REPORT TITLE:
Construction Industry

DESCRIPTION:
Exempts gross proceeds received from state contractors and
subcontractors from GE tax; clarifies definition of "contractor"
in chapter 444, HRS; defines "state resident"; encourages use of
and establishes criteria for project labor agreements.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 1
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO FEDERAL CONSTRUCTION.



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

 1                              PART I
 
 2      SECTION 1.  (a)  Beginning with section 8078 of the United
 
 3 States Defense Appropriations Act of 1986, all subsequent Defense
 
 4 Appropriations Acts require the contractor on a military
 
 5 construction or services project to employ Hawaii residents when
 
 6 Hawaii's unemployment rate exceeds the national average.  The
 
 7 unemployment rate in Hawaii has been above the national average
 
 8 since 1994, but the federal law has not been strictly enforced.
 
 9 Many defense construction and service contracts have been awarded
 
10 to out-of-state contractors that hire individuals that move to
 
11 Hawaii just to work on these particular federal contracts.  This
 
12 apparently is within the scope of the law, though clearly not the
 
13 intent of section 8078.  One reason given for the failure to
 
14 strictly enforce the requirement to employ Hawaii residents is
 
15 that the term "state resident" is not defined in section 8078, in
 
16 its related provisions, or in the Federal Acquisition
 
17 Regulations.
 
18      The purpose of this section is to establish a definition of
 
19 "state resident" that will provide a clear, objective, measurable
 

 
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 1 standard that can be easily followed, copied, and enforced by
 
 2 federal contracting officers in enforcing the preference
 
 3 provisions in federal law.  A clear definition of "state
 
 4 resident" will help keep profits and wages from military
 
 5 construction projects in the State.
 
 6      (b)  For purposes of the employment preference provided in
 
 7 federal law in favor of state residents, "state resident" means
 
 8 an individual who:
 
 9      (1)  Resides in the State at least two hundred days of the
 
10           year;
 
11      (2)  Has filed a Hawaii resident income tax return in the
 
12           taxable year immediately preceding a bid for a federal
 
13           contract by the individual's employer or business that
 
14           is a state contract; provided that an individual who
 
15           was a state resident, left the State to attend school
 
16           or serve in the armed forces of the United States of
 
17           America, and returned to the State to work for a state
 
18           contractor is a state resident, even though the
 
19           individual has not yet resided in the State for at
 
20           least two hundred days or filed a Hawaii resident
 
21           income tax return; and
 
22      (3)  In the case of a business entity, holds a current
 
23           Hawaii business or contracting license, submits a bid
 

 
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 1           for goods, services, or construction under the name
 
 2           appearing on the person's current Hawaii business or
 
 3           contracting license, maintained a place of business
 
 4           within the State staffed by the bidder or an employee
 
 5           of the bidder for a period of six months immediately
 
 6           preceding the date of the bid, and if the business
 
 7           entity is:
 
 8           (A)  An individual, the individual, and at least
 
 9                one-hundred per cent of the individual's employees
 
10                shall be state residents;
 
11           (B)  A corporation or limited liability company, not
 
12                less than eighty-five per cent of the total number
 
13                of officers, directors, members, and shareholders,
 
14                and one-hundred per cent of the employees of the
 
15                corporation or limited liability company shall be
 
16                state residents;
 
17           (C)  A partnership or limited partnership, not less
 
18                than eighty-five per cent of the total number of
 
19                general and limited partners, and one-hundred per
 
20                cent of the employees of the partnership shall be
 
21                state residents;
 
22           (D)  A joint venture or other business entity, not less
 
23                than eighty-five per cent of the total number of
 

 
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 1                owners, officers, and other individuals with a
 
 2                monetary investment in the business entity, and
 
 3                one-hundred per cent of the employees of the joint
 
 4                venture or business entity shall be state
 
 5                residents; or
 
 6           (E)  A combination of the foregoing business entities,
 
 7                not less than eighty-five per cent of the total
 
 8                number of officers, directors, shareholders,
 
 9                general and limited partners, and members with a
 
10                monetary investment in the entity, and one-hundred
 
11                per cent of the employees of the business entity
 
12                shall be state residents.
 
13                              PART II
 
14      SECTION 2.  The purpose of this Part is to provide tax
 
15 exemptions for Hawaii's contractors and subcontractors to help
 
16 rejuvenate their businesses.  In addition, this Part clarifies
 
17 that the definition of contractors includes all contractors
 
18 working in the State directly or indirectly for the federal
 
19 government to the extent allowed under federal law.  Therefore,
 
20 those contractors, including out-of-state contractors, are
 
21 subject to the licensing and other provisions of chapter 444,
 
22 Hawaii Revised Statutes.
 
23      SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended
 

 
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 1 by adding a new section to be appropriately designated and to
 
 2 read as follows:
 
 3      "§237-     Exemption of federal construction contracts.  (a)
 
 4 Any provision of the law to the contrary notwithstanding, there
 
 5 shall be exempted from, and excluded from the measure of the
 
 6 taxes imposed by this chapter, all of the gross proceeds arising
 
 7 from federal construction contracts and received by state
 
 8 contractors and subcontractors licensed under chapter 444 and
 
 9 doing business in the State.
 
10      (b)  For the purposes of this section:
 
11      "State contractor" and "state subcontractor" means a
 
12 contractor who is licensed by the State as a contractor, is doing
 
13 business in the State, and if the contractor is:
 
14      (1)  An individual, the individual, and at least one-hundred
 
15           per cent of the individual's employees shall be state
 
16           residents;
 
17      (2)  A corporation or limited liability company, not less
 
18           than eighty-five per cent of the total number of
 
19           officers, directors, members, and shareholders, and
 
20           one-hundred per cent of the employees of the
 
21           corporation or limited liability company shall be state
 
22           residents;
 
23      (3)  A partnership or limited partnership, not less than
 

 
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 1           eighty-five per cent of the total number of general and
 
 2           limited partners, and one-hundred per cent of the
 
 3           employees of the partnership shall be state residents;
 
 4      (4)  A joint venture or other business entity, not less than
 
 5           eighty-five per cent of the total number of owners,
 
 6           officers, and other individuals with a monetary
 
 7           investment in the business entity, and one-hundred per
 
 8           cent of the employees of the joint venture or business
 
 9           entity shall be state residents; or
 
10      (5)  A combination of the foregoing business entities, not
 
11           less than eighty-five per cent of the total number of
 
12           officers, directors, shareholders, general and limited
 
13           partners, and members with a monetary investment in the
 
14           entity, and one-hundred per cent of the employees of
 
15           the business entity shall be state residents.
 
16      "State resident" means an individual who:
 
17      (1)  Resides in the State at least two hundred days of the
 
18           year; and
 
19      (2)  Has filed a Hawaii resident income tax return in the
 
20           taxable year immediately preceding a bid for a federal
 
21           contract by the individual's employer or business that
 
22           is a state contractor; provided that an individual who
 
23           was a state resident, left the State to attend school
 

 
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 1           or serve in the armed forces of the United States of
 
 2           America, and returned to the State to work for a state
 
 3           contractor is a state resident, even though the
 
 4           individual has not yet resided in the State for at
 
 5           least two hundred days or filed a Hawaii resident
 
 6           income tax return."
 
 7      SECTION 4.  Section 444-1, Hawaii Revised Statutes, is
 
 8 amended by amending the definition of "contractor" to read as
 
 9 follows:
 
10      ""Contractor" means any person who by oneself or through
 
11 others offers to undertake, or holds oneself out as being able to
 
12 undertake, or does undertake to alter, add to, subtract from,
 
13 improve, enhance, or beautify any realty or construct, alter,
 
14 repair, add to, subtract from, improve, move, wreck, or demolish
 
15 any building, highway, road, railroad, excavation, or other
 
16 structure, project, development, or improvement, or do any part
 
17 thereof, including the erection of scaffolding or other
 
18 structures or works in connection therewith.
 
19      "Contractor" includes a subcontractor, a specialty
 
20 contractor, and any person, general engineering, general
 
21 building, or specialty contractor who performs any of the
 
22 activities listed in the previous paragraph directly or
 
23 indirectly for the federal government[.], to the extent allowed
 

 
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 1 under federal law."
 
 2                             PART III
 
 3      SECTION 5.  The purpose of this Part is to encourage the use
 
 4 of a project labor agreement to achieve economy and efficiency in
 
 5 any new federal construction project in which the State is
 
 6 authorized to participate and to establish standards and criteria
 
 7 for a project labor agreement that is consistent with the United
 
 8 States President's memorandum dated June 5, 1997.
 
 9      SECTION 6.  Project labor agreement.  (a)  In any federal
 
10 construction project in which the State is authorized by federal
 
11 law or regulation, or by agreement with the federal agency to
 
12 construct, or to participate in the construction of, any federal
 
13 structure or facility in the State, any department or agency of
 
14 the State that is authorized to award such a contract, on a
 
15 project-by-project basis, may use a project labor agreement if
 
16 the project labor agreement:
 
17      (1)  Advances the project's procurement interest in cost,
 
18           efficiency, and quality;
 
19      (2)  Promotes labor-management stability and compliance with
 
20           legal requirements governing safety and health,
 
21           employment equal opportunity, labor and employment
 
22           standards, and other matters; and
 
23      (3)  Is not precluded from use because of laws applicable to
 

 
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 1           the specific construction project.
 
 2      (b)  If the department or agency of the State determines
 
 3 that the use of a project labor agreement will serve the goals
 
 4 set forth in subsection (a), the department or agency of the
 
 5 State may require that every contractor or subcontractor on the
 
 6 project agree, for that project, to negotiate or become a party
 
 7 to a project labor agreement with unions traditionally
 
 8 representing employees working in the building and construction
 
 9 industry as well as other nonunion contractors, subcontractors,
 
10 and employees, and incorporate the project labor agreement into
 
11 the requests for proposals, invitations for bid under chapter
 
12 103D, Hawaii Revised Statutes, and contract documents.
 
13      (c)  Any project labor agreement reached pursuant to this
 
14 section shall:
 
15      (1)  Bind all contractors and subcontractors on the
 
16           construction project by incorporating the project labor
 
17           agreement into all relevant requests for proposals,
 
18           invitations for bids under chapter 103D, Hawaii Revised
 
19           Statutes, and contract documents;
 
20      (2)  Fully conform to all applicable laws, regulations, and
 
21           executive orders;
 
22      (3)  Allow all contractors and subcontractors wishing to
 
23           compete for contracts and subcontracts on the project
 

 
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 1           to do so, without discrimination against contractors,
 
 2           subcontractors, or employees based on union or nonunion
 
 3           status;
 
 4      (4)  Contain guarantees against strikes, lockouts, and
 
 5           similar work disruptions;
 
 6      (5)  Set forth effective, prompt, and mutually binding
 
 7           procedures for resolving labor disputes arising during
 
 8           the project; and
 
 9      (6)  Provide other mechanisms for labor-management
 
10           cooperation on matters of mutual interest and concern,
 
11           including productivity, quality of work, safety, and
 
12           health.
 
13      (d)  This section does not require a department or agency of
 
14 the State to use a project labor agreement on any federal
 
15 construction project, nor does it preclude use of a project labor
 
16 agreement in circumstances not covered in this section.  This
 
17 section also does not require a contractor to enter into a
 
18 project labor agreement with any particular labor organization.
 
19      (e)  The procurement policy board, in consultation with the
 
20 departments that are covered by this section, shall establish
 
21 appropriate written procedures and criteria for the
 
22 determinations set forth in subsection (a) in accordance with
 
23 chapter 91.
 

 
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 1      (f)  This section does not create any right or benefit,
 
 2 substantive or procedural, enforceable by a non-state party
 
 3 against the State, its departments, agencies, or
 
 4 instrumentalities, its officers, or employees, or any other
 
 5 person.
 
 6      SECTION 7.  The department of accounting and general
 
 7 services shall submit a report on the results of the use of
 
 8 project labor agreements authorized by this Part to the
 
 9 legislature twenty days before the convening of the regular
 
10 session of 2003.
 
11      SECTION 8.  This Part shall apply to project labor
 
12 agreements entered into on or after the effective date of this
 
13 Part.  All project labor agreements entered into before the
 
14 effective date of this Part shall continue to be honored until
 
15 their termination.
 
16                              PART IV
 
17      SECTION 9.  This Act does not affect rights and duties that
 
18 matured, penalties that were incurred, and proceedings that were
 
19 begun, before its effective date.
 
20      SECTION 10.  Statutory material to be deleted is bracketed.
 
21 New statutory material is underscored.
 
22      SECTION 11.  This Act shall take effect July 1, 1999
 
23 provided that part III of this Act shall be reviewed by
 
24 June 30, 2005.