STAND. COM. REP. NO. 1061-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2131
                                     S.D. 1
                                     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 Economic Development and Business
Concerns, to which was referred S.B. No. 2131, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO FEDERAL CONSTRUCTION,"

begs leave to report as follows:

     The purpose of this bill is to provide a general excise tax
credit to Hawaii's subcontractors to help them rejuvenate their
businesses.  In addition, this act clarifies that the definition
of contractors in chapter 444, Hawaii Revised Statutes, includes
all contractors working in the State directly or indirectly for
the federal government to the extent allowed under federal law.

     The Hawaii Electricians Market Enhancement Program Fund, the
Construction Industry Legislative Organization, Inc., the Hawaii
Construction Industry Association, the Plumbers and Fitters Local
675 United Association, the General Contractors Association of
Hawaii, the Hawaii Building and Construction Trades Council, AFL-
CIO, and the Masons Union testified in support of this bill.  The
Department of Taxation, Subcontractors' Association of Hawaii,
and the Tax Foundation of Hawaii commented on this bill.

     Your Committee finds that a tax exemption for federal
construction contracts better serves the needs of Hawaii's
subcontractors than does a tax credit.  

     Your Committee has amended this bill by removing the tax
credit provision and replacing it with tax exemption found in

 
 
                                 STAND. COM. REP. NO. 1061-00
                                 Page 2

 
S.B. No. 2131, as introduced.  In addition, nonsubstantive
technical changes were made for style and clarity.

     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 S.B. No. 2131, S.D. 1, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as S.B. No. 2131, S.D. 1, H.D. 1, and be referred to the
Committee on Finance.

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



                                   ______________________________
                                   ROBERT N. HERKES, Chair