STAND. COM. REP. NO. 3165

Honolulu, Hawaii

RE: H.B. No. 2656

H.D. 2

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Economic Development, Tourism, and Technology, to which was referred H.B. No. 2656, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO A SMALL CRAFT BEER PRODUCER TAX CREDIT,"

begs leave to report as follows:

The purpose and intent of this measure is to encourage and expand the growth of the local craft beer industry by establishing an income tax credit for small craft beer producers who produce one hundred percent of their products in the State.

Your Committee received testimony in support of this measure from the Maui Brewing Company, Kauai Beer Company, Honolulu Beerworks, REAL a Gastropub, Lanikai Brewing Company, Kauai Island Brewing Company, Beer Lab Hawaii, Big Island Brewhaus, Hawaiian Craft Brewers Guild, Chamber of Commerce Hawaii, Waikiki Brewing Company, Oahu County Committee on Legislative Priorities of the Democratic Party of Hawai‘i, Koholā Brewery, Kona Brewing Company, and two individuals. Your Committee received testimony in opposition to this measure from the Hawai‘i Alcohol Policy Alliance and three individuals. Your Committee received comments on this measure from the Department of the Attorney General; Department of Business, Economic Development, and Tourism; and Department of Taxation.

Your Committee finds that small brewing companies have grown in recent years and stimulate Hawaii's economy by supporting other local businesses and creating more jobs. Your Committee further finds that the number of breweries in Hawaii has increased from eight in 2013 to fifteen by the end of 2017. Despite the growth in breweries, your Committee notes that only five percent of beers sold in Hawaii are produced locally. The location of Hawaii proves to be a large obstacle for breweries. Your Committee received testimony indicating that the cost of production in Hawaii is estimated to be forty percent higher than in the continental United States. Your Committee believes that local producers and manufacturers are key players in Hawaii's economy by keeping their employees, products, and market in Hawaii and that more support should be given to local businesses.

Your Committee has amended this measure by:

(1) Reducing the amount of the tax credit that may be claimed by each qualified taxpayer from forty percent to twenty percent of the qualified expenses incurred;

(2) Inserting an aggregate cap of $300,000 for the total amount of tax credits that may be claimed by all qualified taxpayers in any taxable year;

(3) Inserting a cap of $50,000 for the annual tax credit allowed to each qualified producer;

(4) Amending the definition of "qualified producer" to include all corporations that produce one hundred percent of their products in the State, rather than only domestic corporations;

(5) Making it applicable to taxable years beginning after December 31, 2018, and ending on December 31, 2023; and

(6) 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, Tourism, and Technology that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2656, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2656, H.D. 2, S.D. 1, and be referred to your Committee on Ways and Means.

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

________________________________

GLENN WAKAI, Chair