(a) For the purposes of this section, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
Declaration of Restrictive Covenants. Has the same meaning as defined in Chapter 32.
Exemption Period. The ten-year period commencing upon the effective date of the claim for a real property tax exemption pursuant to subsection (b)(4), and ending on June 30 of the last year of the ten-year period.
Regulated Period. The period during which a project is subject to an affordable housing agreement.
(b) This section applies only to the following:
(1) That portion of real property used for affordable rental dwelling units as provided on-site or off-site pursuant to Chapter 29;
(2) That portion of real property used for affordable rental dwelling units provided pursuant to a planned development-transit permit under § 21-9.100-10, or an interim planned development-transit permit under § 21-9.100-5;
(3) That portion of real property used for affordable rental dwelling units located on real property used in connection with a housing project developed in compliance with HRS § 201H-36(a)(5); or
(4) That portion of real property used for affordable rental housing units that:
(A) Are rented to households earning 80 percent and below of the AMI; and
(B) For a period of at least 15 years after a certificate of occupancy is issued for the affordable rental housing project, the affordable units are rented at or below the rental rate limits established by the United States Department of Housing and Urban Development for households earning 80 percent of the AMI for the applicable household size;
pursuant to Chapter 32.
(c) The exemption provided in this section does not apply to any portion of the real property that is:
(1) Used for commercial or other non-residential purposes;
(2) Not for the exclusive use of the tenants of the affordable rental dwelling units; or
(3) Subject to any other exemption from real property taxation.
(d) Real property specified in subsection (b) that is subject to an affordable housing agreement will be exempt from property taxes for the duration of the regulated period, and real property specified in subsection (b)(4) that is subject to a declaration of restrictive covenants will be exempt from property taxes for the duration of the exemption period.
(1) If the project fails to meet the requirements under this section at any time during the regulated period or exemption period, whichever is applicable, the exemption will be canceled and the real property will be subject to taxes and penalties pursuant to subsection (i)(3).
(2) If the ownership of any portion of the real property that qualifies for an exemption under this section changes during the regulated period or exemption period, whichever is applicable, the exemption will be canceled and the entire project, including any retained portion and the portion that changed ownership, will be subject to taxes and penalties pursuant to subsection (i)(3). The taxes and penalties do not apply to any portion of the real property for which a new claim is filed for an exemption within 30 days of the recordation or filing of the real property title change with the registrar of the bureau of conveyances or the assistant registrar of the land court, or both, as appropriate, if the director grants the exemption.
(3) If the ownership of the real property changes during the regulated period, a new claim for exemption must be filed within 30 days of the recordation of filing of such change with the registrar of the bureau of conveyances or the assistant registrar of the land court, or both, as appropriate. Failure to timely file a new claim for an exemption, or to meet the qualifications under this section, will result in cancellation of the exemption, and taxes and penalties will be imposed pursuant to subsection (i)(3).
(e) Where a project is situated upon a single parcel of land, if any portion of the property is ineligible for the property tax exemption under this section:
(1) The remaining eligible portion will not be deprived of the exemption; and
(2) The ineligibility of a portion of the property for exemption under this section will not disqualify that portion from an exemption under any other law.
(f) Exemptions claimed under this section disqualify the same property from receiving an exemption under HRS § 53-38; provided that exemptions claimed under subsection (b)(4) also disqualify the same real property from receiving a real property tax exemption under any other law, except for § 8-10.34.
(g) Notwithstanding any provision in this chapter to the contrary, any real property determined by the director to be exempt from property taxes under this section will be exempt from property taxes effective as of the date the application is filed with the director; provided that the initial application for an exemption must be filed with the director within 60 days after the real property qualifies for the exemption, but in no event later than September 30 preceding the tax year for which the exemption is claimed. A copy of the affordable housing agreement that has been recorded with the registrar of the bureau of conveyances or the assistant registrar of the land court, or both, as appropriate, or the declaration of restrictive covenants that has been executed by the owner of the zoning lot on which an affordable rental housing project is situated, must be filed with the application along with any additional documents determined by the director to be necessary to supplement the application.
(1) For exemptions claimed under subsections (b)(1), (b)(2), and (b)(3), after the initial year for which the real property has qualified for an exemption, a claim for a continued exemption must be filed annually on or before September 30, together with a document from the agency regulating the project certifying that the project continues to be in compliance with the initial affordable housing agreement and is in compliance with the applicable rental requirements.
(2) For exemptions claimed under subsection (b)(4), after the initial year for which the real property has qualified for an exemption, a report must be filed with the director annually on or before September 30 during the exemption period. The report must certify that the affordable rental housing project continues to be in compliance with the declaration of restrictive covenants and the applicable rental requirements pursuant to this chapter, including but not limited to the number of affordable rental housing units that are rented to households earning 80 percent or below of the AMI, and rented at or below the rental rate limits established by the United States Department of Housing and Urban Development for households earning 80 percent of the AMI for the applicable household size or less.
(3) The director may, after 30 days’ written notice, audit the records of the real property exempt from taxes under this section. A taxpayer’s refusal or failure to cooperate and produce all records requested by the director may result in the cancellation of the exemption and subject the real property to the taxes and penalties determined in subsection (i)(3).
(h) In the event property taxes have been paid in advance to the city for real property that subsequently qualifies for the exemption, the director shall refund to the owner that portion of the taxes attributable to, and paid for the period after the qualification.
(i) Cancellation of exemption—penalties.
(1) Notice by director. Following the initial year for which real property has qualified for an exemption under this section, if an owner fails to file a claim for continued exemption by the September 30 deadline, the director shall promptly mail a notice to the owner at the owner’s address of record stating that unless a claim for continued exemption and all the necessary documents are received by the director by November 15 of the same year, the exemption will be canceled.
(2) Cancellation of exemption. An owner who has been sent a notice under subdivision (1) by the director and who fails to file for an exemption by the November 15 deadline will have the exemption canceled and the project will be subject to taxes and penalties pursuant to subdivision (3). In the event the director finds that the initial or a subsequent claim for exemption contains false or fraudulent information, the project fails to meet the requirements during the regulated period, or the owner fails to file annually during the regulated period as required under this section, the director shall cancel the exemption retroactive to the date the exemption was first granted pursuant to an initial filing under subsection (g), and the project will be subject to the taxes and penalties determined in subdivision (3).
(3) Back taxes and penalties. In the event a project is subject to taxes and penalties, as provided in subdivision (2), the differences in the amount of taxes that were paid and those that would have been due but for the exemption allowed are payable, together with a penalty in the form of interest at 10 percent per annum, from the respective dates that these payments would have been due. The taxes and penalties due will be a paramount lien upon the real property. In the event a claim for an exemption is submitted after the September 30 deadline but on or before the November 15 deadline, a late filing penalty of $500 will be imposed.
(Added by Ord. 18-1; Am. Ords. 18-10, 19-8, 20-13)
Editor’s note:
* Amendments made to § 8-10.33(a) in Ordinance 18-10 will be repealed on June 30, 2027, in accordance with Ordinance 18-10.
Section 8-10.33 will be repealed on June 30, 2027, in accordance with Ordinance 18-1 and Ordinance 19-8; provided that any real property tax exemptions granted pursuant to § 8-10.33 prior to its repeal on June 30, 2027, will continue for the regulated period, subject to the requirements and consequences established under § 8-10.33.
Amendments made to § 8-10.33 in Ordinance 19-8, as amended by Ordinance 23-12, will be repealed on June 1, 2030; provided that any exemption under § 8-10.33(b)(4), for portions of real property use for affordable housing units that are rented to households earning 80 percent and below of the area median income, will remain in effect for the duration of the 10-year exemption period in Ordinance 19-8.