STAND. COM. REP. NO. 354-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2607
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Economic Development and Business
Concerns and Higher Education, to which was referred H.B. No.
2607 entitled: 

     "A BILL FOR AN ACT RELATING TO HIGH TECHNOLOGY,"

beg leave to report as follows:

     The purpose of this bill is to strengthen the high
technology business incentives provided in Act 178, Session Laws
of Hawaii 1999 for qualified high technology businesses.

     Specifically, this bill:

     (1)  Designates certain performing arts products, such as
          music CDs, videos, and computer animation, as qualified
          research, thereby allowing high technology businesses
          developing these products to qualify for the income tax
          exclusion for royalties, the income tax exclusion for
          income from stock options, and the high technology
          investment tax credit;

     (2)  Expands the exclusion from income of royalty and other
          income derived from patents and copyrights to include
          income derived from trade secrets;

     (3)  Allows partnership investors the flexibility of
          allocating the high technology business investment tax
          credit among partners without regard to the federal
          income tax allocation rules; and

 
 
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     (4)  Increases the state research and development tax credit
          rate to match the federal tax credit rate.

     The Hawaii Technology Trade Association testified in support
of the measure.  The High Technology Development Corporation
submitted testimony in support of the intent of this measure.   

     Your Committees have amended this bill by making technical,
nonsubstantive amendments for clarity, consistency, and style,
and to conform with drafting requirements.

     As affirmed by the records of votes of the members of your
Committees on Economic Development and Business Concerns and
Higher Education that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
2607, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 2607, H.D. 1, and
be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Economic
                                   Development and Business
                                   Concerns and Higher Education,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DAVID MORIHARA, Chair              ROBERT N. HERKES, Chair