STAND

STAND. COM. REP. 1059

Honolulu, Hawaii

, 2003

RE: S.B. No. 377

S.D. 1

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. 377, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

beg leave to report as follows:

The purpose of this bill is to establish a nonrefundable tax credit (Tax Credit) for qualified costs in the development of facilities for attractions and educational purposes at Ko Olina Resort and Marina.

The Department of Business, Economic Development, and Tourism (DBEDT), Department of Taxation (DOTAX), Hawaii Tourism Authority, Ko Olina Company, Ko Olina Resort and Marina, Outrigger Hotels, Hawaii Building and Construction Trades Council, Estate of James Campbell, Ironworkers Union Local 626, The Chamber of Commerce of Hawaii, and two concerned citizens supported this bill. The Coalition Against Legalized Gambling and a concerned citizen opposed this bill. The Tax Foundation of Hawaii and a concerned citizen offered comments.

Your Committees support the tax incentives provided by this measure. The Tax Credit established will help stimulate the economy in West Oahu, provide jobs for its residents, and will establish another world-class tourist attraction to further improve Hawaii's tourism industry.

However, your Committees also recognize that concerns were raised regarding accountability, especially with respect to the entities that will stand to benefit from the tax incentives contained in this measure. Your Committees note that in the public hearing of this bill, the representative from Ko Olina Company pledged to provide reports and updates on the use of the Tax Credit, including detailed analyses of the economic benefits derived by the State of Hawaii and its residents as a result of the Tax Credit.

Your Committees have amended this measure by:

(1) Deleting the provision that establishes that if any Tax Credit is claimed, then no taxpayer shall claim a credit for any other activity or business at Ko Olina Resort and Marina;

(2) Inserting "seawater air conditioning" into the list of infrastructure projects that qualify under the definition of "qualified costs" for the Tax Credit;

(3) Limiting the recapture of credits to 100 percent of the total tax credits claimed for the preceding taxable year, instead of for all preceding taxable years;

(4) Requiring that qualified taxpayers shall submit a written certified statement containing certain data relating to the Tax Credit to the Director of the Department of DBEDT, instead of the Director of DOTAX;

(5) Requiring DBEDT to maintain records of taxpayers, verify all qualified costs, and issue a certificate to each taxpayer certifying:

(A) The amount of the qualified costs; and

(B) The amount of Tax Credit allowed to the taxpayer for the taxable year;

(6) Requiring the taxpayer to file the certificate with the

taxpayer's tax return;

(7) Requiring DBEDT to certify no more than an unspecified amount of credits for each taxable year, and authorizing DBEDT to verify no more than an unspecified amount of qualified costs for the six years from January 1, 2004, through December 31, 2009; and

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

Your Committees note that developers involved in Ko Olina Resort and Marina will investigate the feasibility of using seawater air conditioning technology for the facilities constructed at Ko Olina Resort and Marina.

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. 377, S.D. 1, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 377, S.D. 1, 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