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March 30, 2018 — Update

Aloha

In this edition:

  1. Legislature Update
  2. Fake News
  3. County Update

It’s been a while since we have sent out a newsletter.One of the downsides of having a full time job which sometimes becomes a “very full” full time job is that I can’t always dedicate all my time to RBOAA.Be assured, we are still watching and responding to all the bills as they come up

1. Legislature Update

There are three main bills we are currently dealing with.  The bill to require local contacts to be real estate agents fortunately was defeated quickly.

SB2963 / HB 2605

This is the latest incarnation of the AirBnB bill, allowing the advertising platform to collect and remit taxes on the owners’ behalf.  It has been around for 3 or 4 years now, always failing to pass.  This year however, the bill took on a lot of additional provisions, including the right of counties to obtain your personal tax information, the right for counties to change the zoning to declare a property to be ineligible for vacation rentals and then seize the property, and requiring AirBnb & Homeaway to immediately cease doing business with any owner who isn’t compliant with all regulations.  The bill originally had language creating a felony for non-compliance, but that has changed to a $25,000 fine.  So, it is all quite frightening really.

What is interesting is that AirBnB has publicly backed away from the bill.  Additionally, the House committees so far have declined to consider the bill.  In response to the House inaction, the Senate has now twice taken a bill, removed all the language and replaced it with the language they want.  This incredibly undemocratic move is referred to as “gut and stuff”.   But they did this in order to force a showdown with the House when the bills go to conference.

Those of you who list with VRBO and Homeaway would have received an email a few weeks ago about this bill.  We are pleased that Homeaway, after many years of ignored requests from RBOAA, finally stepped up to support the advertisers.  Their message unfortunately came out too late for anyone to do anything.

The Bill is next scheduled to be heard on Tuesday April 3.  We have no doubt it will pass the committee as the chair of the committee has been instrumental in keeping this bill alive.  Keep reading as we do have a small request of you.

Here is why we are concerned about this bill:

  1. The advertising broker ( i.e. AirBnB) may collect and remit tax on behalf of all advertisers.  However, if they mess up, AirBnB and the owner are jointly and severally liable for all taxes.  So, if AirBnB collects TAT and doesn’t remit it, you are potentially on the hook.
  2. The bill also requires AirBnb to provide details of how many nights were rented, the rates per night, the address and name and number of the local contact – and this information can be made available to the Counties.  The County of Honolulu has been asking for this for years to help detect compliance with their complex permitting requirements.  No other tax payer is required to provide this level of information without a subpoena.
  3. The advertising broker is required to share your 1099 information with the county.  The State Department of Tax is, by federal law, strictly forbidden to release this information to anyone.  The bill requires all operators to waive their right of privacy and permit the advertising platform to share all of their information.  (Facebook didn’t ask, but you knew they were doing it anyways!)
  4. All operators must provide proof of compliance with all zoning, land use and tax laws.  Our concern here is in providing positive proof of compliance – how do you prove you are legal in every regard.  The Counties have no system to accommodate this.
  5. Failure to comply with any tax or zoning law – or commit any act which the county doesn’t like - may result in a fine of $25000.  Failure to respond within 7 days results in a second $25,000 fine.  This is better than the earlier draft which was a Class C Felony (more than one year in prison).  The bill also provides for not only seizure of the property but also all income earned from operating a vacation rental.
  6. The bill also allows counties to phase out all transient accommodation in any zone for any reason.  This is concerning as county councils and the state legislators are very prone to pressure from unions, neighborhood groups, and anyone else who might vote.
  7. An amnesty program which was in an original draft has been deleted.  If people want to come in from the cold, it helps if you hold the door open for them.

RBOAA is actively opposing this bill, but, we need your help.While we know that the bill will pass through the next committee, we want to let the legislators know that there is opposition to this bill.This will help us at the next stage.

Please, sometime before 10 AM, Hawaiian time April 2, 2018,

  1. Go to https://www.capitol.hawaii.gov/submittestimony.aspx
  2. You will need to sign in / create a sign in, and then enter HB2605
  3. At the very least, click on the button which says Oppose.  If you want to write any comments, you can say you support the testimony provided by RBOOA or you can write any comment you want.  Please keep it polite!

SB2922

The Hawaii Teachers union has once again brought forward the Constitutional Amendment to require the TAT to be increased in order to fund education in the State of Hawaii.We saw this one go right to the bitter end last year before ultimately failing so that the TAT could be increased to pay for the Honolulu rail system. It is hard to get a read on the support, or lack thereof, for this bill at the Legislature, but taxing visitors is politically popular in an election year as most of them don’t vote.

There are a couple other bills still being considered.

One would change the way properties owned by non-residents are taxed upon sale.When you sell a property, a percentage of the sales proceeds is withheld until you file your tax returns or other required forms.The rate will go up and the legislators believe this will increase tax revenue. It is just a temporary increase as you get a refund for any overpayment.The proposal is silly, but perhaps looks good to those who don’t understand tax.

Another bill clarifies that all amounts charged to transient vacation rental guests are subject to TAT.It seems some hotels are charging a resort fee but not collecting tax on the resort fee.RBOAA supports the hotels being required to play on a level playing field with vacation rental owners.

Speaking of hotels, they have had seven consecutive years of increased occupancies and increased room rates.Each of the past seven years has broken all historical records.Yet they are very concerned that we are providing competition to them.

2. Fake News

One of the sad truths of our age is that anyone can say anything and with the benefit of social media and under-staffed media outlets, it can be picked up and spread around without any sort of fact checking.

A social housing group in Hawaii did just that recently, releasing a report which said, amongst many other “facts” that 1 in 7 properties in Maui was a vacation rental.  The real number is closer to 1%.  They made similar fake facts about other islands.  Fortunately, they referenced various reports and surveys and even a very quick look at those sources made it clear that their statements were staggeringly untrue – some of the footnotes contradicted the body of the report.  A junior high student would have received a failing grade if he/she had turned in that paper.  Unfortunately, the original fake news story got a lot of play in the mainstream media (including Fox News) before the counties came out and issued comments.  An F for the Appleseed Center.

3. County Update

At RBOAA, we are focused on the state legislature.  We would love to be able to be involved at the county level as well, but, simply put, we need volunteers to take that on.

This isn’t just our normal plea for volunteers.  As we have been saying for many years now, the fight is going to move from the state to the counties.  We are seeing this increasingly become true.  The state is going to be taking some of the TAT revenues it gets and giving it to the counties to enforce their regulations.  So, more and more, the counties are going to play a significant role.

Here is what some our eagle-eyed members have shared with us recently:

Maui recently passed a bylaw which requires a property to be owned for five years before it can be turned into a vacation rental.  We think this only applies to properties which have never been legal vacation rentals in the past and is primarily focused on restricting growth of vacation rentals in residential areas.  Most vacation rentals on Maui are in “resort zones” and would be unaffected by the new rules.

Maui is also creating a new property classification for vacation rentals.  The rate hasn’t been set, but as my place is on Maui, I know that I already pay significantly higher property taxes than an identical property which is not a vacation rental.  [On Maui, one of the lowest property tax rates is actually reserved for hotels.]

We expect all counties will come up with a new property tax classification for short term rentals.

On the Big Island, the county council was considering a regulatory framework around vacation rentals on the island.  The proposal hit a bit of an obstacle, but in general, the proposals were fair and balanced.  Not perfect, but a good starting point.  Hopefully the proposals come back for further reasoned discussion.

On Honolulu, there are proposals to restrict the number of B&B’s in residential neighborhoods.  Also, one condo association in Waikiki is trying to eliminate vacation rentals from their complex, despite a having permitted vacation rentals since it was built.  Sounds like the owners in that complex need to get themselves organized for their next AGM!

Please remember that everyone at RBOAA is a volunteer and is donating their time on top of working regular paying jobs and whatever else they have going on.  These people dedicate countless hours of their personal time to help protect our - and your – investments in Hawaii.

Please show your appreciation to our team by going to the website and clicking on the DONATE button.

Mahalo and Aloha

Neal

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