STAND. COM. REP. NO. 2023

Honolulu, Hawaii

RE: S.B. No. 2696

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 Public Safety, Intergovernmental, and Military Affairs, to which was referred S.B. No. 2696 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to provide an income tax credit for wages paid by a technology business owner to employees who were formerly in the custody of the Department of Public Safety.

Your Committee received testimony in support of this measure from the Department of Public Safety. Your Committee received testimony in opposition to this measure from one individual. Your Committee received comments on this measure from the Department of Taxation, Tax Foundation of Hawaii, and one individual.

Your Committee finds that the successful reintegration of former inmates back into society is essential to maintaining the effectiveness of the corrections system and promoting public welfare. Upon release from incarceration, it is often difficult for former inmates to find meaningful employment. Without meaningful employment, former inmates are at a higher risk of recidivism. To reduce that risk, it is important to create incentives for businesses to hire formerly incarcerated persons. Accordingly, this measure creates a tax credit on a technology business owner's net income tax liability for certain wages paid to former inmates under their employ.

In addition, your Committee agrees with the suggestion of the Tax Foundation of Hawaii that, instead of creating an entirely new tax credit, section 235-55.91, Hawaii Revised Statutes, should be amended to include the tax credit proposed by this measure. Establishing this measure's tax credit through the existing tax code should help avoid unforeseen issues that often accompany the creation of new tax credits. Further, your Committee agrees with the recommendation of the Department of Public Safety that this measure should allow only those technology businesses that participate in the Work Opportunity Tax Credit program administered by the United States Department of Labor, Employment, and Training to qualify for the tax credit proposed by this measure.

Accordingly, your Committee has amended this measure by:

(1) Incorporating the tax credit for wages of former inmates hired by a technology business into section 235-55.91, Hawaii Revised Statutes;

(2) Clarifying the definition of a "technology business" to include only those technology businesses that also participate in the Work Opportunity Tax Credit program administered by the United States Department of Labor, Employment, and Training Administration; and

(3) 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 Public Safety, Intergovernmental, and Military Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2696, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2696, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Public Safety, Intergovernmental, and Military Affairs,

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CLARENCE K. NISHIHARA, Chair