CONFERENCE COMMITTEE REPORT NO. 122

                            Honolulu, Hawaii
                                            , 1999

                            RE:   S.B. No. 1583
                                  S.D. 2
                                  H.D. 2
                                  C.D. 1




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

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

Sir:

     Your Committee on Conference on the disagreeing vote of the
Senate to the amendments proposed by the House of Representatives
in S.B. No. 1583, S.D. 2, H.D. 2, entitled:  

     "A BILL FOR AN ACT RELATING TO TECHNOLOGY," 

having met, and after full and free discussion, has agreed to
recommend and does recommend to the respective Houses the final
passage of this bill in an amended form.

     The purpose of this measure is to spur economic development
and foster the growth of knowledge-based industries in Hawaii via
tax incentives, special purpose revenue bonds, and other
incentives.  More specifically, this measure:

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


 
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     (2)  Offering a tax incentive for investment in new high
          technology businesses;

     (3)  Integrating technology with Hawaii's tourism and
          marketing industries;

     (4)  Prohibiting the imposition of taxes on Internet
          commerce;

     (5)  Focusing work force development programs to ensure a
          pool of technology professionals; 

     (6)  Accelerating high speed access to the Internet for the
          University of Hawaii and the public schools, and
          establishing educational technology programs within
          public schools;

     (7)  Exempting stock options from qualified high technology
          businesses from income taxation;

     (8)  Assisting Ohana Foundation and its not-for-profit
          affiliates in financing or refinancing costs related to
          the development of a high technology park in Kakaako;

     (9)  Exempting royalties from qualified high technology
          businesses and other sources from gross income for tax
          purposes; and

     (10) Creating tax credits for high technology companies that
          invest in high technology businesses and increase
          research activities.

     Due to the State's current economic condition, your
Committee recognizes the necessity of fostering the development
of the high technology industry in Hawaii.  High technology spans
a variety of fields--from cutting edge bioengineering research,
to the explosive growth of Internet commerce, to the development
of advanced computer software.  Because of this, high technology
promises to be the major industry of the future, fast growing and
enhancing our everyday lives in more ways than can be imagined.
Your Committee's commitment to fostering high technology growth
and development in this State will ensure Hawaii's prominent role
as a mecca for high technology companies and a world-renowned
center for innovation and invention.

     Your Committee has amended this measure to:

     (1)  Specify that the Governor's Special Advisor for
          Technology Development, the Governor's Special Advisory

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          Council for Technology Development, the Millennium Work
          Force Development Training Program, and the Department
          of Education's E Academy programs shall seek and
          utilize any available funding sources, including grant
          moneys, in carrying out their duties;

     (2)  Delete the specific tax credit for financial
          institutions to invest in high technology businesses;

     (3)  Clarify the provisions of the Hawaii Internet Tax
          Freedom Act (section 9);

     (4)  Acknowledge the University of Hawaii's role in the
          development of a high technology workforce by
          appropriating funds to the University of Hawaii to
          implement programs pursuant to the workforce
          development training program;

     (5)  Delete the appropriation for the establishment of a
          University of Hawaii teleconferencing center in
          California's Silicon Valley;

     (6)  Delete the authorization for the issuance of special
          purpose revenue bonds for Ohana Foundation, as this
          provision is addressed in H.B. No. 377, H.D. 2, S.D. 2,
          C.D. 1;  

     (7)  Clarify the provisions for tax exemptions for stock
          options from high technology businesses, and royalties
          from high technology businesses, including the
          deletion of the requirement that these business must
          operate solely in Hawaii, and the addition of computer
          software development companies to the definition of
          "qualified high technology businesses" (sections 20 and
          22);

     (8)  Clarify the provisions for tax credits for investment
          in high technology businesses and increasing research
          activities, including the addition of computer software
          development companies to the definition of "qualified
          high technology businesses", and the allowance of
          financial institutions and insurance companies to
          utilize the tax credits for high technology investment
          (sections 24, 25, 26, and 27); and

     (9)  Make technical nonsubstantive changes for the purposes
          of clarity and style.


 
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     It is the intent of you Committee that the tax credits and
exemptions provided for in this measure be applied to a broad
range of high technology businesses, including Internet based
businesses.  Your Committee urges the Department of Taxation to
consider this intention in the authorization of these tax
incentives.

     Your Committee on Conference is in accord with the intent
and purpose of S.B. No. 1583, S.D. 2, H.D. 2, as amended herein,
and recommends that it pass Final Reading in the form attached
hereto as S.B. No. 1583, S.D. 2, H.D. 2, C.D. 1.

                                   Respectfully submitted,

MANAGERS ON THE PART OF THE        MANAGERS ON THE PART OF THE
            HOUSE                             SENATE
                                   
                                   
                                   
______________________________     ______________________________
DWIGHT Y. TAKAMINE, Co-Chair       DAVID Y. IGE, Co-Chair
                                   
                                   
                                   
______________________________     ______________________________
SYLVIA J. LUKE, Co-Chair           LORRAINE R. INOUYE, Co-Chair
                                   
                                   
                                   
______________________________     ______________________________
DAVID MORIHARA, Co-Chair           BOB NAKATA, Co-Chair
                                   
                                   
                                   
______________________________     ______________________________
KEN ITO, Co-Chair                  CAROL FUKUNAGA, Co-Chair
                                   
                                   
                                   
______________________________     ______________________________
BOB NAKASONE, Member               ANDREW LEVIN, Co-Chair
                                   
                                   
                                   
______________________________     ______________________________
NATHAN SUZUKI, Member              SAM SLOM, Member

 
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______________________________
CHRIS HALFORD, Member



______________________________
COLLEEN MEYER, Member

 
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