FLOOR AMENDMENT NO. 4                    DATE: March 9, 1999     

TO:  S.B. No. 1180

     SECTION 1.  Senate Bill No. 1180, is amended as follows:

     1.  By adding a new section 1 to read as follows:

     "SECTION 1.  The legislature finds that the taxation of
nonresidents established in Act 281, Session Laws of Hawaii 1997
(Act 281), has proved to result in anomalies and difficulties for
both the taxpayer and the department of taxation.  Section
235-4.3 Hawaii Revised Statutes (HRS), formally Act 281 should be
repealed and a new methodology should be enacted.
     The legislature also finds that section 235-61, Hawaii
Revised Statutes, requires employers to deduct and withhold from
wages paid to an employee an amount of income tax, and pay that
withheld amount over to the department of taxation on a periodic
basis.  Subsection (e) allows the department, by rule, to exempt
any employer from the requirement.
     The legislature also finds that nonresidents are generally
not subject to the income tax law and the department of taxation
has adopted section 18-235-61-04, Hawaii Administrative Rules,
that exempts wages paid to nonresident employees from the
withholding requirements.  Section 18-235-61-04 also qualifies
employees as nonresidents, for the purposes of withholding taxes,
as those employees who are temporarily performing services in the
State for not more than sixty days during the calendar year.
     The legislature further finds that members of the
construction industry have testified in previous hearings on the
matter that this rule is being abused to avoid the withholding of
income tax that is legally due to the State.  According to
industry representatives, some employees attempt to qualify as
nonresidents by leaving the State on the fifty-ninth day only to
return a few days later to restart another sixty-day period.
     In addition to the resulting loss of revenues to the State,
the legislature believes that this abuse unfairly penalizes
residents of the State, and that treating residents and
nonresidents similarly regarding withholding is fair and
equitable.  If there is no income tax liability, nonresidents may
file for a return claiming a refund, as residents do.
     The purpose of this Act is to enact a new method of taxing
the income of nonresidents and to repeal the ability of the
department of taxation to exempt nonresident employees from
withholding and to require all employees' wages to be subject to
withholding regardless of residency."

FLOOR AMENDMENT NO.__________________                      Page 2

     2.  By renumbering sections 1 , 2, and 3 of the bill as
sections 2, 3, and 4 of the bill respectively.

     3.  By adding a new section 5 to read as follows:

     "SECTION 5.  Section 235-61, Hawaii Revised Statutes, is
amended by amending subsection (e) to read as follows:

     "(e)  The department, by rule, may require the deduction and
withholding of tax from any remuneration or compensation paid for
or attributable to services that are not subject to the general
excise tax imposed by chapter 237, whether or not such
withholding is provided for hereinabove.  Every person so
required to deduct and withhold tax, or from whom tax is required
to be deducted and withheld, shall be subject to sections 235-61
to 235-67, and every person so required to deduct and withhold
tax shall be deemed an employer for the purposes of this chapter.
     The department[, by rule,] may not exempt any employer from
the requirement of deduction and withholding of taxes[, even
though the requirement is imposed by this section, if and to the
extent that the department finds the requirement unduly onerous
or impracticable of enforcement].""

     3.  By renumbering sections 4 and 5 of the bill as sections
6 and 7 of the bill.
     4.  By renumbering and amending section 6 of the bill to
section 8 of the bill to read as follows:

     "SECTION 8.  This Act shall take effect upon its approval
and sections 2, 3, 4, and 6 of this Act shall apply to taxable
years beginning after December 31, 1998; provided that section 5
of this Act shall take effect on September 1, 1999, and shall be
repealed on September 1, 2002; provided that section 235-61(e),
Hawaii Revised Statutes, shall be reenacted in the form in which
read on the day before the effective date of this Act."

Offered by:_____________________       (    ) Carried

                                       (    ) Failed to Carry

                                       (    ) Withdrawn