STAND. COM. REP. NO. 673

Honolulu, Hawaii

RE: S.B. No. 1360

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1360 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to require partnerships, estates, and trusts to withhold taxes on the income of nonresident partners and beneficiaries.

Your Committee received comments on this measure from the Department of Taxation, Master Limited Partnership Association, and Tax Foundation of Hawaii.

Your Committee finds that, under current state law, partnerships, estates, and trusts who do business in Hawaii are not required to pay income tax to the State, on the premise that their partners or beneficiaries will pay the state income tax on their distributive shares of the underlying entity's income. Your Committee further finds that the State currently has no means of compelling payment from nonresident partners or beneficiaries who choose not to pay the state income tax on their distributive shares of income.

Your Committee has amended this measure by clarifying how the amount withheld by partnerships, estates, and trust is to be calculated.

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. 1360, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1360, 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,

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DONOVAN M. DELA CRUZ, Chair