STAND. COM. REP. NO. 2846

Honolulu, Hawaii

RE:    H.B. No. 2626

       H.D. 2

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committee on Economic Development, Government Operations and Housing, to which was referred H.B. No. 2626, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to establish a temporary, nonrefundable income tax credit for taxpayers who incur certain expenses for manufacturing products in Hawaii.

     Your Committee received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; High Technology Development Corporation; The Chamber of Commerce of Hawaii; Hawaii Strategic Development Corporation; Hawaii Farm Bureau; Hawaii Food Industry Association; Meadow Gold Dairies; and KYD, Inc. dba K. Yamada Distributors.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that as one of the most isolated land masses on Earth, Hawaii must import approximately ninety percent of all products consumed annually.  However, manufacturers in Hawaii produce goods that are in demand across the United States and around the world.  Thus, developing and supporting manufacturing in Hawaii could serve two purposes.  First, in-state manufacturing could reduce Hawaii's need to import consumer products.  Second, Hawaii could export more products made in state, leading to greater economic development.

     Your Committee further finds that providing a manufacturing tax credit would provide financial benefits to manufacturers in Hawaii, thereby increasing their growth.  The tax credit would also encourage other manufacturers to begin operations in Hawaii, thereby strengthening Hawaii's economy.

     Your Committee has amended this measure by:

     (1)  Deleting its contents and inserting the contents of S.B. No. 3082, S.D. 2, Regular Session of 2014, which are substantively similar, except that:

          (A)  The amount of the tax credit, as a percentage of the qualified manufacturing costs incurred during the taxable year, is blank;

          (B)  The cap on manufacturing tax credits that may be claimed per taxpayer is blank; and

          (C)  The effective date is July 1, 2050; and

     (2)  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 Economic Development, Government Operations and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2626, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2626, H.D. 2, 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, Government Operations and Housing,

____________________________

DONOVAN M. DELA CRUZ, Chair