Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2006

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 2076 entitled:

begs leave to report as follows:

The purpose of this measure is to allow, for a limited time, a fee owner to exclude from taxable income one hundred percent of capital gains realized from the sale of a leased fee interest in a residential house lot or multi-family residential leasehold property to a lessee, condominium association, or cooperative.

Testimony in support of this measure was submitted by Hawaii Council of Associations of Apartment Owners, Hawaii Independent Condominium and Cooperative Owners, Hawaii Chapter Community Associations Institute, Hawaii Association of Realtors, and one individual. No testimony in opposition to this measure was submitted. Comments were submitted by the Department of Taxation and the Tax Foundation of Hawaii.

Your Committee finds that this measure brings an incentive-based approach to the leasehold conversion process.

Your Committee further finds that the terms "multi-family residential leasehold property" and "multi-family residential leasehold unit" should include planned unit developments as defined in section 421J-2, Hawaii Revised Statutes, and has amended the measure to incorporate planned unit developments.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2076, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2076, S.D. 1, and be referred to the Committee on Ways and Means.