STAND. COM. REP. NO. 2311

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 3036
                                        S.D. 1




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

Sir:

     Your Committees on Education and Technology and Economic
Development, to which was referred S.B. No. 3036 entitled: 

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

beg leave to report as follows:

     The purpose of this measure is to provide a general excise
tax exemption to qualified high technology businesses for
machinery and equipment purchases.

     In addition, this measure allows such businesses to sell
their unused net operating loss carryover and unused tax credits
to other qualified high technology businesses.  It also extends
the five-year capital loss carry forward period to an unknown
time period.

     Testimony in support of the measure was received from the
Department of Taxation, Department of Business, Economic
Development, and Tourism, and Hawai'i Technology Trade
Association.  Comments on the measure were received from the Tax
Foundation of Hawaii.

     Your Committees find that emerging high technology companies
initially face significant impediments to their success.  Unlike
more mature, profitable companies, emerging high technology
companies are unable to use tax benefits as their research is
conducted.  Such companies also incur sizeable, initial capital
costs and need a steady source of capital until they can make a
profit.

 
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                                   STAND. COM. REP. NO. 2311
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     Your Committees agree that allowing high technology
businesses to sell their unused net operating loss carryover and
unused tax credits and providing them with an exemption from the
general excise tax for machinery and equipment purchases will
encourage the growth of new and existing high technology
companies.

     The measure was amended as follows:

     (1)  Specifying in section 1 which tax credits can be sold
          for any taxable year;

     (2)  Providing a definition of tax credits that may be sold
          as the capital goods excise tax credit and the credit
          for increasing research activities.  In addition, the
          definition of high technology business in section 1 was
          amended to provide an unstated employee limit in order
          to limit this provision to start up companies; 

     (3)  Requiring that the income received from the sale of the
          credits or losses is income for purposes of the net
          income tax; and

     (4)  Making technical, nonsubstantive amendments for
          clarity.

     As affirmed by the records of votes of the members of your
Committees on Education and Technology and Economic Development
that are attached to this report, your Committees are in accord
with the intent and purpose of S.B. No. 3036, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 3036, S.D. 1, and be referred to the Committee
on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Education and
                                   Technology and Economic
                                   Development,



_____________________________      ______________________________
LORRAINE R. INOUYE, Chair          DAVID Y. IGE, Chair


 
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