Wednesday, May 16, 2012

Hawaii State Legislature Passes House Bill 2078

Sunset Over Maui
photo by Roseanna Metge

House Bill 2078, C.D.1, was passed by the Hawaii State Legislature May 1, 2012 with twenty-three yeas and two noes, and now awaits Governor Abercrombie's signature. Hawaii has been roiling with dissension since January 2012 over proposed legislation that would affect tourism, specifically the cottage industry of vacation rentals. Thousands of properties are second homes or investments for people who don't live on the islands, and the legislation aimed to regulate them. Hundreds of people submitted testimony objecting to the bills, which eventually morphed into HB 2078. The law will be effective July 1, 2012, expire December 31, 2015, and anyone who willfully disobeys it will face a stiff penalty, a fine up to $25,000.

Hawaii's Transient Vacation Rental Industry

Akaka Falls, photo by Brianna Rogers via pinmarklet
The bill deleted a controversial requirement of owners to hire a real estate property manager, however identity theft and crime are still a concern. The bill "requires that all advertisements and solicitations on websites for transient accommodations display registration identification numbers," which can be cross-referenced to discover contact information and property addresses. During the hearings, Senator Rosalyn Baker, author and proponent of the bills, was under the impression that there were two numbers for each taxpayer, the GE/TA tax number and the registration number, causing her to dismiss the owners' objections about the potential loss of privacy. After the bill passed, she stated May 9, 2012 that the "Certificate of Registration number and license number are apparently used interchangeably by the Department [of Taxation]." She apologized for her confusion, but still believed that because the numbers aren't based on social security numbers, identity theft wouldn't occur.

However, attorney Greg Kugle disagrees. "Contrary to Senator Baker’s claim that this will not raise security or identity theft issues, publication of the GET number would allow someone with a computer to quickly access the tax records, from which they could learn the owner's name and the street address," he said. "This could allow a would-be burglar to know that a house is a rental and not constantly occupied. It could also allow someone to run rental scams as has occurred in the past, where a non-owner purports to rent a house and obtains a security deposit from would-be tenants."
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The law also would require operators to furnish the name and contact information of a local agent in any written rental agreement and also post it inside the property, plus notify any association of homeowners, community association, condo association, co-op, or other similar entity about the local agent. The Landlord-Tenant Code already requires a landlord who lives off-island to designate a local agent to watch over the property, and the new bill is trying to make the transient accommodations tax (TAT) law consistent with the Code.

The issues aren't new, but contention in the vacation rental industry has been exacerbated since the advent of the internet. Owners can easily rent their homes to visitors online through websites like Vacation Rental By Owner and Homeaway, and local property managers have lost business to the self-managers. Unsubstantiated accusations claiming owners were evading paying their GE/TA taxes also motivated the legislature.

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  1. Thank you for clarifying the definition and/or intetion of "registration number." As a vacation rental owner I was struggling with finding out what that actually meant, and after reading the possible implications of identity theft, I don't think I'm going to post my GET/TAT licence number on any of my advertising sites. It seems incredibly irresponsible of the lawmakers to have overlooked this through ignorance.

  2. Anonymous: July 1, 2012
    Does anyone know if this bill is in effect now?
    Has it been signed into law??
    Do we have to have a Hawaii property manager??

    AS I understand it all we currently need is to put the TAT tax I.D # on
    the internet ads, and have a local contact, which we had anyway! You have to have someone local to take care of problems, repairs, etc.

    I have been looking for answers for the last 3 days since Homeaway alerted us to this bill. If not for them, I would never have known this was going on. How do they expect us to find out about these things?

  3. I just called Governor Abercrombie's office and was told that he has until July 10, 2012 to either sign or veto the bill, and that he is still in the process of consideration. If he doesn't do anything, the bill will become law.