STAND. COM. REP. NO. 3572

Honolulu, Hawaii

RE: H.B. No. 2656

H.D. 2

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2656, H.D. 2, S.D. 1, 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 establish an income tax credit for small craft beer producers.

Your Committee received written comments in support of this measure from the Department of Business, Economic Development, and Tourism; Chamber of Commerce Hawaii; Kauai Beer Company; Kauai Island Brewing Company; Beer Lab HI; Lanikai Brewing Company; Big Island Brewhaus; Maui Brewing Co.; Homebrew in Paradise, LLC; Broken Boundary Brewery, LLC; Waikiki Brewing Company; Hawaiian Craft Brewers Guild; and Oahu County Committee on Legislative Priorities of the Democratic Party of Hawaii.

Your Committee received written comments in opposition to this measure from Hawaii Partnership to Prevent Underage Drinking; Kona Brewing Company; Hawaii Alcohol Policy Alliance; and two individuals.

Your Committee received written comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee notes the Department of Taxation's position that it is able to implement this measure with current applicability to taxable years beginning after December 31, 2018. This will allow the Department of Taxation sufficient time to make the necessary form and computer system changes. Your Committee further notes that, according to the Department of Business, Economic Development, and Tourism, implementation of the process to monitor and certify the tax credit, at a minimum, would cost $50,000 on a recurring basis.

Your Committee has amended this measure by:

(1) Clarifying that, in the case of pass-through entities, distribution and share of the tax credit shall be determined in accordance with section 704(b) of the Internal Revenue Code;

(2) Expanding the types of liquor licenses that qualify a taxpayer to claim the tax credit; and

(3) Making technical nonsubstantive amendments for the purposes of clarity, consistency, and style.

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 H.B. No. 2656, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 2656, H.D. 2, S.D. 2.

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

________________________________

DONOVAN M. DELA CRUZ, Chair