HOUSE OF REPRESENTATIVES	H.R. NO.	115
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII

HOUSE RESOLUTION

REQUESTING THE DEPARTMENT OF TAXATION TO CONDUCT A STUDY ON USING PERFORMANCE AS A BASIS FOR AWARDING TAX CREDITS.

     WHEREAS, state tax credits are used to stimulate growth in the economy and specific industries or regions of the State; and

     WHEREAS, the State has used tax credits extensively to invest in the high technology industry as well as to provide economic opportunities on the Leeward coast of Oahu; and

     WHEREAS, tax credits to benefit the high technology industry have been in place for eight years, yet the State still lacks any reasonable measure of the success or failure of such tax credits; and

     WHEREAS, a novel approach to providing tax credits is to issue such credits based on performance; and

     WHEREAS, the Department of Taxation has achieved great success with its new computer system using performance-based contracts such that computer vendors are paid only if they achieve pre-agreed upon goals and objectives, including increased tax collections to pay for the new computer system; and

     WHEREAS, tax credits issued contingent upon performance could mean that recipients of the tax credits are required to achieve pre-agreed upon goals and objectives or lose their tax preference; and

     WHEREAS, performance-based tax credits would not only provide an excellent incentive for tax credit recipients to succeed, but would also provide an evaluation of the success or failure of the tax credit; now, therefore,

     BE IT RESOLVED by the House of Representatives of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2007, that the Department of Taxation is requested to conduct a study on using performance as a basis for awarding tax credits; and

     BE IT FURTHER RESOLVED that the Department of Taxation is requested to:

     (1)  Combine its direct experience with the performance-based contracts implemented for its computer systems and other operations, with its expertise and accessible data with respect to tax-related issues, to determine whether performance-based tax credits could achieve similar results;

     (2)  Research other states and municipalities to see if these jurisdictions have used performance-based tax credits;

(3)  Report its findings and recommendations to the Legislature, including any suggested legislation, no later than twenty days prior to the convening of the Regular Session of 2008; and

     BE IT FURTHER RESOLVED that a certified copy of this Resolution be transmitted to Director of Taxation.

OFFERED BY:

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Report Title: 

Requests the Department of Taxation to conduct a study on using performance as a basis for awarding tax credits.