STAND. COM. REP. NO.  1111

Honolulu, Hawaii

                , 2007

RE:   H.B. No. 1631

      H.D. 2

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No. 1631, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO HIGH TECHNOLOGY BUSINESS INVESTMENT TAX CREDIT,"

begs leave to report as follows:

     The purpose of this bill is to allow the State to measure the success of its High Technology Business Investment Tax Credit by requiring that:

(1)  A qualified high technology business (QHTB), by claiming the investment credit under section 235-110.9, Hawaii Revised Statutes (HRS), or the research activities credit under section 235-110.91, HRS, agrees to public disclosure of the name of their company;

(2)  QHTBs must file an annual report with the Department of Taxation (DoTax) containing information about their employment positions in the State;

(3)  DoTax must report this information in aggregate form to the Legislature each year, as well as the names of QHTBs receiving the credits; and

(4)  DoTax must use this information to evaluate how successful the investment and research credits have been and report its conclusions to the Legislature.

     DoTax, Hawaii Aquaculture Associates, PacifiCap Group, Oceanic Imaging Consultants, Inc., Archinoetics, LLC, Sunrise Capital, Inc., Oceanit, Hawaii Angels-Maui Chapter, Cardax Pharmaceuticals, Hawaii Science and Technology Council, and numerous individuals testified in opposition to this bill.  The Department of Business, Economic Development, and Tourism and Tax Foundation of Hawaii submitted comments on this measure.

     Your Committee has amended this bill by:

     (1)  Requiring the assessment of a $1,000 per month penalty         for each month the annual survey is not filed by a QHTB       up to a maximum of three months;

     (2)  Requiring DoTax to prepare a report by October 2007,               with summarized data submitted by QHTBs in form N-317              for all previous years available that includes summary         descriptive statistics regarding  the nature of                    qualified research activities, job creation, and                   salaries paid by QHTBs;

     (3)  Requiring DoTax to ensure that reporting requirements under the annual survey do not duplicate other departmental reporting requirements;

     (4)  Specifying that the additional reporting requirements              are only applicable to QHTBs and not individual                    investors; and

     (5)  Making technical, nonsubstantive amendments for clarity,      consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1631, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1631, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Finance,

____________________________

MARCUS R. OSHIRO, Chair