STAND. COM. REP. NO. 1401-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 3032
                                     S.D. 2
                                     H.D. 2




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

Sir:

     Your Committee on Finance, to which was referred S.B. No.
3032, S.D. 2, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO ECONOMIC DEVELOPMENT,"

begs leave to report as follows:

     The purpose of this bill is to stimulate economic
development in Hawaii by:

     (1)  Clarifying what constitutes a Qualified Improvement Tax
          Credit; and

     (2)  Partially exempting the Hawaii Tourism Authority from
          the Environmental Impact Statement (EIS) law and
          excluding marketing and promotional activities not
          requiring a discretionary permit from actions initiated
          under the EIS law.

     Specifically, this bill:

     (1)  Allows a tax credit to reduce a taxpayer's net income
          tax, general excise tax, or public service company tax
          liability for qualified improvement costs as follows:

          (a)  10 percent for qualified improvement costs
               totalling $1,000,000 to $5,000,000;


 
 
 
                                 STAND. COM. REP. NO. 1401-00
                                 Page 2

 
          (b)  15 percent for qualified improvement costs
               totalling over $5,000,000 to $10,000; and

          (c)  20 percent for qualified improvement costs
               totalling over $10,000,000; provided that:

               (i)  If the taxpayer is a general contractor on
                    the project, all employees are paid
                    prevailing wages; and

              (ii)  In any contract let in connection with the
                    project, stipulations require that the
                    contractor and subcontractor pay the
                    prevailing wages for employees working on the
                    project;

     (2)  Requires taxpayers qualifying for a Qualified
          Improvement Tax Credit of 15 percent or more, who
          purchases an operating hotel and closes the hotel for
          renovation, to retain nonsupervisory, nontipped
          employees on the payroll for at least six months
          following the hotel's closure;

     (3)  Defines "qualified improvement costs" as any
          capitalized costs for construction and equipment of a
          permanent nature on property designated primarily for
          hotel or resort use or primarily used for hotel use,
          resort use, or commercial or recreational use to
          support or service a hotel or resort use;

     (4)  Disallows Transient Accommodations Tax credits from
          qualified improvement costs;

     (5)  Requires the Director of Taxation (Director) to develop
          procedures for the distribution and share of Qualified
          Improvement Tax Credits; and

     (6)  Authorizes the Director to develop a plan for each
          qualified taxpayer that phases in the Qualified
          Improvement Tax Credits claimed by the taxpayer over a
          ten-year period.

     The Hawaii Construction Industry Association, the Hawaii
State Council of the American Institute of Architects, the
Subcontractors' Association of Hawaii, Paul Louie & Associates,
Inc., the Waikiki Improvement Association, the Visitor Industry
Coalition, the Consulting Engineers Council of Hawaii, the Hawaii
Developers' Council, the General Contractors Association of
Hawaii, Hidano Construction, Inc., the Land Use Research

 
                                 STAND. COM. REP. NO. 1401-00
                                 Page 3

 
Foundation of Hawaii, and the Hilton Hawaiian Village testified
in support of this measure.

     A council member from Hawaii County, the Hawaii Chapter of
the Sierra Club, Hawaii's Thousand Friends, the Hawaii Audubon
Society, and several individuals opposed this measure.

     The Department of Taxation, the Environmental Center of the
University of Hawaii at Manoa, Tax Foundation of Hawaii, Chamber
of Commerce of Hawaii, ILWU Local 142, the Hawaii Hotel
Association, the American Resort Development Association of
Hawaii submitted comments on this measure.

     Your Committee has amended this measure by:

     (1)  Changing the effective date to July 1, 2005, to
          facilitate further discussion; and

     (2)  Making technical, nonsubstantive amendments for
          purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
3032, S.D. 2, H.D. 1, as amended herein, and recommends that it
pass Third Reading in the form attached hereto as S.B. No. 3032,
S.D. 2, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair