STAND. COM. REP. NO. 3364

                                   Honolulu, Hawaii
                                                     , 2000

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




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

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 1944, H.D. 2, S.D. 1, entitled: 

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

begs leave to report as follows:

     The purpose of this bill is to provide options to the
counties in receiving revenues for real property taxes for public
utilities.

     The legislature enacted chapter 239, Hawaii Revised
Statutes, to impose a public service company tax on public
utilities in lieu of all other taxes, including the real property
tax.  At that time, the real property tax assessment power was
held by the State.  As a result of the 1978 Constitutional
Convention, full control over all powers over the real property
tax were transferred to the counties.

     An eleven-year moratorium was placed on the counties'
ability to modify real property tax laws.  The eleven-year
moratorium expired in 1989.  In 1999, the county of Hawaii
amended its ordinances to tax the real property of public
utilities, rejecting the application of the utilities for a real
property tax exemption.  This will result in a two-tiered
taxation scheme on utilities' real property:  once under chapter
239, and again under county ordinance.

 
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                                   STAND. COM. REP. NO. 3364
                                   Page 2


     If the utilities are taxed in this manner, they will pass
the higher costs on to the consumers.  Your Committee finds that
this scenario can be avoided by offering the counties two
options.  Under the first, instead of enforcing the real property
tax ordinance on the utilities, the counties can elect to share
revenues collected under chapter 239.  Under the second, if the
counties do not so elect, they can impose the real property tax,
forgo the revenue sharing, and the utility will be subject to the
general excise tax instead of the public service company tax
under chapter 239.

     Your Committee has amended this bill by changing the
effective date to January 1, 3000.

     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 H.B. No.
1944, H.D. 2, S.D. 1, as amended herein, and recommends that it
pass Third Reading in the form attached hereto as H.B. No. 1944,
H.D. 2, S.D. 2.

                                 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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