STAND. COM. REP. NO. 1079-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2605
                                     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 Committees on Labor and Public Employment and Economic
Development and Business Concerns, to which was referred S.B. No.
2605, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO EMPLOYMENT SECURITY LAW,"

beg leave to report as follows:

     The purpose of this bill is to provide an option for owner-
employees who own at least 50 percent of an employing unit to opt
out of the state unemployment insurance program with respect to
both associated taxes and benefits.

     The Chamber of Commerce of Hawaii and N.F.I.B. Hawaii
testified in support of this measure.  The Department of Labor
and Industrial Relations and ILWU LOCAL 142 testified in
opposition to this measure.

     In evaluating this measure, your Committees were concerned
about the predicted number of exemptions which would be filed
under this section and the resulting impact on the Unemployment
Insurance fund reserve levels as well as the need for safeguards
to protect against abuse of the exemption. Your Committees
weighed these concerns together with an appreciation of the
plight of the owner-employees of many small businesses who
survive on a small profit margin and would benefit from the tax
relief this measure could offer them.  Your Committees wish to
continue discussion of this issue and therefore after careful
consideration have amended this measure by:

 
 
                                 STAND. COM. REP. NO. 1079-00
                                 Page 2

 

     (1)  Raising the threshold interest of the owner-employee to
          more than 50 percent; and

     (2)  Otherwise subjecting the owner-employee to requirements
          similar to those of shareholders in a family-owned
          private corporation under section 383-7(20), Hawaii
          Revised Statutes.

     As affirmed by the records of votes of the members of your
Committees on Labor and Public Employment and Economic
Development and Business Concerns that are attached to this
report, your Committees are in accord with the intent and purpose
of S.B. No. 2605, S.D. 1, as amended herein, and recommend that
it pass Second Reading in the form attached hereto as S.B. No.
2605, S.D. 1, H.D. 1, and be referred to the Committee on
Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Labor and Public
                                   Employment and Economic
                                   Development and Business
                                   Concerns,

                                   
                                   
                                   
                                   
______________________________     ______________________________
ROBERT N. HERKES, Chair            TERRY NUI YOSHINAGA, Chair