§237-23 - Exemptions, persons exempt, applications for exemption.

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

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

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

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

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

(5) Business leagues, chambers of commerce, boards of
trade, civic leagues, agricultural and horticultural organizations, and
organizations operated exclusively for the benefit of the community and for the
promotion of social welfare that shall include the operation of a prepaid legal
service plan, and from which no profit inures to the benefit of any private
stockholder or individual;

(6) Hospitals, infirmaries, and sanitaria;

(7) Cooperative associations incorporated under
chapter 421 or Code section 521 cooperatives which fully meet the requirements
of section 421-23, except Code section 521 cooperatives need not be organized
in Hawaii; provided that:

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

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

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

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

(9) Corporations, companies, associations, or trusts
organized for the establishment and conduct of cemeteries no part of the net
earnings of which inures to the financial benefit of any private stockholder or
individual; provided that the exemption shall apply only to the activities of
those persons in the conduct of cemeteries and shall not apply to any activity
the primary purpose of which is to produce income, even though the income is to
be used for or in the furtherance of the exempt activities of those persons;
and

(10) Nonprofit shippers associations operating under
part 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 with
the department of taxation by filing a written application for registration in
such form as the department shall prescribe, shall have paid the registration
fee of $20, and shall have had the exemption allowed by the department or by a
court or tribunal of competent jurisdiction upon appeal from any assessment
resulting from disallowance of the exemption by the department;

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

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

(1) A person under subsection (a)(3) to (6), who has
received or applied for recognition of tax exempt status under section
501(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 exemption
letter under section 501(c)(3), (4), (6), or (8) of the Internal Revenue Code
of 1986, as amended, shall register with the department by filing a statement
attaching a copy of the exemption or application for recognition of exempt
status 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 or
affidavits setting forth in general all facts affecting the right to the
exemption and such particular facts as the department may require, to which
shall be attached such records, papers, and other information as the department
may prescribe.

(d) For all persons, the statement registering
the person with the department or application for exemption shall be filed on
or before March 31 of the first year of registration or within three months
after the commencement of business. In the event of allowance of the
exemption, no further statement or application therefor need be filed unless there
is a material change in the facts. In the event of disallowance of the
exemption, a license may be obtained upon payment of the required fee as
provided by section 237-9, less the $20 already paid under this section, which
shall be credited thereon. In the event the registrant has a license under
this chapter, no further fee shall be required for registration under this
section.

(e) The department for good cause may extend
the time for registration or the time for filing an application for exemption. [L
1935, c 141, §4(1); am L 1941, c 265, §2; RL 1945, §5459; am L 1945, c 158, §1
and 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; am
L 1963, c 147, §1; am L 1965, c 201, §38 and c 224, §3; am L 1967, c 39, §1 and
c 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 L
1989, c 6, §4 and c 266, §3; am L 1990, c 109, §1; am L 1991, c 212, §4 and c
286, §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 and
hospital 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 of
Classification or Exemption, Arthur B. Reinwald, 11 HBJ 98.

Case Notes

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

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

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

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

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

Income to exempt organization from work performed by resident
beneficiaries had primary purpose of producing income. 65 H. 199, 649 P.2d
1126.

Interest payments received from sale of real property not
exempt. 65 H. 199, 649 P.2d 1126.

"Rental" income from residents and staff did not
have primary purpose of producing income. 65 H. 199, 649 P.2d 1126.

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

Cited: 41 H. 615, 617.