Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 139
                                        H.D. 1
                                        S.D. 2

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Ways and Means, to which was referred H.B.
No. 139, H.D. 1, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish a clear and objective definition of "state
          resident" that can be used by federal contracting
          officers in enforcing the preferences for state
          residents that are provided in federal law;

     (2)  Exempt from the general excise tax all of the gross
          proceeds arising from federal construction contracts
          and received by state contractors and subcontractors;

     (3)  Clarify that contractors, including out-of-state
          contractors, working on federal construction contracts
          in the State are subject to the licensing and other
          provisions of chapter 444, Hawaii Revised Statutes, to
          the extent allowed under federal law; and

     (4)  Authorize the use of and establish criteria for project
          labor agreements that are intended to ensure the
          efficiency, stability, and quality of federal
          construction projects.

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                                   STAND. COM. REP. NO. 1534
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     Your Committee finds that the construction industry
represents a sizable component of Hawaii's economy but has
experienced economic declines in recent years.  The lack of
business and employment opportunities, the high cost of doing
business in Hawaii, and increased competition from out-of-state
companies have contributed to the declines.  Due to the
importance of the construction industry to Hawaii's economy,
every effort must be made to revitalize and stabilize the
industry.  Your Committee believes that this measure represents a
coherent approach to revitalizing and stabilizing Hawaii's
construction industry.  Your Committee intends this measure to
affect only those projects on federal property that are one
hundred per cent federally funded.

     Your Committee has amended this measure by amending the
definition of "state resident" for purposes of the preference
provisions under federal law.  Your Committee has amended the
criteria needed to be satisfied in order to qualify as a "state
resident" by:

     (1)  Requiring an individual to have paid all of the amounts
          owing on a tax return filed in the preceding year;

     (2)  Requiring a business entity to be a domestic
          corporation, partnership, or business organized or
          formed under the laws of the State;

     (3)  Deleting the requirement that a business entity
          maintain a place of business within the State staffed
          by the bidder or an employee of the bidder for a period
          of six months immediately preceding the date of the

     (4)  Requiring a business entity to maintain its principal
          place of business within the State for at least two-
          hundred consecutive days prior to the submission of a

     (5)  Requiring a business entity to have filed a Hawaii
          resident income tax and all other applicable tax
          returns for the preceding tax year and have paid all
          amounts owing on those tax returns;

     (6)  Requiring a business entity to have complied with all
          applicable Hawaii employment, insurance, and worker's
          compensation laws;

     (7)  Deleting the provisions that require a minimum
          percentage of state residents as owners, principals,

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          partners, and employees depending on the form of the
          business entity;

     (8)  Requiring an employer with one or more employees to
          have one-hundred per cent of those employees qualify as
          "state residents"; and

     (9)  Requiring a business entity that is a joint venture be
          composed entirely of entities that qualify as "state

     Your Committee made parallel and identical amendments to the
definition of "state subcontractor" for purposes of the general
excise tax exemption provided in this measure.  In addition, your
Committee narrowed the scope of the general excise tax exemption
to gross proceeds arising from federal construction projects
received by state subcontractors, rather than including state

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of H.B.
No. 139, H.D. 1, S.D. 1, as amended herein, and recommends that
it pass Third Reading in the form attached hereto as H.B.
No. 139, H.D. 1, S.D. 2.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,

                                 CAROL FUKUNAGA, Co-Chair

                                 ANDREW LEVIN, Co-Chair

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