STAND. COM. REP. NO. 2967

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 1944
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Commerce and Consumer Protection and
Transportation and Intergovernmental Affairs, to which was
referred H.B. No. 1944, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC SERVICE COMPANY TAX,"

beg leave to report as follows:

     The purpose of this measure is to provide for a more
equitable distribution of tax revenues and clarify the tax
liabilities of public utilities.

     Testimony on the measure was submitted by the Department of
Taxation, City and County of Honolulu, County of Maui, Maui
County Council, County of Hawaii, Hawaiian Electric Company,
Inc., Kauai Electric, The Gas Company, Tax Foundation of Hawaii,
County of Kauai, Hawaii County Council, and GTE.

     Public utilities are subject to a public service company
(PSC) tax on their gross income in lieu of general excise and
real property taxation.  Currently, the utilities' right of
exemption from real property taxes is in jeopardy under pending
litigation brought by Hawaii County (County) against the State
challenging the exemption's constitutionality in light of the
1978 constitutional amendment that transferred real property
taxing powers to the counties.  Absent legislative action, if the
County succeeds in its lawsuit, utilities may be subject to
double taxation upon their real property, and the resulting

 
a                                                     HB1944 SD1
 
                                   STAND. COM. REP. NO. 2967
                                   Page 2


increase in their operational expenses will likely be passed on
to consumers in the form of higher utility rates.

     This measure would address the revenue-related concerns of
the counties and avoid the inequitable taxation of public
utilities by giving the counties the option of sharing in the PSC
tax, or foregoing their share in favor of the right to assess
real property taxes against public utilities. 

     Upon careful consideration, your Committees have amended
this measure by:

     (1)  Inserting language and dates in Section 3 of the Act
          that would enable the counties to be paid their share
          of the PSC taxes beginning in fiscal year 2001; and

     (2)  Making technical, nonsubstantive changes for the
          purpose of clarity, consistency, and style.  

     As affirmed by the records of votes of the members of your
Committees on Commerce and Consumer Protection and Transportation
and Intergovernmental Affairs that are attached to this report,
your Committees are in accord with the intent and purpose of
H.B. No. 1944, H.D. 2, as amended herein, and recommend that it
pass Second Reading in the form attached hereto as H.B. No. 1944,
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 Commerce and
                                   Consumer Protection and
                                   Transportation and
                                   Intergovernmental Affairs,



____________________________       ______________________________
CAL KAWAMOTO, Chair                BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     HB1944 SD1