STAND. COM. REP. NO. 511

Honolulu, Hawaii

, 2001

RE: S.B. No. 648

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Economic Development and Technology, to which was referred S.B. No. 648 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to add new tax benefits for high tech industries and amends current benefits to improve them.

Your Committee received testimony in favor of this measure from the Department of Business, Economic Development, and Tourism, Hawaii Venture Capital Association, Maui Economic Development Board, Inc., Hawaiian Dredging Construction Company, Hawaii Opportunities Group, LLC, Science & Technology International, CEATECH USA, Hawaii Technology Trade Association, Software Pharmacy, Inc., Axean Pacific, Oceanit, Queen's Medical Center, Jane Yamashiro and Associates, and an individual. Your Committee received comments on this measure from Tax Foundation of Hawaii, the Executive Assistant to the Governor and Special Advisor for Technology, and the Department of Taxation supported the intent of the bill but opposed most of its incentives.

Your Committee finds that prior legislative acts provided a solid basis for technology-led economic development and diversification in Hawaii but these initiatives did not go far enough to attract capital investment into technology companies. Additional incentives, i.e. tax breaks, for the technology industry as provided by this measure would help attract additional investment capital into the State, strengthen Hawaii's position relative to other states in restructuring its economy, spur economic growth and create high-paying jobs.

Your Committee amended this measure with the following:

(1) Making technical changes for clarification.

(2) Replacing the construction tax credit with a tax credit for worthless debts of qualified high technology business. In the absence of traditional collateral, Hawaii banks need additional incentives to initiate loans to start-ups;

(3) Exempting expenses for royalties and other income derive from any patents, copyrights, and trade secrets;

(4) Expanding the definition of "qualified research" to include non fossil fuel energy related technology; and

(5) Modifying the effective dates of particular sections in accordance with their amendments.

As affirmed by the record of votes of the members of your Committee on Economic Development and Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 648, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 648, 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 and Technology,

____________________________

ROD TAM, Chair