STAND. COM. REP. NO.528

Honolulu, Hawaii

, 2001

RE: H.B. No. 175

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Economic Development and Business Concerns, to which was referred H.B. No. 175 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this bill is to stimulate continued growth and development of high technology businesses by:

(1) Adding new tax benefits, and

(2) Amending current benefits

for high technology industries in Hawaii.

The Kauai Economic Development Board, Hawaii Technology Trade Association, Hawaiian Dredging Construction Company, the Hawaii Opportunities Group, LLC, Software Pharmacy, Inc., Ceatech USA, Hawaii Venture Capital Association; Marshall Reality, Inc., and two concerned citizens testified in support of this bill. The Department of Taxation, the Department of Business, Economic Development, and tourism; High Technology Development Corporation, and Mele Pacific, Inc., supported the intent of this bill. The Tax Foundation of Hawaii and a concerned citizen submitted comments on this bill.

Your Committee finds that this measure will encourage continued growth and development of high technology businesses and associated industries in Hawaii, and will work as an incentive to establish Hawaii as a tech-friendly place to do business for both technical and non-technical businesses.

Your Committee has amended this bill by:

(1) Increasing the investment tax credit to 100 percent for qualified high technology businesses to address the shortage of venture capital available to early-stage technology companies;

(2) Providing additional incentives to financial institutions and angel investors to provide start-up capital to technology companies;

(3) Expanding the definition of "qualified high technology businesses" to include other technology intensive industries that are helping to revitalize Hawaii's economy;

(4) Expanding the refundable research and development credit to include all qualifying expenses, including software development as a qualifying cost;

(5) Providing income tax credits for construction or renovation of office buildings that provide high capacity telecommunications access for high tech tenants;

(6) Extending general excise tax (GET) and GET-related party exemptions to include internet service providers, internet date centers, IT/database management services, and intellectual property royalties;

(7) Expanding the capital goods excise tax to include software purchases, essential investments that will help Hawaii businesses improve their efficiency and productivity; and

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

 

As affirmed by the record of votes of the members of your Committee on Economic Development and Business Concerns that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 175, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 175, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Business Concerns,

____________________________

LEI AHU ISA, Chair