STAND. COM. REP. NO. 1443

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1197
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 1197, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO CONFORMITY OF THE HAWAII
     INCOME TAX LAW TO THE INTERNAL REVENUE CODE,"

begs leave to report as follows:
     
     The purpose of this measure is to conform the Hawaii income
tax law to subtitle A, chapter 1 of the Internal Revenue Code
(IRC) as it applies to the determination of gross income,
adjusted gross income, ordinary income, loss, and taxable income.

     Your Committee received testimony in support of this measure
from the Department of Taxation.  The Tax Foundation of Hawaii
submitted comments.

     Your Committee finds that this is an annual conformity
measure submitted by the Department of Taxation in compliance
with section 235-2.3, Hawaii Revised Statutes (HRS), requiring
the department to maintain state income tax conformance with the
federal code.  The purpose of conformity is to update the state
income tax law with respect to the definition of income with
those changes made to the IRC during the past year, and to adopt
those changes that are appropriate to Hawaii law.

     Your Committee further finds that the changes adopted by
conforming to federal law include increasing the deduction for
health insurance for self-employed taxpayers from forty percent

 
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                                   STAND. COM. REP. NO. 1443
                                   Page 2


to forty-five percent in 1998, sixty percent for 1999 to 2001,
seventy percent in 2002, and one hundred percent in 2003;
increasing the employer deduction allowed for monthly parking
from $155 to $175 per month and for transit passes from $60 to
$65 per month; clarification of computing adjusted gross income
for purposes of qualifying for Roth IRA contributions and
accelerating the inclusion period for Roth IRA rollovers in
certain situations; and clarification of the reduced exclusion on
the sale of a principal residence.

     Your Committee has amended this measure to delete the
proposed Section 235-2.4(p), HRS, with respect to taxable year of
trusts, Section 644 of the IRC.  With the repeal of Section
235-2.4(n), HRS, the proposed new language is unnecessary.  Your
Committee has made technical amendments.

     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 H.B.
No. 1197, H.D. 2, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as H.B. No. 1197,
H.D. 2, 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,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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