STAND. COM. REP. NO. 2042

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2948
                                        S.D. 1




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

Sir:

     Your Committee on Economic Development, to which was
referred S.B. No. 2948 entitled: 

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

begs leave to report as follows:

     The purpose of this measure is to enhance the tax benefits
of Act 178, Session Laws of Hawaii 1999 (SLH), to:

     (1)  Include certain performing arts products in the
          definition of "computer data";

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

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

     (4)  Increase the state tax credit for research and
          development from 2.5 percent to twenty percent to match
          the federal rate.

     Testimony in favor of this measure was submitted by the
Department of Taxation, the Governor's Special Advisor on
Technology Development, the High Technology Development
Corporation, and two individuals.

 
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     Your Committee finds that this measure will further
strengthen high technology business incentives approved in 1999,
and that the proposed changes are in response to industry
recommendations to enhance those incentives. Your Committee is
particularly interested in the opportunities that the measure is
intended to provide to the entertainment industry in Hawaii.  

     Your Committee has amended this measure to make technical
changes to conform the bill to the preferred drafting style.
Your Committee notes that one of the technical changes is to
split Section 235-2.4, Hawaii Revised Statutes (HRS), into two
sections, 235-2.4 and 235-2.45.  Section 235-2.4, HRS, is often
amended, has become unwieldly, and the preferred drafting style
requires that the entire section be set out for any amendment.
As a precedent, Act 19, Session Laws of Hawaii 1985, performed a
similar split.

     As affirmed by the record of votes of the members of your
Committee on Economic Development that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 2948, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 2948,
S.D. 1, and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development,



                                   ______________________________
                                   LORRAINE R. INOUYE, Chair

 
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