Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2006

State of Hawaii

Sir:

Your Committee on Finance, to which was referred H.B. No. 1026 entitled:

begs leave to report as follows:

The purpose of this bill is to adjust individual income tax rates.

Prior to the public hearing, your Committee circulated a proposed draft and received testimony on the proposed draft. Specifically, the proposed draft defines "fair market rental value" under the transient accommodations tax to be twice the amount of gross daily maintenance fees for timeshare units.

The ILWU Local 142 testified in support of this bill. The Department of Taxation, Cendant Corporation, Pahio Resorts, Hawaii Hotel & Lodging Association, ARDA-Hawaii, Maui Sunset Timeshare Association, Interval International, All Islands Timeshare Resales, Marriott International, Inc., Hilton Grand Vacations Club, Starwood Vacation Ownership, and several concerned individuals testified in opposition to this measure. The Tax Foundation of Hawaii offered comments.

Your Committee wishes to use this measure as a vehicle to promote further discussion on the issue of timeshares and tax fairness, especially in light of the increasing prevalence of timeshares within the transient accommodations industry and Hawaii's economy.

After careful consideration, your Committee has amended this bill by substituting its contents with the proposed draft.

In addition, your Committee has amended the proposed draft by:

As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1026, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1026, H.D. 1, and be placed on the calendar for Third Reading.