§235-68  Withholding of tax on thedisposition of real property by nonresident persons.  (a)  As used in thissection:

"Nonresident person" means everyperson other than a resident person.

"Property" or "realproperty" has the meaning as the same term is defined in section 231-1.

"Resident person" means any:

(1)  Individual included in the definition of residentin section 235-1;

(2)  Corporation incorporated or granted a certificateof authority under chapter 414, 414D, or 415A;

(3)  Partnership formed or registered under chapter425 or 425E;

(4)  Foreign partnership qualified to transactbusiness pursuant to chapter 425 or 425E;

(5)  Limited liability company formed under chapter428 or any foreign limited liability company registered under chapter 428;provided that if a single member limited liability company has not elected tobe taxed as a corporation, the single member limited liability company shall bedisregarded for purposes of this section and this section shall be applied asif the sole member is the transferor;

(6)  Limited liability partnership formed underchapter 425;

(7)  Foreign limited liability partnership qualifiedto transact business under chapter 425;

(8)  Trust included in the definition of residenttrust in section 235-1; or

(9)  Estate included in the definition of residentestate in section 235-1.

"Transferee" means any person, theState and the counties and their respective subdivisions, agencies,authorities, and boards, acquiring real property which is located in Hawaii.

"Transferor" means any persondisposing real property that is located in Hawaii.

(b)  Unless otherwise provided in this section,every transferee shall deduct and withhold a tax equal to five per cent of theamount realized on the disposition of Hawaii real property.  Every personrequired to withhold a tax under this section is made liable for the tax and isrelieved of liability for or upon the claim or demand of any other person forthe amount of any payments to the department made in accordance with this section.

(c)  Every transferee required by this sectionto withhold tax under subsection (b) shall make a return of the amount withheldto the department of taxation not more than twenty days following the transferdate.

(d)  No person shall be required to deduct andwithhold any amount under subsection (b), if the transferor furnishes to thetransferee an affidavit by the transferor stating the transferor's taxpayeridentification number and:

(1)  The transferor is a resident person; or

(2)  That by reason of a nonrecognition provision ofthe Internal Revenue Code as operative under this chapter or the provisions ofany United States treaty, the transferor is not required to recognize any gainor loss with respect to the transfer;

(3)  A brief description of the transfer; and

(4)  A brief summary of the law and facts supportingthe claim that recognition of gain or loss is not required with respect to thetransfer.

This subsection shall not apply if the transfereehas actual knowledge that the affidavit referred to in this subsection isfalse.

(e)  An application for a withholdingcertificate may be submitted by the transferor to the department setting forth:

(1)  The name, address, and taxpayer identificationnumber, if any, of the parties to the transaction and the location and generaldescription of the real property to be transferred; and

(2)  A calculation and written justification showingthat the transferor will not realize any gain with respect to the transfer; or

(3)  A calculation and written justification showingthat there will be insufficient proceeds to pay the withholding required undersubsection (b) after payment of all costs, including selling expenses and theamount of any mortgage or lien secured by the property.

Upon receipt of the application, the departmentshall determine whether the transferor has realized or will realize any gainwith respect to the transfer, or whether there will be insufficient proceeds topay the withholding.  If the department is satisfied that no gain will be realizedor that there will be insufficient proceeds to pay the withholding, it shallissue a withholding certificate stating the amount to be withheld, if any.

The submission of an application for awithholding certificate to the department does not relieve the transferee ofits obligation to withhold or to make a return of the tax under subsections (b)and (c).

(f)  No person shall be required to deduct andwithhold any amount under subsection (b) if one or more individual transferorsfurnishes to the transferee an affidavit by the transferor stating thetransferor's taxpayer identification number, that for the year preceding thedate of the transfer the property has been used by the transferor as aprincipal residence, and that the amount realized for the property does notexceed $300,000.

(g)  The department may enter into writtenagreements with persons who engage in more than one real property transactionin a calendar year or other persons to whom meeting the withholdingrequirements of this section are not practicable.  The written agreements mayallow the use of a withholding method other than that prescribed by thissection or may waive the withholding requirement under this section. [L 1990, c213, §1; am L 1991, c 279, §1; am L 1995, c 92, §8; am L 1997, c 178, §2; am L2002, c 40, §6; am L 2003, c 210, §3; am L 2005, c 23, §1]

 

Note

 

  Chapter 415 referred to in definition of "residentperson" is repealed.  For present provisions, see chapter 414.

  Effective July 1, 2002, chapter 415B referred to indefinition of "resident person" is repealed.  For provisionseffective July 1, 2002, see chapter 414D.

  L 2005, c 23, §3 provides:

  "SECTION 3.  This Act shall take effect upon itsapproval [April 22, 2005] and apply to taxable years beginning after December31, 2004; provided that nothing in this Act shall be construed to create anyinference with respect to the proper tax treatment of single member limitedliability companies for taxable years prior to the taxable year beginning onJanuary 1, 2005."