STAND

STAND. COM. REP. NO. 1205

Honolulu, Hawaii

, 2005

RE: H.B. No. 998

H.D. 2

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Tourism and Business and Economic Development, to which was referred H.B. No. 998, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO HOTEL CONSTRUCTION AND REMODELING TAX CREDIT,"

beg leave to report as follows:

The purpose of this measure is to extend the period and increase the amount of the hotel construction and remodeling tax credit (tax credit) and to delete hotels and hotel condominiums and time share projects from eligibility for the credit.

Your Committees received testimony in support of this measure from the Hawaii Tourism Authority, Tourism Liaison, Hawaii Hotel & Lodging Association, Hawaii Resort Developers Conference, American Resort Development Association-Hawaii Chapter, Outrigger Enterprises, Inc., Waikiki Improvement Association, and Subcontractors Association of Hawaii. Testimony in opposition was received from the Department of Taxation, Starwood Hotels & Resorts Worldwide, Inc., and Cedant Corporation/Fairfield Resorts. Comments were received from the Tax Foundation of Hawaii.

The hotel construction and remodeling tax credit has proven to be a valuable incentive for hotels to make the necessary upgrades to their facilities to better accommodate the rise in tourism. The result is an improvement of Hawaii's visitor product. The intent of this measure is to extend and increase the tax credit in the interests of promoting the tourism industry.

Your Committee has amended this measure by:

(1) Extending the four per cent tax credit through December 31, 2007, raising the tax credit to eight per cent from January 1, 2008 to December 31, 2010, and sunsetting the tax credit on December 31, 2010;

(2) Imposing a threshold amount of costs to which the tax credit applies of $5,000,000;

(3) Limiting the tax credit to "qualified full service hotel facility";

(4) Providing for a nonrefundable tax credit; and

(5) Providing for a recapture of the tax credit for conversion to a time share plan or a condominium.

As affirmed by the records of votes of the members of your Committees on Tourism and Business and Economic Development that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 998, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 998, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Tourism and Business and Economic Development,

____________________________ WILL ESPERO, Chair		____________________________ DONNA MERCADO KIM, Chair