Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1556
                                        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 S.B.
No. 1556, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to exempt and exclude from
imposition of the general excise tax the income received by
resident licensed contractors and subcontractors from federal
construction contracts.

     The measure also clarifies that contractors and
subcontractors working on federal projects in Hawaii are included
in the definition of "contractor" for the purposes of and subject
to the licensing requirements of chapter 444, Hawaii Revised
Statutes, only to the extent allowed under federal law.

     Testimony in support of this measure was received from the
Plumbing and Mechanical Contractors of Hawaii and the Hawaii
Electricians Market Enhancement Program Fund.

     The Department of Taxation and the Tax Foundation of Hawaii
submitted comments on the measure.

     Testimony indicated that some out-of-state contractors had a
bidding advantage over Hawaii contractors because they did not
factor the state four percent general excise tax into their bids
for federal contracts.  The measure would help Hawaii contractors
submit more competitive bids on federal contracts, thereby

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                                   STAND. COM. REP. NO. 741
                                   Page 2

creating more business and employment opportunities for Hawaii's
construction industry.

     Your Committee has amended this measure by:

     (1)  Replacing the term "resident" contractor and
          subcontractor with "state" contractor and
          subcontractor; and

     (2)  Defining "state contractor" and "state subcontractor"
          as a licensed contractor doing business in the State
          with its owners, principals, officers, and employees
          meeting specific residency requirements.

     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 S.B.
No. 1556, S.D. 1, as amended, and recommends that it pass Third
Reading in the form attached hereto as S.B. No. 1556, 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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