STAND. COM. REP. NO. 1064

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 136
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
136, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to upgrade Hawaii's hotel stock
by creating a tax credit for improvements made to hotel
properties.

     The Department of Business, Economic Development, and
Tourism, the Waikiki Improvement Association, the Hawaii Hotel
Association, the Sheraton Princess Kaiulani, the Hilton Hawaiian
Village, the Estate of James Campbell, Louis Vuitton Hawaii,
Outrigger Enterprises, Inc., and Hyatt Resorts testified in
support of the bill.  The Department of Taxation testified in
support of the intent of the measure.  The Tax Foundation of
Hawaii commented on the bill.

     Your Committee has amended the bill by:

     (1)  Changing the amount of the tax credit from four per
          cent of the improvement costs to a sliding scale of 25
          to 100 per cent, based upon the cost of improvements;

 
 
 
 
 
 
 
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     (2)  Changing and extending the duration for which tax
          credits may be taken for the period from December 31,
          1998, to December 31, 2003, to a period to be
          determined by the taxpayer of up to ten consecutive
          years; 

     (3)  Specifying that the tax credit is allowed for
          improvement costs incurred during taxable years
          beginning after December 31, 1998, and before January
          1, 2004;

     (4)  Expanding the application of the tax credit to the
          general excise tax, the transient accommodations tax,
          and the public service company tax; 

     (5)  Providing that distribution and share of the tax credit
          shall be determined by rules adopted by the Director of
          Taxation, rather than by provisions contained in
          Section 235-110.7(a), Hawaii Revised Statutes; and

     (6)  Making technical, nonsubstantive revisions for style
          and clarity.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
136, H.D. 1, as amended herein, and recommends that it pass Third
Reading in the form attached hereto as H.B. No. 136, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair