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 S.B. No. 2563, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to exempt certain leveraged small business investment companies from the franchise tax otherwise applicable to small business investment companies.

Specifically, this measure exempts those leveraged small business investment companies that are licensed by the United States Small Business Administration.

Furthermore, this measure appropriates general funds to the University of Hawaii for the support of small businesses. Specifically, this bill provides funding for the expansion of the Small Business Development Center and the Hawaii Business Research Library, and the establishment of a Hawaii Award of Excellence Center.

Your Committee finds that the current franchise tax on all small business investment companies deters venture investors from establishing leveraged small business investment companies in the State. Removing the tax will attract these leveraged small business investment companies and thereby improve the opportunities for small businesses to gain access to capital.

Furthermore, your Committee finds that expansion of the Small Business Development Center will promote sustainable economic development and strengthen the economic conditions under which small businesses may thrive.

Your Committee has amended this measure by eliminating funding for the Leeward and Windward Oahu consulting and training centers of the Small Business Development Center, the second research position at the Hawaii Business Research Library, and the Hawaii Award of Excellence Center. Your Committee has also amended this measure by changing the remaining appropriation amounts to blank figures in order to promote continued discussion of the matter.

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 S.B. No. 2563, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2563, S.D. 2.