STAND. COM. REP. NO. 1165

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 377
                                        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 Committees on Education and Technology and Economic
Development, to which was referred H.B. No. 377, H.D. 2,
entitled: 

     "A BILL FOR AN ACT RELATING TO ECONOMIC DEVELOPMENT,"

beg leave to report as follows:

     The purpose of this measure is to spur economic development
and foster growth of knowledge-based industries in Hawaii by:

     (1)  Providing a technology-related job creation tax credit
          to offset the cost of technology-related job creation
          costs;

     (2)  Establishing the Hawaii Internet Exchange to serve as a
          catalyst for the development of internet-focused
          businesses;

     (3)  Accelerating work force development programs to create
          a pool of information technology professionals;

     (4)  Providing a tax credit for making increased
          expenditures in certain technological and scientific
          research and development; and

     (5)  Providing a tax credit for investing in high technology
          businesses.


 
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     Testimony in support of this measure was submitted by the
University of Hawaii, the Department of Education, the Department
of Taxation, the Department of Business, Economic Development,
and Tourism, the High Technology Development Corporation, and the
Ohana Foundation.  The Tax Foundation of Hawaii submitted
comments on this measure.

     Your Committees strongly believe in the necessity of this
measure.  If Hawaii is to overcome its economic hardships, and
develop and diversify its economy, then the State must take full
advantage of the advances in telecommunications, information
technology, and the explosive growth of the Internet.  Hawaii's
geographic location allows for an ideal environment which fosters
technological advances.

     Your Committees have amended this measure to delete its
contents, except for Part V, and replace them with the contents
of S.B. No. 1583, S.D. 2, a similar measure previously heard by
your Committees.  Additional amendments were made to make this
measure more effective in fostering the growth of the high
technology industry in Hawaii. 

     As amended, this measure:

     (1)  Consolidates the State's high technology agencies,
          divisions, and offices, under the coordination of a
          special advisor for technology development, and creates
          a governor's special advisory council for technology
          development to assist the advisor;

     (2)  Offers a tax incentive for technology training or job
          creation;

     (3)  Offers a tax incentive for investments in qualified
          high technology businesses;

     (4)  Offers a tax incentive for investments in high
          technology research;

     (5)  Exempts from excise tax and income tax, royalties due
          to high technology inventions;

     (6)  Authorizes the issuance of special purpose revenue
          bonds to the Ohana Foundation for the construction of
          facilities for research, development, technology
          development, and technology support;

     (7)  Integrates high technology with Hawaii's tourism and
          marketing industries;

 
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     (8)  Prohibits the imposition of taxes on Internet access
          and commerce;

     (9)  Establishes the Hawaii Internet Exchange to serve as a
          catalyst for the development of Internet focused
          businesses;

    (10)  Focuses work force development programs to ensure a
          pool of technology professionals; and

    (11)  Accelerates high speed access to the Internet for the
          University of Hawaii and the public schools, and
          establishes educational technology programs within
          public schools.

     As affirmed by the records of votes of the members of your
Committees on Education and Technology and Economic Development
that are attached to this report, your Committees are in accord
with the intent and purpose of H.B. No. 377, H.D. 2, as amended
herein, and recommend that it pass Second Reading in the form
attached hereto as H.B. No. 377, H.D. 2, S.D. 1, and be referred
to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Education and
                                   Technology and Economic
                                   Development,



____________________________       ______________________________
LORRAINE R. INOUYE, Chair          DAVID Y. IGE, Chair

 
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