STAND. COM. REP. NO. 736

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1180
                                        




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 S.B.
No. 1180 entitled: 

     "A BILL FOR AN ACT RELATING TO THE INCOME TAXATION OF
     NONRESIDENTS,"

begs leave to report as follows:

     The purpose of this measure is to remedy the unanticipated
problems resultant from Act 281, Session Laws of Hawaii 1997,
which intended to cure the disparity in tax treatment between
residents and nonresidents.

     Testimony in support of this measure was received the
Department of Taxation.  Testimony was received from the Tax
Foundation of Hawaii.

     Your Committee finds that under current law, Act 281,
Session Laws of Hawaii 1997, nonresident taxpayers with income
from Hawaii sources are required to calculate their Hawaii income
tax liability by determining tax liability as if they were Hawaii
residents.

     Your Committee finds that Act 281, Session Laws of Hawaii
1997, discourages economic activity by substantially raising the
tax liabilities of nonresident investors and requiring all
nonresidents earning income in Hawaii to file tax returns no
matter how small the amount of income.


 
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                                   STAND. COM. REP. NO. 736
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     Your Committee finds that Act 281, Session Laws of Hawaii
1997, significantly increases the tax liabilities of our military
personnel.  In many instances, nonresident Hawaii tax liabilities
were 1000% more than the liabilities calculated under the prior
law.

     Your Committee finds that the impact of this measure will be
a revenue loss of $2.7 million.  However, this measure will allow
more revenue than under the law prior to Act 281, Session Laws of
Hawaii 1997, yet at the same time, the inequities between the tax
treatment of nonresidents and residents will be addressed.

     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. 1180 and recommends that it pass Second Reading 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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