HB3212

Report Title:

Real Property Tax

Description:

Establishes a one per cent ceiling on county real property tax assessments.

HOUSE OF REPRESENTATIVES	H.B. NO.	3212
TWENTY-THIRD LEGISLATURE, 2006
STATE OF HAWAII

A BILL FOR AN ACT

 

RELATING TO REAL PROPERTY TAX.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

REAL PROPERTY TAX ASSESSMENTS

§ -1 Definitions. As used in this chapter:

"Any person over the age of fifty-five years of age" means and includes a married couple, one member of which is over the age of fifty-five years.

"Full cash value" means the county assessor's valuation of real property situated in that county, as shown on the 2005 tax bill or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 2005 assessment. Full cash value includes real property not already assessed up to the 2005 full cash value that is reassessed to reflect that valuation.

"Newly constructed" may be defined by the counties, but does not include the following:

(1) The construction or addition of any active solar energy system;

(2) The construction or installation of any fire sprinkler system, other fire extinguishing system, fire detection system, or fire-related egress improvement, as defined by the counties, that is constructed or installed after the effective date of this Act;

(3) The construction, installation, or modification on or after the effective date of this Act of any portion or structural component of a single- or multiple-family dwelling that is eligible for a county homeowner's exemption if the construction, installation, or modification is for the purpose of making the dwelling more accessible to a severely disabled person; or

(4) The construction, installation, removal, or modification on or after the effective date of this Act of any portion or structural component of an existing building or structure if the construction, installation, removal, or modification is for the purpose of making the building more accessible to, or more usable by, a disabled person;

"Newly constructed" does not mean or include real property that is reconstructed after a disaster, as declared by the governor, where the fair market value of the real property, as reconstructed, is comparable to its fair market value prior to the disaster.

"Qualified contaminated property" means residential or nonresidential real property that is:

(1) In the case of residential real property, rendered uninhabitable, and in the case of nonresidential real property, rendered unusable, as the result of either environmental problems, in the nature of and including, but not limited to, the presence of toxic or hazardous materials, or the remediation of those environmental problems, except where the existence of the environmental problems was known to the owner, or to a related individual or entity, at the time the real property was acquired or constructed;

(2) Located on a site that has been designated as a toxic or environmental hazard or as an environmental cleanup site by a state or federal agency;

(3) Real property that contains a structure or structures thereon prior to the completion of environmental cleanup activities, and that structure or structures are substantially damaged or destroyed as a result of those environmental cleanup activities; and

(4) Stipulated by a governmental agency, with respect to the environmental problems or environmental cleanup of the real property, not to have been rendered uninhabitable or unusable, as applicable, by any act or omission in which an owner of that real property participated or acquiesced.

"Replacement dwelling" means a building, structure, or other shelter constituting a place of abode, whether real or personal property, and any land on which it may be situated.

"Substantially damaged or destroyed property" means property that sustains physical damage amounting to more than fifty per cent of its value immediately before the disaster. Damage includes a diminution in the value of property as a result of restricted access caused by the disaster;

"Uninhabitable" means residential real property that, as a result of health hazards caused by or associated with the environmental problems, is unfit for human habitation, and nonresidential real property is "unusable" if that property, as a result of health hazards caused by or associated with the environmental problems, is unhealthy and unsuitable for occupancy.

§ -2 Real property tax ceiling amount. (a) The maximum amount of any ad valorem tax on real property shall not exceed one per cent of the full cash value of the property as prescribed under this chapter. The real property tax shall be administered and collected by the counties. The counties may adopt rules pursuant to chapter 91 or enact ordinances to administer this chapter.

§ -3 Exemptions. (a) Any person over the age of fifty five years of age who resides on property that is eligible for a county homeowner's exemption may transfer the base year value of the property entitled to exemption to any replacement dwelling of equal or lesser value located within the same county and purchased or newly constructed by that person as the person's principal residence within two years of the sale of the original property. For purposes of this section, a two-dwelling unit shall be considered two separate single-family dwellings. This subsection shall apply to any replacement dwelling that was purchased or newly constructed on or after the effective date of this Act.

§ -4 Base year. (a) The counties may extend the provisions relating to transfer of base year value to situations in which the replacement dwellings are located in a county and the original properties are located in another county within this State. This subsection shall apply to any replacement dwelling that was purchased or newly constructed on or after the date the county adopted applicable provisions relating to transfer of base year value.

(b) The counties may extend the provisions relating to the transfer of base year values from original properties to replacement dwellings of homeowners over the age of fifty-five years to severely disabled homeowners, but only with respect to those replacement dwellings purchased or newly constructed on or after the effective date of this Act.

(c) The full cash value base may reflect, from year to year, the inflationary rate not to exceed two per cent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or the full cash value base may be reduced to reflect substantial damage, destruction, or other factors causing a decline in value.

§ -5 Acquisition of property. For the purposes of this chapter, the acquisition of real property as a replacement for comparable property is not a change in ownership if the person acquiring the real property has been displaced from the property replaced by eminent domain proceedings, by acquisition by a public entity, or governmental action that has resulted in a judgment of inverse condemnation. The real property acquired shall be deemed comparable to the property replaced if it is similar in size, utility, and function or if it conforms to state regulations defined by the law governing the relocation of persons displaced by governmental actions. This subsection shall affect only those assessments of that property that occur after the effective date of this Act.

§ -6 Damaged or destroyed property. (a) Notwithstanding any other provision of this chapter to the contrary, the counties shall provide that the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the governor, may be transferred to comparable property within the same county that is acquired or newly constructed as a replacement for the substantially damaged or destroyed property.

(b) In addition to the transfer of base year value of property within the same county, the counties may adopt rules allowing the transfer of the base year value of property that is located within another county that is substantially damaged or destroyed by a disaster, as declared by the governor, to comparable replacement property of equal or lesser value that is located within the adopting county and is acquired or newly constructed within three years of the substantial damage or destruction of the original property as a replacement for that property. The scope and amount of the benefit provided to a property owner by the transfer of base year value of property pursuant to this subsection shall not exceed the scope and amount of the benefit provided to a property owner by the transfer of base year value of property.

(c) This section shall apply to any comparable replacement property that is acquired or newly constructed as a replacement for property substantially damaged or destroyed by a disaster, as declared by the governor, and to the determination of base year values for the 2005-2006 fiscal year and fiscal years thereafter.

(e) Replacement property is comparable to the property substantially damaged or destroyed if it is similar in size, utility, and function to the property that it replaces and if the fair market value of the acquired property is comparable to the fair market value of the replaced property prior to the disaster.

§ -7 Transfer of property between family members. (a) For the purposes of this chapter, property that has been purchased or has undergone a change in ownership does not include the purchase or transfer of real property between spouses, including but not limited to the following:

(1) Transfers to a trustee for the beneficial use of a spouse, or the surviving spouse of a deceased transferor, or by a trustee of such a trust to the spouse of the trustor;

(2) Transfers to a spouse that take effect upon the death of a spouse;

(3) Transfers to a spouse or former spouse in connection with a property settlement agreement or decree of dissolution of a marriage or legal separation;

(4) The creation, transfer, or termination, solely between spouses, of any co-owner's interest; or

(5) The distribution of a legal entity's property to a spouse or former spouse in exchange for the interest of the spouse in the legal entity in connection with a property settlement agreement or a decree of dissolution of a marriage or legal separation.

(b) Property that has been purchased or undergone a change in ownership does not include the purchase or transfer of a principal residence of the transferor in the case of a purchase or transfer between parents and their children and the purchase or transfer of the first $1,000,000 of the full cash value of all other real property between parents and their children. This subsection shall apply to both voluntary transfers and transfers resulting from a court order or judicial decree.

(c) Subject to subsection (d) and commencing with purchases or transfers that occur on or after the effective date of this Act, the exclusion established by subsection (b) also applies to a purchase or transfer of real property between grandparents and their grandchild or grandchildren, as defined by the counties, that otherwise qualifies under subsection (b), if all of the parents of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of the purchase or transfer.

(d) A purchase or transfer of a principal residence shall not be excluded pursuant to subsection (c) if the transferee grandchild or grandchildren also received a principal residence, or interest therein, through another purchase or transfer that was excludable pursuant to subsection (b). The full cash value of any real property, other than a principal residence, that was transferred to the grandchild or grandchildren pursuant to a purchase or transfer that was excludable pursuant to subsection (b), and the full cash value of a principal residence that fails to qualify for exclusion as a result of the preceding sentence, shall be included in applying, for purposes of subsection (c), the $1,000,000 full cash value limit specified in subsection (b).

§ -8 Contaminated property. (a) Notwithstanding any other law to the contrary, the counties shall provide, with respect to a qualified contaminated property, that either, but not both, of the following shall apply:

(1) The base year value of the qualified contaminated property, as adjusted, may be transferred to a replacement property that is acquired or newly constructed as a replacement for the qualified contaminated property, if the replacement real property has a fair market value that is equal to or less than the fair market value of the qualified contaminated property if that property were not contaminated and, except as otherwise provided by this chapter, is located within the same county. The base year value of the qualified contaminated property may be transferred to a replacement real property located within another county if the county council of that other county, after consultation with the affected local agencies within that county, has adopted a resolution authorizing an inter-county transfer of base year value as so described. This section applies only to replacement property that is acquired or newly constructed within five years after ownership in the qualified contaminated property is sold or otherwise transferred; and

(2) In the case in which the remediation of the environmental problems on the qualified contaminated property requires the destruction of, or results in substantial damage to, a structure located on that property, the repair of a substantially damaged structure, or the construction of a structure replacing a destroyed structure on the qualified contaminated property, performed after the remediation of the environmental problems on that property is not new construction; provided that the repaired or replacement structure is similar in size, utility, and function to the original structure.

(b) It is rebuttably presumed that an owner of real property participated or acquiesced in an act or omission that rendered the real property uninhabitable or unusable, as applicable, if that owner is related to any individual or entity that committed that act or omission and is:

(1) A spouse, parent, child, grandparent, grandchild, or sibling of that individual;

(2) A corporate parent, subsidiary, or affiliate of that entity;

(3) An owner of, or has control of, that entity; or

(4) Owned or controlled by that entity.

If this presumption is not overcome, the owner shall not receive the relief provided for in this chapter. The presumption may be overcome by presentation of satisfactory evidence to the assessor, who shall not be bound by the findings of the county in determining whether the presumption has been overcome.

§ -9 Amendments. Unless specifically provided otherwise, amendments to this chapter shall be effective for changes in ownership that occur, and new construction that is completed, after the effective date of this Act. Unless specifically provided otherwise, amendments to this chapter shall be effective for changes in ownership that occur, and new construction that is completed, on or after the effective date of the amendment."

SECTION 2. Chapter 246, Hawaii Revised Statutes, is repealed.

SECTION 3. This Act shall take effect upon its approval and upon ratification of a constitutional amendment requiring the legislature to establish a one per cent ceiling on real property tax assessments.

INTRODUCED BY:	_____________________________