STAND. COM. REP. NO. 1406-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2409
                                     S.D. 1
                                     H.D. 2




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

Sir:

     Your Committee on Finance, to which was referred S.B. No.
2409, S.D. 1, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Encourage the development of high technology industries
          in Hawaii by exempting amounts received by a
          telecommunications common carrier from a person
          operating a call center from General Excise and Public
          Service Company taxes;

     (2)  Allows a Qualified Improvement Tax Credit to reduce a
          taxpayer's net income tax, general excise tax, or
          public service company tax liability for qualified
          improvement costs as follows:

          (a)  10 percent for qualified improvement costs
               totalling $1,000,000 to $5,000,000;

          (b)  15 percent for qualified improvement costs
               totalling over $5,000,000 to $10,000; and

          (c)  20 percent for qualified improvement costs
               totalling over $10,000,000; provided that:


 
 
                                 STAND. COM. REP. NO. 1406-00
                                 Page 2

 
               (i)  If the taxpayer is a general contractor on
                    the project, all employees are paid
                    prevailing wages; and

              (ii)  In any contract let in connection with the
                    project, stipulations require that the
                    contractor and subcontractor pay the
                    prevailing wages for employees working on the
                    project;

     (2)  Requires taxpayers qualifying for a Qualified
          Improvement Tax Credit of 15 percent or more, who
          purchases an operating hotel and closes the hotel for
          renovation, to retain nonsupervisory, nontipped
          employees on the payroll for at least six months
          following the hotel's closure;

     (3)  Defines "qualified improvement costs" as any
          capitalized costs for construction and equipment of a
          permanent nature on property designated primarily for
          hotel or resort use or primarily used for hotel use,
          resort use, or commercial or recreational use to
          support or service a hotel or resort use;

     (4)  Disallows Transient Accommodations Tax credits from
          qualified improvement costs;

     (5)  Requires the Director of Taxation (Director) to develop
          procedures for the distribution and share of Qualified
          Improvement Tax Credits; and

     (6)  Authorizes the Director to develop a plan for each
          qualified taxpayer that phases in the Qualified
          Improvement Tax Credits claimed by the taxpayer over a
          ten-year period.

     The High Technology Development Corporation, Laborers
International Union of North America Local 368, Laborers-
Employers Cooperation and Education Trust, International
Association of Bridge, Structural, and Ornamental Iron Workers,
Hawaii Operating Engineers Industry Stabilization Fund,
Plumbers/Fitters Local 675, Waikiki Improvement Association,
Hawaii Resort Developers Conference, Visitor Industry Coalition,
Land Use Research Foundation of Hawaii, General Contractors
Association of Hawaii, Consulting Engineers Council of Hawaii,
Hidano Construction, Inc., Hawaii Technology Trade Association,
Hawaii Construction Industry Association, American Institute of
Architects Hawaii State Council, Paul Louie and Associates, Inc.,

 
                                 STAND. COM. REP. NO. 1406-00
                                 Page 3

 
Hawaii Developers' Council, and Hilton Hawaiian Village supported
this bill.

     The Chamber of Commerce of Hawaii supported the intent of
this bill.  

     The Department of Taxation, American Resort Developers
Association of Hawaii, the Hawaii Hotel Association, and the Tax
Foundation of Hawaii commented on this bill.

     Upon further consideration, your Committee has amended this
bill by:

     (1)  Changing the effective date to July 1, 2005; and

     (2)  Making technical, nonsubstantive changes for purposes
          of style and clarity.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
2409, S.D. 1, H.D. 1, as amended herein, and recommends that it
pass Third Reading in the form attached hereto as S.B. No. 2409,
S.D. 1, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair