Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Tourism and Economic Development, to which was referred H.B. No. 1400, H.D. 1, entitled:

beg leave to report as follows:

The purpose of this measure is to extend the hotel and construction remodeling tax credit for construction and renovation costs incurred before January 1, 2008.

Your Committees received testimony in support of this measure from the Hawaii Tourism Authority, Ko Olina Resort & Marina, The Chamber of Commerce of Hawaii, Hawaii Construction Industry Association, PLA Incorporated, AIA Hawaii State Council, Hawaii Business Roundtable, Land Use Research Foundation of Hawaii, The Hawaii Hotel Association, The Pacific Resource Partnership, Waikiki Improvement Association, Building Industry Association – Hawaii, Outrigger Enterprises, Inc., Cendant Corporation/Fairfield Resorts, Waikiki Neighborhood Board No. 9, and an individual. Testimony in opposition was submitted by the Department of Taxation. Comments were received from the Tax Foundation of Hawaii.

Your Committees find that the hotel construction and remodeling tax credit which applies to costs incurred before July 1, 2003, is an excellent means to boost Hawaii's tourism and construction industries. Your Committees further find that the credit should be extended if hotels that benefit from the credit assume some of the responsibility of promoting Hawaii products to tourists who comprise a captive audience in hotels.

Your Committees have amended this measure by deleting its contents and inserting S.B. No. 1174, S.D. 1, which provides:

(1) A nonrefundable income tax credit;

By amending this measure, your Committees have taken a different approach to the tax credit. However, your Committees believe that this tax credit might in fact generate tax revenues, based upon testimony of the Waikiki Improvement Association, Outrigger Enterprises, Inc., and The Hawaii Hotel Association. Each took surveys of hotels and resorts about current and future renovation and remodeling under the tax credit. The results were calculated to derive tax revenue lost and generated. Outrigger Enterprises contracted a professional firm for the survey and study, with a report that was published in time for the hearing on this measure. Your Committees encouraged these entities to share their findings with the Governor.

As affirmed by the records of votes of the members of your Committees on Tourism and Economic Development that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1400, H.D. 1, as amended herein, and recommend

that it pass Second Reading in the form attached hereto as H.B. No. 1400, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.