Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2396, H.D. 2, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to establish a State Private Investment Fund and to clarify and improve several high technology industry tax credits.

Your Committee finds that the State is at a crossroads, with respect to the future of Hawaii's high technology industry. Just three years ago, under Act 221, Session Laws of Hawaii 2001, the State provided the financing vehicle for start-up high technology companies. These fledgling companies have grown quickly and have done well for themselves and are ready to take the next step forward, but more sophisticated growth financing is needed.

Since this second-level financing is not available in Hawaii, these Hawaii companies must move to where the money is located. Whether it is to Silicon Valley or elsewhere, their moving defeats the whole purpose of nurturing these companies to stay and grow in Hawaii.

This bill provides the means for the industry to stay rooted in Hawaii by establishing the State Private Investment Fund. The Fund provides the financing tools necessary to meet the continuing growth, needs, and objectives of the high technology industry.

The bill also clarifies and enhances other tax incentives developed to assist the high technology industry, including the high technology business investment tax credit, the technology infrastructure renovation tax credit, and the tax credit for research activities. The bill also clarifies criteria used to award tax incentives for high technology companies.

Your Committee has amended the bill by changing dollar amounts to blanks to promote further discussion.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2396, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 2396, H.D. 2, S.D. 2.