STAND. COM. REP. NO. 312

Honolulu, Hawaii

, 2005

RE: H.B. No. 998

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 Tourism & Culture and Economic Development & Business Concerns, to which was referred H.B. No. 998 entitled:

"A BILL FOR AN ACT RELATING TO HOTEL CONSTRUCTION AND REMODELING TAX CREDIT,"

beg leave to report as follows:

The purpose of this bill is to continue and expand incentives to develop our visitor industry infrastructure by changing the amount of the Hotel Construction and Remodeling Tax Credit (Tax Credit) and extending the Tax Credit to July 1, 2012, as follows:

(1) Raising the Tax Credit from four percent to eight percent of construction or renovation costs incurred for each qualified hotel facility for costs incurred before July 1, 2009; and

(2) Extending the four percent Tax Credit for construction or renovation costs incurred for each qualified hotel facility for costs incurred from July 1, 2009, through June 20, 2012.

In addition, this bill:

(1) Repeals the Tax Credit on July 1, 2012;

(2) Includes commercial buildings and facilities located within a qualified resort area in the definition of "qualified hotel facility"; and

(3) Repeals the provision requiring taxpayers to be in compliance with all applicable federal, state, and county statutes, rules, and regulations to qualify for the Tax Credit.

The Hawaii Tourism Authority, Hawaii Hotel & Lodging Association, and Outrigger Hotels supported this bill. The Department of Business, Economic Development, and Tourism supported the intent of this bill. The Department of Taxation opposed this measure.

Your Committees support the extension and increase in the Tax Credit provided for in this bill as a way to provide incentives for the hotel industry. However, your Committees note that testimony submitted in the public hearing for this bill indicated that the conversion of full service hotels to time share facilities and condominiums is a potential problem for the hotel industry and for Hawaii in general. Conversion from full service hotel rooms to time share or condominium units results in a reduced amount and choice of lodging available to visitors, loss of tax revenue from taxes such as the transient accommodations tax, and a net job reduction, as full service hotels generally retain more employees than time shares or condominiums.

In light of this, your Committees have amended this bill by:

(1) Deleting time share facilities, condominiums, and commercial buildings and facilities located within a qualified resort area from the definition of "qualified hotel facility";

(2) Establishing 100 percent recapture provisions for Tax Credits claimed on facilities that are converted, or in the process of being converted, to time share facilities or condominiums;

(3) Deleting associations of apartment owners and time share associations from the definition of "taxpayer"; and

(4) Making technical, nonsubstantive amendments for style, consistency, and clarity.

As affirmed by the records of votes of the members of your Committees on Tourism & Culture and Economic Development & Business Concerns that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 998, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 998, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committees on Tourism & Culture and Economic Development & Business Concerns,

 

____________________________

ROBERT N. HERKES, Chair

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JERRY L. CHANG, Chair