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. 3126 entitled:

begs leave to report as follows:

The purpose of this measure is to create an incentive for the construction of affordable housing units in Hawaii through a general excise tax credit.

Testimony in support of the measure was submitted by Land Use Research Foundation of Hawaii, Pacific Housing Assistance Corporation, and an individual. The Department of Taxation opposed the measure. Tax Foundation of Hawaii offered comments.

Your Committee finds that tax incentives are critical to stimulate investment in the development of affordable housing. The four percent general excise tax credit on residential construction cost could leverage millions of dollars in investment in new and renovated homes. Although a general excise tax exemption is currently available for qualified housing developers, the tax credit is more marketable to investors as a means of generating capital for housing development.

Your Committee has amended this measure to delete the cap on maximum allowable credits during the taxable year, and to make technical, nonsubstantive amendments for style.

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. 3126, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3126, S.D. 1, and be referred to the Committee on Ways and Means.