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Honolulu weighs new bed-and-breakfast property tax category

A bill being considered in Honolulu would create a new property tax category for homeowners operating bed-and-breakfast establishments.

The Honolulu City Council approved the first reading of the bill Wednesday, The Star-Advertiser reported . If passed, the bill could be in effect by July 1.

The Budget Committee could take up the bill this month, but would not establish a rate for the new category.

Tax rates for each category are determined by the City Council each June, officials said. The proposed category could fall somewhere between the standard residential category and the hotel-resort category.

The standard residential category is currently $3.50 for every $1,000 of assessed value, city officials said. The hotel-resort category just increased by $1 this year to $13.90 for every $1,000 of assessed value.

Currently, those with nonconforming use certificates and operating in residential districts must pay the standard residential rates.

Under the proposal, those operating under nonconforming use permits would be required to pay the hotel-resort rate, officials said.

People operating transient or whole-home vacation rentals without a host would also be taxed at the hotel-resort rate under the bill.

"It's the underlying zoning that determines how it gets classified," said Gary Kurokawa, Mayor Kirk Caldwell's chief of staff. "This bill takes away that and puts everyone on a level playing field with all the same type of uses."

The city of Honolulu expects to issue up to 1,700 new permits for hosted B&B operations starting October 2020 after the council approved a wide-ranging vacation rental ordinance earlier this year. Under that ordinance, property cannot be rented or leased for a period of less than 30 days unless specifically permitted to do so.

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