STAND. COM. REP. NO. 2660

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 364
                                        S.D. 2




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

Sir:

     Your Committee on Ways and Means, to which was referred S.B.
No. 364, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to include within the general
excise tax exemption for insurance companies' gross income or
gross proceeds, income derived from a reciprocal insurer by the
attorney-in-fact for the reciprocal insurance company. 

     Testimony in favor of this measure was submitted by Medical
Insurance Exchange of California.  The Department of Taxation
submitted testimony in opposition.  The State Insurance
Commissioner and the Tax Foundation of Hawaii submitted comments.

     Your Committee finds that unlike the stock insurer and
mutual insurer, a reciprocal insurer does not have any employees
and its day-to-day operations are administered by an attorney-in-
fact.  In this way, the attorney-in-fact is similar to the
business administrator of stock and mutual insurance companies,
whose salary is not subject to the general excise tax.  This
measure would extend the same exemption to the reciprocal
insurance companies.

     Your Committee has made technical amendments for the
purposes of clarity, and has changed the effective date of the
Act to apply to taxable years after July 1, 2000.


 
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                                   STAND. COM. REP. NO. 2660
                                   Page 2


     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of S.B.
No. 364, S.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as S.B. No. 364,
S.D. 2.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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