| 47 | | - | PART I SECTION 1. Chapter 201, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§201- Limited-profit housing council. (a) There is established the limited-profit housing council within the department of business, economic development, and tourism for administrative purposes, to oversee and administer the establishment and governance of limited-profit housing associations in the State. (b) The limited-profit housing council shall be composed of the following members: (1) The chairs of the standing committees of the legislature with subject matter jurisdiction over housing or the chairs' designees; (2) The executive director of the Hawaii housing finance and development corporation, who shall serve as co‑chair; (3) The executive director of the Hawaii public housing authority, who shall serve as co-chair; (4) The director of business, economic development, and tourism or the director's designee; (5) The attorney general or the attorney general's designee; (6) The director of taxation or the director's designee; (7) A representative from the city and county of Honolulu's office of housing with experience in the development of housing exclusively for qualified residents; (8) A representative from the county of Maui's department of housing with experience in the development of housing exclusively for qualified residents; (9) A representative from the county of Kauai's housing agency with experience in the development of housing exclusively for qualified residents; and (10) A representative from the county of Hawaii's office of housing and community development with experience in the development of housing exclusively for qualified residents. (c) Meetings shall be open to the public and subject to chapter 92. The co-chairs shall determine how often the council shall meet; provided that the council shall meet at least once during each calendar year. (d) The department shall provide administrative support to the council and appoint an administrator, who shall serve at the pleasure of the council and shall be exempt from chapter 76. The administrator shall be responsible for the day-to-day operations of the council. (e) The council may adopt rules under chapter 91 necessary to effectuate this section. (f) For the purposes of this section, "qualified resident" has the same meaning as defined in section 201H-32." PART II SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows: "Chapter LIMITED-PROFIT HOUSING ASSOCIATIONS § -1 Purpose. The purpose of this chapter is to create long-term housing exclusively for qualified residents, through the establishment of limited-profit housing associations. § -2 Definitions. As used in this chapter: "Contractor" means any general engineering, general building, or specialty contractor, any subcontractor, or any person, who by oneself or through others offers to undertake, or holds oneself out as being able to undertake, or does undertake to alter, add to, subtract from, improve, enhance, or beautify any realty or construct, alter, repair, add to, subtract from, improve, move, wreck, or demolish any building, highway, road, railroad, excavation, or other structure, project, development, or improvement, or do any part thereof, including the erection of scaffolding or other structures or works in connection therewith. "Financial relationship" means a relationship between a person and a contractor, where: (1) The person is, or has been within the last three years, an employee of a contractor, its parent company, or its subsidiaries; (2) The person is related by blood, marriage, or adoption to; is a party to a civil union with; is a reciprocal beneficiary or household member of; or resides with a contractor or an officer or director of a contractor, its parent company, or its subsidiaries; or (3) The person or an association of which the person is a director, officer, or manager or in which the person owns beneficially or of record five per cent or more of the outstanding equity interests or the outstanding shares of a contractor, its parent company, or its subsidiaries. "Limited-profit housing association" or "association" means a domestic corporation, incorporated under chapter 414, that is approved by the limited-profit housing council to act as a limited-profit housing association and whose status as a limited-profit housing association has not been terminated as provided in this chapter. "Limited-profit housing council" or "council" means the council established pursuant to section 201- . "Qualified resident" has the same meaning as defined in section 201H-32. § -3 Establishment; standards of conduct; termination. (a) A domestic corporation, incorporated under chapter 414, may establish itself as a limited-profit housing association upon approval from the council. If a corporation that is not a limited-profit housing association is a party to a merger, consolidation, or division, or is the exchanging corporation in a share exchange, and the surviving, new, or any resulting corporation in the merger, consolidation, division, or share exchange is to be a limited-profit housing association, then the plan of merger, consolidation, division, or share exchange shall not be effective unless approved by the council. (b) Upon approval of its limited-profit housing association status, the corporation shall include in its articles, or amend its articles to include, a statement that the corporation's primary purpose is to provide long-term housing exclusively for qualified residents, in the State and that the corporation shall devote its assets, including its shareholders' equity, to generate housing exclusively for qualified residents, and regularly check and monitor its business operations to ensure that it is aligned with this primary purpose. (c) All directors and officers of an association shall be independent of and shall have no financial relationship with any contractors. (d) The director of an association shall not be personally liable for monetary damages for any action taken as a director; provided that the director performed the duties of the director's office in compliance with the general standards of conduct pursuant to section 414-221. (e) The officer of an association shall not be personally liable for monetary damages for any action taken as an officer; provided that the officer performed the duties of the position in compliance with the general standards of conduct pursuant to section 414-233. (f) Upon proper notice, an association that is noncompliant with this chapter shall have its status as a limited-profit housing association revoked. (g) An association may elect to terminate its status as a limited-profit housing association and cease to be subject to this chapter upon approval from the council. If a plan of merger, consolidation, division, or share exchange would have the effect of terminating the status of a corporation as a limited-profit housing association, the plan shall not be effective unless it is approved by the council. § -4 Leasehold purchase prices; rental prices. (a) A limited-profit housing association shall only charge a fixed price for the use of its housing units exclusively for qualified residents. The fixed price shall be at a level neither higher nor lower than necessary to cover the costs for constructing and operating the building, while considering the actual and reasonable costs of managing the housing units exclusively for qualified residents, including the formation of reserves. The fixed price shall be based on the following factors: (1) Construction expenses, including the financing of the housing units exclusively for qualified residents; (2) Operating expenses and management costs; and (3) Replacement reserves. (b) If a tenant or buyer of a housing unit exclusively for qualified residents built by an association disagrees with the cost of the housing unit exclusively for qualified residents, the tenant or buyer may have the amount of the fixed price reviewed by a court of law. § -5 Asset management. (a) The revenues generated by a limited-profit housing association shall be reserved and placed in a revolving fund where the moneys shall be used only for limited business activities as provided under section -6. (b) The association shall only distribute its profits once a year. The profit distributed shall not exceed the permissible interest rate for shareholder equity as determined by the council. (c) The dividend paid to a member or shareholder that withdraws from the association shall be only the amount of the nominal value of the member's or shareholder's capital contribution. § -6 Limited business activities. (a) Limited-profit housing associations shall primarily construct, rehabilitate, and manage housing exclusively for qualified residents. Additional primary activities of an association may include the large-scale renovation and management of the housing of other limited-profit housing associations. All activities performed under this subsection shall be performed under the name of the association. (b) With written approval from the council, an association may perform other housing-related services. (c) Any interruption in building activities by an association shall require the explicit permission of the council." SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Income earned by a limited-profit housing association. Notwithstanding any law to the contrary, all income earned from a limited-profit housing association established pursuant to chapter that would otherwise be taxed as ordinary income shall be excluded from taxation under this chapter; provided that any income that is not used for primary business activities under section -6(a) shall be subject to taxation under this chapter if the limited-profit housing association is unable to verify that the income has been properly utilized in five years for the primary business activities of the association." SECTION 4. Section 23-94, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows: "(c) This section shall apply to the following: (1) Section 235-4.5(a)--Exclusion of intangible income earned by a trust sited in this State; (2) Section 235-4.5(b)--Exclusion of intangible income of a foreign corporation owned by a trust sited in this State; (3) Section 235-4.5(c)--Credit to a resident beneficiary of a trust for income taxes paid by the trust to another state; (4) Sections 235-55 and 235-129--Credit for income taxes paid by a resident taxpayer to another jurisdiction; (5) Section 235-71(c)--Credit for a regulated investment company shareholder for the capital gains tax paid by the company; (6) Section 235-110.6--Credit for fuel taxes paid by a commercial fisher; (7) Section 235-110.93--Credit for important agricultural land qualified agricultural cost; [(8) Section 235-110.94--Credit for organically produced agricultural products; (9)] (8) Section 235-129(b)--Credit to a shareholder of an S corporation for the shareholder's pro rata share of the tax credit earned by the S corporation in this State; [and (10)] (9) Section 209E-10--Credit for a qualified business in an enterprise zone; provided that the review of this credit pursuant to this part shall be limited in scope to income tax credits[.]; and (10) Section 235- --Exclusion of income earned by a limited-profit housing association." SECTION 5. Section 76-16, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows: "(b) The civil service to which this chapter applies shall comprise all positions in the State now existing or hereafter established and embrace all personal services performed for the State, except the following: (1) Commissioned and enlisted personnel of the Hawaii National Guard and positions in the Hawaii National Guard that are required by state or federal laws or regulations or orders of the National Guard to be filled from those commissioned or enlisted personnel; (2) Positions filled by persons employed by contract where the director of human resources development has certified that the service is special or unique or is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures. Any contract may be for any period not exceeding one year; (3) Positions that must be filled without delay to comply with a court order or decree if the director determines that recruitment through normal recruitment civil service procedures would result in delay or noncompliance, such as the Felix-Cayetano consent decree; (4) Positions filled by the legislature or by either house or any committee thereof; (5) Employees in the office of the governor and office of the lieutenant governor, and household employees at Washington Place; (6) Positions filled by popular vote; (7) Department heads, officers, and members of any board, commission, or other state agency whose appointments are made by the governor or are required by law to be confirmed by the senate; (8) Judges, referees, receivers, masters, jurors, notaries public, land court examiners, court commissioners, and attorneys appointed by a state court for a special temporary service; (9) One bailiff for the chief justice of the supreme court who shall have the powers and duties of a court officer and bailiff under section 606-14; one secretary or clerk for each justice of the supreme court, each judge of the intermediate appellate court, and each judge of the circuit court; one secretary for the judicial council; one deputy administrative director of the courts; three law clerks for the chief justice of the supreme court, two law clerks for each associate justice of the supreme court and each judge of the intermediate appellate court, one law clerk for each judge of the circuit court, two additional law clerks for the civil administrative judge of the circuit court of the first circuit, two additional law clerks for the criminal administrative judge of the circuit court of the first circuit, one additional law clerk for the senior judge of the family court of the first circuit, two additional law clerks for the civil motions judge of the circuit court of the first circuit, two additional law clerks for the criminal motions judge of the circuit court of the first circuit, and two law clerks for the administrative judge of the district court of the first circuit; and one private secretary for the administrative director of the courts, the deputy administrative director of the courts, each department head, each deputy or first assistant, and each additional deputy, or assistant deputy, or assistant defined in paragraph (16); (10) First deputy and deputy attorneys general, the administrative services manager of the department of the attorney general, one secretary for the administrative services manager, an administrator and any support staff for the criminal and juvenile justice resources coordination functions, and law clerks; (11) (A) Teachers, principals, vice-principals, complex area superintendents, deputy and assistant superintendents, other certificated personnel, and no more than twenty noncertificated administrative, professional, and technical personnel not engaged in instructional work; (B) Effective July 1, 2003, teaching assistants, educational assistants, bilingual or bicultural school-home assistants, school psychologists, psychological examiners, speech pathologists, athletic health care trainers, alternative school work study assistants, alternative school educational or supportive services specialists, alternative school project coordinators, and communications aides in the department of education; (C) The special assistant to the state librarian and one secretary for the special assistant to the state librarian; and (D) Members of the faculty of the University of Hawaii, including research workers, extension agents, personnel engaged in instructional work, and administrative, professional, and technical personnel of the university; (12) Employees engaged in special, research, or demonstration projects approved by the governor; (13) (A) Positions filled by inmates, patients of state institutions, and persons with severe physical or mental disabilities participating in the work experience training programs; (B) Positions filled with students in accordance with guidelines for established state employment programs; and (C) Positions that provide work experience training or temporary public service employment that are filled by persons entering the workforce or persons transitioning into other careers under programs such as the federal Workforce Investment Act of 1998, as amended, or the Senior Community Service Employment Program of the Employment and Training Administration of the United States Department of Labor, or under other similar state programs; (14) A custodian or guide at Iolani Palace, the Royal Mausoleum, and Hulihee Palace; (15) Positions filled by persons employed on a fee, contract, or piecework basis, who may lawfully perform their duties concurrently with their private business or profession or other private employment and whose duties require only a portion of their time, if it is impracticable to ascertain or anticipate the portion of time to be devoted to the service of the State; (16) Positions of first deputies or first assistants of each department head appointed under or in the manner provided in section 6, article V, of the Hawaii State Constitution; three additional deputies or assistants either in charge of the highways, harbors, and airports divisions or other functions within the department of transportation as may be assigned by the director of transportation, with the approval of the governor; one additional deputy in the department of human services either in charge of welfare or other functions within the department as may be assigned by the director of human services; four additional deputies in the department of health, each in charge of one of the following: behavioral health, environmental health, hospitals, and health resources administration, including other functions within the department as may be assigned by the director of health, with the approval of the governor; two additional deputies in charge of the law enforcement programs, administration, or other functions within the department of law enforcement as may be assigned by the director of law enforcement, with the approval of the governor; three additional deputies each in charge of the correctional institutions, rehabilitation services and programs, and administration or other functions within the department of corrections and rehabilitation as may be assigned by the director of corrections and rehabilitation, with the approval of the governor; two administrative assistants to the state librarian; and an administrative assistant to the superintendent of education; (17) Positions specifically exempted from this part by any other law; provided that: (A) Any exemption created after July 1, 2014, shall expire three years after its enactment unless affirmatively extended by an act of the legislature; and (B) All of the positions defined by paragraph (9) shall be included in the position classification plan; (18) Positions in the state foster grandparent program and positions for temporary employment of senior citizens in occupations in which there is a severe personnel shortage or in special projects; (19) Household employees at the official residence of the president of the University of Hawaii; (20) Employees in the department of education engaged in the supervision of students during meal periods in the distribution, collection, and counting of meal tickets, and in the cleaning of classrooms after school hours on a less than half-time basis; (21) Employees hired under the tenant hire program of the Hawaii public housing authority; provided that no more than twenty-six per cent of the authority's workforce in any housing project maintained or operated by the authority shall be hired under the tenant hire program; (22) Positions of the federally funded expanded food and nutrition program of the University of Hawaii that require the hiring of nutrition program assistants who live in the areas they serve; (23) Positions filled by persons with severe disabilities who are certified by the state vocational rehabilitation office that they are able to perform safely the duties of the positions; (24) The sheriff; (25) A gender and other fairness coordinator hired by the judiciary; (26) Positions in the Hawaii National Guard youth and adult education programs; (27) In the Hawaii state energy office in the department of business, economic development, and tourism, all energy program managers, energy program specialists, energy program assistants, and energy analysts; (28) Administrative appeals hearing officers in the department of human services; (29) In the Med-QUEST division of the department of human services, the division administrator, finance officer, health care services branch administrator, medical director, and clinical standards administrator; (30) In the director's office of the department of human services, the enterprise officer, information security and privacy compliance officer, security and privacy compliance engineer, security and privacy compliance analyst, information technology implementation manager, assistant information technology implementation manager, resource manager, community or project development director, policy director, special assistant to the director, and limited English proficiency project manager or coordinator; (31) The Alzheimer's disease and related dementia services coordinator in the executive office on aging; (32) In the Hawaii emergency management agency, the executive officer, public information officer, civil defense administrative officer, branch chiefs, and emergency operations center state warning point personnel; provided that for state warning point personnel, the director shall determine that recruitment through normal civil service recruitment procedures would result in delay or noncompliance; (33) The executive director and seven full-time administrative positions of the school facilities authority; (34) Positions in the Mauna Kea stewardship and oversight authority; (35) In the office of homeland security of the department of law enforcement, the statewide interoperable communications coordinator; (36) In the social services division of the department of human services, the business technology analyst; (37) The executive director and staff of the 911 board; [[](38)[]]Senior software developers in the department of taxation; [[](39)[]]In the department of law enforcement, five Commission on Accreditation for Law Enforcement Agencies, Inc., coordinator positions; [[](40)[] ]The state fire marshal; [and] [[](41)[] ]The administrator for the law enforcement standards board[.]; and (42) The administrator for the limited-profit housing council. The director shall determine the applicability of this section to specific positions. Nothing in this section shall be deemed to affect the civil service status of any incumbent as it existed on July 1, 1955." SECTION 6. 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,] spouses, 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] the 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] that 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, or any interest therein, to or by a limited-profit housing association established pursuant to chapter ." PART III SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 8. This Act shall take effect upon its approval; provided that: (1) Sections 3, 4, and 6 shall take effect on January 1, 2026; and (2) Section 3 shall apply to taxable years beginning after December 31, 2025. |
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| 47 | + | PART I SECTION 1. Chapter 201, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§201- Limited-profit housing council. (a) There is established the limited-profit housing council within the department of business, economic development, and tourism for administrative purposes, to oversee and administer the establishment and governance of limited-profit housing associations in the State. (b) The limited-profit housing council shall be composed of the following members: (1) The chairs of the standing committees of the legislature with subject matter jurisdiction over housing or the chairs' designees; (2) The executive director of the Hawaii housing finance and development corporation, who shall serve as co‑chair; (3) The executive director of the Hawaii public housing authority, who shall serve as co-chair; (4) The director of business, economic development, and tourism or the director's designee; (5) The attorney general or the attorney general's designee; (6) The director of taxation or the director's designee; (7) A representative from the city and county of Honolulu's office of housing with experience in affordable housing development; (8) A representative from the county of Maui's department of housing with experience in affordable housing development; (9) A representative from the county of Kauai's housing agency with experience in affordable housing development; and (10) A representative from the county of Hawaii's office of housing and community development with experience in affordable housing development. (c) Meetings shall be open to the public and subject to chapter 92. The co-chairs shall determine how often the council shall meet; provided that the council shall meet at least once during each calendar year. (d) The department shall provide administrative support to the council and appoint an administrator, who shall serve at the pleasure of the council and shall be exempt from chapter 76. The administrator shall be responsible for the day-to-day operations of the council. (e) The council may adopt rules under chapter 91 necessary to effectuate this section." PART II SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows: "Chapter LIMITED-PROFIT HOUSING ASSOCIATIONS § -1 Purpose. The purpose of this chapter is to create long-term affordable housing in the State through the establishment of limited-profit housing associations. § -2 Definitions. As used in this chapter: "Contractor" means any general engineering, general building, or specialty contractor, any subcontractor, or any person, who by oneself or through others offers to undertake, or holds oneself out as being able to undertake, or does undertake to alter, add to, subtract from, improve, enhance, or beautify any realty or construct, alter, repair, add to, subtract from, improve, move, wreck, or demolish any building, highway, road, railroad, excavation, or other structure, project, development, or improvement, or do any part thereof, including the erection of scaffolding or other structures or works in connection therewith. "Financial relationship" means a relationship between a person and a contractor, where: (1) The person is, or has been within the last three years, an employee of a contractor, its parent company, or its subsidiaries; (2) The person is related by blood, marriage, or adoption to; is a party to a civil union with; is a reciprocal beneficiary or household member of; or resides with a contractor or an officer or director of a contractor, its parent company, or its subsidiaries; or (3) The person or an association of which the person is a director, officer, or manager or in which the person owns beneficially or of record five per cent or more of the outstanding equity interests or the outstanding shares of a contractor, its parent company, or its subsidiaries. "Limited-profit housing association" or "association" means a domestic corporation, incorporated under chapter 414, that is approved by the limited-profit housing council to act as a limited-profit housing association and whose status as a limited-profit housing association has not been terminated as provided in this chapter. "Limited-profit housing council" or "council" means the council established pursuant to section 201- . § -3 Establishment; standards of conduct; termination. (a) A domestic corporation, incorporated under chapter 414, may establish itself as a limited-profit housing association upon approval from the council. If a corporation that is not a limited-profit housing association is a party to a merger, consolidation, or division, or is the exchanging corporation in a share exchange, and the surviving, new, or any resulting corporation in the merger, consolidation, division, or share exchange is to be a limited-profit housing association, then the plan of merger, consolidation, division, or share exchange shall not be effective unless approved by the council. (b) Upon approval of its limited-profit housing association status, the corporation shall include in its articles, or amend its articles to include, a statement that the corporation's primary purpose is to provide long-term affordable housing in the State and that the corporation shall devote its assets, including its shareholders' equity, to generate affordable housing and regularly check and monitor its business operations to ensure that it is aligned with this primary purpose. (c) All directors and officers of an association shall be independent of and shall have no financial relationship with any contractors. (d) The director of an association shall not be personally liable for monetary damages for any action taken as a director; provided that the director performed the duties of the director's office in compliance with the general standards of conduct pursuant to section 414-221. (e) The officer of an association shall not be personally liable for monetary damages for any action taken as an officer; provided that the officer performed the duties of the position in compliance with the general standards of conduct pursuant to section 414-233. (f) Upon proper notice, an association that is noncompliant with this chapter shall have its status as a limited-profit housing association revoked. (g) An association may elect to terminate its status as a limited-profit housing association and cease to be subject to this chapter upon approval from the council. If a plan of merger, consolidation, division, or share exchange would have the effect of terminating the status of a corporation as a limited-profit housing association, the plan shall not be effective unless it is approved by the council. § -4 Leasehold purchase prices; rental prices. (a) A limited-profit housing association shall only charge a fixed price for the use of its affordable housing units. The fixed price shall be at a level neither higher nor lower than necessary to cover the costs for constructing and operating the building, while considering the actual and reasonable costs of managing the affordable housing units, including the formation of reserves. The fixed price shall be based on the following factors: (1) Construction expenses, including the financing of the affordable housing units; (2) Operating expenses and management costs; and (3) Replacement reserves. (b) If a tenant or buyer of an affordable housing unit that is built by an association disagrees with the cost of the affordable housing unit, they may have the amount of the fixed price reviewed by a court of law. § -5 Asset management. (a) The revenues generated by a limited-profit housing association shall be reserved and placed in a revolving fund where the moneys shall be used only for limited business activities as provided under section -6. (b) The association shall only distribute its profits once a year. The profit distributed shall not exceed the permissible interest rate for shareholder equity as determined by the council. (c) The dividend paid to a member or shareholder that withdraws from the association shall be only the amount of the nominal value of the member's or shareholder's capital contribution. § -6 Limited business activities. (a) Limited-profit housing associations shall primarily construct, rehabilitate, and manage affordable housing. Additional primary activities of an association may include the large-scale renovation and management of the affordable housing of other limited-profit housing associations. All activities performed under this subsection shall be performed under the name of the association. (b) With written approval from the council, an association may perform other housing-related services. (c) Any interruption in building activities by an association shall require the explicit permission of the council." SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Income earned by a limited-profit housing association. Notwithstanding any law to the contrary, all income earned from a limited-profit housing association established pursuant to chapter that would otherwise be taxed as ordinary income shall be excluded from taxation under this chapter; provided that any income that is not used for primary business activities under section -6(a) shall be subject to taxation under this chapter if the limited-profit housing association is unable to verify that the income has been properly utilized in five years for the primary business activities of the association." SECTION 4. Section 23-94, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows: "(c) This section shall apply to the following: (1) Section 235-4.5(a)--Exclusion of intangible income earned by a trust sited in this State; (2) Section 235-4.5(b)--Exclusion of intangible income of a foreign corporation owned by a trust sited in this State; (3) Section 235-4.5(c)--Credit to a resident beneficiary of a trust for income taxes paid by the trust to another state; (4) Sections 235-55 and 235-129--Credit for income taxes paid by a resident taxpayer to another jurisdiction; (5) Section 235-71(c)--Credit for a regulated investment company shareholder for the capital gains tax paid by the company; (6) Section 235-110.6--Credit for fuel taxes paid by a commercial fisher; (7) Section 235-110.93--Credit for important agricultural land qualified agricultural cost; [(8) Section 235-110.94--Credit for organically produced agricultural products; (9)] (8) Section 235-129(b)--Credit to a shareholder of an S corporation for the shareholder's pro rata share of the tax credit earned by the S corporation in this State; [and (10)] (9) Section 209E-10--Credit for a qualified business in an enterprise zone; provided that the review of this credit pursuant to this part shall be limited in scope to income tax credits[.]; and (10) Section 235- --Exclusion of income earned by a limited-profit housing association." SECTION 5. 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] the 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] that 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, or any interest therein, to or by a limited-profit housing association established pursuant to chapter ." PART III SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 7. This Act shall take effect upon its approval; provided that: (1) Sections 3, 4, and 5 shall take effect on January 1, 2026; and (2) Section 3 shall apply to taxable years beginning after December 31, 2025. INTRODUCED BY: _____________________________ |
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