HB 1369 Hawaii House · 2025 Regular Session

RELATING TO TAXATION.

HB 1369 amends Hawaii's general excise and use tax laws by changing or removing specific tax exemptions. This directly affects businesses that currently qualify for those exemptions, requiring them to pay tax on activities they previously avoided. The bill's key provision eliminates targeted exemptions, making certain business transactions subject to taxation. The change adjusts which business activities fall under these tax requirements without altering the overall tax rates.

Issues: ✓ Budget & Taxes

Bill status vetoed 4 of 5 stages cleared

Introduction

Jan 2025

Committee Review

Apr 2025

House Passage

Apr 2025

Senate Passage

Apr 2025

Vetoed

Jul 2025

Introduced Jan 23, 2025 Vetoed Jul 3, 2025

Maddy AI version diff · 3 comparisons

What changed between versions

HB1369_HD1 → HB1369_SD1 · 8 edits

MODERATE

This bill significantly rewrites Hawaii's tax code to add new exemptions, credits, and definitions focused on local agriculture, aviation, and healthcare. It introduces progressive local food sourcing requirements for aircraft and aviation facilities, creates renewable fuel tax credits, and expands exemptions for various industries while repealing older provisions.

Scope change

The bill expands the scope of tax exemptions to include new categories of businesses and activities, particularly those supporting local agriculture and aviation, while removing exemptions for air pollution control facilities and certain exchange-related fees.

REQUIREMENT

New progressive local food sourcing requirements mandate that aircraft and aviation facilities increase their purchase of fresh local agricultural products from 18% by 2028 to 50% by 2048.

FISCAL

Added a renewable fuels production tax credit of 20 cents per 76,000 BTUs sold, with a maximum claim of $3.5 million per year for qualifying taxpayers.

ELIGIBILITY

Modified the definition of eligible business activities to explicitly exclude medical cannabis dispensary activities from certain tax benefits.

EXEMPTIONS

Repealed exemptions for air pollution control facilities and certain shipbuilding businesses that were previously exempt from general excise tax.

Added new exemptions for amounts received by hospitals, healthcare facilities, and practitioners for Medicare, Medicaid, and TRICARE-related goods and services.

Added exemptions for aircraft service and maintenance facilities that meet the new local food sourcing requirements.

DEFINITION

Added new definitions for 'fresh local agricultural products' and 'local value-added, processed, agricultural, or food products' to establish sourcing standards.

TIMELINE

Extended the exemption for certain sugarcane producer transactions from manufacturers until January 1, 2031.

HB1369_CD1 → HB1369_HD1 · 7 edits

MODERATE

This bill fundamentally rewrites Hawaii's taxation laws by replacing most existing tax credits, exemptions, and deductions with new provisions aligned to the federal Internal Revenue Code. It repeals over two dozen old sections and adds 50 new subsections to the General Excise Tax, Income Tax, and Use Tax chapters. The changes modernize tax treatment of federal credits, update exemptions for healthcare and agriculture, and extend certain tax benefits for small businesses and cooperatives.

Scope change

The bill significantly expands the scope of federal tax code integration into state taxation, adding 50 new subsections while repealing 23 existing sections. It broadens exemptions for healthcare providers, agricultural producers, and cooperatives while tightening requirements for real property lease deductions.

SCOPE

Added 50 new subsections to tax chapters aligning state tax treatment with Internal Revenue Code sections 1-1400U-3, covering topics like foreign tax credits, production activities deductions, and qualified business income.

ELIGIBILITY

Repealed 23 existing sections including capital goods excise tax credits, renewable fuels production tax credits, and various industry-specific exemptions that were previously in effect.

Modified real property lease deduction rules to require written sublease agreements and allocate deductions based on fair rental values rather than gross proceeds.

Added new exemptions for healthcare providers selling prescription drugs and prosthetic devices, and for sugarcane producers selling to manufacturers.

REQUIREMENT

Modified tax credit computation rules to require entity-level determination for partnerships and pass-through entities, with specific basis reduction requirements for Section 179 deductions.

DEFINITION

Added comprehensive definitions for lease, lessee, lessor, sublease, and sublessee to standardize real property lease terminology across tax provisions.

TIMELINE

Modified effective date to July 1, 3000, with transitional rules applying to leases and facilities certified before December 31, 2025.

HB1369 → HB1369_CD1 · 8 edits

MODERATE

This bill fundamentally rewrites Hawaii's General Excise Tax and Use Tax laws by replacing the original solar water heater mandate with a new tax structure focused on maritime and securities activities. The legislation removes all references to solar energy requirements and replaces them with detailed exemptions and tax treatments for shipping, tugboat services, shipbuilding, and securities exchange operations. Additionally, it repeals the existing tax exemption for securities exchange fees and dues, effectively subjecting these previously exempt transactions to taxation.

Scope change

The bill significantly expands the scope of taxable activities by removing maritime and securities-related exemptions that were previously in place, while simultaneously eliminating the solar water heater mandate that required builders to install solar heating systems.

REQUIREMENT

Completely removed the requirement that new single-family dwellages must include solar water heater systems, which was previously mandated in Section 196-6.5.

EXEMPTIONS

Replaced the solar water heater mandate with a new tax exemption framework for maritime activities including loading/unloading agricultural commodities, tugboat services, pilot transportation, and oceangoing vehicle transportation.

Added new tax exemptions for shipbuilding and ship repair gross proceeds, which were not previously explicitly exempted.

Repealed the tax exemption for securities exchange fees, dues, and transaction amounts that were previously protected under Section 237-24.5.

Replaced the film and creative industries development fund provisions with new tax treatment for maritime and securities-related income.

Modified the sugarcane producer exemption to clarify eligibility criteria for independent cane farmers and tax dependency on manufactured product value.

DEFINITION

Added new definitions for 'Exchange', 'Exchange member', 'Securities', and 'products' to clarify the scope of securities trading activities.

TIMELINE

Established a July 1, 2025 effective date for the new tax provisions.

Floor votes

How they voted

This bill passed the Senate by voice vote (no roll call recorded).

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Jul 3, 2025

Vetoed

Vetoed (Gov. Msg. No. 1403).

lower

Jul 3, 2025

Vetoed

Vetoed on 07/03/2025 - Returned from the Governor without approval (Gov. Msg. No. 1403).

upper

Jun 6, 2025

Vetoed

Notice of intent to veto (Gov. Msg. No. 1301)

lower

Jun 6, 2025

Vetoed

Notice of Intent to veto dated 06/06/2025 (Gov. Msg. No. 1301)

upper

Apr 30, 2025

Lower · Passed

Passed Final Reading as amended in CD 1 with none voting aye with reservations; Representative(s) Alcos, Garcia, Muraoka, Pierick, Reyes Oda, Shimizu voting no (6) and Representative(s) Cochran excused (1).

lower

Apr 30, 2025

Upper · Passed

Passed Final Reading, as amended (CD 1). Ayes, 24; Aye(s) with reservations: none. Noes, 1 (Senator(s) DeCorte). Excused, 0 (none).

upper

Apr 25, 2025

Introduced

48 Hrs. Notice (as amended CD 1) 04-30-25

upper

Apr 25, 2025

Upper · Passed

Reported from Conference Committee as amended CD 1 (Conf. Com. Rep. No. 247).

upper

Apr 25, 2025

Lower · Passed

Reported from Conference Committee (Conf Com. Rep. No. 247) as amended in (CD 1).

lower

Apr 23, 2025

Upper · Passed

The Conference committee recommends that the measure be PASSED, WITH AMENDMENTS. The votes of the Senate Conference Managers were as follows: 3 Aye(s): Senator(s) Hashimoto, Kim, Fevella; Aye(s) with reservations: none ; 0 No(es): none; and 0 Excused: none.

upper

Apr 23, 2025

Lower · Passed

The Conference Committee recommends that the measure be Passed, with Amendments. The votes were as follows: 3 Ayes: Representative(s) Yamashita, Takenouchi, Alcos; Ayes with reservations: none; 0 Noes: none; and 0 Excused: none.

lower

Apr 22, 2025

Lower · Passed

Bill scheduled for Conference Committee Meeting on Wednesday, 04-23-25 10:30AM in conference room 309.

lower

Apr 10, 2025

Amended

House disagrees with Senate amendment (s).

lower

Apr 8, 2025

Introduced

Returned from Senate (Sen. Com. No. 763) in amended form (SD 1).

lower

Apr 8, 2025

Upper · Passed

Passed Third Reading, as amended (SD 1). Ayes, 25; Aye(s) with reservations: Senator(s) DeCoite, Elefante, Fevella, Ihara, Inouye, Kim, McKelvey. Noes, 0 (none). Excused, 0 (none). Transmitted to House.

upper

Apr 3, 2025

Upper · Passed

The committee(s) on WAM recommend(s) that the measure be PASSED, WITH AMENDMENTS. The votes in WAM were as follows: 12 Aye(s): Senator(s) Dela Cruz, Aquino, Hashimoto, Kanuha, Lee, C., Wakai; Aye(s) with reservations: Senator(s) Moriwaki, DeCoite, Elefante, Inouye, Kim, Fevella ; 1 No(es): Senator(s) Kidani; and 0 Excused: none.

upper

Mar 31, 2025

Upper · Passed

The committee(s) on WAM has scheduled a public hearing on 04-03-25 10:00AM; Conference Room 211 & Videoconference.

upper

Mar 6, 2025

Committee

Referred to WAM.

upper

Mar 6, 2025

Introduced

Received from House (Hse. Com. No. 363).

upper

Mar 4, 2025

Lower · Passed

Passed Third Reading with Representative(s) Iwamoto voting aye with reservations; Representative(s) Alcos, Garcia, Matsumoto, Muraoka, Reyes Oda, Shimizu, Souza voting no (7) and Representative(s) Kapela, Pierick, Ward excused (3). Transmitted to Senate.

lower

Feb 19, 2025

Lower · Passed

The committee on FIN recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 12 Ayes: Representative(s) Yamashita, Takenouchi, Holt, Hussey, Kitagawa, Kusch, Lamosao, Lee, M., Miyake, Morikawa, Templo; Ayes with reservations: Representative(s) Reyes Oda; Noes: none; and 4 Excused: Representative(s) Grandinetti, Keohokapu-Lee Loy, Alcos, Ward.

lower

Jan 27, 2025

Committee

Referred to FIN, referral sheet 4

lower

Jan 23, 2025

Introduced

Introduced and Pass First Reading.

lower

1 primary · 0 co-sponsors