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Committee defers bill to let low-income housing tax credits offset state transient accommodations tax
Summary
A joint House committee deferred HB916, which would let state low-income housing tax credits offset transient accommodations tax (TAT) liabilities in the county where a qualified project is located, after tax officials warned of administration and consumer-protection risks.
The joint hearing of the House Committee on Tourism and the House Committee on Economic Development and Technology on Feb. 11, 2025, deferred House Bill 916, which would allow tax credits under the state's low-income housing tax credit program to be used to offset state transient accommodations tax (TAT) liabilities in the county where a qualified low-income building is located and would make Act 129 permanent.
The bill drew caution from the Department of Taxation and the Tax Foundation of Hawaii. Eliza, Department of Taxation, said, "this bill poses very significant challenges to administer and would create a more complex tax system for everybody." She added, "tracking and verifying a income tax credit that is given to an entity that flows through to individuals and investors and then is gone through to a TAT account would be, very difficult and makes it susceptible to abuse." Eliza also warned the measure "would create a tax credit for someone who didn't pay this tax." The Tax Foundation's Jade McMillan noted potential consumer-protection issues if taxpayers pass on TAT and then seek credit to offset taxes collected.
The bill text would restrict credits applied against TAT to amounts imposed in the same county as the qualified low-income building and would make Act 129 permanent. HHFDC (listed as a supporter) was scheduled to testify but did not appear; the Department of Business, Economic Development & Tourism (DBEDT) was noted on the record. The committee received written testimony showing eight submissions in support and one in opposition for the related items on the overall agenda.
At the reconvened hearing the chair recommended deferral, saying the proposal "needs more time to work" and encouraged the Department of Taxation and DBEDT to coordinate on possible paths forward. The chair's recommendation to defer was adopted. The committee did not take a final vote on policy language or report a substitute; the measure was deferred for further consideration.
The record shows substantive concerns from tax administrators about program design and verification; the committee signaled it wants agency collaboration before advancing the bill.
