STAND. COM. REP. NO. 705

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 1514
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 1514 entitled:

     "A BILL FOR AN ACT RELATING TO PUBLIC SERVICE COMPANY TAX,"

begs leave to report as follows:

     The purpose of this bill is to provide the respective
counties with revenues collected under the public service company
tax which are in lieu of real property taxes.

     Testimony in support of this bill was received from the
Hawaii Hotel Association and the City and County of Honolulu.
Your Committee also received testimony supporting this bill, but
with amendments, from GTE Hawaiian Tel and Hawaiian Electric
Industries, Inc.  The Tax Foundation of Hawaii submitted
informational comments.

     Your Committee recognizes that the public service company
tax was imposed on public utilities in lieu of all other taxes,
other than income taxes, including public utility fees, franchise
taxes, and other taxes.  Specifically, the levying of the public
service company tax was imposed for practical reasons to avoid
the complexities of accurately identifying and assessing utility
properties and was intended to replace the collection of the
State's general excise tax and the counties' real property tax.
However, even though the counties do not impose real property

 
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taxes on public utilities, they do not receive any share of the
public service company tax.

     Your Committee recognizes that allocating and sharing that
portion of the public service company tax in excess of four per
cent (representing the counties' real property taxes) on public
utilities with the counties is equitable.  However, as pointed
out in testimony, safeguards should be instituted to prevent
excessive double taxation should the counties levy a real
property tax.

     In addition, power and telecommunications utilities are
taxed at rates above four per cent under section 239-5(a), Hawaii
Revised Statutes, while the tax rate for other public utilities
such as common carriers is four per cent.  That is, the public
service company tax for public utilities other than power and
telecommunications utilities covers only the state general excise
tax and not the real property tax.  Thus, after deducting the
four per cent excise tax, there would be no excess amounts to
allocate to the counties.  In light of this, your Committee finds
that the intent of the bill is to share public service company
tax revenues with the counties only with respect to power and
telecommunications utilities under section 239-5(a), Hawaii
Revised Statutes.  As a result, reference to other public
utilities under section 239-5(b), Hawaii Revised Statutes, is
inappropriate.

     Accordingly, and upon further consideration, your Committee
has amended this bill to:

     (1)  Remove all references to section 239-5(b), Hawaii
          Revised Statutes; and

     (2)  Add a new provision under section 239-5(d), Hawaii
          Revised Statutes, to preclude excessive taxation in the
          form of the imposition of a real property tax by a
          county on power and telecommunications utilities by:

          (A)  Specifically prohibiting a county from receiving a
               share of the public service company tax if it
               imposes a real property tax; and

          (B)  Requiring amounts allocated to a county from the
               public service company tax to be paid to the state
               general fund as soon as a county imposes a real
               property tax.


 
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     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 1514, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
1514, H.D. 1, and be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,



                                   ______________________________
                                   RON MENOR, Chair

 
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