SB3105

SECTION 1. As used in part I of this Act:

"Department" means the department of taxation.

"Director" means the director of taxation.

"Eligible property" means a room, apartment, suite, single family dwelling, or the like, in the State for which the taxpayer received gross rental or gross rental proceeds at any time during the period from January 1, 2023, to June 30, 2024.

"Gross rental" or "gross rental proceeds" means the same as is defined in section 237D-1, Hawaii Revised Statutes.

"Long-term rental" means a room, apartment, suite, single family dwelling, or the like, which is leased, let, or rented to a person, other than a transient, for a period of one hundred eighty days or longer.

"Taxpayer" means any individual, partnership, receiver, trustee, guardian, executor, administrator, fiduciary, or any other entity of any kind subject to tax under title 14, Hawaii Revised Statutes, or any person required to collect and remit tax to the State under title 14, Hawaii Revised Statutes.

"Transient accommodations" means the same as is defined in section 237D-1, Hawaii Revised Statutes.

"Waiver period" means all taxable periods beginning after December 31, 2014, and ending before January 1, 2024.

SECTION 2. (a) The director shall develop and administer a one-time tax amnesty program as provided for in this Act. The director shall begin accepting applications for the amnesty program on January 1, 2025, and shall continue accepting applications until December 31, 2025.

(b) Upon satisfaction of the requirements set forth in subsection (c), the State shall waive criminal prosecution and all fines, penalties, and interest that may be assessed for the waiver period for taxes imposed under chapters 237 and 237D, Hawaii Revised Statutes, for gross income, gross rental, or gross rental proceeds received for the furnishing of an eligible property as a transient accommodation; provided that the waiver shall apply only to the eligible property for which the application for tax amnesty is granted.

(c) The waiver authorized by subsection (a) shall be granted to a taxpayer who files an application for amnesty in the form prescribed by the director and who:

(1) After June 30, 2024, but prior to December 31, 2025, converts a transient accommodation to a long-term rental by entering into a written residential lease agreement for a term of at least twenty-four months for the eligible property with an individual who is not an immediate family member of the taxpayer or who does not have a direct or indirect ownership interest in the eligible property;

(2) Files or amends all returns as may be required by the director for the waiver period;

(3) Pays in full the principal amount of outstanding taxes imposed under chapters 237 and 237D, Hawaii Revised Statutes, for gross income, gross rental, or gross rental proceeds received for the furnishing of the eligible property as a transient accommodation during the waiver period; provided that the taxpayer may enter into an installment payment agreement with the department in cases of hardship, as determined by and upon the terms set forth by the director; and

(4) Has not received notice, written or otherwise, that the taxpayer is the subject of a criminal investigation or criminal prosecution for nonpayment, delinquency, evasion, or fraud in relation to any federal or state taxes.

(d) Notwithstanding any provision to the contrary, any waiver granted pursuant to subsection (b) shall be canceled if:

(1) The taxpayer fails to provide sufficient evidence, as determined by the director, within thirty days of the department's written demand, that the eligible property was leased, let, or rented as a long-term rental for at least twenty-four months between the time period beginning on July 1, 2024, and ending on December 31, 2027;

(2) The taxpayer provided false information in the application for amnesty or in the returns required to be filed or amended under subsection (c)(2); or

(3) The taxpayer fails to make all installment payments as required by any installment payment agreement entered into pursuant to subsection (c)(3).

(e) No refund or credit shall be allowed for:

(1) Any interest or penalty relating to the eligible property that was imposed for the waiver period and paid prior to the time the taxpayer applies for amnesty under this Act; or

(2) Any taxes paid pursuant to subsection (c)(3).

(f) The director shall:

(1) Provide any forms or instructions necessary for the filing of amnesty applications and returns; and

(2) Take all actions necessary to implement this Act.

PART II

SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§235- Capital gains from the sale of certain short-term rental properties; excluded from taxation. (a) Notwithstanding any law to the contrary, all capital gains realized from the sale of a qualified short-term rental property to a qualified buyer shall be excluded from taxation under this chapter.

(b) To qualify for the exclusion in this section:

(1) The qualified short-term rental property shall be sold to a qualified buyer for a sales price of not more than $2,000,000;

(2) The sale of the qualified short-term rental property shall close after June 30, 2024, and before January 1, 2026;

(3) The taxpayer shall obtain from the qualified buyer a declaration, signed under penalty of perjury, stating that the qualified buyer intends to immediately occupy the qualified short-term rental property as the qualified buyer's primary residence for a period of not less than two years;

(4) All outstanding taxes imposed under chapters 235, 237, and 237D for gross income, gross rental, or gross rental proceeds received for the furnishing of the qualified short-term rental property as a transient accommodation shall be paid prior to the close of the sale; and

(5) The taxpayer shall electronically file all forms and returns as required by the director.

"Qualified buyer" means an individual who:

(1) Is not an immediate family member of any owner of the qualified short-term rental property;

(2) Does not have a direct or indirect ownership interest in the qualified short-term rental property;

(3) Does not have a direct or indirect ownership interest in any other real property; and

(4) Intends to immediately occupy the qualified short-term rental property as their primary residence for a period of not less than two years.

"Qualified short-term rental property" means real property in the State that was furnished as a transient accommodation, as defined in section 237D-1, during the period from January 1, 2023, to July 1, 2024."

PART III

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 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 during the period from June 30, 2024, to December 31, 2025, with a value of not more than $2,000,000 to an individual who:

(A) Is not an immediate family member of any owner of the property;

(B) Does not have a direct or indirect ownership interest in the property;

(D) Intends to immediately occupy the property as the individual's primary residence for a period of not less than two years;

provided that the property was furnished as a transient accommodation, as defined in section 237D-1, during the period from January 1, 2023, to June 30, 2024; and provided further that all outstanding taxes imposed under chapters 235, 237, and 237D for gross income, gross rental, or gross rental proceeds received for the furnishing of the property as a transient accommodation has been paid."

SECTION 5. Section 247-6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) No certificate is required to be filed for any document or instrument made exempt by section 247-3, except that in the following situations, a certificate shall be filed in the manner and place that the director shall prescribe, within ninety days after the transaction or prior to the recordation or filing of the document or instrument with the registrar of conveyances or the assistant registrar of the land court or after the ninety-day period, recordation, or filing as the director shall prescribe:

(1) For any document or instrument described under section 247-3(3), any party to the document or instrument shall file a certificate declaring that the document or instrument merely confirms or corrects a deed, lease, sublease, assignment, transfer, or conveyance previously recorded or filed.

(2) For any document or instrument described under section 247-3(4), any party to the document or instrument shall file a certificate declaring the amount of the nominal consideration paid and marital or parental relationship of the parties.

(3) For any document or instrument described under section 247-3(5), any party to the document or instrument shall file a certificate declaring the reasons why the consideration is $100 or less.

(4) For any document or instrument described in section 247-3(6), any party to the document or instrument shall file a certificate declaring that the document or instrument is made pursuant to an agreement of sale, and where applicable, an assignment or assignments of agreements of sale.

(5) For any document or instrument described under section 247-3(8), any person made a party to the document or instrument as grantee, assignee, or transferee shall file a certificate declaring the full and actual consideration of the property transferred.

(6) For any document or instrument described under section 247-3(11), any party to the document or instrument shall file a certificate declaring each owner's:

(A) Undivided interest in the real property and the value of that interest before partition; and

(B) Proportionate interest and the value of that interest after partition.

(7) For any document or instrument described under section 247-3(12), any party to the document or instrument shall file a certificate declaring that the document or instrument is made pursuant to an order of the court and containing the court case number.

(8) For any document or instrument described under section 247-3(13), any party to the document or instrument shall file a certificate declaring that the document or instrument conveys real property from a testamentary trust to a trust beneficiary.

(9) For any document or instrument described under section 247-3(14), any party to the document or instrument shall file a certificate declaring that the document or instrument conveys real property from the grantor to a grantor's revocable living trust or from a grantor's revocable living trust to the grantor.

(10) For any document or instrument described under section 247-3(18), any party to the document or instrument shall file:

(A) A declaration signed under penalty of perjury by the transferee, declaring their intent to immediately occupy the property as their primary residence for a period of not less than two years; and

(B) Certificates from the appropriate parties declaring that all requirements in section 247-3(18) have been met."

PART IV

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act, upon its approval, shall take effect on January 1, 2024; provided that:

(1) Part II shall apply to taxable years beginning after December 31, 2023, and shall be repealed on January 1, 2026; and

(2) Part III shall take effect on July 1, 2024, and shall be repealed on January 1, 2026; provided that sections 247-3 and 247-6, Hawaii Revised Statutes, shall be reenacted in the form in which they read on June 30, 2024.

INTRODUCED BY:

_____________________________

BY REQUEST

THE SENATE	S.B. NO.	3105
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII