STAND

STAND. COM. REP. NO. 670

Honolulu, Hawaii

, 2005

RE: H.B. No. 1448

H.D. 2

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Judiciary, to which was referred H.B. No. 1448, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO INCOME TAX CREDIT,"

begs leave to report as follows:

The purpose of this bill is to reduce the impact of residential fires by providing financial incentives to install automatic fire sprinkler systems. This bill:

(1) Establishes a tax credit for every automatic fire sprinkler system installed and placed into service after June 30, 2006;

(2) Allows a tax credit amounting to five percent of the qualifying costs of a sprinkler system for an apartment or condominium built before 1975, single-family residential dwelling, and multi-residential dwelling;

(3) Caps the tax credit at $1,000 in each taxable year for each individual sprinkler system; and

(4) Allows the tax credit to be claimed up to five consecutive taxable years.

The State Fire Council, Verizon Hawaii, and the Hawaii Independent Condominium and Cooperative Owners testified in support of this bill. The Hawaii Council of Associations of Apartment Owners (HCAAO) supported the intent of this measure, and an individual offered comments. The Department of Taxation opposed this bill.

Your Committee has amended this bill by:

(1) Deleting the percentage amount of the qualifying costs that can be claimed for tax credits;

(2) Making the tax credit applicable to taxable years beginning after December 1, 2020, for continuing discussion; and

(3) Making technical, nonsubstantive amendments for style and clarity.

Your Committee appreciates HCAAO's insights on the challenges facing apartment owners to pay their share of the costs. One suggestion was that the apartment owners' pro-rata share of the cost for installing a sprinkler system in the common elements should be included as part of their actual costs. HCAAO also pointed out that the one-time installation cost would usually be paid back through increased maintenance fees spread out over a 20-year period. This bill allows the tax credit to be claimed for five taxable years.

As affirmed by the record of votes of the members of your Committee on Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1448, H.D. 1, as amended herein, and recommends that it be referred to the Committee on Finance in the form attached hereto as H.B. No. 1448, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Judiciary,

		____________________________ SYLVIA LUKE, Chair