Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Transportation, to which was referred H.B. No. 390 entitled:

begs leave to report as follows:

The purpose of this bill is to assist the motor vehicle rental industry by reducing from $3.00 to $2.00 per day, the rental motor vehicle surcharge tax that was to be levied for the period between September 1, 1999, to August 31, 2007.

Catrala-Hawaii testified in support of this measure. The Department of Transportation (DOT) and Department of Taxation (DOTAX) testified in opposition to this measure.

Act 223, Session Laws of Hawaii 1999, temporarily raised the motor vehicle rental surcharge tax from $2.00 to $3.00 per day for the period between September 1, 1999, to August 31, 2007, to temporarily bolster lagging general fund revenues during difficult economic times. However, your Committee finds that Hawaii's economy is enjoying moderate revenue growth and that the increase in the vehicle rental surcharge tax is no longer needed.

Your Committee understands the concerns raised by DOT and DOTAX that the surcharge reduction will result in approximately $14.7 million in lost revenues for fiscal year 2006, and that the retroactive application of the surcharge reduction to 1999 may result in necessary refunds of approximately $98 million to motor vehicle rental companies. However, your Committee believes that it is fair and appropriate to reduce the surcharge at this time. Your Committee finds that the fiscal implications this measure may have are beyond its purview and that it is more appropriate for the Committee on Finance to discuss these implications.

As affirmed by the record of votes of the members of your Committee on Transportation that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 390 and recommends that it pass Second Reading and be referred to the Committee on Finance.