RELATING TO VACANT HOMES.

HB489

HOUSE OF REPRESENTATIVES

H.B. NO.

489

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating to vacant homes
.

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

����
SECTION
1.
�
The legislature finds that Hawaii
residents substantially subsidize the State's infrastructure through various
forms of taxation, which directly enhances property values and development
opportunities throughout Hawaii.
�
The
legislature further finds that an increasing number of residential properties
are being purchased as second homes and left largely unoccupied throughout the
year, creating adverse impacts on local communities and failing to contribute
proportionally to the local economy that sustains their value.

����
The
legislature additionally finds that vacant second homes benefit from publicly
funded infrastructure, services, and improvements while not generating the
economic activity typically associated with occupied residences.
�
This creates an inequitable burden on Hawaii
residents who continuously support local businesses and contribute to the
vitality of their communities through daily economic activity.

����
The
purpose of this Act is to recover lost funds from vacant homes by establishing
an equitable tax structure for vacant second homes by:

����
(1)
�
Implementing a surcharge equivalent to the
general excise tax on the:

���������
(A)
�
Average market rental rates to incentivize
property owners to either occupy their properties or make them available for
long-term rental, thereby contributing to Hawaii's housing inventory and local
economy; and

���������
(B)
�
Potential purchases a typical household would
have made had the property been occupied as a primary residence; and

����
(2)
�
Using the revenues of the surcharge for a
rental assistance program similar to the federal section 8 tenant-based housing
assistance program.

����
SECTION
2
.
�
Chapter 201H, Hawaii
Revised Statutes, is amended by adding a new section to part I to be
appropriately designated and to read as follows:

����
"
�201H-
�
Vacant
homes special fund
.
�
(a)
�
There is established a vacant homes special
fund into which shall be deposited the following moneys:

����
(1)
�
Appropriations
by the legislature;

����
(2)
�
Gifts,
donations, and grants from public agencies and private persons; and

����
(3)
�
All proceeds
collected by the department of taxation pursuant to chapter 237, part .

����
All interest earned or accrued on
moneys deposited in the fund shall become part of the fund.
�
The fund shall be administered by the
department; provided that the department may contract with a public or private
agency to provide the day‑to‑day management of the fund.

����
(b)
�
Subject to legislative authorization, moneys
from the fund may be appropriated to the counties for:

����
(1)
�
Enforcement of
chapter 237, part

;
and

����
(2)
�
Rental
assistance programs
similar to the
federal section 8 tenant-based housing assistance payment program of the United
States Housing Act of 1937, as amended
.
"

����
SECTION 3.
�
Chapter 237, Hawaii Revised Statutes, is
amended by adding a new part to be appropriately designated and to read as
follows:

"
PART .
�
Vacancy surcharge

����
�237-A
�
Definitions.
�
For the purposes of this
part:

����
"Individual" means a
natural person.

����
"Residential real
property" means fee simple or leasehold real property on which is
situated:

����
(1)
�
At least one
dwelling
unit; or

����
(2)
�
A residential
condominium or cooperative apartment, the primary use of which is occupancy as
a residence;

that is not subject to taxation pursuant to chapter
237D.

����
�237-B
�
Imposition of surcharge.
�
(a)
�
There
is hereby levied and shall be assessed and collected annually, a surcharge against
persons licensed pursuant to section 237-9 on account of the person's vacant
residential real property in the State.
�

The surcharge shall be measured by the application of rates against the
average annual rental value of the
residential
real property
and any general excise tax the State would have collected had the
residential real property been occupied
and occupants made purchase at spending levels consistent with occupants in
that residential real property size and zip code
.
�
The surcharge shall be
in
addition to any other taxes under this chapter, if any
.

����
(b)
�

All surcharges under this part shall be paid by the owner of the vacant
residential real property.

����
(c)
�
Any residential real property
dwelling unit that was vacant
for one hundred eighty days or more
during the previous year shall be assessed a
surcharge of
:

����
(1)
�
Four

per cent of the average annual rental value of the
residential real property
published pursuant to section 237-D
; and

����
(2)
�
Four

per cent of the amount of general excise tax the State would have collected
had the residential real property been occupied and occupants made purchases at
spending levels consistent with occupants in that residential real property
size and zip code;

provided that if the residential real property
consists of more than one dwelling unit, then the surcharge shall be calculated
on the proportional average annual rental value of the vacant dwelling unit
published pursuant to section 237-D.

����
(d)
�

R
esidential real property shall
be considered occupied on any day that
the residential real property was
:

����
(1)
�
The primary,
legal, or voting residence of any individual;

����
(2)
�
The temporary
residence of a military service member or dependent;

����
(3)
�
The temporary
residence of a student;

����
(4)
�
Rented to an
individual for fair market value pursuant to a long-term or short-term rental
agreement; or

����
(5)
�
Lawfully leased,
let, or rented for fair market value and for which taxes were paid under
chapter 237D.

����
�237-C
�
Exemptions.
�
(a)
�
The surcharge imposed by this part shall not
apply for the following periods of vacancy:

����
(1)
�
For a twelve-month
period of vacancy following the death of a registered owner;

����
(2)
�
For a
twenty-four-month period of vacancy for residential real property undergoing
redevelopment or major renovations for which the owner can demonstrate tenancy
is untenable;

����
(3)
�
For a twelve-month
period of vacancy during which an owner or lessee resides in a hospital or a
long-term or supportive-care facility;

����
(4)
�
For the first
six-month period of vacancy during which the owner or lessee is required to
live elsewhere to satisfy an employment requirement;

����
(5)
�
For any period of
vacancy necessary to comply with a court order or executive order; or

����
(6)
�
For any period of
vacancy during which the owner or lessee is serving in the military and
deployed to another location.

����
(b)
�

This part shall not apply to any residential real property:

����
(1)
�
Owned by the
United States or for which the United

States
is a lessee;

����
(2)
�
Owned by the State
and not leased to a private party;

����
(3)
�
For which the
State is the lessee;

����
(4)
�
Owned by a county
and not leased to a private party; or

����
(5)
�
For which a county
is the lessee.

����
�237-D
�
Average annual rental value; calculation.
�
(a)
�
Before
January 15 of each year, the department of business, economic development, and
tourism shall publish on its website a list of average annual rental values for
residential real property.

����
(b)
�

The list of average annual rental values shall include values specific
to each geographic region, the size of the residential real property, the
number of bedrooms, the number of bathrooms, and other characteristics deemed
relevant to rental value by the department of business, economic development,
and tourism.

����
(c)
�

Each owner assessed a surcharge pursuant to section 237-B shall
calculate the surcharge based upon the applicable average annual rental value
divided by three hundred sixty-five days, then multiplied by the total number
of days the residential real property was vacant.

����
(d)
�

The director of business, economic development, and tourism may adopt,
amend, or repeal rules pursuant to chapter 91 to carry out this section.

����
�237-E
�
Return and payments; penalties.
�
(a)
�
On
or before February 20 of each year, each owner of residential real property
shall file a return with the director of taxation in a form pursuant to
subsection (b) and notwithstanding section 237‑30, shall remit the amount
of any surcharge required by section 237-B.

����
(b)
�

The director of taxation shall prescribe the form of the return.
�
The return shall:

����
(1)
�
State the number
of days during the previous year that the residential real property was:

���������
(A)
�
Occupied for any
reason specified by section 237‑B(d);

���������
(B)
�
Vacant for any
reason specified by section 237‑C(a); and

���������
(C)
�
Vacant for any
reason not specified by section 237‑C(a);

����
(2)
�
Require the
submission of any documents necessary to support the information submitted
pursuant to paragraph (1); and

����
(3)
�
Include a
certification, signed and subject to penalty pursuant to section 710-1063, that
the statements made are true and correct to the best of the owner's knowledge,
information, and belief.

����
�237-F
�
Assessment of surcharge upon failure to make
return; limitation period; penalty; exceptions; extension by agreement.
�
(a)
�
If
any owner of a residential real property fails to make a return as required by
this part, fails to obtain a license pursuant to section 237-9, or fails to
remit the amount of any surcharge required by this part, the director of
taxation shall make an estimate of the surcharge liability of the owner from
any information the director of taxation obtains and, according to the estimate
so made, assess any surcharges, interest, and penalty due from the owner, give
notice of the assessment to the owner and make demand upon the owner for
payment.

����
(b)
�

The penalty for failure to submit a return and the surcharges under to
this section shall be the greater of:

����
(1)
�
No more than $

per day for each day after February 20 or a date specified by the director of
taxation that the return is not filed; or

����
(2)
�
An amount equal to
the surcharge that would have been imposed under this part.

The penalty imposed shall be in addition to any
surcharge and interest owed.

����
(c)
�

Interest shall be calculated on the sum owed at the rate of eight per
cent a year.

����
(d)
�

The assessment shall be presumed to be correct until and unless, upon an
appeal duly taken as provided in section 237-42, the contrary shall be
clearly proved by the owner assessed, and the burden of proof upon that appeal
shall be upon the owner assessed to disprove the correctness of the assessment.

����
(e)
�

After a return is filed under this part, the director of taxation shall
cause the return to be examined and may make further audits or investigation as
the director of taxation considers necessary.
�

If the director of taxation determines that there is a deficiency with
respect to the payment of any surcharge due under this part, the director of
taxation shall assess the surcharge and interest due, give notice of the
assessment to the owner liable, and make demand upon the owner for payment.

����
(f)
�

Except as otherwise provided by this section, the amount of surcharge,
interest, or penalty imposed by this part shall be assessed or levied within
three years after the return was filed, or within three years of the due date
prescribed for the filing of the return, whichever is later, and no proceeding
in court without assessment for the collection of any of the surcharge,
interest, or penalty shall begin after the expiration of the period.
�
Where
the assessment of the surcharge
, interest, or penalty
imposed under this part has been
made within the period of limitation applicable thereto, the surcharge
,
interest, or penalty
may be
collected by levy or by a proceeding in court under chapter 231; provided that
the levy is made or the proceeding began within fifteen years after the
assessment of the surcharge
, interest, or penalty
.
�
Notwithstanding
any other provision to the contrary in this section, the limitation on
collection after assessment in this section shall be suspended for the period:

����
(1)
�
The
owner or lessee

agrees
to suspend the period;

����
(2)
�
The
assets of the owner or lessee are in control or custody of a court in any
proceeding before any court of the United States or any state, and for six
months thereafter;

����
(3)
�
An
offer in compromise under section 231-3(10) is pending; and

����
(4)
�
During
which the owner or lessee is outside the State if the period of absence is for
a continuous period of at least six months; provided that if at the time of the
owner's return to the State the period of limitations on collection after
assessment would expire before the expiration of six months from the date of
the owner's return, the period shall not expire before the expiration of the
six months.

����
(g)
�

In the case of a false or fraudulent return with intent to evade the
surcharge, or of a failure to file the annual return, the surcharge, interest,
or penalty may be assessed or levied at any time;
provided that the burden of proof with respect to the issues of
falsity or fraud and intent to evade surcharge shall be upon the State.

����
(h)
�

Where, before the expiration of the period prescribed in subsection (f),
both the department and the owner have consented in writing to the assessment
or levy of the surcharge, interest, or penalty after the date fixed by
subsection (f), the surcharge, interest, or penalty may be assessed or levied
at any time prior to the expiration of the period agreed upon.
�
The period so agreed upon may be extended by
subsequent agreements in writing made before the expiration of the period
previously agreed upon.

����
�237-G
�
Overpayment; refunds.
�
(a)
�

Upon application by an owner, if the director of taxation determines
that any surcharge, interest, or penalty has been paid more than once, or has
been erroneously or illegally collected or computed, the surcharge, interest,
or penalty shall be credited by the director of taxation on any surcharges or
taxes then due from the owner under this part.
�

The director of taxation shall refund the balance to the owner or the
owner's successors, administrators, executors, or assigns in accordance with
section 231-23.
�
No credit or refund
shall be allowed for any surcharge, interest, or penalty imposed by this part,
unless a claim for a credit or refund is filed as follows:

����
(1)
�
If a return is
timely filed, or is filed within three years after the date prescribed for
filing the return, then the credit or refund shall be claimed within three
years after the date the return was filed or the date prescribed for filing the
return, whichever is later; or

����
(2)
�
If a return is not
filed, or is filed more than three years after the date prescribed for filing
the return, a claim for credit or refund shall be filed within:

���������
(A)
�
Three years after
the payment of the surcharge; or

���������
(B)
�
Three years after
the date prescribed for the filing of the return,

whichever is later.

����
Paragraphs (1) and (2) are mutually
exclusive; provided that this limitation shall not apply to a credit or refund
pursuant to an appeal made under section 237-42.

����
(b)
�

As to all surcharge payments for which a refund or credit is not
authorized by this section, including, without prejudice to the generality of
the foregoing, cases of unconstitutionality, the remedies provided by appeal or
by section 40-35 are exclusive.

����
�237-H
�
Records to be kept; examination.
�
Every owner of residential real property
shall keep in the English language within the State, and preserve for a period
of three years, suitable records relating to the surcharge levied and assessed
under this part, and other books, records of account, and invoices as may be
required by the department, and all those books, records, and invoices shall be
open for examination at any time by the department or the Multistate Tax
Commission under chapter 255, or the authorized representative thereof.

����
�237-I
�
Reward.
�
The department may remit a
reward of up to twenty-five per cent of collected surcharge, interest, and
penalty on a single unreported violation to an individual who provides evidence
leading to the determination that a residential real property was vacant for
more than one hundred eighty days and for which a surcharge is owed under this
part; provided that the person providing the evidence is not the owner, related
to the owner, employed by the owner, or employed in a position related to the
enforcement of this part or any other tax law.

����
�237-J
�
Disposition of tax revenues.

�
Notwithstanding section 237‑31, all
revenues collected under this part shall be paid into the vacant homes special
fund established pursuant to section 201
H
-

.

����
�237-K
�
County disclosure of residential properties
not occupied by an owner.
�
No later
than January 1 of each year, each county shall provide to the director of
taxation a list of residential real properties that are classified as not being
occupied by the owner, including residential property classified as "non
owner occupied", "residential A", or "residential
investor".

����
�237-L
�
Administration and enforcement; rules.
�
(a)
�
All
of the other provisions of chapter 237 not inconsistent with this part and that
may appropriately be applied to the taxes, persons, circumstances, and
situations involved in this part, including, without prejudice to the
generality of the foregoing, provisions as to penalties and interest, and
provisions granting administrative powers to the department, and provisions for
the assessment, levy, and collection of taxes, shall be applicable to the surcharges
imposed by this part as if the surcharges are taxes, and to the assessment,
levy, and collection thereof.

����
(b)
�

The director of taxation may adopt, amend, or repeal rules pursuant to
chapter 91 to carry out this part."

����
SECTION
4
.
�
Section 237-9, Hawaii Revised Statutes, is
amended by amending subsection (a) to read as follows:

����
"
(a)
�
Except as provided in this section, any
person who has a gross income or gross proceeds of sales or value of products
upon which a privilege tax

or
surcharge
is imposed by this chapter, as a condition precedent to
engaging or continuing in
[
such
]
the
business,

or who owns residential real
property in the State that is not used as the owner's primary residence,

shall in writing apply for and obtain from the department of taxation, upon a
one-time payment of the sum of $20, a license to engage in and to conduct
[
such
]
the
business, upon condition that the person shall pay the
taxes
, surcharges, or both,

accruing to the State under this chapter, and the person shall thereby be duly
licensed to engage in and conduct the business.
�

The license shall not be transferable and shall be valid only for the
person in whose name it is issued and for the transaction of business at the
place designated therein.
�
The license
may be inspected and examined, and shall at all times be conspicuously
displayed at the place for which it is issued
[
.
]
; provided
that any license obtained because the person owns residential real property in
the State that is not used as the owner's primary residence shall be displayed
as required by the director of taxation by rule.
"

����
SECTION 5.
�
Chapter 237, Hawaii Revised Statutes, is
amended by designating sections 237-1 to 237-7 as part I and inserting a title
before section 237-1 to read as follows:

"
PART
I.
�
DEFINITIONS
"

����
SECTION 6.
�
Chapter 237, Hawaii Revised Statutes, is
amended by designating sections 237-8 to 237-49 as part II and inserting a
title before section 237-8 to read as follows:

"
PART
II.
�
ADMINISTRATION
"

����
SECTION 7.
�
In codifying the new sections added by
section
2
of this Act, the revisor
of statutes shall substitute appropriate section numbers for the letters used
in designating the new sections in this Act.

����
SECTION 8.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION 9.
�
This Act shall take effect on
January
1, 202
6
.

INTRODUCED BY:

_____________________________

Report Title:

DOTAX;
DBEDT;
HHFDC;
Counties;
Vacant
Home Surcharge; GET

Description:

Establishes a Vacant
Homes Special Fund under the Hawaii Housing Finance and Development Corporation
for rental assistance programs.
�
Establishes
a general excise tax surcharge on an owner that allows a residential real
property to remain vacant for 1
8
0
days or more a year.
�
Requires persons
who own residential real property, but do not live there, to obtain a general
excise tax license.
�
Requires the
counties to disclose to the Department of Taxation a list of properties
classified as not being occupied by an owner of that property.
�
Requires the Department of Business, Economic
Development, and Tourism to calculate average annual rental value for the basis
for the surcharge amount.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.