SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

TRANSIENT VACATION RENTALS

§ -1 Definitions. As used in this chapter:

"Application" or "app" means a type of software that allows access to an online rental service provider.

"Bed and breakfast establishment" or "bed and breakfast home" means a single-family dwelling occupied by an owner or a guest house let for consideration for less than thirty days.

"Department" means the department of commerce and consumer affairs.

"Director" means the director of commerce and consumer affairs.

"Dwelling" means:

(1) A single-family dwelling unit;

(2) A multi-family dwelling unit;

(3) A bed and breakfast establishment or bed and breakfast home; and

(4) An "apartment" defined in section 514A-3 or "unit" defined in section 514B-3 that is not part of a hotel-condominium defined in section 486K-1.

"Let" means to rent a transient vacation rental for compensation or fees.

"Local contact" means the owner or an operator, lessee, or any individual or company, contracted by the owner or lessee, residing on or having a principal place of business on the same island where the transient vacation rental property is located who shall be available on a twenty-four-hour, seven-days-per-week basis.

"Lodging" means temporary sleeping accommodations in a dwelling or portion of a dwelling.

"Nongovernmental entity" includes an association of homeowners, a community association, association of apartment owners as defined in section 514A-3, and board or board of directors as defined in section 514B-3.

"Online rental service provider" means any company, organization, club, group, or application that offers a transient vacation rental service via the Internet.

"Owner" means the grantee in the deed and instrument for the transient vacation rental recorded in the bureau of conveyances.

"Transient" means any person who rents or uses a transient vacation rental for compensation or fees for less than thirty days.

"Transient vacation rental" means a dwelling or lodging located in the State let by an owner, operator, or lessee for compensation or fees, including club fees, for less than thirty days. Transient vacation rental does not include any facility owned or used by a government agency or a tenement home, group home, group residence, group living arrangement, boarding house, or rooming house certified pursuant to section 445-94.

§ -2 Powers and duties of the director. In addition to any other powers and duties authorized by law, the director may:

(1) Grant licenses to transient vacation rental owners pursuant to this chapter;

(2) Adopt, amend, or repeal rules as the director deems proper to fully effectuate this chapter;

(3) Fine, suspend, terminate, or revoke any license for any cause prescribed by this chapter, or for any violation of the rules, and refuse to grant any license for any cause which would be grounds for revocation, termination, or suspension of a license; and

(4) Investigate the actions of any unlicensed person acting or alleged to be acting in the capacity of a licensee under this chapter.

§ -3 License; requirements; renewal. (a) No transient vacation rental shall operate or do business in this State without the owner first obtaining a license under this chapter. The application for a license shall be submitted on forms prescribed by the director and with the appropriate fees, prescribed by the director, which shall be deposited into the compliance resolution fund under section 26-9(o).

(b) The application shall include:

(1) The address and tax map key number of the transient vacation rental;

(2) The name, address, and contact information of the owner of the transient vacation rental;

(3) The name, phone number, and address of the local contact for the transient vacation rental;

(4) The name, address, and contact information of any nongovernmental entity with authority over the property on which the transient vacation rental is located, along with a copy of the covenants, by-laws, and administrative provisions with which compliance of the transient vacation rental is required;

(5) Proof of compliance with county ordinances relating to the regulation of transient vacation rentals, including any registration number, license, permit, special use permit, or non-conforming use permit that may be required by the county;

(6) The account number and the name of the financial institution at which the client trust account required by section -6 is held;

(7) Submission of:

(A) The general excise tax license number issued pursuant to chapter 237;

(B) The transient accommodations tax registration number issued pursuant to chapter 237D; and

(C) The general excise tax and transient accommodations tax filings for the previous two years, for any transient vacation rental existing on the effective date of this Act for which the applicant is the owner; and

(8) The name of the application or app, name of the online rental service provider or providers, the address of any website on the Internet, or other means of mass communications being utilized for advertisements or solicitations of the transient vacation rental.

The owner shall notify the department within sixty days of any change in the information required by this subsection.

(c) The owner of a transient vacation rental shall renew its license each year on or before December 31 on a form provided by the department, which shall provide the owner an opportunity to verify or update the information required in subsection (b).

(d) No license may be assigned, sold, leased, encumbered, or otherwise transferred, except upon the written application to and approval by the director.

§ -4 Issuance of license and seal; provision of information to the county. (a) Each license shall be in a form prescribed and signed by the director, and issued in the name of the department with an official seal as evidence of the validity of the license.

(b) The department shall maintain and annually update a list of the licensed transient vacation rentals, and shall provide the county agency charged with the administration of county zoning laws all the information required by section -3 regarding the transient vacation rentals licensed in the county.

§ -5 Transient vacation rentals; requirements. (a) The owner or lessor of a transient vacation rental shall:

(1) Prominently post the name and phone number of the local contact in the transient vacation rental, and include the information in any transient vacation rental contract or rental agreement; and

(2) Include the license number and official seal of the transient vacation rental in any advertisements or solicitations of the transient vacation rental through an online rental service provider, an application or app, or other means of mass communication.

(b) The owner shall submit to the applicable nongovernmental entity all covenants, bylaws, and administrative provisions with which the owner�s compliance is required for the property on which the transient vacation rental is located, along with the following:

(1) The address of the transient vacation rental;

(2) The name, address, and contact information of the owner of the transient vacation rental, and license number of the transient vacation rental; and

(3) The name, phone number, and address of the local contact, who shall be available on a twenty-four-hour, seven-days-per-week basis.

The owner shall notify and provide updated information to the nongovernmental entity within sixty calendar days of any change in the required information.

(c) The owner shall comply with all county ordinances relating to the posting of information in the transient vacation rental, posting of signs, provision of safety information, parking, notification of neighbors, and other requirements required by the county.

§ -6 Client trust account. (a) Each owner of a transient vacation rental licensed under this chapter shall establish a client trust account in a federally insured financial institution located in Hawaii into which shall be deposited all sums received from a consumer for transient vacation rental services. The trust account shall be established and maintained for the protection of the consumers paying the money to the owner of the transient vacation rental. The moneys in the account shall not be encumbered except for partial or full payment for the provision of the transient vacation rental purchased or to make refunds for services not performed, less any amounts for cancellation fees that were previously disclosed to the consumer.

(b) The owner of a transient vacation rental shall maintain all books and records necessary to comply with this chapter and the rules adopted by the department. The owner shall keep and maintain for a period of at least two years copies of all bank statements, deposit slips, canceled checks, drafts, and wire or electronic transaction documents relating to client trust accounts. The owner shall make such records available for inspection and audit within three business days of a written request by the director or the officer or agency charged with the administration of county zoning laws or the licensing of transient vacation rentals.

§ -7 Prohibited acts. (a) No owner of a transient vacation rental shall:

(1) Sell or advertise a transient vacation rental located in the State of Hawaii without first being licensed by the director under this chapter and including the license number and official seal in any advertisement or solicitation of the transient vacation rental;

(2) Conduct business as a licensed transient vacation rental without establishing and maintaining a client trust account, as required in section -6; or

(3) Otherwise violate any of the provisions of this chapter or rules adopted pursuant to this chapter.

(b) Any advertisement or written, graphic, or oral statement in connection with the solicitation of business for a transient vacation rental through an online rental service provider, an application or app, or other means of mass communication is prima facie evidence of the selling, advertising, or conducting of business of a transient vacation rental.

§ -8 Enforcement; inspection. (a) The director may contract with qualified persons, including investigators, who shall be exempt from chapter 76, or delegate to the agency charged with the administration of county zoning laws to enforce this chapter.

(b) The officer or agent of the department or officer or agent of the agency charged with the administration of county zoning laws delegated by the department to enforce this chapter shall have the power to serve and execute warrants or issue citations to enforce any of the provisions of this chapter.

(c) Any employee or agent of the department or officer or agent of the county charged with the administration of county zoning laws delegated by the department to enforce this chapter or the terms and conditions for licensing of transient vacation rentals under this chapter, upon written notification to the owner or local contact for the transient vacation rental, may enter upon, cross over, be upon, or remain upon privately owned land for the purpose of:

(1) Investigating and enforcing the compliance of the transient vacation rental with this chapter; and

(2) Investigating and enforcing the compliance of the vacation rental with the ordinances of the county in which the transient vacation rental is located.

(d) The employee or agent of the department or officer or agent of the county charged with the administration of county zoning laws delegated by the department to enforce this chapter shall have the powers and duties deemed necessary for the efficient and effective enforcement of this chapter. Whenever the employee or agent of the department or officer or agent of the county is refused entry upon land or to a building for the purpose of inspection under this section, the department or county may make a complaint to the district judge in whose circuit the land or building is located, and the district judge may thereupon issue a warrant, directed to any police officer of the circuit, commanding the police officer to render sufficient assistance to the employee or agent. Whenever the existence of an illegal operation is discovered by an inspection under this section, the judge in whose circuit the land or building is located shall allow a writ of injunction to abate and prevent the continuance of the illegal operation.

(e) The owner shall be required to pay an amount estimated to be necessary to cover the actual expenses of the inspection. The department or the county agency delegated to enforce this chapter shall establish by rule a fee schedule of reasonable expenses, which may include expenses for travel time and costs, time for the inspection of transient vacation rentals, and administrative costs for the enforcement of compliance with applicable state and county laws and ordinances.

(f) The penalties and fees for expenses collected by a county agency delegated by the department to enforce this chapter shall be realizations of the county enforcing this chapter to be deposited into a fund established by the county agency delegated by the department to enforce this chapter for the purpose of enforcing this chapter. The revenues from the penalties and fees collected by the county enforcing this chapter shall be deemed to satisfy article VIII, section 5, of the state constitution.

§ -9 Penalty. Any owner of a transient vacation rental who fails to comply with this chapter shall pay a civil penalty of $10,000 for each separate offense; provided that following a warning issued by the director or an agent of the county charged with the enforcement of this chapter, the owner shall be subject to a fine of $2,000 for each separate offense."

SECTION 2. Section 237D-1, Hawaii Revised Statutes, is amended as follows:

1. By amending the definition of "gross rental" or "gross rental proceeds" to read:

""Gross rental" or "gross rental proceeds" means the gross receipts, including club fees, cash or accrued, of the taxpayer received as compensation for the furnishing of transient accommodations and the value proceeding or accruing from the furnishing of such accommodations without any deductions on account of the cost of property or services sold, the cost of materials used, labor cost, taxes, royalties, interest, discounts, or any other expenses whatsoever. Every taxpayer shall be presumed to be dealing on a cash basis unless the taxpayer proves to the satisfaction of the department of taxation that the taxpayer is dealing on an accrual basis and the taxpayer's books are so kept, or unless the taxpayer employs or is required to employ the accrual basis for the purposes of the tax imposed by chapter 237 for any taxable year in which event the taxpayer shall report the taxpayer's gross income for the purposes of this chapter on the accrual basis for the same period.

The words "gross rental" or "gross rental proceeds" shall not be construed to include the amounts of taxes imposed by chapter 237 or this chapter on operators of transient accommodations and passed on, collected, and received from the consumer as part of the receipts received as compensation for the furnishing of transient accommodations. Where transient accommodations are furnished through arrangements made by a travel agency or tour packager at noncommissionable negotiated contract rates and the gross income is divided between the operator of transient accommodations on the one hand and the travel agency or tour packager on the other hand, gross rental or gross rental proceeds to the operator means only the respective portion allocated or distributed to the operator, and no more. For purposes of this definition, where the operator maintains a schedule of rates for identifiable groups of individuals, such as kamaainas, upon which the accommodations are leased, let, or rented, gross rental or gross rental proceeds means the receipts collected and received based upon the scheduled rates and recorded as receipts in its books and records."

2. By amending the definition of "transient accommodations" to read:

""Transient accommodations" means the furnishing of a room, apartment, suite, or the like which is customarily occupied by a transient for less than one hundred eighty consecutive days for each letting by a hotel, apartment hotel, motel, [condominium property regime or apartment as defined in chapter 514A or unit as defined in chapter 514B, cooperative apartment, or rooming house that provides living quarters, sleeping, or housekeeping accommodations,] condominium hotel as defined in section 467-30, transient vacation rental as defined in section -1, or other place in which lodgings are regularly furnished to transients for consideration."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on January 1, 2016.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	825
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII