Bill Text: HI SB3005 | 2024 | Regular Session | Introduced
Bill Title: Relating To The Conveyance Tax.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2024-01-26 - Referred to HHS/HOU/WTL, WAM. [SB3005 Detail]
Download: Hawaii-2024-SB3005-Introduced.html
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THE SENATE |
S.B. NO. |
3005 |
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THIRTY-SECOND LEGISLATURE, 2024 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to the conveyance tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
The legislature also finds that the conveyance tax, a one-time tax at the time of real property sales, is an appropriate revenue source for affordable housing, land conservation, and homeless services. Although housing prices in the State have risen dramatically over the past thirteen years, the State's conveyance tax rates have not been updated since Act 59, Session Laws of Hawaii 2009. Presently, the State's conveyance tax is significantly lower than the rates of other high-cost areas in the country.
The legislature notes that almost all homes in the State that are sold for over $2,000,000 are purchased as investment properties, not as homes for full-time residents. Accordingly, it is appropriate for out-of-state investors of real estate to assist in mitigating the impacts for residents who are not benefiting from the current market dynamics. Renters, houseless residents, and the local workforce are struggling with the rising cost of housing, thus a tax on real estate at the time of sale to help mitigate those costs is appropriate and fair.
Cities across the country are increasing their conveyance tax rates to fund affordable housing. San Francisco increased the tax rate to 5.5 per cent on homes valued over $10 million in 2020, and two years ago, Los Angeles increased the real property transfer tax to 4.5 per cent on any residential or commercial property over $5 million in value and six per cent on property sales over $10 million in value. Smaller cities with high housing costs are also increasing the taxes on real estate sales to mitigate the impacts of housing costs. Crested Butte and Telluride in Colorado that attract wealthy buyers due to access to world class ski opportunities, have a tax of three per cent on home sales regardless of price. Aspen, Colorado, which has the most well-developed workforce housing program in the country where almost forty per cent of the housing total housing stock is reserved as permanently affordable housing for full-time residents, has largely funded their workforce housing program through a 1.5 per cent tax on property sales that has been in place since 1989.
Presently, it is common practice to tax property sales as a means to mitigate the impacts of high home costs and the loss of land due to housing development. Furthermore, a conveyance tax of 0.5 per cent on homes valued at less than $2,000,000, a rate of four per cent on homes valued between $2,000,000 and $10 million, and six per cent on homes valued at over $10 million conforms to tax rates that other cities are assessing to fund their various housing programs.
The legislature additionally finds that increases in tax rates of homes over $2,000,000 is unlikely to have any negative impact on local full-time residents as the vast majority of buyers who purchase these homes do so as an investment and not as their full-time residence. The monthly mortgage costs of a $2,000,000 home are approximately $13,000 a month, which is unaffordable for a majority of the State's residents working in the local economy. An individual or a couple would need to be earning over $300,000 a year to afford a $2,000,000 home and residents at this income bracket can most likely afford a four per cent tax on the purchase of the home.
The legislature recognizes that the increases in housing prices, residential rent, and the homeless population over the past several years has accelerated the urgent need to sustainably fund affordable housing and homeless services in Hawaii. The 2023 point in time count estimates that there are currently 6,223 individuals living unsheltered in the State, not including the greater number of "hidden homeless" individuals temporarily living with friends or relatives because they cannot afford to live on their own. Investing in affordable housing and homeless services, including supportive housing, is key to addressing homelessness and ensuring that everyone in the State has an affordable place to live.
Accordingly, the purpose of this Act is to:
(1) Establish the Homeless Services Fund;
(2) Amend the conveyance tax rates based on
property values;
(3) Repeal the conveyance tax rates set separately
for conveyances for which the purchasers are ineligible for a county
homeowner's exemption on property tax;
(4) Exempt from conveyance taxes, conveyances of
real property to organizations with certain affordability requirements and to
certain nonprofit organizations;
(5) Allow collected conveyance taxes to be
allocated to the affordable homeownership revolving fund and homeless services fund,
and amend the allocations to the land conservation fund and rental housing revolving
fund; and
(6) Allow counties to apply for matching funds from the affordable homeownership revolving fund for housing projects that are subject to a perpetual affordability requirement.
SECTION 2. Chapter 356D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§356D- Homeless services fund. (a) There is established within
the state treasury a homeless services fund, into which shall be deposited:
(1) Ten per cent of the conveyance tax
collected and allocated to the homeless services fund pursuant to section 247-7;
and
(2) Appropriations made by the
legislature.
(b) Moneys from any other private or public
source may be deposited in or credited to the fund; provided that mandates,
regulations, or conditions on these funds do not conflict with the use of the
fund under this section. Moneys received
as a deposit or private contribution shall be deposited, used, and accounted
for in accordance with the conditions established by the agency or person
making the contribution.
(c) The homeless services fund shall be
administered and managed by the authority.
Moneys in the homeless services fund shall be expended for homeless
services and supportive housing, including homeless facilities programs for the
homeless authorized by the authority.
(d) The authority shall submit a report to the
legislature no later than twenty days prior to the convening of each regular
session, providing an accounting of the fund. The report shall include, at minimum:
(1) A detailed account of all funds
received; and
(2) All moneys expended from the
homeless services fund."
SECTION 3. Section 201H-206, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:
"(d) The fund may include [sums]:
(1) Sums appropriated by the
legislature[, private];
(2) Private contributions[,
proceeds];
(3) Proceeds from repayment of loans[,
interest,];
(4) Interests and other returns[,];
(5) Conveyance taxes collected under
chapter 247 and allocated to the affordable homeownership revolving fund
pursuant to the percentage identified in section 247-7. Counties may be eligible to apply for
matching funds from the fund; provided that the counties shall have an approved
comprehensive affordable housing plan that:
(A) Consulted with at least one per cent
of their full-time resident population;
(B) Identifies available lands for
affordable housing;
(C) Identifies infrastructure needs and
availability; and
(D) Requires housing projects developed
using moneys from the fund to be subject to an affordability clause that keeps
the property affordable in perpetuity, also known as a "deed-restricted
property";
provided
further that costs for the development of or an update to an existing county
comprehensive affordable housing plan may, upon application, be paid out of
these funds; and [moneys]
(6) Moneys from other sources."
SECTION 4. Section 247-2, Hawaii Revised Statutes, is amended to read as follows:
"§247-2 Basis and rate of tax. The tax imposed by section 247-1 shall be based on the actual and full consideration (whether cash or otherwise, including any promise, act, forbearance, property interest, value, gain, advantage, benefit, or profit), paid or to be paid for all transfers or conveyance of realty or any interest therein, that shall include any liens or encumbrances thereon at the time of sale, lease, sublease, assignment, transfer, or conveyance, and shall be at the following rates:
[(1) Except as provided in paragraph (2):
(A) Ten cents
per $100 for properties with a value of less than $600,000;
(B) Twenty cents per $100 for properties
with a value of at least $600,000, but less than $1,000,000;
(C) Thirty cents per $100 for properties with a
value of at least $1,000,000, but less than $2,000,000;
(D) Fifty cents per $100 for properties with a
value of at least $2,000,000, but less than $4,000,000;
(E) Seventy cents per $100 for properties with
a value of at least $4,000,000, but less than $6,000,000;
(F) Ninety cents per $100 for properties with a
value of at least $6,000,000, but less than $10,000,000; and
(G) One dollar per $100 for properties with a
value of $10,000,000 or greater; and
(2) For the sale of a condominium or
single family residence for which the purchaser is ineligible for a county
homeowner's exemption on property tax:
(A) Fifteen cents per $100 for
properties with a value of less than $600,000;
(B) Twenty-five cents per $100 for
properties with a value of at least $600,000, but less than $1,000,000;
(C) Forty cents per $100 for properties with a
value of at least $1,000,000, but less than $2,000,000;
(D) Sixty cents per $100 for properties with a
value of at least $2,000,000, but less than $4,000,000;
(E) Eighty-five cents per $100 for properties
with a value of at least $4,000,000, but less than $6,000,000;
(F) One dollar and ten cents per $100 for
properties with a value of at least $6,000,000, but less than $10,000,000; and
(G) One dollar and twenty-five cents per $100
for properties with a value of $10,000,000 or greater,]
(1) Fifty cents per $100 for properties
with a value of less than $2,000,000;
(2) Four dollars per $100 for properties
with a value of at least $2,000,000, but less than $10,000,000; and
(3) Six dollars per $100 for properties
with a value of $10,000,000 or greater,
of [such]
the actual and full consideration; provided that in the case of a lease
or sublease, this chapter shall apply only to a lease or sublease whose full
unexpired term is for a period of five years or more[, and in those cases,
including (where appropriate) those cases where the]; provided further
that, if a lease has been extended or amended, the tax in this chapter
shall be based on the cash value of the lease rentals discounted to present day
value and capitalized at the rate of six per cent, plus the actual and full
consideration paid or to be paid for any and all improvements, if any, that
shall include on-site as well as off-site improvements, applicable to the
leased premises; and provided further that the tax imposed for each transaction
shall be not less than $1."
SECTION 5. Section 247-3, Hawaii Revised Statutes, is amended to read as follows:
"§247-3 Exemptions. The tax imposed by section 247-1 shall not apply to:
(1) Any document or instrument that is executed prior to January 1, 1967;
(2) Any document or instrument that is given to secure a debt or obligation;
(3) Any document or instrument that only confirms or corrects a deed, lease, sublease, assignment, transfer, or conveyance previously recorded or filed;
(4) Any document or instrument between husband and wife, reciprocal beneficiaries, or parent and child, in which only a nominal consideration is paid;
(5) Any document or instrument in which there is a consideration of $100 or less paid or to be paid;
(6) Any document or instrument conveying real property that is executed pursuant to an agreement of sale, and where applicable, any assignment of the agreement of sale, or assignments thereof; provided that the taxes under this chapter have been fully paid upon the agreement of sale, and where applicable, upon such assignment or assignments of agreements of sale;
(7) Any deed, lease, sublease, assignment of lease, agreement of sale, assignment of agreement of sale, instrument or writing in which the United States or any agency or instrumentality thereof or the State or any agency, instrumentality, or governmental or political subdivision thereof are the only parties thereto;
(8) Any document or instrument executed pursuant to a tax sale conducted by the United States or any agency or instrumentality thereof or the State or any agency, instrumentality, or governmental or political subdivision thereof for delinquent taxes or assessments;
(9) Any document or instrument conveying real property to the United States or any agency or instrumentality thereof or the State or any agency, instrumentality, or governmental or political subdivision thereof pursuant to the threat of the exercise or the exercise of the power of eminent domain;
(10) Any document or instrument that solely conveys or grants an easement or easements;
(11) Any document or instrument whereby owners partition their property, whether by mutual agreement or judicial action; provided that the value of each owner's interest in the property after partition is equal in value to that owner's interest before partition;
(12) Any document or instrument between marital partners or reciprocal beneficiaries who are parties to a divorce action or termination of reciprocal beneficiary relationship that is executed pursuant to an order of the court in the divorce action or termination of reciprocal beneficiary relationship;
(13) Any document or instrument conveying real property from a testamentary trust to a beneficiary under the trust;
(14) Any document or instrument conveying real property from a grantor to the grantor's revocable living trust, or from a grantor's revocable living trust to the grantor as beneficiary of the trust;
(15) Any document or instrument conveying real property, or any interest therein, from an entity that is a party to a merger or consolidation under chapter 414, 414D, 415A, 421, 421C, 425, 425E, or 428 to the surviving or new entity;
(16) Any document or instrument conveying
real property, or any interest therein, from a dissolving limited partnership
to its corporate general partner that owns, directly or indirectly, at least a
ninety per cent interest in the partnership, determined by applying section 318
(with respect to constructive ownership of stock) of the federal Internal
Revenue Code of 1986, as amended, to the constructive ownership of interests in
the partnership; [and]
[[](17)[]]Any document
or instrument that conforms to the transfer on death deed as authorized under
chapter 527[.];
(18) Any document or instrument conveying
real property to an organization that has a minimum of thirty years remaining
of a price-restricted affordability period, or places a deed restriction on the
property to maintain permanent affordability; and
(19) Any document or instrument conveying
real property to a nonprofit organization that:
(A) Is exempt from federal income tax by
the Internal Revenue Services; and
(B) Will hold the property in an
undeveloped state and for conservation purposes in perpetuity through a deed
restriction on the property."
SECTION 6. Section 247-7, Hawaii Revised Statutes, is amended to read as follows:
"§247-7 Disposition of taxes. All taxes collected under this chapter shall
be paid into the state treasury to the credit of the general fund of the State,
to be used and expended for the purposes for which the general fund was created
and exists by law; provided that of the taxes collected each fiscal year:
(1) Ten per cent [or $5,100,000, whichever is
less,] shall be paid into the land conservation fund established pursuant
to section 173A-5; [and]
(2) [Fifty per cent or $38,000,000, whichever
is less,] Twenty-five per cent shall be paid into the rental housing
revolving fund established by section 201H-202[.];
(3) Twenty-five per cent shall be paid into the
affordable homeownership revolving fund established pursuant to section 201H-206;
and
(4) Ten per cent shall be paid into the
homeless services fund established pursuant to section 356D- ."
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect upon its approval.
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INTRODUCED BY: |
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Report Title:
Hawaii Public Housing Authority; Conveyance Tax; Rates; Exemption; Allocation; Homeless Services Fund; Affordable Homeownership Revolving Fund; Land Conservation Fund; Rental Housing Revolving Fund; Affordable Housing; Development; Affordability Requirements
Description:
Establishes the Homeless Services Fund. Amends the conveyance tax rates based on property values. Repeals the conveyance tax rates set separately for conveyances for which the purchasers are ineligible for a county homeowner's exemption on property tax. Exempts from conveyance taxes, conveyances of real property to organizations with certain affordability requirements and to certain nonprofit organizations. Allows collected conveyance taxes to be allocated to the Affordable Homeownership Revolving Fund and Homeless Services Fund and amends the allocations to the Land Conservation Fund and Rental Housing Revolving Fund. Allows counties to apply for matching funds from the Affordable Homeownership Revolving Fund for housing projects that are subject to a perpetual affordability requirement.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
