Gov. Ige pursues Airbnb tax deal

Gov. David Ige’s administration is pursuing a private tax agreement with Airbnb Inc. that would allow the vacation rental company to collect taxes from its hosts and send the money to the state.

Airbnb says collecting taxes from its hosts would generate more than $30 million per year in additional state taxes.

“Ige is working with Airbnb and other online retailers of short-term rentals to negotiate voluntary collection agreements,” said Ige’s spokeswoman Cindy McMillan in an email. “Ultimately, the state wants to collect the taxes it is owed without encouraging illegal activity.”

Mike McCartney, Ige’s chief of staff, said privacy laws prevent the state from releasing details of the agreement, which must be signed off on by Ige and Airbnb before it takes effect. McCartney declined to say when that might happen.

The move, which has been quietly in play since the last legislative session ended, is garnering mixed reactions.

Some lawmakers and community members say they support efforts to bring additional money to state coffers by advancing an issue that stalemated twice legislatively.

Others see it as an end run that attempts to settle a controversial issue outside the public purview.

So far the document’s contents are unknown to all but Airbnb, the state Department of Taxation and Ige’s administration. The Honolulu Star-Advertiser filed a formal request for the document Monday.

McCartney said lawmakers were informed that Ige’s administration would attempt an administrative solution when the last legislative session closed without a tax collection bill.

“(Legislators) tried in good faith to find a solution. The understanding is that we would try to see if we could do something administratively,” he said. “We are going through our due diligence.”

McCartney said the agreement, which is about “efficient tax collection,” is intended to be just one step toward finding a balance that could also require state legislation as well as county regulation and enforcement.

“This is a big issue. It’s a public policy issue. This is not meant to circumvent the (counties) or the Legislature,” he said.

Airbnb policy manager Matt Middlebrook said the company already has tax remittance agreements in place in more than 350 jurisdictions worldwide.

“We are committed to being a long-term partner with the state. That is why we have worked for the past three years to reach an agreement with legislators and the governor to collect and remit taxes on behalf of our hosts, and that remains our goal,” Middlebrook said in a statement.

Representatives of Save O‘ahu Neighborhoods and Save North Shore Neighborhoods, who were among the advocacy groups most cautious about previously proposed state Airbnb tax collection bills, want a public process.

“This feels like an end run around the community and the legislative process. Discussions should be open and transparent,” said Kathleen Pahinui of Save North Shore Neighborhoods, who says the spread of illegal rentals has changed the fabric of Oahu neighborhoods and hurt home affordability.

In 2016 an Airbnb-endorsed tax collection bill rose to Ige’s office; however, he vetoed it, saying it provided a shield for owners who weren’t complying with county laws. This past session another variation went to conference but died without Ige providing public feedback.

McCartney said Ige’s position hasn’t changed and is reflected in the draft agreement, although the administration could not reveal specifics.

The Ige administration’s silent stance is in stark contrast to the highly polarized public process underway at the Honolulu City Council, which will hear four resolutions regarding short-term vacation rentals today at 10 a.m. at Honolulu Hale. The city proposals run the gamut from improving enforcement of home-based short-term vacation rentals to relaxing a circa-1989 Council position that made such units illegal outside of resort districts, while grandfathering in operations for those who obtained a nonconforming use certificate.

If those measures move forward, the city Department of Planning and Permitting would draft and submit bills that would have to undergo more public debate before the Council would make a final decision.

DPP also was a frequent testifier on the Airbnb tax bills during the state’s last two legislative sessions. But it is among the concerned parties that Ige’s administration has left in the dark during the current negotiation.

“The department doesn’t have any knowledge of this matter and will reserve comment for now,” said DPP spokesman Curtis Lum.

Mufi Hannemann, Hawaii Lodging & Tourism Association president and CEO, said the organization does not have enough information to take a position on the current agreement, either.

“We haven’t seen it and we have questions,” Hannemann said. “We think it would have been appropriate to share this with stakeholders. Our preference is legislation as opposed to an (agreement).”

Hannemann said HLTA has been one of the “staunchest advocates” for vacation rental tax collection legislation. However, he said HLTA would support an agreement only if it ensured Airbnb hosts met city and state requirements and put the company on a “level playing field” with the rest of the accommodations industry. HLTA also wants to have a say in where the tax money goes, Hannemann said.

“We hate to see it go directly into the general fund. We’d like to see more of it go to tourism,” he said.

Still, state Rep. Richard Onishi (D, Hilo-Keaau-Kurtis­town-Volcano) and state Sen. Glenn Wakai (D, Kalihi-­Salt Lake), who head the Legislature’s tourism committees, say they support the administration’s quest to reach agreement with Airbnb.

“We haven’t heard any specifics, but I am happy that it’s moving forward,” Onishi said. “The original issue that started all of this was Airbnb’s willingness to be a tax collector. We’ve had, in my mind, extensive public process over the last two years. The governor’s office is fully aware of all the concerns and issues — that’s one of the reasons that they vetoed the first bill.”

Ige vetoed the Airbnb bill last year due in part to his concern it could have given people false impressions of what is legal or illegal, McCartney said. Ige also remains concerned about ensuring short-term vacation rentals provide a safe, quality visitor experience that is balanced by the community’s need for things like adequate infrastructure and affordable housing, he said.

Wakai’s only complaint is that Ige hasn’t already signed the state’s Airbnb tax agreement, which he said has been ready since September.

“We lawmakers failed to provide the governor a bill, and this is kind of a backstop for it,” Wakai said. “Every month (the governor) doesn’t sign the agreement, the state is losing money. I understand people’s hesitation when there’s been little public input, but we are a state in need of paying off debt.”