STAND. COM. REP. NO. 2287

Honolulu, Hawaii

RE:    S.B. No. 2519

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committees on Economic Development and Taxation and Energy and Environment, to which was referred S.B. No. 2519 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

beg leave to report as follows:

     The purpose of this measure is to except entities that use diesel oil for power-generating facilities from the additional one cent increase in diesel oil license taxes.

     Testimony in support of this measure was submitted by Kauai Island Utility Cooperative.  Comments on the measure were submitted by the Department of Taxation and the Tax Foundation of Hawaii.

     Act 209, Session Laws of Hawaii 2007, increased the rate of license tax imposed upon fuel distributors by section 243-4, Hawaii Revised Statutes, by an additional one cent per gallon of liquid fuel.  Your Committees find that in enacting Act 209, the Legislature did not intend the increased rate to be applicable to diesel oil sold or used for electrical power-generating facilities.  Rather, your Committees believe that the intent of the Act was to tax other transportation related fuels that did not contain alcohol.

     Accordingly, it is the intent of your Committees to support an exemption from the additional one cent license tax on diesel oil that is used by power-generating facilities.

     Your Committees received a fiscal impact statement from the Department of Taxation that this measure, as introduced, would not result in any impact to the general fund, but would reduce revenues to the State Highway Fund by $600,000 in fiscal year 2008, $1,200,000 in fiscal year 2009, and $600,000 in fiscal year 2010.  The measure would not have any impact on the State Highway Fund after fiscal year 2010.  Their methodology is as follows:

     The tax rate on the fuel is set to decrease from two cents per gallon to one cent on December 31, 2009, thus multiplying the rate changes by one hundred twenty million gallons of diesel oil used by the State for non-highway purposes in fiscal year 2007 would result in the fluctuating fiscal impact to the State Highway Fund.

     Your Committees have amended this measure by:

     (1)  Repealing the repeal of the definition of "power-generating facility", which is scheduled to occur on December 31, 2009 under Act 103, Session Laws of Hawaii 2007;

     (2)  Ensuring that the amendments made to section 243-4, Hawaii Revised Statutes, by this Act will not be repealed when that section is repealed on December 31, 2009; and

     (3)  Making technical, nonsubstantive amendments for the purpose of clarity.

     As affirmed by the records of votes of the members of your Committees on Economic Development and Taxation and Energy and Environment that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2519, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2519, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Economic Development and Taxation and Energy and Environment,

____________________________ RON MENOR, Chair

____________________________ CAROL FUKUNAGA, Chair