Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Education and Military Affairs, to which was referred S.B. No. 1248 entitled:

begs leave to report as follows:

The purpose of this measure is to allow the Department of Education to use the Working Families Tax Relief Act to allow for the issuance of qualified zone academy bonds to subsidize school repair, renovation and restoration projects, equipment and technology acquisition, curriculum development, and teacher training.

Testimony in support of the measure was submitted by the Department of Education (DOE). The Department of Taxation submitted comments.

Your Committee finds that measures to subsidize school projects are a much needed additional source of funding. Under Internal Revenue Code section 1397E, banks, insurers, and corporations actively engaged in the business of lending money and holding qualified zone academy bonds may claim a federal income tax credit. The tax credit will then be used for payment in lieu of the bond interest. Authorizing the DOE to qualify schools as qualified zone academies and the Director of Finance to issue bonds for the fiscal biennium 2005-2007 will assist the DOE with another funding source for its projects.

Upon further consideration, your Committee has amended this bill to include further descriptions of the requirements of this federal program and nonsubstantive technical amendments for clarification purposes.

As affirmed by the record of votes of the members of your Committee on Education and Military Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1248, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1248, S.D. 1, and be referred to the Committee on Ways and Means.