STAND. COM. REP. NO. 1053-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2948
                                     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 Economic Development and Business
Concerns and Higher Education, to which was referred S.B. No.
2948, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO HIGH TECHNOLOGY,"

beg leave to report as follows:

     The purpose of this bill is to strengthen high technology
business incentives provided in Act 178, Session Laws of Hawaii
1999, for high technology businesses.

     Specifically, this bill:

     (1)  Designates certain performing arts products such as
          music CDs, videos, and computer animation as qualified
          research, thereby allowing high technology businesses
          to qualify for:

          (A)  The income tax exclusion for income from stock
               options; and

          (B)  The high technology investment tax credit;

     (2)  Expands the exclusion from income of royalty and other
          income derived from patents and copyrights, to include
          income derived from trade secrets;


 
 
 
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     (3)  Allows partnership investors the flexibility of
          allocating the high technology business investment tax
          credit among partners, without regard to federal income
          tax rules; and

     (4)  Increases the state research development tax credit
          rate to match the federal tax credit.

     The Department of Taxation and the High Technology
Development Corporation testified in support of this measure.
The Tax Foundation of Hawaii submitted comments on this measure.

     Your Committees have amended this bill by deleting its
contents and inserting the substantive provisions of:

     (1)  S.B. No. 2420, S.D. 2, which establishes the five-year
          New Economy Technology Scholarship Pilot Program to:

          (a)  Create a sustained pool of highly-trained
               technology workers in the shortest time possible;
               and

          (b)  Encourage Hawaii students to pursue higher
               education and training in science and technology
               fields;

          and

     (2)  H.B. No. 2955, H.D. 1, which provides an income tax
          credit for the cost of training the taxpayer or the
          taxpayer's employees to upgrade their technology-
          related skills.

     Technical, nonsubstantive amendments were made for clarity
and style.

     As affirmed by the records of votes of the members of your
Committees on Economic Development and Business Concerns and
Higher Education that are attached to this report, your
Committees are in accord with the intent and purpose of S.B. No.
2948, S.D. 1, as amended herein, and recommend that it pass
Second Reading in the form attached hereto as S.B. No. 2948, S.D.
1, H.D. 1, and be referred to the Committee on Finance.

 
 
 
 
 
 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Economic
                                   Development and Business
                                   Concerns and Higher Education,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DAVID MORIHARA, Chair              ROBERT N. HERKES, Chair