STAND. COM. REP. NO. 3043

Honolulu, Hawaii

RE: S.B. No. 2044

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2044, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE CONTROLLING INTEREST TRANSFER TAX,"

begs leave to report as follows:

The purpose and intent of this measure is to facilitate the collection of conveyance-related taxes.

Specifically, the measure:

(1) Establishes that the transfer of a controlling interest in an entity that owns real property in the State shall be subject to the conveyance tax established in Chapter 247, Hawaii Revised Statutes;

(2) Requires an unspecified amount of revenue from taxes established under Chapter 247, Hawaii Revised Statutes, to be deposited into the dwelling unit revolving fund; and

(3) Requires the Department of Taxation to adopt applicable administrative rules.

Your Committee received written comments in support of this measure from the Department of Land and Natural Resources, Office of Planning and Sustainable Development, Hawaii Housing Finance and Development Corporation, Partners In Care, and two individuals.

Your Committee received written comments in opposition to this measure from the Grassroot Institute of Hawaii, NAIOP Hawaii, and Land Use Research Foundation of Hawaii.

Your Committee received written comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee recognizes that current taxation law inadvertently allows parties, usually large investors, to avoid paying conveyance taxes by transferring real property through entity-level transactions. Your Committee finds it appropriate to close this legal loophole and deposit a portion of resulting tax revenues into the dwelling unit revolving fund, which is used to support state housing development programs and regional state infrastructure programs.

Your Committee has amended this measure by inserting a definition of the term "fair market value" into the relevant tax statute.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2044, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2044, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair