Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Human Services, to which was referred S.B. No. 786 entitled:

begs leave to report as follows:

The purpose of this measure is to establish a non-refundable tax credit for the qualified adoption expenses incurred in efforts to adopt a child.

Testimony in support of this measure was submitted by the Department of Taxation; the Hawaii Family Forum; and two concerned citizens. Testimony in support of the intent of this measure was submitted by Hawaii International Child, Inc. The Department of Human Services and the Tax Foundation of Hawaii submitted comments on this measure.

Your Committee finds that this measure establishes a non-refundable tax credit that is similar to the federal tax credit established under section 23, Internal Revenue Code of 1986, as amended, which allows taxpayers to adopt a child to claim a non-refundable tax credit. The Department of Taxation testified in support of this measure, provided that the amount of the tax credit be limited to $5,000. According to the Department of Taxation, the projected revenue loss to the State of providing a $5,000 tax credit, would be $330,000.

Accordingly, your Committee has amended this measure by setting the amount of the tax credit at $5,000, rather than $10,000.

As affirmed by the record of votes of the members of your Committee on Human Services that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 786, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 786, S.D. 1, and be referred to the Committee on Ways and Means.