STAND

STAND. COM. REP. 1023

Honolulu, Hawaii

, 2003

RE: S.B. No. 359

S.D. 2

H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Tourism and Culture and Economic Development and Business Concerns, to which was referred S.B. No. 359, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO FILM INDUSTRY,"

beg leave to report as follows:

The purpose of this bill is to provide additional incentives for motion picture and film production in Hawaii by:

(1) Raising the tax credit for the production of motion picture or television films (Tax Credit) in the State to include up to 15 percent of the costs of wages and salaries incurred, provided that the Tax Credit for wages and salaries shall apply only to the first $25,000 per employeee; and

(2) Providing that for purposes of the Tax Credit, motion picture and film production shall include commercials that advertise products and services to consumers.

In addition, this bill:

(1) Prohibits any taxpayer that has claimed a Tax Credit from qualifying as a "qualified high technology business" for the income tax exclusion for royalties; and

(2) Requires the Hawaii Television and Film Development Board, with participation from Hawaii's film and media industry, to review, analyze, and propose recommendations on possible tax or other incentives that may be enacted and implemented to encourage the acquisition, utilization, and local availability of television and movie production equipment in Hawaii.

The Big Island Film Office, Hawaii State AFL-CIO, IATSE Local 665, Screen Actor's Guild Hawaii, Honolulu Film Office, FilmWorks Pacific & FilmWorks Press, and two concerned citizens supported this bill. The Department of Taxation, Department of Business, Economic Development, and Tourism, and the Tax Foundation of Hawaii offered comments.

Your Committees have amended this measure by:

(1) Deleting the provision that increases the Tax Credit for costs incurred for wages and salaries;

(2) Deleting the provision that provides that the Tax Credit for wages and salaries shall apply only to the first $25,000 per employee;

(3) Increasing the Tax Credit to 8 percent for costs incurred in any county with a population over 700,000, and 10 percent for costs incurred in any county with a population of 700,000 or less;

(4) Defining "commercials" to mean advertising messages that are created by traditional or new media, including but not limited to film, tape, or digital means; and

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

As affirmed by the records of votes of the members of your Committees on Tourism and Culture and Economic Development and Business Concerns that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 359, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 359, S.D. 2, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committees on Tourism and Culture and Economic Development and Business Concerns,

____________________________ BRIAN SCHATZ, Chair		____________________________ JERRY L. CHANG, Chair