Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 364
                                        S.D. 1

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


     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 364 entitled: 


begs leave to report as follows:

     The purpose of this measure is to include within the general
excise tax exemption for insurance companies' gross proceeds
those proceeds received by a corporate attorney-in-fact in
connection with administrative functions performed on behalf of a
reciprocal insurer.

     Testimony was presented at the hearing in support of this
measure by a representative of the Hawaii Captive Insurance
Council and the Medical Insurance Exchange of California.  Though
not present at the hearing, the Hawaii Medical Association
submitted written testimony in support of this measure.

     At the hearing, a representative of the Department of
Taxation testified in opposition to the measure, and the
Insurance Commissioner presented comments on the measure.

     Your Committee finds that, by their nature, reciprocal
insurers must utilize an attorney-in-fact to provide for
administrative functions for its insured subscribers.  The
imposition of an excise tax on the business which a reciprocal
insurer's attorney-in-fact must perform has the potential to
discourage captive insurance companies formed as reciprocal

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                                   STAND. COM. REP. NO. 375
                                   Page 2

insurers from organizing and operating their attorney-in-fact in

     Your Committee finds, however, that it is imprudent to
provide a retroactive effective date in this measure.  Your
Committee has amended this measure by changing the effective date
to any taxable year ending after July 1, 1999 and making other
conforming amendments.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 364, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 364, S.D. 1, and be referred to the Committee on Ways and

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

                                   BRIAN KANNO, Co-Chair

                                   BRIAN T. TANIGUCHI, Co-Chair

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