Senator Baker Comments on ‘Vacation Rental Bills’ Controversy

We invited Senator Roz Baker to comment on the ongoing controversy over the proposed ‘vacation rental bills’ that have upset some property owners.  Senator Baker was personally identified in the previously published “LETTER: Condo Owner Objects to Vacation Rental Bills.”

Senator Rosalyn H. Baker, South and West Maui. Courtesy photo.

By Senator Rosalyn H. Baker, 5th District, South and West Maui

Mahalo to MauiNow.com for providing me an opportunity to comment on the vacation rental bills that have been reviewed by the Legislature this session.

They have certainly been among the most hotly contested this year. As Chair of the Senate Committee on Commerce and Consumer Protection (CPN), I have reviewed hundreds of pages of testimony, almost all from out of state. The opposition to these measures has been passionate and outspoken, but supporters have also raised some troubling issues in the vacation rental industry. The reason the committee advanced the most recent bill, HB2078, is twofold: to protect the consumers who are renting these accommodations and to assist the Department of Taxation in enforcing the tax laws that are already on the books.

In determining whether to move HB2078 forward, the opposition’s testimony was given much consideration and ultimately resulted in the bill being significantly amended. Some of the amendments were suggested by an email testifier.

Last Friday, CPN passed out HB2078 with amendments that make it clear that existing laws like the Landlord-Tenant Code apply to these vacation rentals. This version HB2078, SD2 gets rid of the requirement that owners living out of state or on another island use a licensed rental agent to manage their properties. However, any owner that does not reside on the same island as the rental property must designate someone on-island to act as a local point of contact. This requirement already exists in the Landlord-Tenant Code but there has been some uncertainty regarding its applicability to these rental properties. Including this provision in the bill is important to ensure that our visitors have someone they can call in case of an emergency or if they need any kind of assistance. This bill would also require that the contact information for the local contact person be provided to the appropriate condominium, apartment or planned community association. Often times, these associations are left with the burden of dealing with unhappy visitors in need of assistance when it is the owner’s obligation to provide that assistance. This provision will help remedy that situation.

The vacation rentals, subject to this legislation, present a particularly difficult GET/TAT enforcement problem for the Department of Taxation. Amendments made to HB2078 help to remedy that problem. For instance, homeowner associations and the counties will be required to submit an owner’s relevant information to the Department of Taxation. This applies to all owners of these transient accommodations, even owners residing on the same island as their property. Again, this bill is intended to reinforce existing laws to make sure these businesses are in compliance. Our intention never has been to put them out of business.

I am sympathetic with the honest business owners who are providing these accommodations legally and in compliance with the law and tax requirements. However, the state needs the ability to pursue those that are not in compliance or who underreport revenue. Over the last few years, the growth of this industry through the internet has made it even harder to identify those who are not complying with the applicable provisions of the Hawaii Tax Code and the Landlord-Tenant Code. This difficulty and the problems associated with it needed to be addressed. The previous versions of these bills were, perhaps, too onerous an approach. The amendments made to HB2078 by the Senate Committee on Commerce and Consumer Protection will go a long way to remedying these problems while allowing owners to manage their own businesses.

Indeed, my legislative colleagues and I want people to come visit Hawaii. We want small businesses owners to thrive and make good use of their investments. But we also want people to comply with the laws that are in place. Unfortunately, there are those that willfully disregard the law and even some who mistakenly believe certain provisions do not apply to them. This bill will foster compliance and allow renters visiting our beautiful state to trust that they are dealing with legitimate businesses. HB2078, SD2, the committee report and testimony has been posted on the legislature’s website.

A hui hou,

Senator Rosalyn H. Baker, Chair, Senate Committee on Commerce and Consumer Protection, 5th District, South and West Maui