Bill Text: HI SB678 | 2024 | Regular Session | Introduced
Bill Title: Relating To The Conveyance Tax.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Introduced) 2023-12-11 - Carried over to 2024 Regular Session. [SB678 Detail]
Download: Hawaii-2024-SB678-Introduced.html
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THE SENATE |
S.B. NO. |
678 |
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THIRTY-SECOND LEGISLATURE, 2023 |
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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 further finds that the conveyance tax, which is a one-time tax at
the time of sale, 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. Hawaii's
current conveyance tax is also much lower than the rates of other high-cost
areas in the country.
The
legislature notes that most homes in the State that are sold for over $2,000,000
are purchased as investment properties. Accordingly,
it is appropriate for out-of-state investors of real estate to assist in
mitigating the impacts for Hawaii residents who are not benefiting from the
current market dynamics. Modest
increases in the conveyance tax for homes under $2,000,000 would have a minimal
impact on any local buyer since the conveyance tax is generally less than five
per cent of the seller's overall closing costs. A small 0.2 per cent increase of the
conveyance tax on a $1,000,000 property in the State is also unlikely to have
any impact on the sale price since the market price of homes is primarily
driven by buyer demand, not the closing costs of the transaction.
The
legislature additionally finds that, due to the critical need for affordable
housing, land conservation, and homeless services, the caps on allocations to
the rental housing revolving fund and land conservation fund should be removed
and ten per cent of funds should be dedicated to homeless services and
supportive housing. The legislature additionally
finds that previous legislation was introduced to dedicate fifty per cent of
the funds from the conveyance tax to the rental housing revolving fund, which
is the primary funding source for new low-income rental housing. Although Act 84, Session Laws of Hawaii 2015, increased
the percentage annually allocated from the conveyance tax into the rental
housing revolving fund from twenty-five to fifty per cent, it also added a
maximum cap of $38,000,000 per year, which has severely limited deposits into
the fund. For example, in 2022, the
earnings from the conveyance tax totaled $188,000,000, of which fifty per cent
would be $98,000,000. However, due to
the cap, only $38,000,000 was allocated to affordable housing.
Similarly,
prior to the passage of Act 84, Session Laws of Hawaii 2015, there was no
maximum cap to the ten per cent of revenues from the conveyance tax allocated
to the legacy land use conservation fund, which provides grants to community
organizations and government agencies to purchase and protect land with
exceptional and endangered resources. Accordingly,
in 2022, ten per cent would have been $18,800,000; however, due to the current
cap, only $5,100,000 was allocated to land conservation.
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 2022 point in time count
estimates that there are currently 5,973 individuals living unsheltered in the
State, not including the greater number of "hidden homeless" people
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) Increase the conveyance tax rates;
(3) Exempt the conveyance tax on property with a restriction on increasing the rental price or resale price above any increase in the consumer price index for at least thirty years;
(4) Remove the maximum disposition caps of the conveyance tax allocated to the rental housing revolving fund and legacy land use conservation fund; and
(5) Allocate ten per cent of the conveyance tax for homeless services and supportive housing.
SECTION 2. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§346- 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 as provided by section 247-7; and
(2) Appropriations
made by the legislature to the fund.
(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
department. 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
department.
(d) The department shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session. The report shall include at a minimum detailing all funds received and all moneys disbursed out of the homeless services fund."
SECTION 3. 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]
Fifty 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] (B) $2 per $100 for properties with a
value of at least $2,000,000, but less than $4,000,000;
[(E) Seventy cents] (C) $4 per $100 for properties with a
value of at least $4,000,000, but less than $6,000,000;
[(F) Ninety cents] (D) $5 per $100 for properties with a
value of at least $6,000,000, but less than $10,000,000; and
[(G) One dollar] (E) $6 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]
Fifty-five 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] (B) $2 per $100 for properties with a
value of at least $2,000,000, but less than $4,000,000;
[(E) Eighty-five cents] (C) $4 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] (D) $5 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] (E) $6 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 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 4. 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] the
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[.]; and
(18) Any document or instrument conveying real property that has a land use regulatory agreement or restrictive covenant that restricts the rental price or resale price from increasing above any increase in the consumer price index for a minimum of thirty years beyond the conveyance date."
SECTION 5. 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,] shall be paid into the rental housing revolving fund established
by section 201H-202[.]; and
(3) Ten per cent shall be paid into the homeless services fund established pursuant to section 346- ."
SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect on July 1, 2023; provided that sections 3, 4, and 5 of this Act shall apply to taxable years beginning after December 31, 2023.
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INTRODUCED BY: |
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Report Title:
Conveyance Tax; Exemptions; Rental Housing Revolving Fund; Land Conservation Fund; Homeless Services Fund
Description:
Increases the conveyance tax rates. Exempt the conveyance tax on property with a restriction on increasing the rental price or resale price above any increase in the consumer price index for at least thirty years. Removes the maximum disposition caps of the conveyance tax allocated to the Rental Housing Revolving Fund and Legacy Land Use Conservation Fund. Allocates ten per cent of the conveyance tax for homeless services and supportive housing. Creates the Homeless Services Fund.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
