STAND. COM. REP. NO. 2342

Honolulu, Hawaii

RE:    S.B. No. 2001

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 2001 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to establish a waiver program to exempt a taxpayer's gambling winnings from state income tax.

     Specifically, this measure exempts a taxpayer from reporting gambling winnings for a five-day period upon payment of a $10 fee.  Each non-transferable written waiver must be obtained from the Department of Taxation at least three days before the commencement of the period during which the waiver is in effect.  The waiver applies whether or not a taxpayer itemizes tax deductions, and applies to taxable years beginning after December 31, 2010.  Finally, this measure requires the Department of Taxation to adopt rules to implement the waiver program, no later than January 1, 2011.

     Your Committee received testimony in support of this measure from the Department of Taxation.  The Tax Foundation of Hawaii and one individual offered comments.  Written testimony presented to the Committee may be reviewed on the Legislature's website.

     Your Committee has amended this measure by:

(1)  Clarifying that the exemption applies only to gambling winnings legally acquired outside the State;

(2)  Providing that the waiver fee must be paid at least twenty-four hours before the commencement of the period during which the waiver is in effect; and

(3)  Providing that no exemption waiver shall be issued until the Department of Taxation adopts rules;

(4)  Changing the $10 fee for a single waiver to an unspecified amount; and

(5)  Making technical nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2001, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2001, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DONNA MERCADO KIM, Chair