HomeMy WebLinkAboutCOM 0365.001 2002-2004 To: Aaron Chung, Chairman of the Finance Committee
f
Via: ~ i Constance Kiriu, Legislative Auditor ,
i
From: Rodney Oshiro, Legislative Analyst
Date: October 13, 2003 0
t7 w
Subject: Exemptions as Stated in the Hawaii County Code, Chapter l9~tic1~0. ~
C F.a r-~
This review of purpose and intent of real property tax exemptions is being pro4ii~ed atryouf`
request.
3 -
S:
Real property exemptions are subsidies designed to give relief to a certain gr~p'of p~pe~3~
owners. These subsidies would encourage economic development for certai>~tses cwt may
provide relief for public or personal benefit to mitigate their tax burden. Governmef~Powned
properties have traditionally been exempt from taxation in order to avoid an empty ritual of
taxing itself. Such exemptions maybe full or partial depending on what the county wishes to
accomplish.
HISTORY OF REAL PROPERTY TAX FUNCTION AND EXEMPTIONS
The real property tax function was originally the responsibility of the State Department of
Taxation. Many of these exemptions were enacted prior to Statehood. Their authority ended
with the passage of the Constitutional Convention Proposal No. 7, R.D. 2, which amended
Article VII, Section 3, Hawaii State Constitution, transferring the real property tax function to
the counties. This amendment was ratified on November 1978 and the effective date of the
transfer was July 1, 1981. On July 1, 1981, Ordinance No. 613 iniriated the County's Real
Property Tax Legislation. All exemptions under state law were allowed to continue until 1989.
For 11 years after ratification, until November 6, 1989, all four counties by majority had to agree
on uniform policy and assessment practices. Hawaii Association of Counties created an
oversight body to coordinate the legislation in the State.
LEGISLATIVE HISTORY OF CERTAIN EXEMPTIONS
We have reviewed the legislative history of exemptions to ascertain the purpose of each
exemption, which we have detailed in the attached schedule. Many of the exemptions were pre-
1957. [t should be noted that other exemptions may be included in other sections like
dedications, etc. Some purposes are not known, as there is no information pertaining to them.
Should you have any questions, please call me at 96 i -8494.
Gomm. No.
Ref. To:
Raf. Uote
SCHEDULE OF EXEMPTIONS
HAWAII COUNTY CODE
CHAPTER 19, ARTICLE l0
October 13, 2003
SECTION TITLE PURPOSE/OTHER INFORMATION
19-71 Homes. ? 1896, Act 51 (Section 34) provided a one percent tax on property in
excess of $300. No purpose was expressed in the Act or Committee
report.
? Existed in the publication of the "1957 Territory of Hawaii,
Compilation of Tax Laws'.
? Existed in the County's initial 1981 Ordinance No. 613.
? Over the years, the purpose was to provide tax relief, encourage
home ownership, the settlement of land and to offset the appreciation
of property values.
19-73 Homes of totally disabled ? 1949, Act 189 enacted the exemption to totally disabled veteran as a
veterans. result of injuries while on duty. No purpose was expressed in the Act
or Committee report.
? Existed in the publication of the "1957 Territory of Hawaii,
Compilation of Tax Laws'.
? Existed in the County's initial 1981 Ordinance No. 613.
19-74 Persons affected with Hansen's ? 1907, Act 93 enacted the exemption to a person declared to be leper
Disease. and detained were exempt from personal property, personal taxes
and specific taxes. No purpose was expressed in the Act or
Committee report.
? Existed in the publication of the "1957 Territory of Hawai i,
Compilation of Tax Laws".
? Existed in the County's initial 1981 Ordinance No. 613.
? Over the years, the exemption amount has increased.
19-75 Exemption, persons with ? Impaired sight existed in the publication of the "1957 Territory of
impaired sight or hearing and Hawaii, Compilation of Tax Laws'.
persons totally disabled. ? Existed in the County's initial 1981 Ordinance No. 613.
? 1989, Ordinance 89-150 removed the State Dept. of Health from the
certification process.
? 2001, Ordinance 01-73 added a licensed audiologist to the list of
qualified physicians to facilitate the application process.
? Over the years, the exemption amount has increased.
1
SCHEDULE OF EXEMPTIONS
HAWAII COUNTY CODE
CHAPTER 19, ARTICLE 10
October 13, 2003
SECTION TITLE PURPOSE/OTHER INFORMATION
19-76 Nonprofit medical, hospital ? HRS 433, Mutual and Fraternal Benefit Societies are exempt from
indemnity associations, tax- every state, county and municipal tax, except for unemployment
exempt. compensation tax. Repealed in 1987 and replaced by HRS 432,
Mutual Benefit Societies.
? Existed in the County's initial 1981 Ordinance No. 613.
19-77 Charitable, etc., purposes. ? 1896, Act 51, Section 33 exempted Board of Education, private
Board of Education, private schools, Queens Hospital, religious societies, and burying grounds.
schools, religious societies, No purpose was expressed in the Act or Committee reports.
Queens Hospital, Burying ? Some of this section existed in the publication of the "1957 Territory
grounds. of Hawaii, Compilation of Tax Laws".
? Existed in the County's initial 1981 Ordinance No. 613.
Labor Union Trusts. ? 1963, Act 67, Labor Union Trusts was granted an exemption. The
law was intended to correct the inequity of not including Labor Union
Trusts with government employees association, which primary
purpose was to improve employment conditions.
Association League of Federal ? 1965, Act 201 exempted Association League of FCU, and Patriotic
Credit Unions and Patriotic Societies chartered under Title 36, U.S. Code. The law provided tax
Societies. relief to stimulate economic development and secure other social and
economic goals. The discussion did not disclose social or economic
goals. Patriotic Societies exemption was granted to include
organizations like the American Red Cross.
Senior Citizen Housing. ? 1967, Act 225 was enacted to enlarge exemptions of anon-profit
nature to include Senior Citizen Housing facilities which had qualified
under U.S. Housing Act 1959.
19-78 Property used in manufacture of ? 1955, Act 220 was enacted to exempt for five years the construction
pulp and paper. of a plant: which manufactured bagasse fibers and property used for
the growing and processing of sandalwood. No purpose was
expressed in the Act or Committee report.
? Existed in the publication of the "1957 Territory of Hawaii,
Compilation of Tax Laws".
? Existed in the County's initial 1981 Ordinance No. 613.
2
SCHEDULE OF EXEMPTIONS
HAWAII COUNTY CODE
CHAPTER 19, ARTICLE 10
October 13, 2003
SECTION TITLE PURPOSE/OTHER INFORMATION
19-79 Crop shelters ? 1970, Act 57 was enacted to exempt crop shelters in the assessment
of real property.
? Existed in the County's initial 1981 Ordinance No. 613.
19-80 Exemption dedicated lands in ? 1965, Act 201 was enacted to provide tax relief that would secure
urban districts. other social and economic goals, which had a benefit to the public.
The discussion did not disclose social or economic goals.
? Existed in the County's initial 1981 Ordinance No. 613.
19-82 Alternate energy improvements, ? 1974, Act 189 established this new section to promote energy
exemption. conservation.
? Existed in the County's initial 1981 Ordinance No. 613, except that
there was an expiration date of December 31, 1981.
? 1983, Ordinance No. 83-57 enacted this section.
19-84 Public property, etc. ? 1896, Act 51 (Section 33) reflected the exemption belonging to the
government. No purpose was expressed.
? 1932, Act 40 provided RPT exemption to U.S., Territory, public
instruction or to any county, provided it was not leased to a private
party.
? Existed in the Publication of the "1957 Territory of Hawaii,
Compilation of Tax Laws'.
? State Constitution, Article XVI, Sec. 9, Tax exemption of Federal
Property.
? Existed in the County's initial 1981 Ordinance No. 613.
19-86 Property of the United States ? 1955, Act 177, recognized that the usual governmental services were
leased under the National not being furnished on property belonging to the U.S. (military
Housing Act. reservation) and felt the bill expressed a sound legislative policy.
? Existed in the publication of the "1957 Territory of Hawaii,
Compilation of Tax Laws".
? State Constitution, Article XVt, Sec. 9, Tax exemption of Federal
Property.
? Existed in the County's initial 1981 Ordinance No. 613.
3
SCHEDULE OF EXEMPTIONS
HAWAI9 COUNTY CODE
CHAPTER 19, ARTICLE 10
October 13, 2003
SECTION TITLE PURPOSE/OTHER INFORMATION
19-87 Exemption for low and ? 1967, Act 135 was enacted to encourage housing projects regulated
moderate-income housing. by the Federal Government & operated by a nonprofit under Sec
221(d)(3) of the National Housing Act, effective 1/1/68.
? In 1968, the State Legislature passed an emergency measure due to
the critical shortage of adequate housing for low and moderate-
income families, under the provisions of section 221 (d)(a) of the
National Housing Act to exempt RPT.
? Existed in the County's initial 1981 Ordinance No. 613.
19-89 Exemptions for certain Hawaiian ? Hawaiian Homes Commission Act, Title 5, Sec.503 (c), Homestead
Homes property, and other general lessee shall pay property tax.
agencies. ? 1992, Ordinance 92-129, Hawaiian Homes lands as defined by the
Hawaiian Homes Commission Act, exclusive of buildings, shall be
exempt except for minimum tax. Its purpose was to give relief to
Hawaiian Homestead properties and to move forward on the Native
Hawaiian issue.
Public Utilities. ? 1999, Ordinance 99-159 and 2001 Ordinance 01-36, the County did
not recognize RPT exemption in 239HRS (GE tax was collected in
lieu of RPT) and would accept such revenues in excess of GE taxes
in lieu of RPT.
? 2001, Ordinance 01-36 would position the County in anticipation of
State legislation.
? State legislation effective 7/1/01, 239-5(a) required Public Utilities to
pay RPT.
19-89.1 Historic residential real property ? 1982, Ordinance 837 recognized it was in the public's interest to
dedicated for preservation, preserve the historic residential properties. They are important
exemption. assets and rapid economic developments threaten them.
19-89.2 Credit union exemption. ? 1987, Ordinance 87-116 provided for a new exemption to include
State and Federal Credit Union. The Council recognized that the
Credit Union was nonprofit, cooperative organizations, which had a
restrictive field of membership, and provided members the
opportunity to improve their economic and social conditions.
19-89.3 Exemptions for enterprise zones. ? 1995, Ordinance 95-14 the County provided a 3-year exemption from
RPT for all new construction to promote business and economic
development, as provided in the State legislation.
4