STAND. COM. REP. NO. 339

Honolulu, Hawaii

RE:    S.B. No. 1934

       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 S.B. No. 1934 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to require the Department of Taxation to allow an individual taxpayer to request that the taxpayer's refund be electronically deposited into more than one account at financial institutions.

     Testimony in support of this measure was received from The Hawai‘i Alliance for Community Based Economic Development, 3Point, and one individual.  The Department of Taxation submitted testimony in opposition.  The Tax Foundation of Hawaii submitted comments.

     Your Committee finds that for many people, particularly lower income taxpayers, a tax refund is the only substantial amount of "discretionary" income they may receive in a year.  Your Committee has heard of individuals who use the tax refund to pay down debt, access a mortgage assistance program, and make tuition payments – expenses that would not be "affordable" otherwise.

     Your Committee has also heard that income splitting is a standard asset management tool for the wealthy, allowing a person to split assets into separate pools for spending and for saving.  This measure would provide a similar opportunity for a Hawaii taxpayer – no matter what the income level – to split the financial asset that the tax refund represents.  Doing so by electronic deposit into separate financial accounts ensures that the refund is more likely to be reserved for extraordinary expenses.

     Your Committee notes that both the federal government and California allow an individual's tax refund to be electronically deposited in more than one financial account.

     It is the intent of your Committee to provide Hawaii residents with refund splitting options comparable to that provided by the federal government, which allows the refund to be split into a maximum of three accounts.

     Your Committee has amended this measure by allowing a taxpayer to designate up to three accounts at financial institutions for direct deposit of the taxpayer's refund.

     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 S.B. No. 1934, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1934, 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