STAND. COM. REP. NO. 625

Honolulu, Hawaii

RE:    S.B. No. 731

       S.D. 2

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. 731, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO FUEL TAX,"

begs leave to report as follows:

     The purpose of this measure is to exempt power-generating facilities and electric cooperatives from the tax on liquid fuel.

     Testimony in support of this measure was received from Kaua‘i Island Utility Cooperative.  The Department of Transportation, Department of Taxation, and Tax Foundation of Hawaii submitted comments.

     Your Committee finds that this measure would clarify a question regarding the interpretation of language in chapter 243, Hawaii Revised Statutes, pertaining to which types of liquid fuels are subject to specific taxes.

     Your Committee received a revenue impact statement from the Department of Taxation that stated the revenue loss to the State Highway Fund would be $1,400,000 to $1,700,000 in fiscal year 2008.

     In its methodology, the Department stated the State's fuel tax for non-highway use of diesel oil was $1,600,000 in fiscal year 2006.  The counties did not tax this fuel.  Assuming two per cent growth per year, the revenue cost for 2008 would be $1.62 X 1.02 X 1.02 = $1,690,000.

     Your Committee is in support of this measure; provided that the savings realized by the power-generating facility are passed on to customers of the facility.

     Your Committee has amended this measure by inserting an effective date of July 1, 2035, for the purposes of further discussion.

     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. 731, S.D. 1, as amended herein, and recommends that it be referred to the Committee on Ways and Means, in the form attached hereto as S.B. No. 731, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair