STAND. COM. REP. NO. 1068

Honolulu, Hawaii

RE:    H.B. No. 1411

       H.D. 2

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred H.B. No. 1411, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO CONFORMITY OF THE HAWAII INCOME TAX LAW TO THE INTERNAL REVENUE CODE,"

begs leave to report as follows:

     The purpose of this measure is to amend Hawaii's income tax law to conform with changes to the Internal Revenue Code.

     Testimony in support of this measure was received from the Department of Taxation (Department).  The Tax Foundation of Hawaii submitted comments.

     Your Committee received a fiscal impact statement from the Department that the measure will reduce income tax revenues at an annual rate of about $1,500,000 in fiscal year 2008.

     Your Committee notes the Tax Foundation's comments regarding the effective date of this measure, which is upon approval, but does not specify the applicable taxable year.  Tax changes for Hawaii are usually adopted for a tax year to ensure compliance and simplicity.  This year, however, there were five congressional income tax enactments, four of which contained a number of amendments and many retroactive and prospective effective dates.

     In addition, your Committee recognizes that section 235‑2.5(a)(3), Hawaii Revised Statutes, addresses retroactive provisions in federal public laws, recognizing that the retroactive dates in the federal Internal Revenue Code shall be operative.  However, changes in federal laws in 2006 contained so many and varied effective dates that your Committee has ensured their adoption by placing language in the effective date to state clearly that those retroactive and prospective dates are operative for Hawaii.  In addition, your Committee has made technical, nonsubstantive amendments to conform the measure to preferred drafting style.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1411, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1411, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair