Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Health and Human Services, to which was referred S.B. No. 2985 entitled:

begs leave to report as follows:

The purpose of this measure is to establish a tax credit for qualified costs incurred by a taxpayer who owns a federal qualified health center.

Your Committee received testimony in support of this measure from the Waianae Coast Comprehensive Health Center. Testimony in opposition to this measure was submitted by the Department of Taxation. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that the downturn in the economy has impacted Hawaii's health centers in many ways. Most importantly, revenues for health centers are down, while demand for safety net services has increased.

Your Committee further finds that this tax credit targets capital improvements in the most depressed communities in the State. In order to be classified as a federally qualified health center, a community must be low income with a high incidence of medical problems with few alternative resources.

Your Committee supports a tax credit for improvements to qualified health centers, as a way to encourage capital improvements and improve the overall provision of health care services in the State.

Your Committee amended this measure so that it can be properly administered. The proposed amendments to section 237-24, Hawaii Revised Statutes, have been deleted and the appropriate language has been inserted to allow a claim of the credit against the general excise tax. Double tax benefits are eliminated by preventing claims for other tax credits involving the same costs for which a tax credit is allowed under this bill.

As affirmed by the record of votes of the members of your Committee on Health and Human Services that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2985, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2985, S.D. 1, and be referred to the Committee on Ways and Means.