STAND. COM. REP. NO. 56

Honolulu, Hawaii

RE:    S.B. No. 1962

       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 Commerce, Consumer Protection, and Affordable Housing, to which was referred S.B. No. 1962 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to provide an income tax deduction to residential unit owner-occupants for the qualifying costs of installation of an automatic fire sprinkler system.

     Your Committee received testimony in support of this measure from the State Fire Council, the Honolulu Fire Department, and the Hawaii Council of Associations of Apartment Owners.  Testimony in opposition to this measure was received from the Department of Taxation.  Comments on this measure were received from the Tax Foundation of Hawaii.

     Your Committee received a fiscal impact statement from the Department of Taxation that this measure, if passed, would result in an annual revenue loss to the State of approximately $10,100,000, assuming the maximum tax credit of $7,000 was claimed.  During the public hearing on this measure, your Committee received testimony from the Department of Taxation that the State would suffer up to a $1,500,000 annual loss for every $1,000 claimed as a tax credit under this measure.  However, the Department of Taxation did not specify the methodology by which the fiscal impact was calculated.

     Your Committee finds that this measure encourages the installation of automatic fire sprinkler systems in residential units to mitigate the effects residential fires and prevent property damage, injuries, and deaths.

     Your Committee has amended this measure by deleting the specified amount for the maximum deduction that may be claimed in order to promote further discussion.

     As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Affordable Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1962, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1962, S.D. 1, and be referred to the Committee on Economic Development and Taxation.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Affordable Housing,

____________________________

BRIAN T. TANIGUCHI, Chair