STAND. COM. REP. NO.  1887

Honolulu, Hawaii

                , 2007

RE:   S.B. No. 1034

      S.D. 2

      H.D. 1

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 S.B. No. 1034, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to level the playing field and create a fairer market for all inter-island airlines by exempting common carriers from the general excise (GE) and use taxes for fuel for use in intrastate transportation.

     The Tourism Liaison of the Department of Business, Economic Development, and Tourism, Aloha Airlines, Hawaiian Airlines, Chamber of Commerce of Hawaii, Hawaii Chapter of the March of Dimes, Hawaii Fueling Facilities Corporation, Aloha Airlines Pilots' Union, Association of Flight Attendants, Transport Workers Union, International Association of Machinists and Aerospace Workers and Plumbers and Fitters Union supported this bill.  The Department of Taxation (DOTAX) and Tax Foundation of Hawaii submitted comments.

     Your Committee has amended this bill by:

(1)  Inserting a cap of $3.8 million in exemptions from the GE and use taxes;

(2)  Requiring a report from DOTAX regarding revenue loss in the first year of the tax exemption;

(3)  Changing the effective date to July 1, 2020, to encourage further discussion;

(4)  Inserting a sunset date of December 31, 2009; and

(5)  Making technical, nonsubstantive changes 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 S.B. No. 1034, S.D. 2, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1034, S.D. 2, H.D. 1.

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

____________________________

MARCUS R. OSHIRO, Chair