STAND. COM. REP. NO. 2487

Honolulu, Hawaii

RE:    S.B. No. 2561

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred S.B. No. 2561 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to establish a tax credit for the preservation and rehabilitation of historic structures.

     Testimony in support of this measure was submitted by the Historic Hawaii Foundation, the North Shore Chamber of Commerce, and five individual citizens.  Testimony in opposition of this measure was submitted by the Department of Taxation.  Comments on the measure were submitted by the Department of Land and Natural Resources and the Tax Foundation of Hawaii.

     Your Committee finds that providing an income tax credit for the purpose of preserving and rehabilitating historic structures is an important step in helping to preserve our culture, arts, and traditions.

     Accordingly, it is the intent of your Committee to support a tax credit for the limited costs of rehabilitating or preserving historic structures.

     Your Committee has received an annual revenue loss estimate to the State from the Department of Taxation that this measure would result in annual losses of $735,000.  Their methodology is as follows:

     There are an estimated one hundred eighty-six residences and one hundred eight other buildings in Hawaii that are listed on the National and State Register of Historic Places.  For purposes of the revenue impact, it is assumed that five per cent of the historic residences and other buildings are renovated each year at an average cost of $200,000.

     Your Committee has amended this measure by:

     (1)  Adding a "certified historic structure" definition;

     (2)  Adding various scenarios where recapture of a previously claimed credit would be applicable;

     (3)  Providing a blank annual cap on the credit; and

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

     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. 2561, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2561, 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