STAND. COM. REP. NO. 1183-04

Honolulu, Hawaii

, 2004

RE: S.B. No. 3024

S.D. 2

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Finance, to which was referred S.B. No. 3024, S.D. 2, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CAPITAL FORMATION,"

begs leave to report as follows:

The purpose of this bill is to meet the financing needs of technology-intensive businesses in Hawaii to enable their development and growth by, among other things:

(1) Creating the Hawaii Private Investment Fund (HPIF) Program to increase the availability of equity and debt capital for emerging, expanding, and restructuring enterprises in Hawaii;

(2) Establishing a Business-research Institute Tax Credit;

(3) Clarifying the existing High Technology Business Investment Tax Credit (High Tech Tax Credit) by:

(a) Adding a definition of "investment tax credit allocation ratio" for clarity;

(b) Establishing that a presumption exists that a transaction satisfies the doctrine of economic substance and business purpose if the High Tech Tax Credit has a certain investment tax credit ratio for every dollar invested; and

(c) Reassuring taxpayers with Department of Taxation (DoTax) "comfort" rulings that they can depend on such rulings despite changes to the law;

(4) Extending the Technology Infrastructure Renovation Tax Credit and deleting the definition for "technology-enabled infrastructure" to facilitate further discussion;

(5) Clarifying that the refundable tax credit for scientific research by qualified research and development companies is limited to qualified high technology businesses as defined in the section relating to the High Tech Tax Credit;

(6) Requiring disclosure of the qualifying costs and identities of corporate investors and qualifying corporations, except for confidential or proprietary information, under the proposed Hawaii business-research institutes tax credit, applicable to the entire bill and Act 221, Session Laws of Hawaii 2001 (Act 221);

(7) Establishing record-keeping requirements and procedures for DBEDT as they pertain to the tax credits;

(8) Clarifying that the Legislature intends Act 221 to be "neutrally" construed; provided that DoTax is given latitude to qualify companies for Act 221;

(9) Tightening the general eligibility requirements for Act 221;

(10) Appropriating funds from the Hawaii Strategic Development Corporation Revolving Fund to operate the HPIF Program; and

(11) Appropriating funds for eight full-time equivalent auditor positions to establish a corporate investigation team in DoTax to audit corporate tax returns and perform any other duties necessary to effectuate the purposes of this measure.

The Waikiki Improvement Association and Hawaii Technology Trade Association testified in support of this measure with amendments. The Department of Business, Economic Development, and Tourism, Chamber of Commerce of Hawaii, High Technology Development Corporation, and several concerned individuals supported the intent of this measure. The Department of Taxation and Hawaii Venture Capital Association supported the intent of this measure with amendments. The Tax Foundation of Hawaii, Office of Information Practices, and a concerned individual offered comments.

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. 3024, S.D. 2, H.D. 1, and recommends that it pass Third Reading.

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

 

____________________________

DWIGHT Y. TAKAMINE, Chair