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SB3293
THE SENATE
S.B. NO.
3293
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
RELATING
TO TAXATION
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
����
SECTION 1.
�
The legislature finds that Act 247, Session Laws of Hawaii 2005,
authorized the counties to adopt a surcharge of up to one-half of one per cent
on state tax to support public transportation projects.
�
The law has been subsequently amended,
including by Act 1, Special Session Laws of Hawaii 2017, Act 11, Session
Laws of Hawaii 2018, and Act 48, Session Laws of Hawaii 2023, to extend
the time period in which a county may adopt and impose the surcharge on state
tax.
�
The law currently authorizes a
county that has previously adopted a surcharge on state tax to extend the
surcharge through December 31, 2030.
�
The
legislature concludes that it is appropriate to authorize the counties to
permanently adopt and impose a public transportation surcharge, which shall be
at the same rate of one-half of one per cent after December 31, 2030; provided
that after December 31, 2030, the split or disbursement of this surcharge
between the State and the counties shall be one-fourth of one per cent each
with the State's share being reserved and allocated to the med-QUEST division of
the department of human services, which administers the State's medicaid
program.
����
The legislature further
finds that a county with a population greater than five hundred thousand is
currently restricted to using the surcharge revenues for capital costs of mass
transit projects while smaller counties may use their surcharge for other
purposes, including operational costs of public transportation systems and
housing infrastructure, costs, and that the restrictions on the larger counties
should be amended to allow for wider use of the funds.
����
The purpose of this Act
is to further amend the county surcharge on state general excise and use taxes
by:
����
(1)
�
Authorizing a county with a
pre-existing surcharge on state general excise and use taxes to permanently
extend its surcharge to be imposed after December 31, 2030 at the same
rate of one-half of one per cent; provided that after December 31, 2030, the
split or disbursement of this surcharge between the State and the counties
shall be one-fourth of one per cent each with the State's share being reserved
and allocated to the
med-QUEST division of the department of human services, which
administers the State's medicaid program
; and
����
(2)
�
For counties with a population greater than
five hundred thousand, authorizing use of surcharge revenues for purposes other
than capital costs of mass transit systems, in alignment with smaller counties that
are not restricted to using those revenues only for capital costs of public
transportation.
����
SECTION
2
.
�
Section
40-81.5, Hawaii Revised Statutes, is amended as follows:
����
1.
�
By amending subsection (a) to read:
����
"(a)
�
Beginning on September 5, 2017, [
and
ending on December 31, 2031,
] the comptroller, upon the request for payment
by the rapid transportation authority, shall verify that the authority's
invoices for the [
capital
] costs of a locally preferred alternative for
a mass transit project comply with section 46-16.8(f).
����
2.
�
By amending subsection (c) to read:
����
"
(c)
�
After submission of invoices by the rapid
transportation authority for capital costs of a locally preferred alternative
for a mass transit project are verified by the comptroller as an acceptable use
of funds received pursuant to a surcharge on state tax authorized pursuant to
section 46-16.8, the comptroller shall submit a certification statement,
including any appropriate supporting documents, to the department of budget and
finance for the allocation of funds, if available, pursuant to sections 248-2.7
and 248-2.6(d).
�
The certification
statement shall include, at a minimum, the total amount contained in the
invoices for [
capital
] costs that are verified as an appropriate use of
funds pursuant to section 46-16.8(f)."
����
SECTION
3
.
�
Section
46-16.8, Hawaii Revised Statutes, is amended to read as follows:
����
"
�46-16.8
�
County surcharge on state tax.
�
(a)
�
Each county may establish a
surcharge on state tax at the rates enumerated in sections 237-8.6 and
238-2.6.
�
A county electing to establish
this surcharge shall do so by ordinance; provided that:
����
(1)
�
No ordinance shall be adopted until the
county has conducted a public hearing on the proposed ordinance;
����
(2)
�
The ordinance shall be adopted before
December 31, 2005; and
����
(3)
�
No county surcharge on state tax that
may be authorized under this subsection shall be levied before January 1, 2007[
,
or after December 31, 2022, unless extended pursuant to subsection (b)
].
Notice of
the public hearing required under paragraph (1) shall be published in a
newspaper of general circulation within the county at least twice within a
period of thirty days immediately preceding the date of the hearing.
����
A
county electing to exercise the authority granted under this subsection shall
notify the director of taxation within ten days after the county has adopted a
surcharge on state tax ordinance and, beginning no earlier than January 1,
2007, the director of taxation shall levy, assess, collect, and otherwise
administer the county surcharge on state tax.
����
(b)
�
Each county that has established a surcharge
on state tax before July 1, 2015, under authority of subsection (a) may extend
the surcharge [
until December 31, 2030,
] at the [
same
] rates[
.
]
enumerated in sections 237-8.6 and 238-2.6.
�
A county electing to extend this surcharge
shall do so by ordinance; provided that[
:
����
(1)
�
No
]
no
ordinance shall be
adopted until the county has conducted a public hearing on the proposed
ordinance[
; and
����
(2)
�
The ordinance shall be adopted prior
to January 1, 2018
].
����
A
county electing to exercise the authority granted under this subsection shall
notify the director of taxation within ten days after the county has adopted an
ordinance extending the surcharge on state tax.
�
The director of taxation shall levy, assess, collect, and otherwise
administer the extended surcharge on state tax.
����
(c)
�
Each county that has not established a
surcharge pursuant to subsection (a) on state tax before July 1, 2015, may
establish the surcharge at the rates enumerated in sections 237-8.6 and
238-2.6.
�
A county electing to establish
this surcharge shall do so by ordinance; provided that:
����
(1)
�
No ordinance shall be adopted until the
county has conducted a public hearing on the proposed ordinance;
����
(2)
�
The ordinance shall be adopted before
December 31, 2023; and
����
(3)
�
No county surcharge on state tax that
may be authorized under this subsection shall be levied before January 1, 2019[
,
or after December 31, 2030
].
����
A
county electing to exercise the authority granted under this subsection shall
notify the director of taxation within ten days after the county has adopted a
surcharge on state tax ordinance.
�
Beginning on January 1, 2019, January 1, 2020, January 1, 2024, or
January 1, 2025, as applicable pursuant to sections 237-8.6 and 238-2.6, the
director of taxation shall levy, assess, collect, and otherwise administer the
county surcharge on state tax.
����
(d)
�
Each county that has established a surcharge
on state tax before March 31, 2019, under subsection (a) or (c) may amend the
surcharge ordinance to change the authorized uses of surcharge revenues,
pursuant to subsection [
(g);
]
(h);
provided that:
����
(1)
�
No ordinance shall be amended pursuant
to this section until the county has conducted a public hearing on the proposed
amendment; and
����
(2)
�
The ordinance shall be amended before
December 31, 2023.
����
(e)
�
Notice of the public hearing required under
subsection (b), (c), or (d), before adoption or amendment of an ordinance
establishing or extending the surcharge on state tax shall be published in a
newspaper of general circulation within the county at least twice within a
period of thirty days immediately preceding the date of the hearing.
����
(f)
�
Each county with a population greater than
five hundred thousand that adopts [
or extends
] a county surcharge on
state tax ordinance pursuant to subsection (a) [
or (b)
] shall use the
surcharge revenues received from the State
before January 1, 2031,
for [
capital
]
:
����
(1)
�
Capital, operating, or maintenance
costs of a locally preferred alternative for a mass transit project;
and
����
(2)
�
Expenses in complying with the
Americans with Disabilities Act of 1990 with respect to paragraph (1);
provided
that revenues derived from the county surcharge on state tax shall not be used[
:
����
(1)
�
To
]
to
build or repair
public roads or highways, bicycle paths, or support public transportation
systems already in existence before July 12, 2005;
���
[
(2)
�
For operating costs or maintenance
costs of the mass transit project or any purpose not consistent with this subsection;
or
����
(3)
�
For administrative or operating,
marketing, or maintenance costs, including personnel costs, of a rapid
transportation authority charged with the responsibility for constructing,
operating, or maintaining the mass transit project;
]
provided
further that nothing in this section shall be construed to prohibit a county
from using county funds that are not derived from a surcharge on state tax for [
a
purpose described in paragraph (2) or (3).
]
the prohibited purposes
immediately described above.
����
(g)
�
Each county with a population greater than
five hundred thousand that extends a county surcharge on state tax ordinance
pursuant to subsection (b) beyond December 31, 2030, shall use the surcharge
revenues received from the State after December 31, 2030, for:
����
(1)
�
Capital, operating, or maintenance
costs of a locally preferred alternative for a mass transit project;
����
(2)
�
Expenses in complying with the
Americans with Disabilities Act of 1990 with respect to paragraph (1);
����
(3)
�
Building or repairing public roads
or highways, bicycle paths, or support public transportation systems already in
existence before July 12, 2005;
����
(4)
�
Operating costs or maintenance costs
of a mass transit project;
����
(5)
�
Administrative or operating,
marketing, or maintenance costs, including personnel costs, of a rapid
transportation authority charged with the responsibility for constructing,
operating, or maintaining a mass transit project; and
����
(6)
�
Any other uses as allowed for smaller
counties as described in subsection (h);
provided
that the split or disbursement of this surcharge between the State and the
counties shall be one-fourth of one per cent each with the State's share being
reserved and allocated to the State's med-QUEST division of the department of
human services.
����
[
(g)
]
(h)
�
Each county having a
population equal to or less than five hundred thousand that adopts a county
surcharge on state tax ordinance pursuant to this section shall use the
surcharges received from the State for:
����
(1)
�
[
Operating or capital
]
Capital,
operating, or maintenance
costs of public transportation within each county
for public transportation systems, including:
���������
(A)
�
Public roadways or highways;
���������
(B)
�
Public buses;
���������
(C)
�
Trains;
���������
(D)
�
Ferries;
���������
(E)
�
Pedestrian paths or sidewalks; or
���������
(F)
�
Bicycle paths;
����
(2)
�
Expenses in complying with the
Americans with Disabilities Act of 1990 with respect to paragraph (1); and
����
(3)
�
Housing infrastructure costs; provided
that a county that uses surcharge revenues for housing infrastructure shall not
pass on those housing infrastructure costs to the developer of a housing
project; provided further that this paragraph shall apply only if a county
amended its surcharge ordinance pursuant to subsection (d) or adopts a county
surcharge on state tax ordinance after December 31, 2022;
provided
that each county having a population equal to or less than five hundred
thousand that adopts a county surcharge on state tax ordinance pursuant to this
section after December 31, 2022, shall use the surcharge revenues received from
the State only for the purposes described in paragraph (3) for
county-appropriated housing infrastructure costs.
����
[
(h)
]
(i)
�
As used in this section:
����
"Capital
costs" means nonrecurring costs required to construct a transit facility
or system, including debt service, costs of land acquisition and development,
acquiring of rights-of-way, planning, design, and construction, and including
equipping and furnishing the facility or system.
�
For a county with a population greater than
five hundred thousand, capital costs also include non-recurring personal
services and other overhead costs that are not intended to continue after
completion of construction of the minimum operable segment of the locally
preferred alternative for a mass transit project.
����
"Housing
infrastructure costs" includes pedestrian paths or sidewalks on a county
road near or around a public school, and water, drainage, sewer, water reuse,
waste disposal, and waste treatment systems that connect to the infrastructure
of the county and shall include financing costs, including any related debt
service and financing agreement costs."
����
SECTION
4
.
�
Section
237-8.6, Hawaii Revised Statutes, is amended by amending subsections (a) and
(b) to read as follows:
����
"
(a)
�
The county surcharge on state tax, upon the
adoption of county ordinances and in accordance with the requirements of
section 46-16.8, shall be levied, assessed, and collected as provided in this
section on all gross proceeds and gross income taxable under this chapter.
�
No county shall set the surcharge on state
tax
to be levied, assessed, or collected
at a rate greater than one-half
of one
per cent of all gross proceeds and gross income taxable under
this chapter[
.
]
; provided that after December 31, 2030, the split or
disbursement of this surcharge between the State and the counties shall be
one-fourth of one per cent each with the State's share being reserved and
allocated to the med-QUEST division of the department of human services.
�
All provisions of this chapter shall apply to
the county surcharge on state tax.
�
With
respect to the surcharge, the director of taxation shall have all the rights
and powers provided under this chapter.
�
In addition, the director of taxation shall have the exclusive rights
and power to determine the county or counties in which a person is engaged in
business and, in the case of a person engaged in business in more than one
county, the director shall determine, through apportionment or other means,
that portion of the surcharge on state tax attributable to business conducted
in each county.
����
(b)
�
Each county surcharge on state tax that may
be adopted, extended, or amended pursuant to section 46-16.8 shall be levied
beginning in a taxable year after the adoption of the relevant county
ordinance; provided that no surcharge on state tax may be levied[
:
����
(1)
�
Before:
����
(A)
]
before:
����
(1)
�
January 1, 2007, if the county
surcharge on state tax was established by an ordinance adopted before December
31, 2005;
���������
[
(B)
]
(2)
�
January 1, 2019, if the county
surcharge on state tax was established by the adoption of an ordinance after
June 30, 2015, but before June 30, 2018;
���������
[
(C)
]
(3)
�
January 1, 2020, if the county
surcharge on state tax was established by the adoption of an ordinance on or
after June 30, 2018, but before March 31, 2019;
���������
[
(D)
]
(4)
�
January 1, 2024, if the county surcharge on
state tax was established by the adoption of an ordinance on or after March 31,
2019, but before August 1, 2023; or
���������
[
(E)
]
(5)
�
January 1, 2025, if the county surcharge on
state tax was established by the adoption of an ordinance on or after August 1,
2023, but before December 31, 2023[
; and
����
(2)
�
After December 31, 2030
]."
����
SECTION
5
.
�
Section
238-2.6, Hawaii Revised Statutes, is amended by amending subsections (a) and
(b) to read as follows:
����
"
(a)
�
The county surcharge on state tax, upon the
adoption of a county ordinance and in accordance with the requirements of
section 46-16.8, shall be levied, assessed, and collected as provided in this
section on the value of property and services taxable under this chapter.
�
No county shall set the surcharge on state
tax
to be levied, assessed, or collected
at a rate greater than one-half
of one
per cent of the value of property taxable under this chapter[
.
]
;
provided that after December 31, 2030, the split or disbursement of this
surcharge between the State and the counties shall be one-fourth of one per
cent each with the State's share being reserved and allocated to the med-QUEST
division of the department of human services.
�
All provisions of this chapter shall apply to
the county surcharge on state tax.
�
With
respect to the surcharge, the director shall have all the rights and powers
provided under this chapter.
�
In
addition, the director of taxation shall have the exclusive rights and power to
determine the county or counties in which a person imports or purchases
property and, in the case of a person importing or purchasing property in more
than one county, the director shall determine, through apportionment or other
means, that portion of the surcharge on state tax attributable to the
importation or purchase in each county.
����
(b)
�
Each county surcharge on state tax that may
be adopted, extended, or amended shall be levied beginning in a taxable year
after the adoption of the relevant county ordinance; provided that no surcharge
on state tax may be levied[
:
����
(1)
�
Before:
����
(A)
]
before:
����
(1)
�
January 1, 2007, if the county
surcharge on state tax was established by an ordinance adopted before December
31, 2005;
���������
[
(B)
]
(2)
�
January 1, 2019, if the county
surcharge on state tax was established by the adoption of an ordinance after
June 30, 2015, but before June 30, 2018;
���������
[
(C)
]
(3)
�
January 1, 2020, if
the county surcharge on state tax was established by the adoption of an
ordinance on or after June 30, 2018, but before March 31, 2019;
���������
[
(D)
]
(4)
�
January 1, 2024, if the county surcharge on
state tax was established by the adoption of an ordinance on or after March 31,
2019, but before August 1, 2023; or
���������
[
(E)
]
(5)
�
January 1, 2025, if the county surcharge on
state tax was established by the adoption of an ordinance on or after August 1,
2023, but before December 31, 2023[
; and
����
(2)
�
After December 31, 2030
]."
����
SECTION
6
.
�
Section 248-2.7,
Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read
as follows:
����
"(b)
�
[
For the period beginning
]
Beginning
on January 1, 2018, [
to December 31, 2030,
] transient accommodations tax
and surcharge on state tax revenues allocated to the mass transit special fund
pursuant to sections 237D-2(e) and 248-2.6 shall be deposited into the special
fund.
�
All interest earned on the moneys
in the special fund shall be credited to the general fund.
�
The mass transit special fund shall be exempt
from the central service expenses deduction under section 36-27 and
departmental administrative expenses deduction under section 36-30.
����
(c)
�
Upon receiving a certification statement from
the comptroller pursuant to section 40-81.5, the director of finance shall
allocate and disburse moneys in the mass transit special fund to the director
of finance of a county with a population greater than five hundred thousand;
provided that the director of finance shall only disburse those amounts that
are certified in the certification statement for that county for the purposes
specified in section 46-16.8; [
provided further that revenues allocated from
the special fund shall not be used for:
����
(1)
�
Operating or maintenance costs of
the mass transit project or any purpose not consistent with section 46-16.8(f);
or
����
(2)
�
Administrative, operating,
marketing, or maintenance costs, including personnel costs, of a rapid
transportation authority charged with the responsibility for constructing,
operating, or maintaining the mass transit project;
]
provided
further that the total amount of funds that are available, allocated, and
disbursed by the director of finance pursuant to this section shall not be in
excess of the total amount indicated on the certification statement.
�
The director of finance may allocate and
disburse moneys pursuant to this section on a monthly basis.
����
Any
amounts allocated and disbursed pursuant to this section shall be subject to
the availability of funds deposited and on balance in the special fund.
�
The director of finance shall not allocate or
disburse any amounts from the special fund that are in excess of any amounts
deposited and on balance in the special fund."
����
SECTION
7.
�
Act 247, Session Laws of Hawaii 2005,
as amended by Act 240, Session Laws of Hawaii 2015, as amended by Act 1,
Special Session of 2017, is amended by amending section 9 to read as follows:
����
"SECTION
9.
�
This Act shall take effect upon its
approval[
; provided that:
����
(1)
�
If none of the counties of the State
adopt an ordinance to levy a county surcharge on state tax by December 31,
2005, this Act shall be repealed and section 437D‑8.4, Hawaii Revised
Statutes, shall be reenacted in the form in which it read on the day prior to
the effective date of this Act;
����
(2)
�
If any county does not adopt an
ordinance to levy a county surcharge on state tax by December 31, 2005, it
shall be prohibited from adopting such an ordinance pursuant to this Act,
unless otherwise authorized by the legislature through a separate legislative
act; and
����
(3)
�
If an ordinance to levy a county
surcharge on state tax is adopted by December 31, 2005:
���������
(A)
�
The ordinance shall be repealed on
December 31, 2022; provided that the repeal of the ordinance shall not affect
the validity or effect of an ordinance to extend a surcharge on state tax
adopted pursuant to an act of the legislature; and
���������
(B)
�
This Act shall be repealed on
December 31, 2030, and section 437D‑8.4, Hawaii Revised Statutes, shall
be reenacted in the form in which it read on the day prior to the effective
date of this Act; provided that the amendments made to section 437D-8.4, Hawaii
Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act
11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014,
shall not be repealed
]."
����
SECTION
8.
�
This Act shall not affect the
validity or effect of any surcharge on state tax adopted pursuant to
Act 247, Session Laws of Hawaii 2005; Act 240, Session Laws of Hawaii 2015;
Act 137, Session Laws of Hawaii 2017; Act 1, Special Session Laws of Hawaii
2017; Act 11, Session Laws of Hawaii 2018; and Act 48, Session Laws of Hawaii
2023, prior to the effective date of this Act.
����
SECTION
9.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.
����
SECTION
10.
�
This Act shall take effect on July
1, 2026.
INTRODUCED BY:
_____________________________
Report Title:
General
Excise Tax; County Surcharge; Tax Assessment; Use
Description:
Authorizes a county with a pre-existing surcharge to
continue the surcharge after December 31, 2030, at the same rate of 0.5 per
cent; provided that after December 31, 2030, the split or disbursement of this
surcharge between the State and the counties shall be 0.25 per cent each with
the State's share being reserved and allocated to the Med-QUEST division of the
Department of Human Services.
�
Expands
the authorized use of surcharge revenues to more than capital costs of a
locally preferred alternative for a mass transit project for counties with a
population greater than five hundred thousand.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.