REPORT TITLE:
General Excise Tax


DESCRIPTION:
Includes a reciprocal insurer's attorney-in-fact in the
definition of insurance company for the purposes of exemption
from the general excise tax.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.350        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE GENERAL EXCISE TAXATION OF RECIPROCAL INSURERS
   AND THEIR ATTORNEYS-IN-FACT.



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

 1      SECTION 1.  The legislature finds that there is a need to
 
 2 clarify the tax treatment accorded to reciprocal insurers under
 
 3 the state general excise tax law.
 
 4      Reciprocal insurers generally do business in all fifty
 
 5 states.  Unlike stock or mutual insurance companies which have
 
 6 internal management and operations departments and staff to
 
 7 perform the management and administrative functions required of
 
 8 an insurer, reciprocol insurance companies must by law, operate
 
 9 through an attorney-in-fact for these functions.
 
10      The Hawaii excise tax law exempts insurance companies
 
11 authorized to do business under chapter 431, Hawaii Revised
 
12 Statutes.  The excise tax law is unclear, however, as to whether
 
13 the attorney-in-fact for a reciprocol insurance company
 
14 authorized to do business under chapter 431, Hawaii Revised
 
15 Statutes, is included within the definition of an insurance
 
16 company for purposes of that exemption.
 
17      The legislature finds that the intent of Act 286, Session
 
18 Laws of Hawaii 1991, which is codified at section 237-29.7,
 
19 Hawaii Revised Statutes, was to exempt all insurance companies
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 authorized to do business under chapter 431, Hawaii Revised
 
 2 Statutes, from the excise tax law, including the attorney-in-fact
 
 3 of a reciprocal insurer.  Act 286 was not intended to
 
 4 discriminate against reciprocal insurers or the attorney-in-fact
 
 5 for a reciprocal.
 
 6      SECTION 2.  Section 237-29.7, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "[[]�237-29.7[]]  Exemption of insurance companies.  This
 
 9 chapter shall not apply to the gross income or gross proceeds of
 
10 insurance companies authorized to do business under chapter 431;
 
11 except this exemption shall not apply to any gross income or
 
12 gross proceeds received after December 31, 1991, as rents from
 
13 investments in real property in this State; provided that gross
 
14 income or gross proceeds from investments in real property
 
15 received by insurance companies after December 31, 1991, under
 
16 written contracts entered into before January 1, 1992, that do
 
17 not provide for the passing on of taxes or tax increases shall
 
18 not be taxed until the contracts are renegotiated, renewed, or
 
19 extended.
 
20      For purposes of this section, insurance company includes a
 
21 reciprocal insurer's bona fide attorney-in-fact with respect to
 
22 income derived from its principal business as corporate attorney
 
23 for a reciprocal insurer."
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 3.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 4.  This Act, upon its approval, shall take effect
 
 4 retroactively to January 1, 1992; provided this Act and the
 
 5 legislative intent expressed in section 1 may be cited for any
 
 6 currently pending disputes related to section 237-29.5, Hawaii
 
 7 Revised Statutes.
 
 8 
 
 9                              INTRODUCED BY:______________________