STAND. COM. REP. NO. 353-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2794
                                     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 Economic Development and Business
Concerns, to which was referred H.B. No. 2794, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to clarify the applicability of
the general excise tax (GET) to offshore aircraft leasing
companies by:

     (1)  Exempting from the GET, amounts received as rent for
          the rental or leasing of aircraft or aircraft engine
          used by the lessees or renters for the interstate air
          transportation of passengers; and

     (2)  Providing that the existing use tax exemption for the
          leasing of aircraft or aircraft engines is for the
          acquisition or importation of any aircraft or aircraft
          engine by any lessee or renter engaged in interstate
          air transportation.

     Hawaiian Airlines testified in support of this measure.
Aloha Airlines testified in support of the intent of this
measure.  The Department of Taxation testified in opposition to
this measure.  Comments were received from the Tax Foundation of
Hawaii.

     Your Committee notes that subject to the effective date of
this bill, the tax exemption will be applied prospectively.

 
 
                                 STAND. COM. REP. NO. 353-00
                                 Page 2

 
However, it is your Committee's intent that the exemption in the
bill also be applied retroactively to the effective date.  It is
also your Committee's intent that any tax reimbursements be
credited toward future taxes.

     Your Committee has amended this bill by:

     (1)  Deleting the definitions of "interstate air
          transportation";

     (2)  Changing the effective date to July 1, 2000; and

     (3)  Making technical, nonsubstantive amendments for clarity
          and style.

     As affirmed by the record of votes of the members of your
Committee on Economic Development and Business Concerns that is
attached to this report, your Committee is in accord with the
intent and purpose of H.B. No. 2794, H.D. 1, as amended herein,
and recommends that it be referred to the Committee on Finance,
in the form attached hereto as H.B. No. 2794, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development and Business
                                   Concerns,



                                   ______________________________
                                   ROBERT N. HERKES, Chair