STAND. COM. REP. NO. 2177

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2781
                                        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. 2781 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to 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.

     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, American Resort Development Association of
Hawaii, Associated Builders and Contractors, Inc., General
Contractors Association of Hawaii, The Pacific Resource
Partnership, Waikiki Improvement Association, Hilton Hawaiian
Village, Outrigger Enterprises, Inc., Sheraton Princess Kaiulani
Hotel, and Retail Merchants of Hawai`i.  The Sierra Club, Hawai`i
Chapter submitted testimony in opposition.

     Your Committee finds that Act 306, Session Laws of Hawaii
(SLH) 1999, established a tax credit for improvements to visitor
facilities, 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. 2177
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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. 2709, Relating to Taxation, would amend the
statute created by Act 306, SLH 1999, to set the tax credit for
qualified improvement costs of a qualified resort facility and a
qualified general facility at four per cent.  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 extend the tax
credits through December 31, 2006. 

     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. 2781, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 2781,
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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