CONFERENCE COMMITTEE REPORT NO.119

                            Honolulu, Hawaii
                                            , 2000

                            RE:   S.B. No. 2409
                                  S.D. 1
                                  H.D. 2
                                  C.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

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

Sir:

     Your Committee on Conference on the disagreeing vote of the
Senate to the amendments proposed by the House of Representatives
in S.B. No. 2409, S.D. 1, H.D. 2, entitled:  

     "A BILL FOR AN ACT RELATING TO TAXATION," 

having met, and after full and free discussion, has agreed to
recommend and does recommend to the respective Houses the final
passage of this bill in an amended form.

     The purpose of this bill is to provide an exemption from the
general excise and public service company taxes for call centers,
and to specify the terms, conditions, and amount of tax credits
allowed qualified improvements under chapter 235D, Hawaii Revised
Statutes (HRS).

     Your Committee notes that last year the legislature enacted
chapter 235D, HRS, to allow an unspecified tax credit for
qualified improvements for resort and general facilities.  This
bill provides an increased percentage of tax credit for
increasing expenditures to improve hotels and other resort and
resort related activities.

 
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     Your Committee has amended the bill to:

     (1)  Divide the bill into Part I containing the call center
          provisions and Part II containing the qualified
          improvement provisions;

     (2)  Delete reference to commercial or recreational use to
          support or service a hotel or resort use in the
          definition of qualified improvement costs, clarify that
          zoning for resort use is resort/commercial, clarify
          that time share use is included, and add a provision
          concerning residential use in areas designated for
          hotel, resort, or time share use to include condominium
          facilities.  The term resort/commercial includes the
          term "resort-commercial" as used in the land use
          ordinance of the city and county of Honolulu;

     (3)  Add a definition of taxpayer to include associations of
          apartment owners and time share owners association and
          clarify other provisions to include such associations;

     (4)  Add a provision to allow a tax credit of four per cent
          for improvement costs less than $1,000,000, delete the
          $10,000,000 cap for costs over $5,000,000, and increase
          to $30,000,000 the costs necessary to claim the twenty
          per cent tax credit.  Add a provision requiring the
          department of business, economic development, and
          tourism to certify that without the twenty per cent
          credit the project is not economically feasible and the
          department of taxation to certify that the project will
          contribute positive tax dollars to the state treasury
          within five years and that the tax credit may be phased
          in to prevent negative impacts on the state treasury.
          Add a provision to allow taxpayers who cannot or choose
          not to comply with the twenty per cent provisions to
          claim the credit at fifteen per cent.  Require that all
          credit claimants meet the prevailing wage requirement
          for projects involving costs of over $10,000,000;

     (5)  Add a provision allowing the department of taxation to
          request the assistance of the department of labor and
          industrial relations in administering the provisions of
          the bill relating to prevailing wages and
          nonsupervisory, nontipped employees, and allowing the
          department of taxation to request documentation to
          assist in carrying out these provisions;


 
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     (6)  Add a provision that taxpayers shall be in compliance
          with all applicable federal, state, and county
          statutes, rules, and regulations;

     (7)  Amend the provision allowing the director of taxation
          to develop a plan that phases in the tax credits over a
          ten-year period to provide instead that the director
          shall allow tax credits to be claimed over a seven-year
          period in a fluctuating manner in relationship to the
          tax revenues generated by a project.  Your Committee
          notes that during the construction of a project
          substantial revenues are generated by the activity
          involving the project.  After a project is finished the
          tax revenues it pays to the State will fall and then as
          the project matures tax revenues will increase.  Your
          Committee intends for the director to develop a plan so
          that, if entitled, a higher amount of tax credits may
          be claimed when the activity of the project generates
          higher state tax revenues and when lower tax revenues
          are generated then a lower amount of tax credits may be
          allowed.  In no case does your Committee intend that
          the full amount of the tax credits to which a taxpayer
          is entitled not be claimed in the seven-year period;

     (8)  Add a provision that no taxpayer that claims a credit
          under these provisions shall claim a hotel construction
          and remodeling tax credit under the income tax law; and

     (9)  Amend the effective date to reflect the amendments made
          by your Committee.

     As affirmed by the record of votes of the managers of your
Committee on Conference that is attached to this report, your
Committee on Conference is in accord with the intent and purpose
of S.B. No. 2409, S.D. 1, H.D. 2, as amended herein, and
recommends that it pass Final Reading in the form attached hereto
as S.B. No. 2409, S.D. 1, H.D. 2, C.D. 1.


 
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                                   Respectfully submitted on
                                   behalf of the managers:

  ON THE PART OF THE HOUSE           ON THE PART OF THE SENATE



_____________________________     _______________________________
Rep. ROBERT N. HERKES             Sen. LORRAINE R. INOUYE
Co-Chair                          Co-Chair



_____________________________     _______________________________
Rep. DWIGHT Y. TAKAMINE           Sen. DAVID Y. IGE
Co-Chair                          Co-Chair



                                  _______________________________
                                  Sen. CAROL FUKUNAGA
                                  Co-Chair



                                  _______________________________
                                  Rep. Andrew Levin
                                  Co-Chair

 
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