STAND. COM. REP. NO. 2174

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2709
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Economic Development, to which was
referred S.B. No. 2709 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to set the tax credit for
qualified improvement costs of a qualified resort facility and a
qualified general facility at four per cent.

     Testimony in favor of this measure was submitted by
Department of Business, Economic Development, and Tourism,
Department of Taxation, Hawaii Tourism Authority, The Chamber of
Commerce of Hawaii, General Contractors Association of Hawaii,
Subcontractors Association of Hawaii, Building Industry
Association of Hawaii, the Construction Industry Legislative
Organization, Inc., Hidano Construction, Inc., Hawaii
Associations of REALTORS, Hawaii Hotel Association, Maui Hotel
Association, Waikiki Improvement Association, Hilton Hawaiian
Village, Outrigger Enterprises, Inc., and Victoria Ward, Limited.
The Sierra Club, Hawai`i Chapter submitted testimony in
opposition.  The Tax Foundation of Hawaii submitted comments.

     Your Committee finds that Act 306, Session Laws of Hawaii
1999, established this tax credit, but without a specified
percentage.  Your Committee has heard from both the visitor and
construction industries that this omission has had a detrimental
effect on planned improvements, and that in some cases, needed
improvements have been put on hold as a result.

 
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                                   STAND. COM. REP. NO. 2174
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     Your Committee has also considered three related measures
that would address tax incentives for upgrading Hawaii's visitor
facilities.  S.B. No. 2781, Relating to Taxation, would provide a
four per cent tax credit for hotel construction and remodeling
for taxable years beginning after December 31, 1998, and before
January 1, 2002.  S.B. No. 3015, Relating to Commercial and
Industrial Improvements, would provide a four per cent tax credit
for the cost of construction of new facilities over $60,000,000,
for taxable years beginning after December 31, 2000, and before
January 1, 2006.  S.B. No. 3018, Relating to Taxation, would
provide a graduated exemption from the general excise tax for
qualified improvement costs to a qualified resort facility for
taxable years beginning after December 31, 1998, and ending
December 31, 2004.  Your Committee believes there is some merit
in each of these measures and that all four bills should receive
further consideration, as amended, and forwarded to the Committee
on Ways and Means.

     Your Committee has amended this measure to change four per
cent to twenty per cent.

     As affirmed by the record of votes of the members of your
Committee on Economic Development that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 2709, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 2709,
S.D. 1, and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development,



                                   ______________________________
                                   LORRAINE R. INOUYE, Chair

 
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