In this edition:
1. Legislative Update – Three weeks into the Session;
2. Funding and Membership Drive;
3. New Regulations Effective January 1, 2016;
4. Specific regulations for each County
1. 2017 Legislative Session in now Open
We are three weeks into the legislative session and RBOAA has submitted testimony on over a dozen bills already. The Government Relations team has been working around the clock…if not literally, at least it feels like it!
We also got some great press from the Hawaii Free Press.
In the January update, we discussed how the 2016 session ended with Governor Ige vetoing the bill which would allow the advertising platforms to collect and remit taxes on behalf of the operators.
As you know, one of the main criticisms of vacation rentals, whether true or not, is that we do not collect and remit taxes. The hotel industry uses that argument across the nation to support increased regulation or the outright banning of vacation rentals. Last year, the bill had put forward by one of the advertising platforms in an attempt to crack down on tax cheats but also to stem the efforts of the hotel industry to shut us down.
This bill has resurfaced in 2017 with six different versions being presented.
Some versions of the bill were put forward by the hotel industry and included language which would limit transient vacation rentals to no more than 60 days of rentals per year and limit vacation rental owners to owning no more than one property.
There are about 10 bills which propose to increase taxes on us, including two which require an amendment to the State Constitution in order to allow the State to impose a new tax upon vacation rentals and residential investment properties.
We started with about 20 bills dealing with vacation rentals in four themes.
1. Advertising Platforms (such as VRBO) can collect and remit taxes on behalf of operators (you).
2. Travelers to Hawaii and people and companies who provide accommodation to the travelers should pay more in tax.
3. People who rent out residential property to vacationers should be limited to renting out no more than 60 nights per year and owning no more than one or two properties. (More on this below)
4. Counties should be allowed to change zoning to eliminate transient vacation rentals. This proposal comes up each year, but this year, it only applies to the County of Kauai.
Let’s focus on #3 first as the limitations on rentals are very concerning, obviously. Our initial understanding was that the restrictions were intended to apply to a small group of vacation rental owners. However, we later learned that the restrictions were intended to apply to every vacation rental except hotels, motels, inns and B&B’s. RBOAA vigorously opposed these bills. The bills were also opposed by the State Attorney General. The Senate committee rejected the bill on Friday afternoon and the House Committee removed the language limiting activity to one unit and to 60 days. So, put that in the win column!
Advertising Platforms as Tax Collection Agents
This remains a hot button issue. The legislators are determined to pass this bill and avoid a veto again this year. Our members are definitely split on this topic.
RBOAA is testifying on the bill and asking for amendments to improve it. We support the concept of easing both the tax collection burden and enforcement of compliance with county zoning regulations. Not only is that the right position to take, but it helps neutralize the primary criticism we face in the media and in the legislature. If our opponents (currently, it is the hotels) can’t say we don’t pay tax and we don’t comply with zoning, the legislators are far less incentivized to impose new regulations on us.
We are seeking the amendments to a) prevent the tax collection agent from charging us for collecting and remitting tax; b) allowing us to opt-out of the tax collection arrangement our advertising platform has (under certain circumstances); and c) require the state to conduct annual audits of the tax collection agents.
As travelers don’t vote, they are a good source of tax revenue. There are a number of proposals to increase the TAT to cover education, environment and housing. There is also a proposal to add an additional tax on the property tax.
RBOAA will try to help the legislators understand that Hawaii needs to remain competitive in the tourism and convention market.
Here is a brief synopsis of the bills we are working on:
HB1470 – has passed to the second round of committees
This bill is one of many dealing with the question of hosting platforms as tax collection agents. It requires us, as operators, to keep records (putting the onus of audit on the operator). The bill provides for hosting platforms to de-list any advertiser (you) who does not comply with tax or zoning laws and requires the platforms to obtain attestation from you that you are in compliance with zoning laws.
This bill previously had the language to limit us to 60 days rental per year and limit us to owning only one property and provided for a 4% increase in the TAT. That language is all gone, but this bill remains deeply flawed and RBOAA will be opposing it vigorously until it is defeated.
HB 1471 / SB1087 – both versions have passed to the second round of committees
These bills allow anyone, not just hosting platforms, to act as tax collection agents. This bill is not offensive but it needs to be a lot better in order to be good legislation. RBOAA is strongly pushing for improvements and amendments to the bill as noted above.
We expect these bills will pass. There is very strong support at the Capitol for them.
SB1281 / SB1202 – both bills were deferred (rejected) in first round of committee
HB1242 – has not been heard in committee and is not likely to be heard
These three bills were similar in concept to HB1471 and SB 1087.
HB546 – rejected in the first round of committee
This bill proposed surtax on the TAT in order to fund housing for hotel employees.
HB180 / HB 182 / SB 686 / SB 683 – all passed to the second round of committees
These bills increase property taxes on both vacation rentals and residential investment properties to help fund the education system in Hawaii. Two bills increase the tax and two bills provide for the amendment to the Hawaii State Constitution to make the new tax legal.
Property Value Surcharge per $1000 of property value
Under $500,000 $3.50
$500,000- $750,000 $4.50
$1,000,000 – $2,000,000 $6.50
$2,000,000 and over $7.50
So, if your property was worth $400,000, you would pay $1400 in residential property tax surcharge each year. If your property was worth $2,000,000, you would pay $15,000.
In addition, there is proposed a nightly tax of $3.00 for rents up to $150 per night and $5.00 per night for rents over $150. This is regardless of occupancy. So the $400,000 property probably commands a rent of $150 a night on average, so 365*$5 = $1825, for a total tax of $3225.
Currently, this type of tax is most likely not possible to implement in Hawaii, so they are proposing a constitutional amendment (SB683 & HB182) to allow the state to impose this tax. This is the same tax which has been the subject of a legal battle in the City and County of Honolulu.
The Counties are not in favor of this bill, nor is the State Department of Finance. However, the bills have garnered massive support for parents, teachers’ unions, schools and social agencies.
RBOAA is opposing the bills, but we expect this battle to be hard-fought.
SB862 / HB1331 – SB862 has passed to the next round of committees and HB1331 has not yet been heard.
These identical bills allow for the phase out of single family transient vacation rental units in the counties with populations fewer than 100,000, which is essentially Kauai. The County of Kauai has put forward this bill every year for at least the past 5 years. Every year it gets defeated. By narrowing the scope to just that county, perhaps they think it will have a better chance. RBOAA is opposing the bill
SB704 – passed to the second round of committees
This bill proposes to set up a committee to study transient accommodations in the State and provides for membership from vacation rental owners.
HB1586 – First hearing scheduled for next week
The preamble to the bill proposes moving the tax burden from residents to non-residents. The bill, as currently drafted, doesn’t actually change the tax structure to affect non-residents. We will continue to watch this bill as it is likely to get amended by committee.
HB1453 / SB1143 – neither version has been heard by committee
This is another tax on tourists, this one being $20 per guest to fund environmental protection and conservation. The wording indicates that a party of 4 would pay $80.
SB702 – not yet heard by committee
This bill has already garnered some media attention as it states that failure to register for TAT and GET is a class C felony. A Class C felony is punishable by a maximum of seven years in prison. Class C felonies include crimes such as theft, possession of a controlled substance, second-degree statutory rape and first-degree involuntary manslaughter.
This bill also sets up a public database whereby anyone can look you up to see if you are properly registered. This raises certain security and privacy concerns.
SB695 – not yet heard by committee
This bill is actually quite good as it attempts to clarify that TAT applies to rent and mandatory fees charged to guests. RBOAA supports clarification of tax rules.
The Hawaii Legislature opened earlier in January and will run until about mid-May.
2. Funding and Membership – RBOAA
It is, of course, membership renewal time!
“Mahalo” to all of you who renewed your membership and/or made a donation to RBOAA this year. We would not be able to do what we do without your support.
We have engaged our lobbyist in Honolulu already this year and he has been of great help so far. But, he is not cheap!
In a recent study of some of the more popular owner rental web sites, there appears to be more than five thousand owner-managed vacation rental properties in Hawaii. That number dwarfs our membership numbers so we know there are a lot of owners out there who might not be aware of RBOAA, not aware of all the good work we have done, and all of the good we will continue to do on your behalf.
We need to grow our membership in order to continue on as we have in the past. Please ask anyone you know who owns a vacation rental property to visit our web site www.rboaa.org and become a member or make a donation today. We all have neighbors, friends, or maybe even family who would benefit. Please don’t assume they are aware of RBOAA. We are all in this together and all of you can act as a small army of recruiters. Please do your part and help us spread the word.
Help us make sure everyone who self manages a vacation rental property in Hawaii is aware of the opposition we all face and that RBOAA is here to help.
So please, right now, please renew your membership at www.rboaa.org and/or click on the “Donate — Click Here” button.
Remember, none of your executive team is paid – we are all volunteers.
3. Act 204 Took Effect January 1, 2016. Make sure you are in compliance today.
The full details of Act 204 are available on our website at www.rboaa.org. The key summary points are:
• If you don’t live on the same island as your vacation rental, you need to name a Local Contact and you must identify your Local Contact by name, phone number and email address to your guests before they check in and within the rental property. Your local contact does not need to be a real estate agent unless he/she is performing tasks for which a real estate license is required (e.g. collecting rent on your behalf).
• You must post your Hawaii Tax ID number (your TAT ID number) conspicuously in all advertisements and in your rental
We are still – yes – still – waiting for the detailed rules from the DoT as to how they will enforce and interpret Act 204. We will send that along to you when we get it.
4. Specific Regulations for each County
RBOAA’s mandate is focused at the State of Hawaii level, and to consider certain issues which bridge the County level and the State level.It is very important for you to know that each county in Hawaii has its own regulations (or lack thereof) for zoning and permitting of vacation rentals. Please visit the County Regulations page on the RBOAA website, https://www.rboaa.org/county-regulations/ to check for regulations and upcoming potential regulations. The onus is on you, as owner, to ensure you are in compliance with all regulations – state, county and HOA.
We recently updated the page with information on all counties.
We will do our best to keep this page up to date, but we can’t promise it is always up to date. If you have specific questions about county regulations which you can’t answer from our website, please contact the county. RBOAA simply does not have the volunteer resources to answer questions on specific county regulations.