CONFERENCE COMMITTEE REPORT NO.111

                            Honolulu, Hawaii
                                            , 2000

                            RE:   S.B. No. 2706
                                  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. 2706, 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 tax relief for
operators of airlines.

     More specifically, this bill provides a taxpayer the option
of:

     (1)  Taking an aircraft operating lease investment tax
          credit, that is deductible from the net income tax
          liability of a lessee of an aircraft under an operating
          lease;


 
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     (2)  Taking a general excise tax exemption for amounts
          received as rent for leasing or renting aircraft or
          aircraft components used by lessees or renters for
          interstate air transportation of passengers or goods;
          or

     (3)  Exempting the importation of aircraft or aircraft
          engines from the use tax.

     In addition, the bill reduces the general excise tax on
lessors of aircraft and aircraft engines to one-half of one per
cent.

     Upon further consideration of this bill, your Committee has
deleted all substantive provisions except for the income tax
credit.  Your Committee has amended the income tax credit by
reducing the credit to two per cent, deleting the June 30, 2000,
date and allowing the credit to be claimed for operating leases
entered into before or after the effective date of the Act.

     In addition, your Committee has amended the credit to
require that the eligible aircraft for which the lease credit is
allowed be state 3 aircraft as provided by federal law.  Stage 3
aircraft are required in most places in the world and are quieter
aircraft.  By making this change your Committee is encouraging
the investment in new, quieter aircraft that will benefit the
State.  Finally your Committee has made the bill effective for
taxable years beginning after December 31, 1999, and to apply to
lease rent paid after June 30, 2000.

     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. 2706, 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. 2706, 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. KENNETH T. HIRAKI            Sen. CAL KAWAMOTO
Co-Chair                          Co-Chair



_____________________________     _______________________________
Rep. ROBERT N. HERKES             Sen. CAROL FUKUNAGA
Co-Chair                          Co-Chair



_____________________________
Rep. SYLVIA LUKE                  
Co-Chair                          

 
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