STAND. COM. REP. NO. 399

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 194
                                        S.D. 1




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

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 194 entitled: 

     "A BILL FOR AN ACT RELATING TO INCOME TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to establish a State income
tax credit equal to fifty per cent of a taxpayer's long-term care
insurance costs. 

     The Insurance Commissioner, the Hawaii State Commission on
the Status of Women, the Hawaii State Association of Life
Underwriters, and State Farm Insurance Companies presented
testimony in support of the measure.  The Hawaii Medical Services
Association, the Hawaii Long Term Care Association, AssistGuide,
Inc., and an individual, though not present at the hearing,
submitted written testimony in support of the measure.  The
American Council of Life Insurance presented testimony in support
of the measure with proposed amendments.  The Department of
Taxation presented comments on the measure.

     Your Committee finds that Hawaii residents age seventy and
older comprise the fastest growing segment of the State's
population.  As Hawaii's population ages and more residents
require long-term care, the problem of how to finance such care
becomes more urgent.  

     Long-term care services can cost an average of $65,000 to
$75,000 for skilled nursing or intermediate care facilities, and

 
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                                   STAND. COM. REP. NO. 399
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nursing home costs often exceed a family's ability to pay.
Additionally, seventy per cent of Medicaid payments in the State
go towards nursing home care and the cost of paying for long-term
care for indigent individuals creates a drain on the State's
resources.  

     By providing taxpayers with a fifty per cent State income
tax credit for long-term care insurance costs, this measure
provides an incentive for individuals to purchase long-term care
insurance during their younger years when premiums are more
affordable. 

     Your Committee further finds that in order for premium
payments to qualify for a federal income tax deduction under
section 213 of the Internal Revenue Code, payments must be made
for a "qualified long-term care insurance contract" as defined in
section 7702B of the Internal Revenue Code.  In order to ensure
that premium payments also qualify for a federal tax deduction,
your Committee has amended this measure by:

     (1)  Providing that the tax credit shall be in an amount
          equal to fifty per cent of the premium costs paid
          during the taxable year for a qualified long-term care
          insurance contract as defined in section 7702B of the
          Internal Revenue Code that covers either the taxpayer,
          the taxpayer's spouse, the taxpayer's parent, or a
          dependent as defined in section 152 of the Internal
          Revenue Code; and 

     (2)  Deleting definitions from section 2 of this measure.

     Your Committee has also made a technical, nonsubstantive
amendment to the measure to conform it to preferred drafting
style. 

     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. 194, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 194, S.D. 1, and be referred to the Committee on Ways and
Means.


 
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                                   STAND. COM. REP. NO. 399
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                                   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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