Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1186, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to provide for a temporary increase in the hotel construction and remodeling tax credit.

Specifically, this measure raises the four per cent hotel and construction and remodeling tax credit to eight per cent temporarily, from January 1, 2006 through June 30, 2009, then reduces the tax credit back to four per cent on July 1, 2009, and repeals the tax credit altogether on June 30, 2012.

Your Committee finds that the hotel construction and remodeling tax credit has been successful since its inception in 2001. The tax credit has spurred construction to reduce unemployment, boost the economy, and provide quality hotel facilities for the State's visitor industry.

Your Committee concurs with the intent of this measure to exclude time share units regulated under chapter 514E, Hawaii Revised Statutes, from the definition of "qualified full service hotel facilities" thus making time share units ineligible for the hotel construction and remodeling tax credit. Your Committee believes that the focus of the hotel construction and remodeling tax credit should be on hotel facilities that provide full services to their guests. Your Committee has therefore excluded "time share owners association" from the definition of "taxpayer".

Your Committee also concurs with the increase in the tax credit proposed in this measure, but for purposes of administrative ease, finds that the tax credit should remain at four per cent until December 31, 2007, raised to eight per cent on January 1, 2008, and finally repealed on December 31, 2010. Your Committee has amended the bill accordingly.

Your Committee has also amended the bill by changing the effective date to July 1, 2050, for purposes of furthering discussions and by making technical amendments for style and consistency.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1186, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1186, S.D. 2.