§237-23  Exemptions, persons exempt,applications for exemption.  (a)  This chapter shall not apply to thefollowing persons:

(1)  Public service companies as that term is definedin section 239-2, with respect to the gross income, either actual gross incomeor gross income estimated and adjusted, that is included in the measure of thetax imposed by chapter 239;

(2)  Public utilities owned and operated by the Stateor any county, or other political subdivision thereof;

(3)  Fraternal benefit societies, orders, orassociations, operating under the lodge system, or for the exclusive benefit ofthe members of the fraternity itself, operating under the lodge system, andproviding for the payment of death, sick, accident, prepaid legal services, orother benefits to the members of the societies, orders, or associations, and totheir dependents;

(4)  Corporations, associations, trusts, or societiesorganized and operated exclusively for religious, charitable, scientific, oreducational purposes, as well as that of operating senior citizens housingfacilities qualifying for a loan under the laws of the United States asauthorized by section 202 of the Housing Act of 1959, as amended, as well asthat of operating a prepaid legal services plan, as well as that of operatingor managing a homeless facility, or any other program for the homelessauthorized under part VII of chapter 356D;

(5)  Business leagues, chambers of commerce, boards oftrade, civic leagues, agricultural and horticultural organizations, andorganizations operated exclusively for the benefit of the community and for thepromotion of social welfare that shall include the operation of a prepaid legalservice plan, and from which no profit inures to the benefit of any privatestockholder or individual;

(6)  Hospitals, infirmaries, and sanitaria;

(7)  Cooperative associations incorporated underchapter 421 or Code section 521 cooperatives which fully meet the requirementsof section 421-23, except Code section 521 cooperatives need not be organizedin Hawaii; provided that:

(A)  The exemption shall apply only to thegross income derived from activities that are pursuant to purposes and powersauthorized by chapter 421, except those provisions pertaining to or requiringcorporate organization in Hawaii do not apply to Code section 521 cooperatives;

(B)  The exemption shall not relieve any personwho receives any proceeds of sale from the association of the duty of returningand paying the tax on the total gross proceeds of the sales on account of whichthe payment was made, in the same amount and at the same rate as would applythereto had the sales been made directly by the person, and all those personsshall be so taxable; and

(C)  As used in this paragraph, "section521 cooperatives" mean associations that qualify as a cooperative undersection 521 (with respect to exemption of farmers' cooperatives from tax) ofthe Internal Revenue Code of 1986, as amended;

(8)  Persons affected with Hansen's disease andkokuas, with respect to business within the county of Kalawao;

(9)  Corporations, companies, associations, or trustsorganized for the establishment and conduct of cemeteries no part of the netearnings of which inures to the financial benefit of any private stockholder orindividual; provided that the exemption shall apply only to the activities ofthose persons in the conduct of cemeteries and shall not apply to any activitythe primary purpose of which is to produce income, even though the income is tobe used for or in the furtherance of the exempt activities of those persons;and

(10)  Nonprofit shippers associations operating underpart 296 of the Civil Aeronautics Board Economic Regulations.

(b)  The exemptions enumerated in subsection(a)(3) to (6) shall apply only:

(1)  To those persons who shall have registered withthe department of taxation by filing a written application for registration insuch form as the department shall prescribe, shall have paid the registrationfee of $20, and shall have had the exemption allowed by the department or by acourt or tribunal of competent jurisdiction upon appeal from any assessmentresulting from disallowance of the exemption by the department;

(2)  To activities from which no profit inures to thebenefit of any private stockholder or individual, except for death or otherbenefits to the members of fraternal societies; and

(3)  To the fraternal, religious, charitable,scientific, educational, communal, or social welfare activities of suchpersons, or to the activities of such hospitals, infirmaries, and sanitaria assuch, and not to any activity the primary purpose of which is to produce incomeeven though the income is to be used for or in furtherance of the exemptactivities of such persons.

(c)  To obtain allowance of an exemption:

(1)  A person under subsection (a)(3) to (6), who hasreceived or applied for recognition of tax exempt status under section501(c)(3), (4), (6), or (8) of the Internal Revenue Code of 1986, as amended,or who is a subordinate person of a person who has received a group exemptionletter under section 501(c)(3), (4), (6), or (8) of the Internal Revenue Codeof 1986, as amended, shall register with the department by filing a statementattaching a copy of the exemption or application for recognition of exemptstatus and any particular facts that the department may require; and

(2)  All other persons under subsection (a)(3) to (6)shall file an application for exemption in the form of an affidavit oraffidavits setting forth in general all facts affecting the right to theexemption and such particular facts as the department may require, to whichshall be attached such records, papers, and other information as the departmentmay prescribe.

(d)  For all persons, the statement registeringthe person with the department or application for exemption shall be filed onor before March 31 of the first year of registration or within three monthsafter the commencement of business.  In the event of allowance of theexemption, no further statement or application therefor need be filed unless thereis a material change in the facts.  In the event of disallowance of theexemption, a license may be obtained upon payment of the required fee asprovided by section 237-9, less the $20 already paid under this section, whichshall be credited thereon.  In the event the registrant has a license underthis chapter, no further fee shall be required for registration under thissection.

(e)  The department for good cause may extendthe time for registration or the time for filing an application for exemption. [L1935, c 141, §4(1); am L 1941, c 265, §2; RL 1945, §5459; am L 1945, c 158, §1and c 253, §3; am L 1949, c 234, §3; RL 1955, §117-20; am L Sp 1957, c 1,§3(y), (z); am L 1959, c 252, §39 and c 277, §3; am L Sp 1959 2d, c 1, §16; amL 1963, c 147, §1; am L 1965, c 201, §38 and c 224, §3; am L 1967, c 39, §1 andc 159, §1; HRS §237-23; am L 1969, c 152, §1; am L 1970, c 180, §12; am L 1971,c 4, §3; am L 1976, c 156, §10 and c 203, §5; am L 1979, c 105, §23; am L 1980,c 213, §1; am L 1982, c 92, §5; am L 1987, c 39, §4; am L 1988, c 173, §2; am L1989, c 6, §4 and c 266, §3; am L 1990, c 109, §1; am L 1991, c 212, §4 and c286, §3; am L 1992, c 106, §7; am L Sp 1995, c 20, §5; am L 1997, c 350, §17;am L 1998, c 212, §3; am L 2001, c 125, §1; am L 2007, c 249, §17]

 

Attorney General Opinions

 

  Exemption of corporation operating a nonprofit medical andhospital service program under contract with individuals and groups.  Att. Gen.Op. 64-6.

 

Law Journals and Reviews

 

  Rule of Strict Construction in Tax Cases, a Question ofClassification or Exemption, Arthur B. Reinwald, 11 HBJ 98.

 

Case Notes

 

  Charitable trust doing business within Territory liable forexcise tax.  33 H. 371.

  Where primary purpose of rental activity was not productionof income, rental income was exempt from tax under subs. (b)(3).  53 H. 1, 486P.2d 396.

  Statutes granting exemptions are strictly construed againsttaxpayer.  56 H. 321, 536 P.2d 91.

  Derogation from common rate is an exemption and strictlyconstrued.  56 H. 644, 547 P.2d 1343.

  Maintenance of a nonprofit retirement residence for theelderly as a charitable purpose.  63 H. 199, 624 P.2d 1346.

  Income to exempt organization from work performed by residentbeneficiaries had primary purpose of producing income.  65 H. 199, 649 P.2d1126.

  Interest payments received from sale of real property notexempt.  65 H. 199, 649 P.2d 1126.

  "Rental" income from residents and staff did nothave primary purpose of producing income.  65 H. 199, 649 P.2d 1126.

  Operation of a parking garage and physician's office buildingare not hospital activities "as such" that exempts the income derivedfrom taxation.  66 H. 318, 661 P.2d 1201.

  Cited:  41 H. 615, 617.