of projects entered into under a public-private partnership with the ERS to improve water infrastructure or water supply, or to promote clean energy.  Authorizes ERS investments in such public-private partnerships.

 

 

 

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