STAND. COM. REP. NO. 234

Honolulu, Hawaii

, 2005

RE: H.B. No. 1448

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Economic Development & Business Concerns and Public Safety & Military Affairs, to which was referred H.B. No. 1448 entitled:

"A BILL FOR AN ACT RELATING TO INCOME TAX CREDIT,"

beg leave to report as follows:

The purpose of this bill is to enhance public safety and reduce loss of life due to fires by establishing a tax credit for every automatic fire sprinkler system installed and placed into service after June 30, 2005. Specifically, this bill allows a tax credit for 35 percent of the actual cost of an automatic fire sprinkler system for a single-family residential property, multi-family residential property, and commercial property.

The Hawaii Fire Fighters Association and Verizon Hawaii supported this bill. The Hawaii Independent Condominium & Cooperative Owners and Hawaii Council of Associations of Apartment Owners supported this bill with amendments. The Department of Taxation (DOTAX) opposed this bill. The Tax Foundation of Hawaii offered comments.

Your Committees note that some public testimony submitted for this bill was directed at a proposed H.D. 1 that was distributed at the public hearing. The State Fire Council supported the proposed H.D. 1 of this bill.

Your Committees find that providing tax incentives for automatic fire sprinkler systems is an important step in ensuring that more of Hawaii's residents are protected from the dangers of a fire. However, your Committees note that the bill, as introduced, has raised some concerns, including the absence of any provision to limit the amount of the credit.

In light of these concerns, your Committees have retained the intent of this measure, which is to provide a tax credit for automatic fire sprinkler systems, but have deleted its substantive contents and inserted a substantively different tax credit. As amended, this bill, among other things:

(1) Establishes a tax credit for each automatic fire sprinkler system that is installed and placed into service by a taxpayer after June 30, 2006;

(2) Sets the amount of the tax credit at five percent of the qualifying costs of the automatic fire sprinkler system;

(3) Caps the tax credit at $1,000 in each taxable year for each automatic fire sprinkler system;

(4) Allows the tax credit to be claimed for each taxable year up to five consecutive taxable years;

(5) Prohibits refunding of the tax credit;

(6) Defines "qualifying costs" as the costs incurred in purchasing or otherwise acquiring an automatic fire sprinkler system, including accessories and installation, for use:

(A) In apartments and condominiums built before 1975 and other multi-residential dwellings; and

(B) In single-family residential dwellings;

(7) Requires DOTAX to submit a report to the Legislature detailing the estimated amount of tax credits that may be claimed and the estimated amount of state tax revenue that may be lost as a result of the tax credit; and

(8) Makes the tax credit effective on approval but applicable to tax years beginning after December 31, 2004.

As affirmed by the records of votes of the members of your Committees on Economic Development & Business Concerns and Public Safety & Military Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1448, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 1448, H.D. 1, and be referred to the Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committees on Economic Development & Business Concerns and Public Safety & Military Affairs,

 

____________________________

KEN ITO, Chair

____________________________

ROBERT N. HERKES, Chair