STAND. COM. REP. NO.1258-02

Honolulu, Hawaii

, 2002

RE: S.B. No. 2383

S.D. 2

H.D. 2

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Finance, to which was referred S.B. No. 2383, S.D. 2, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION TO STIMULATE THE ECONOMY,"

begs leave to report as follows:

The purpose of this bill is to promote construction in Hawaii by:

(1) Establishing a nonrefundable qualified project construction tax credit for qualified project construction costs incurred after December 31, 2002, and before January 1, 2010. More specifically, this credit:

(A) Amounts to four percent in each taxable year for qualified project construction costs incurred up to $10,000,000 over a consecutive seven-year period;

(B) Amounts to ten percent in each taxable year for qualified project construction costs incurred of more than $10,000,000 over a consecutive seven-year period; provided that the taxpayer shall require that any general contractor performing work for the qualified project pay its employees the prevailing wages;

(C) Defines "qualified project construction costs" to mean any costs incurred after December 31, 2002, and before January 1, 2010, for plans, design, construction, infrastructure, amenities, equipment, alteration, modification, telecommunications, and information technology relating to a qualified project; and

(D) Defines "qualified project" to mean a single or multiple phase development or renovation project situated on one or more parcels of real property which are contiguous, adjoining, or in close proximity to each other;

and

(2) Expanding the hotel construction and remodeling tax credit to include construction and renovation costs incurred for:

(A) Any property on which commercial or recreational use is permitted to support or service a hotel/hotel-condo or resort use; or

(B) Offsite improvements necessary to service destination resort areas where a hotel/hotel-condo is situated.

The Chamber of Commerce of Hawaii, Building Industry Association of Hawaii, Laborers' International Union of North America Local 368, Subcontractors Association of Hawaii, AIA Hawaii State Council, Hawaii Construction Industry Association, Waikiki Improvement Association, Paul Louie & Associates, Inc., Hawaii Business Roundtable, Retail Merchants of Hawaii, Hawaii Attractions Association, Hawaii Resort Developers Conference, The Estate of James Campbell, Plumbing & Mechanical Contractors Association of Hawaii, Cendant Corporation, and Waianae Coast Comprehensive Health Center supported this measure. The Department of Business, Economic Development, and Tourism and the Hawaii Tourism Authority supported the intent of this bill.

The Department of Taxation opposed this bill. The Department of Budget and Finance and the Tax Foundation of Hawaii offered comments.

Your Committee has amended this measure by:

(1) Replacing references to "capital investment" with "development";

(2) Changing the period during which the credit can be taken from seven years to four years beginning with the year 2003 and running through 2007;

(3) Lowering the amount of the credit for large construction projects from ten percent to eight percent;

(4) Clarifying that residential projects do not qualify for this credit;

(5) Ensuring that if a project claims a credit for its costs based on the hotel construction and remodeling tax credit (section 235-110.4, Hawaii Revised Statutes (HRS), or the technology infrastructure renovation tax credit (section 235-110.51, HRS), the project may not claim the qualified project construction tax credit established by this measure; and

(6) Making technical, nonsubstantive amendments for style and clarity.

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. 2383, 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. 2383, S.D. 2, H.D. 2.

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

 

____________________________

DWIGHT Y. TAKAMINE, Chair