STAND. COM. REP. NO. 1427

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 1178
                                     S.D. 2
                                     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 Economic Development and Business
Concerns, to which was referred S.B. No. 1178, S.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAXATION
     OF RELATED ENTITIES,"

begs leave to report as follows:

     The purpose of this bill is to clarify the definition of
"related entities' for purposes of the general excise tax.

     Testimony in support of this measure was submitted by the
Department of Taxation.  The Tax Foundation of Hawaii submitted
comments.

     Your Committee notes that this bill is similar in general
purpose and intent to H.B. No. 1206, "A BILL FOR AN ACT RELATING
TO THE GENERAL EXCISE TAXATION OF RELATED ENTITIES".

     Your Committee has amended this bill by inserting the
language reflected in H.B. 1206, thereby adopting the federal tax
code standard for consolidated returns.  This standard requires
commonality in ownership based upon eighty per cent value and
eighty per cent voting power.  The measure also provides that a
group or combination of entities that constitute a "unitary
business' for income tax purposes comes within the meaning of
"related entities".   


 
 
 
                                 STAND. COM. REP. NO.  1427
                                 Page 2

 
     As affirmed by the record of votes of the members of your
Committee on Economic Development and Business Concerns that is
attached to this report, your Committee is in accord with the
intent and purpose of S.B. No. 1178, S.D. 2, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as S.B. No. 1178, S.D. 2, H.D. 1, and be referred to the
Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development and Business
                                   Concerns,



                                   ______________________________
                                   ROBERT N. HERKES, Chair