STAND. COM. REP. NO. 3010

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2432
                                        H.D. 1
                                        S.D. 1




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

Sir:

     Your Committee on Government Operations and Housing, to
which was referred H.B. No. 2432, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO LOW-INCOME HOUSING TAX
     CREDIT,"

begs leave to report as follows:

     The purpose of this measure is to assist members of
partnerships, limited liability companies, or S corporations to
claim the low-income housing tax credit.

     In addition, the measure allows a taxpayer to claim the
state credit without claiming the federal credit.

     Testimony in support of this measure was received from the
Department of Taxation and Housing and Community Development
Corporation of Hawaii.

     The State low-income housing tax credit program helps create
affordable housing for persons earning less than 60 per cent of
the median income by providing preferences for projects
consisting of units which will be available to families with
substantially lower incomes.  The intent of the program is to
attract investors who provide equity to build these projects in
return for tax credits for a period of ten years.

     Your Committee finds that under current law, investors may
claim the State low-income housing tax credit only if they also

 
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claim the the federal low-income housing tax credit.  By allowing
investors to claim the tax credit whether or not they claim the
federal tax credit, the State will realize an increase in the
development of affordable rental housing.

     Your Committee also finds that the need for low income
housing may be reduced if more attention is given to the State's
struggling economy.  Although the business sector has been crying
for relief from taxes and government regulation, our economy is
suffering due to a lack of spending.  The net income of families
must be increased to facilitate spending and stimulate the
economy and this could take place by increasing the standard
income tax deductions as follows:

     (1)  $10,000 in the case of a joint return;

     (2)  $8,685 in the case of a head of a household;

     (3)  $5,000 in the case of an individual who is not married;

     (4)  $5,000 in the case of a married individual filing a
          separate return.

     Your Committee also finds that the personal exemption for
individual taxpayers instead of being multiplied by $1,040 should
be multiplied by $5,000 for the first two exemptions, and by
$2,500 for all additional exemptions.  These changes would assist
individuals and further stimulate the economy.  Unfortunately,
your Committee finds that this measure cannot be the vehicle for
these changes.

     Your Committee has amended this measure to make technical
changes to conform the bill to the preferred drafting style.
Your Committee notes that one of the technical changes is to
split Section 235-2.4, Hawaii Revised Statutes (HRS), into two
sections, 235-2.4 and 235-2.45.  Section 235-2.4, HRS, is often
amended, has become unwieldy, and the preferred drafting style
requires that the entire section be set out for any amendment.
As a precedent, Act 19, Session Laws of Hawaii 1985, performed a
similar split.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 2432, H.D. 1, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 2432, H.D. 1, S.D. 1, and be referred to the
Committee on Ways and Means.


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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