STAND. COM. REP. NO. 58-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2794
                                     H.D. 1




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

Sir:

     Your Committee on Transportation, to which was referred H.B.
No. 2794 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to clarify the current excise
tax law with regard to its applicability to offshore aircraft
leasing companies.

     Your Committee finds that intrastate transportation needs
between the islands of Hawaii are currently served primarily by
air carriers, serving both residents and tourists.  Your
Committee further finds that the two major interisland air
carriers have made and will continue to make capital improvement
investments to help the economy of the State, and support our
major industry, tourism.  Your Committee further finds that out-
of-state industries, which lease aircraft and aircraft engines to
local carriers, are subject to Hawaii's excise tax, which would
be passed along to local air carriers.

     This bill exempts the amount that out-of-state lessors
receive from leasing of aircraft for commercial use from Hawaii's
excise tax law.

     Testimony in support of this measure was received from
Hawaiian Airlines.  The Department of Taxation testified in
opposition to this bill, citing that it would result in a revenue
loss. The Tax Foundation of Hawaii provided comments.

 
 
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     Your Committee has amended the proposed measure by amending
its effective date from July 1, 2000 to July 1, 2020.

     As affirmed by the record of votes of the members of your
Committee on Transportation that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2794, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 2794, H.D. 1, and
be referred to the Committee on Economic Development and Business
Concerns.

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



                                   ______________________________
                                   KENNETH T. HIRAKI, Chair