Honolulu, Hawaii



RE:    S.B. No. 3084

       S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2016

State of Hawaii




     Your Committee on Ways and Means, to which was referred S.B. No. 3084 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to disallow the tax credit for cesspool upgrade, conversion, or connection for taxpayers whose adjusted gross income exceeds certain amounts.


     Your Committee received testimony in support of this measure from the Hawaii Cattlemen's Council, Hawaii Farm Bureau, and Ponoholo Ranch Limited.


     Your Committee received comments on this measure from the Department of Health, Department of Taxation, and Tax Foundation of Hawaii.


     Your Committee finds that, in order to reduce the contamination of groundwater, drinking water sources, streams, and the ocean caused by cesspool pollution, Act 120, Session Laws of Hawaii 2015, established a temporary income tax credit for taxpayers who upgrade or convert a qualified cesspool into a septic system or an aerobic treatment unit system, or connect a qualified cesspool to a sewer system.  The tax credit has an aggregate cap of $5,000,000 per taxable year.  Your Committee further finds that the intent of this measure is to ensure that taxpayers who are most in need of tax relief will be able to claim this credit.


     Your Committee believes that, as this measure moves forward, the Department of Taxation, in consultation with the Department of Health, should consider and make recommendations on how to mitigate the impact on taxpayers whose adjusted gross income levels are close enough to the disallowance threshold that their eligibility to claim the tax credit becomes uncertain.  Your Committee further believes that the counties should also offer incentives for the upgrade, conversion, or connection of cesspools.


     Your Committee has amended this measure by:


     (1)  Clarifying that eligibility to claim the tax credit is based on a taxpayer's federal adjusted gross income, rather than state adjusted gross income; and


     (2)  Changing the effective date to January 1, 2050, to facilitate further discussion on the measure.


     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3084, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3084, S.D. 1, and be placed on the calendar for Third Reading.


Respectfully submitted on behalf of the members of the Committee on Ways and Means,