REPORT TITLE: 
GET exemptions for food,
health care services and rent
DESCRIPTION:
Exempts food purchased from supermarkets, health care services,
and residential rents from the GET. Defines "food", "health care
provider"' "health care services"' and "medical equipment".
Deletes tax credits for food and nursing facility services.

 
HB HMIA 99-293
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO GENERAL EXCISE TAX EXEMPTIONS FOR FOOD, HEALTH CARE
   SERVICES, AND RENT.



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


 1      SECTION 1.  The legislature finds that many residents of
 
 2 Hawaii have difficulty affording the high cost of food, health
 
 3 care services, and housing in the State.  The high cost of basic
 
 4 living expenses forces some individuals to leave Hawaii while
 
 5 others who remain are forced to tolerate a lower quality of life.
 
 6 As the largest proportion of health care service users, the
 
 7 chronically ill, the elderly, pregnant women, children, and the
 
 8 disabled are the most inequitably burdened by the general excise
 
 9 tax on medical and other health care services.  Since many of
 
10 these individuals live on fixed incomes, receipt of any necessary
 
11 health care services consequently reduces their financial funds
 
12 available for costly food and housing.  Those persons who most
 
13 need health care services should be assured that they will be
 
14 able to afford those services.  
 
15      Similarly, the basic necessity of food should not be viewed
 
16 as a means of producing revenue for the State at a cost of lower
 
17 quality of living for its residents.  The savings realized by
 
18 providers of certain food and health care services can be passed
 
19 on to consumers to make the cost of living more affordable to
 

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 1 Hawaii residents.  
 
 2      Adding to the high cost of paradise is the lack of
 
 3 affordable housing.  Currently, the general excise taxes imposed
 
 4 on rents is passed on to the renter.  The general excise taxation
 
 5 of rents only increases the already high cost of housing.
 
 6      The purpose of this Act is to reduce the high cost of
 
 7 certain food, health care services, and housing by establishing
 
 8 exemptions from the general excise tax law for certain food,
 
 9 health care services, and residential rents. 
 
10      SECTION 2.  Section 235-55.9, Hawaii Revised Statutes, is
 
11 repealed.
 
12      ["�235-55.9  Medical services excise tax credit.(a)  Each
 
13 resident individual taxpayer, who files an individual income tax
 
14 return for a taxable year, and who is not claimed or is not
 
15 otherwise eligible to be claimed as a dependent by another
 
16 taxpayer for Hawaii state individual income tax purposes, may
 
17 claim a medical services excise tax credit against the resident
 
18 taxpayer's individual income tax liability for the taxable year
 
19 for which the individual income tax return is being filed;
 
20 provided that a resident individual who has no income or no
 
21 income taxable under this chapter and who is not claimed or is
 
22 not otherwise eligible to be claimed as a dependent by a taxpayer
 
23 for Hawaii state individual income tax purposes may claim this
 

 
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 1 credit.
 
 2      (b)  The medical services excise tax credit shall be six per
 
 3 cent of the nursing facilities expenses paid by or for the
 
 4 resident individual during the taxable year.
 
 5      (c)  For the purposes of this section "nursing facility
 
 6 expenses" are amounts actually paid by the taxpayer for services
 
 7 provided to the taxpayer or to any individual who bears a
 
 8 relationship to the taxpayer as described in section 152(a) (with
 
 9 respect to dependent defined) of the Internal Revenue Code by a
 
10 nursing facility licensed under section 321-9 and 321-11 and any
 
11 intermediate care facility for mentally retarded persons under
 
12 sections 321-9 and 321-11; provided that the nursing facility
 
13 expense was subject to the imposition and payment of the tax
 
14 imposed by chapter 346E.
 
15      The amount of nursing facility expenses paid during the
 
16 taxable year shall not be reduced by any insurance reimbursement.
 
17      (d)  The tax credits claimed by a resident taxpayer pursuant
 
18 to this section shall be deductible from the resident taxpayer's
 
19 individual income tax liability, if any, for the tax year in
 
20 which they are properly claimed.  If the tax credits claimed by a
 
21 resident taxpayer exceed the amount of income tax payment due
 
22 from the resident taxpayer, the excess of credits over payments
 
23 due shall be refunded to the resident taxpayer; provided that tax
 

 
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 1 credits properly claimed by a resident individual who has no
 
 2 income tax liability shall be paid to the resident individual;
 
 3 and provided further that no refunds or payment on account of the
 
 4 tax credits allowed by this section shall be made for amounts
 
 5 less than $1.
 
 6      (e)  The director of taxation shall prepare such forms as
 
 7 may be necessary to claim a credit under this section.  The
 
 8 director may also require the taxpayer to furnish reasonable
 
 9 information in order that the director may ascertain the validity
 
10 of the claim for credit made under this section and the director
 
11 may adopt rules necessary to effectuate the purposes of this
 
12 section pursuant to chapter 91.
 
13      (f)  All claims for tax credits under this section,
 
14 including any amended claims, must be filed on or before the end
 
15 of the twelfth month following the close of the taxable year for
 
16 which the credits may be claimed.  Failure to comply with the
 
17 foregoing provision shall constitute a waiver of the right to
 
18 claim the credit."]
 
19      SECTION 3.  Section 237-16.5, Hawaii Revised Statutes, is
 
20 amended to read:
 
21      "[�237-16.5]  Tax on written real property leases; deduction
 
22 allowed.(a)  This section relates to the leasing of real
 
23 property for purposes other than residential housing by a lessor
 

 
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 1 to a lessee.  There is hereby levied, and shall be assessed and
 
 2 collected annually, a privilege tax against persons engaging or
 
 3 continuing within the State in the business of leasing real
 
 4 property to another, equal to four per cent of the gross proceeds
 
 5 or gross income received or derived from the leasing; provided
 
 6 that where real property is subleased by a lessee to a sublessee,
 
 7 the lessee, as provided in this section, shall be allowed a
 
 8 deduction from the amount of gross proceeds or gross income
 
 9 received from its sublease of the real property.  The deduction
 
10 shall be in the amount allowed under this section.
 
11      All deductions under this section and the name and general
 
12 excise tax number of the lessee's lessor shall be reported on the
 
13 general excise tax return.  Any deduction allowed under this
 
14 section shall only be allowed with respect to leases and
 
15 subleases in writing and relating to the same real property.
 
16      (b)  The lessee shall obtain from its lessor a certificate,
 
17 in the form as the department shall prescribe, certifying that
 
18 the lessor is subject to tax under this chapter on the gross
 
19 proceeds or gross income received from the lessee.  The absence
 
20 of the certificate in itself shall give rise to the presumption
 
21 that the lessee is not allowed the deduction under this section.
 
22      (c)  If various real property or space leased to the lessee
 
23 have different rental values, then the total monetary gross
 

 
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 1 proceeds or gross income paid to a lessor for all real property
 
 2 or space shall first be allocated to the fair rental value for
 
 3 each real property or space.  If the lessee leases less than one
 
 4 hundred per cent of real property or space that was leased from
 
 5 the lessor to a sublessee, then the total monetary gross proceeds
 
 6 or gross income paid by the lessee for that real property or
 
 7 space to its lessor shall be allocated.  The percentage of real
 
 8 property or space subleased shall be multiplied by the monetary
 
 9 gross proceeds or gross income paid for the real property or
 
10 space by the lessee to its lessor.  The product of the preceding
 
11 multiplication shall be deducted from the monetary gross proceeds
 
12 or gross income received for real property or space by the
 
13 lessee.
 
14      Once the allocations are made, the appropriate deduction
 
15 under subsection (g) shall be made.
 
16      (d)  The lessor shall make allocations under this section at
 
17 the time the sublease is entered into and the allocations shall
 
18 not be changed during the term of the sublease.  There shall be a
 
19 reasonable basis for the allocations, taking into consideration
 
20 the size, quality, and location of the real property or space
 
21 subleased.  In no event shall the total amount allocated to all
 
22 subleases exceed the total monetary gross proceeds paid by the
 
23 lessee to its lessor.  The director may redetermine the amount of
 

 
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 1 the deduction under this section if the director finds that the
 
 2 basis for allocation is not reasonable or that redetermination is
 
 3 necessary to prevent the avoidance of taxes.
 
 4      (e) As used in this section:
 
 5      "Lease" means the rental of real property for purposes other
 
 6 than residential housing under an instrument in writing by which
 
 7 one conveys real property for a specified term and for a
 
 8 specified consideration, and includes the written extension or
 
 9 renegotiation of a lease, and any holdover tenancy.  
 
10      "Lessee" means one who holds real property for purposes
 
11 other than residential housing under lease, and includes a
 
12 sublessee. 
 
13      "Lessor" means one who conveys real property for purposes
 
14 other than residential housing by lease, and includes a
 
15 sublessor.
 
16      "Real property or space" means the area actually rented and
 
17 used by the lessee, and includes common elements [as defined in
 
18 section 514A-3].
 
19      "Sublease" includes the rental of real property for purposes
 
20 other than residential housing which is held under a lease and is
 
21 made in a written document by which one conveys real property for
 
22 a specified term and for a specified consideration.  Sublease
 
23 includes the written extension or renegotiation of a sublease and
 

 
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 1 any holdover tenancy under the written sublease.
 
 2      "Sublessee" means one who holds real property for purposes
 
 3 other than residential housing under a sublease.
 
 4      "Sublessor" means one who conveys real property for purposes
 
 5 other than residential housing by sublease."
 
 6      SECTION 4.  Section 237-24.3, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "�237-24.3  Additional amounts not taxable.  In addition to
 
 9 the amounts not taxable under section 237-24, this chapter shall
 
10 not apply to:
 
11      (1)  Amounts received from the loading, transportation, and
 
12           unloading of agricultural commodities shipped for a
 
13           producer or produce dealer on one island of this State
 
14           to a person, firm, or organization on another island of
 
15           this State.  The terms "agricultural commodity",
 
16           "producer", and "produce dealer" shall be defined in
 
17           the same manner as they are defined in section 147-1;
 
18           provided that agricultural commodities need not have
 
19           been produced in the State;
 
20      (2)  Amounts received from sales of:
 
21           (A)  Intoxicating liquor as the term "liquor" is
 
22                defined in chapter 244D;
 
23           (B)  Cigarettes and tobacco products as defined in
 

 
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 1                chapter 245; and
 
 2           (C)  Agricultural, meat, or fish products grown,
 
 3                raised, or caught in Hawaii, to any person or
 
 4                common carrier in interstate or foreign commerce,
 
 5                or both, whether ocean-going or air, for
 
 6                consumption out-of-state on the shipper's vessels
 
 7                or airplanes;
 
 8      (3)  Amounts received by the manager or board of directors
 
 9           of:
 
10           (A)  An association of apartment owners of a
 
11                condominium property regime established in
 
12                accordance with chapter 514A; or
 
13           (B)  A nonprofit homeowners or community association
 
14                incorporated in accordance with chapter 415B or
 
15                any predecessor thereto and existing pursuant to
 
16                covenants running with the land,
 
17           in reimbursement of sums paid for common expenses;
 
18      (4)  Amounts received or accrued from:
 
19           (A)  The loading or unloading of cargo from ships,
 
20                barges, vessels, or aircraft, whether or not the
 
21                ships, barges, vessels, or aircraft travel between
 
22                the State and other states or countries or between
 
23                the islands of the State;
 

 
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 1           (B)  Tugboat services including pilotage fees performed
 
 2                within the State, and the towage of ships, barges,
 
 3                or vessels in and out of state harbors, or from
 
 4                one pier to another; and
 
 5           (C)  The transportation of pilots or governmental
 
 6                officials to ships, barges, or vessels offshore;
 
 7                rigging gear; checking freight and similar
 
 8                services; standby charges; and use of moorings and
 
 9                running mooring lines;
 
10      (5)  Amounts received by an employee benefit plan by way of
 
11           contributions, dividends, interest, and other income;
 
12           and amounts received by a nonprofit organization or
 
13           office, as payments for costs and expenses incurred for
 
14           the administration of an employee benefit plan;
 
15           provided that this exemption shall not apply to any
 
16           gross rental income or gross rental proceeds received
 
17           after June 30, 1994, as income from investments in real
 
18           property in this State; and provided further that gross
 
19           rental income or gross rental proceeds from investments
 
20           in real property received by an employee benefit plan
 
21           after June 30, 1994, under written contracts executed
 
22           prior to July 1, 1994, shall not be taxed until the
 
23           contracts are renegotiated, renewed, or extended, or
 

 
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 1           until after December 31, 1998, whichever is earlier.
 
 2           For the purposes of this paragraph, "employee benefit
 
 3           plan" means any plan as defined in section 1002(3) of
 
 4           title 29 of the United States Code, as amended;
 
 5      (6)  Amounts received for purchases made with United States
 
 6           Department of Agriculture food coupons under the
 
 7           federal food stamp program, and amounts received for
 
 8           purchases made with United States Department of
 
 9           Agriculture food vouchers under the Special
 
10           Supplemental Foods Program for Women, Infants and
 
11           Children;
 
12      (7)  Amounts received by a for-profit hospital[,];
 
13           infirmary[,]; sanitarium or a nonprofit or for-profit
 
14           medical clinic[,]; health care facility[,]; dialysis
 
15           facility[,]; health care center[,]; day care center for
 
16           the elderly[,]; home care service for furnishing
 
17           individuals medical or health care services, or both,
 
18           including room and board and monitoring or supervision;
 
19           surface and air ambulances; nursing facilities licensed
 
20           under section 321-9 and 321-11; pharmacy[,]; or a
 
21           practitioner licensed to administer the drug to an
 
22           individual for selling prescription drugs [or],
 
23           prosthetic devices, or medical equipment to an
 
24           individual[; provided that this paragraph shall not
 

 
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 1           apply to any amounts received for services provided in
 
 2           selling prescription drugs or prosthetic devices.] or
 
 3           for furnishing health care services.  This paragraph
 
 4           shall also apply to any amounts received for health
 
 5           care services provided by a licensed health care
 
 6           provider. As used in this paragraph:
 
 7           (A)  "Health care provider" means a person holding a
 
 8                valid license issued under chapter 463E, 442, 447,
 
 9                448, 451A, 452, 453, 455, 457, 457A, 457G, 458,
 
10                45, 460, 461, 461J, 463E, 465, 466J, or 468E.
 
11           (B)  "Health care services" means the practice of the
 
12                occupation for which a health care provider holds
 
13                a valid state license to the extent that the
 
14                practice of the occupation involves the diagnosis,
 
15                cure, mitigation, treatment, or prevention of
 
16                disease.
 
17           (C)  "Medical equipment" means any device, instrument,
 
18                appliance, apparatus, or contrivance, electronic,
 
19                mechanical, or otherwise that is intended for use
 
20                in the diagnosis, cure, mitigation, treatment, or
 
21                prevention of disease.
 
22      [(A)](D)  "Prescription drugs" are those drugs defined under
 
23                section 328-1(4) and dispensed by filling or
 

 
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 1                refilling a written or oral prescription by a
 
 2                practitioner licensed under law to administer the
 
 3                drug and sold by a licensed pharmacist under
 
 4                section 328-16 or practitioners licensed to
 
 5                administer drugs; and
 
 6      [(B)](E)  "Prosthetic device" means any artificial device or
 
 7                appliance, instrument, apparatus, or contrivance,
 
 8                including their components, parts, accessories,
 
 9                and replacements thereof, used to replace a
 
10                missing or surgically removed part of the human
 
11                body, which is prescribed by a licensed
 
12                practitioner of medicine, osteopathy, or podiatry
 
13                and which is sold by the practitioner or which is
 
14                dispensed and sold by a dealer of prosthetic
 
15                devices; provided that "prosthetic device" shall
 
16                not mean any auditory, ophthalmic, dental, or
 
17                ocular device or appliance, instrument, apparatus,
 
18                or contrivance;
 
19      (8)  Taxes on transient accommodations imposed by chapter
 
20           237D and passed on and collected by operators holding
 
21           certificates of registration under that chapter;
 
22      (9)  Amounts received as dues by an unincorporated merchants
 
23           association from its membership for advertising media,
 

 
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 1           promotional, and advertising costs for the promotion of
 
 2           the association for the benefit of its members as a
 
 3           whole and not for the benefit of an individual member
 
 4           or group of members less than the entire membership;
 
 5           and
 
 6     (10)  Amounts received by a labor organization for real
 
 7           property leased to:
 
 8           (A)  A labor organization; or
 
 9           (B)  A trust fund established by a labor organization
 
10                for the benefit of its members, families, and
 
11                dependents for medical or hospital care, pensions
 
12                on retirement or death of employees,
 
13                apprenticeship and training, and other membership
 
14                service programs.
 
15           As used in this paragraph, "labor organization" means a
 
16           labor organization exempt from federal income tax under
 
17           section 501(c)(5) of the Internal Revenue Code, as
 
18           amended. 
 
19      (11)  All of the gross proceeds arising from the retail sale
 
20           of food in supermarkets in this State.
 
21           As used in this section "food" means any food or food
 
22           product for home consumption except alcoholic
 
23           beverages, tobacco, and hot food or hot food products
 

 
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 1           ready for immediate consumption, and:
 
 2           (A)  In the case of those persons who are sixty years
 
 3                of age or over or who receive supplemental
 
 4                security income benefits under Title XVI of the
 
 5                Social Security Act (42 U.S.C. �1381 et seq.), and
 
 6                their spouses, includes meals prepared by and
 
 7                served in senior citizens' centers, apartment
 
 8                buildings occupied primarily by senior citizens,
 
 9                public or private nonprofit establishments (eating
 
10                or otherwise) that feed senior citizens, private
 
11                establishments that contract with the appropriate
 
12                agency of the State to offer meals for senior
 
13                citizens at concessional prices, and meals
 
14                prepared for and served to residents of federally
 
15                subsidized housing for the elderly;
 
16           (B)  In the case of persons sixty years of age or over
 
17                and persons who are physically or mentally
 
18                handicapped or otherwise so disabled that they are
 
19                unable adequately to prepare all of their meals,
 
20                includes meals prepared for and delivered to them
 
21                and their spouses at their home by a public or
 
22                private nonprofit organization or by a private
 
23                establishment that contracts with the appropriate
 

 
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 1                state agency to perform meal services at
 
 2                concessional prices;
 
 3           (C)  In the case of narcotics addicts or alcoholics
 
 4                served by drug addiction or alcoholic treatment
 
 5                and rehabilitation programs, includes meals
 
 6                prepared and served under rehabilitation programs;
 
 7           (D)  In the case of disabled or blind recipients of
 
 8                benefits under Title II or Title XVI of the Social
 
 9                Security Act (42 U.S.C. �� 401 et seq., 1381 et
 
10                seq.) who are residents in a public or private
 
11                nonprofit group living arrangement that serves not
 
12                more than sixteen residents and is certified by
 
13                the appropriate state agency or agencies under
 
14                regulations issued under section 1616(e) of the
 
15                Social Security Act (42 U.S.C. �1382(e)(1)),
 
16                includes meals prepared and served under the
 
17                arrangement; and
 
18           (E)  In the case of women and children temporarily
 
19                residing in public or private nonprofit shelters
 
20                for battered women and children, includes meals
 
21                prepared and served by the residential shelters.
 
22           The word "food" may be further defined by the
 
23           department of taxation through the enumeration of food
 

 
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 1           items in rules or information releases, provided that
 
 2           the department shall consult with the federal Food and
 
 3           Nutrition Service of the United States Department of
 
 4           Agriculture in further defining the word "food" so that
 
 5           such further definition comports with the meaning of
 
 6           "food" for food stamp purposes."
 
 7      (12) Amounts received by landlords, lessors, and landowners
 
 8           as residential rent."
 
 9      SECTION 5.  Section 237-30.5, Hawaii Revised Statutes, is
 
10 amended to read:
 
11      "[�237-30.5]  Collection of rental by third party; filing
 
12 with department; statement required.(a)  Every person
 
13 authorized under an agreement by the owner of real property
 
14 located within this State to collect rent on behalf of such owner
 
15 shall be subject to this section[.] ; provided that this section
 
16 shall not apply to residential rentals."
 
17      SECTION 6.  Statutory material to be repealed is bracketed.
 
18 New statutory material is underscored.
 
19      SECTION 7.  This Act shall take effect on July 1, 2000. 
 
20 
 
21 
 
22                         INTRODUCED BY:___________________________
 
23 
 

 
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