Aloha from the President of RBOAA.
The legislative session has completed the first two weeks of the session and a lot of dust has settled, and so I wanted to provide you with an update In this edition:
- New Regulations Effective January 1, 2016.
- Proposed Bills as at January 31, 2016.
- RBOAA Funding and Membership Drive.
1. Act 204 Took Effect January 1, 2016. Make sure you are in compliance today. We know that the media is checking and some of you are not in compliance!
The full details of Act 204 are available on this website.
- 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
- You must post your Hawaii Tax ID number (your TAT ID number) conspicuously in all advertisements and in your rental
If you have any questions, RBOAA recommends you contact the Hawaii Department of Taxation. The DoT will shortly be issuing some information about how they are going to administer the new rules and I will send that along to you when I get it.
2. Proposed Bills
- Licensing and Regulation. Most significantly, the bills which were designed to make Vacation Rentals a regulated industry did not progress. The primary reason they didn’t move forward is that the Legislators are waiting to see how Act 204 (2015) is enacted and to what degree it resolves the tax collection issues. However, as we suggested earlier this year, the pressure from the Counties can really be seen in the bills which are moving forward. They are very focused on rentals who are not in compliance with county zoning and who are not paying property taxes.
- Increase in TAT and GET. We are also seeing a number of bills which will increase both the TAT and the GET rates – by as much as 100%. Hopefully, economic common sense will prevail, but tourists are a politically expedient way to raise taxes. Here are the bills we are watching closely and providing testimony on. [For those who want to read the bills, they can be viewed at http://www.capitol.hawaii.gov/. Enter the bill number into the box “Bill Status/Measure Status”]
- Zoning. The current wording would allow counties to phase out nonconforming single-family transient vacation rental units in any zoning classification. The counties are all in support of this, as are the hotel unions. No surprise as we have seen the strong opposition that residents of high end neighborhoods in Kailua, Maui and Kauai have mounted against vacation rentals. RBOAA has strongly opposed these bills as they violate property owners’ rights to use their property. We have also proposed amendments designed to mitigate the impact of these bills, if passed. To date, we know the bill is moving forward with unknown amendments. SB2123 / HB1646/HB1573
- Property Manager Monopoly. None of these bills are currently moving forward.
- Advertising Platforms as Tax Collection Agents. Last time, we told you about a bill allowing property managers to be licensed to collect and remit taxes. As it turns out, the bill was put forward by AirBnB and is needed in order to ratify an agreement tentatively signed between AirBnB and the State of Hawaii. In principle, RBOAA agrees with the intent of the bill as we believe that a measure which allows the State to collect taxes efficiently and without an added administrative or regulatory burden on us, as owners, is a good thing. As it is written currently, an advertising platform has the option to join in or not. So, AirBnB will certainly take part, but I don’t know if VRBO or FlipKey will take part. My hunch is they would not want the potential liability associated with not remitting the correct amount of tax. I don’t know if the Property Managers will or not. What does this mean to you? If you are with an advertising platform that signs on to this program, they will collect and remit GET and TAT on your behalf. You would be responsible for GET and TAT on any bookings you do outside of that platform. So, if you are exclusively with AirBnB, they will handle all your GET and TAT. If you are with VRBO and with AirBnB, AirBnB will handle only the portion booked through them and you would handle the rest. Do I give up control? Some people have argued that the owner gives up some control by having someone else collect and remit taxes on their behalf. I don’t buy that argument as, quite simply, you don’t have any control over collecting and remitting taxes now – you have to do it! What is the risk? The main risk is that the wording may get changed to compel all advertising platforms to act as tax collectors which will be burdensome for the small platforms. The other big risk is that property managers and real estate agents may start to advertise that we “must” sign up with an advertising platform that is a tax collection agent. We have previously seen this type of false advertising with realtors sending out advertisements saying we need to hire a realtor to be the local contact – which we know is not, and never was, the law. However, I am sure they got some clients by using that scare tactic. RBOAA has testified in general support of the proposed legislation. The bill, as written, is far from perfect and has some major loopholes written into it. But, it is a step in the right direction. We have asked for amendments to address our concerns, but so far, those amendments have not been accepted. HB1850/SB2693
- TAT Rates – there is a bill which would allow the counties to set their own TAT rates. The current proposal is to allow counties to match the current TAT tax rate imposed by the State. RBOAA testimony has drawn from Economics 101 and has pointed out tourists have a choice about where they go. Currently, the Hawaii hotel tax rate is comparable to Florida’s, but doubling the rate would be uncompetitive. HB1584/SB2286 There are also a couple bills around which could raise the statewide GET rate and one which would eliminate it for businesses with under $50,000 of revenue. We will see where those go.
3. Funding and Membership We invested over $30,000 on legal and lobbying fees last year and while that seems like a lot, we had a very positive final outcome, so the investment was worthwhile and essential. However, in doing so, we spent every penny you donated last year and so we started this year with an empty bank account. We are working on a new strategy with our lobbyists to contain the fees this year, but to some extent, the costs we incur are driven by how aggressive our opponents are. I believe that we will spend far less money this year than we did last year, however, we will need to invest some money again this year.
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. It is crucial to our common cause that we have the funds we need to let our voice be heard and to fight when we need to. We all have made large investments in Hawaii and we have to fight to preserve our right to self-manage our properties without unnecessary regulation. A small monetary investment from all of you will go a long way to ensuring that. 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.
You will find a printable brochure on www.rboaa.org that you can print and distribute, you can mention us at any meetings you and your fellow owners may have, and you can send emails to anyone who might benefit from helping us prevent our opponents putting an end to our rights as vacation property owners. Spread the word today!! A $100 or $200 investment in RBOAA could save you thousands in increased annual costs in the future and could protect your investment in Hawaii. So please, right now, please renew your membership at www.rboaa.org and click on the “Donate — Click Here” button. Remember, none of your executive is paid – we are all volunteers.
Thank you for your continued support.