STAND. COM. REP. NO. 410

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1176
                                        




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 1176 entitled: 

     "A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX
     LICENSING OF SINGLE-MEMBER LIMITED LIABILITY COMPANIES,"

begs leave to report as follows:

     The purpose of this measure is to eliminate the duplicate
taxation of single-member limited liability companies.

     Specifically, the measure exempts single-member limited
liability companies recognized under Chapter 428, Hawaii Revised
Statutes, that, for state and federal income tax reporting
purposes:

     (1)  Has no registration or filing requirements separate and
          apart from the member;

     (2)  Is subject to the requirement that all items of income,
          deduction, and credit are to be reported by the member;
          and

     (3)  Is an entity that is disregarded as an entity separate
          from the member;

from the licensing, registration, or filing requirements;
provided that the member is licensed and pays the appropriate
general excise tax on the gross income derived by the limited
liability company.

 
a                                                     SB1176
                                   STAND. COM. REP. NO. 410
                                   Page 2



     The Departments of Taxation and Commerce and Consumer
Affairs presented testimony in favor of the measure.  A Hawaii
attorney, although not present, submitted written testimony in
favor of the measure.  The Tax Foundation submitted comments on
the measure.

     Your Committee finds that the measure will make the general
excise tax treatment of single-member limited liability companies
consistent with tax treatment under state and federal income
taxes.  Your Committee further finds that the measure would
reduce the general excise tax licensing burden on single-member
limited liability companies, thereby making it a more attractive
means of organizing a business.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1176 and recommends that it pass Second
Reading and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     SB1176