HRS § 235-68 — Withholding of tax on the disposition of real property by nonresident persons


§235-68 Withholding of tax on the
disposition of real property by nonresident persons. (a) As used in this
section:
"Nonresident person" means every
person other than a resident person.
"Property" or "real
property" has the meaning as the same term is defined in section 231-1.
"Resident person" means any:
(1) Individual included in the definition of resident
in section 235-1;
(2) Corporation incorporated or granted a certificate
of authority under chapter 414, 414D, or 415A;
(3) Partnership formed or registered under chapter
425 or 425E;
(4) Foreign partnership qualified to transact
business pursuant to chapter 425 or 425E;
(5) Limited liability company formed under chapter
428 or any foreign limited liability company registered under chapter 428;
provided that if a single member limited liability company has not elected to
be taxed as a corporation, the single member limited liability company shall be
disregarded for purposes of this section and this section shall be applied as
if the sole member is the transferor;
(6) Limited liability partnership formed under
chapter 425;
(7) Foreign limited liability partnership qualified
to transact business under chapter 425;
(8) Trust included in the definition of resident
trust in section 235-1; or
(9) Estate included in the definition of resident
estate in section 235-1.
"Transferee" means any person, the
State and the counties and their respective subdivisions, agencies,
authorities, and boards, acquiring real property which is located in Hawaii.
"Transferor" means any person
disposing real property that is located in Hawaii.
(b) Unless otherwise provided in this section,
every transferee shall deduct and withhold a tax equal to 7.25 per cent of the
amount realized on the disposition of Hawaii real property. Every person
required to withhold a tax under this section is made liable for the tax and is
relieved of liability for or upon the claim or demand of any other person for
the amount of any payments to the department made in accordance with this
section.
(c) Every transferee required by this section
to withhold tax under subsection (b) shall make a return of the amount withheld
to the department of taxation not more than twenty days following the transfer
date.
(d) No person shall be required to deduct and
withhold any amount under subsection (b), if the transferor furnishes to the
transferee an affidavit by the transferor stating the transferor's taxpayer
identification number and:
(1) The transferor is a resident person; or
(2) That by reason of a nonrecognition provision of
the Internal Revenue Code as operative under this chapter or the provisions of
any United States treaty, the transferor is not required to recognize any gain
or loss with respect to the transfer;
(3) A brief description of the transfer; and
(4) A brief summary of the law and facts supporting
the claim that recognition of gain or loss is not required with respect to the
transfer.
This subsection shall not apply if the transferee
has actual knowledge that the affidavit referred to in this subsection is
false.
(e) An application for a withholding
certificate may be submitted by the transferor to the department setting forth:
(1) The name, address, and taxpayer identification
number, if any, of the parties to the transaction and the location and general
description of the real property to be transferred; and
(2) A calculation and written justification showing
that the transferor will not realize any gain with respect to the transfer; or
(3) A calculation and written justification showing
that there will be insufficient proceeds to pay the withholding required under
subsection (b) after payment of all costs, including selling expenses and the
amount of any mortgage or lien secured by the property.
Upon receipt of the application, the department
shall determine whether the transferor has realized or will realize any gain
with respect to the transfer, or whether there will be insufficient proceeds to
pay the withholding. If the department is satisfied that no gain will be
realized or that there will be insufficient proceeds to pay the withholding, it
shall issue a withholding certificate stating the amount to be withheld, if
any.
The submission of an application for a
withholding certificate to the department does not relieve the transferee of
its obligation to withhold or to make a return of the tax under subsections (b)
and (c).
(f) No person shall be required to deduct and
withhold any amount under subsection (b) if one or more individual transferors
furnishes to the transferee an affidavit by the transferor stating the
transferor's taxpayer identification number, that for the year preceding the
date of the transfer the property has been used by the transferor as a
principal residence, and that the amount realized for the property does not
exceed $300,000.
(g) The department may enter into written
agreements with persons who engage in more than one real property transaction
in a calendar year or other persons to whom meeting the withholding
requirements of this section are not practicable. The written agreements may
allow the use of a withholding method other than that prescribed by this
section or may waive the withholding requirement under this section.