STAND. COM. REP. NO. 621

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 1268

       S.D. 1

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

 

Madam:

 

     Your Committee on Economic Development and Taxation, to which was referred S.B. No. 1268 entitled:

 

"A BILL FOR AN ACT RELATING TO A COLLEGE SAVINGS PROGRAM TAX CREDIT,"

 

begs leave to report as follows:

 

     The purpose of this measure is to establish a college savings program tax credit.

 

     Testimony in support of this measure was received from the University of Hawaii System and the Hawaii Association of Independent Schools.  The Department of Budget and Finance, the Department of Taxation, and the Tax Foundation of Hawaii submitted comments.

 

     Your Committee finds that increasing options for financing a college education is important to the development of the highly skilled workforce necessary in emerging and innovative industries.

 

     Your Committee received a revenue impact statement from the Department of Taxation (Department) that stated the projected revenue loss is $6,300,000 for fiscal year 2010.

 

     In its methodology, the Department stated that approximately 50,000 students were enrolled in fall 2005, at the University of Hawaii, and it was assumed that twenty-five per cent of these students would have a parent or guardian who will contribute to the College Savings Program.  The maximum credit amount was applied to this number to get the projected revenue loss.

 

     Your Committee further finds that Section 529 of the Internal Revenue Code allows states to sponsor programs that allow contributions to qualifying educational tax-free accounts, and that Hawaii has a 529 Program.

 

     Your Committee has heard, however, that Hawaii's 529 Program is not widely used.  Your Committee also notes that there has been discussion of a tax credit, as opposed to a tax deduction, to accomplish a similar purpose.

 

     It is the intent of your Committee to continue the discussion on the pros and cons of the various college savings options.

 

     Your Committee has amended this measure accordingly, by:

 

     (1)  Inserting an effective date of July 1, 2035, for the purposes of further discussion; and

 

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

 

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1268, as amended herein, and recommends that it be referred to the Committee on Ways and Means, in the form attached hereto as S.B. No. 1268, S.D. 1.

 

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

 

 

 

____________________________

CAROL FUKUNAGA, Chair