STAND. COM. REP. NO. 721-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2607
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
2607, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO HIGH TECHNOLOGY,"

begs leave to report as follows:

     The purpose of this bill is to strengthen high technology
business incentives provided in Act 178, Session Laws of Hawaii
1999, for high technology businesses.

     Specifically, this bill:

     (1)  Designates certain performing arts products such as
          music CDs, videos, and computer animation as qualified
          research, thereby allowing high technology businesses
          to qualify for:

          (A)  The income tax exclusion for income from stock
               options; and

          (B)  The high technology investment tax credit;

     (2)  Expands the exclusion from income of royalty and other
          income derived form patents and copyrights, to include
          income derived from trade secrets;

     (3)  Allows partnership investors the flexibility of
          allocating the high technology business investment tax
          credit among partners, without regard to federal income
          tax rules; and

 
                                 STAND. COM. REP. NO. 721-00
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     (4)  Increases the state research development tax credit
          rate to match the federal tax credit.

     The Department of Taxation and Hawaii Technology Trade
Association supported this bill.  The High Technology Development
Corporation supported the intent of this bill.  The Tax
Foundation of Hawaii commented on this bill.

     Upon further consideration, your Committee has amended this
bill by:

     (1)  Changing the effective date to apply to the taxable
          years beginning after December 31, 2010; and

     (2)  Making technical, nonsubstantive changes for purposes
          of style and clarity.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2607, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 2607, H.D.
2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair