CONFERENCE COMMITTEE REP. NO. 26

Honolulu, Hawaii

, 2019

RE: S.B. No. 394

S.D. 1

H.D. 1

C.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sirs:

Your Committee on Conference on the disagreeing vote of the Senate to the amendments proposed by the House of Representatives in S.B. No. 394, S.D. 1, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

The purpose of this measure is to amend the way Hawaii taxes multistate businesses.

Specifically, this measure:

(1) Requires multistate businesses to apportion income, for tax purposes, by using only the taxpayer's sales factor, rather than the average of the taxpayer's property, payroll, and sales factors; and

(2) Adopts market-based sourcing for the sale of services and intangible property for purposes of apportioning income under the Uniform Division of Income for Tax Purposes Act.

Your Committee on Conference finds that multistate businesses are taxed in Hawaii under the Uniform Division of Income for Tax Purposes Act, which apportions a share of their total income to each state in which they do business using the average of the taxpayer's sales, property, and payroll factors. Your Committee on Conference further finds that apportioning a multistate business' income using only the sales factor, rather than the equally weighted three-factor formula currently in use, will not properly reflect a taxpayer's activity in the State.

Your Committee on Conference has amended this measure by deleting the provisions that would require multistate businesses to apportion income using only the taxpayer's sales factor, rather than the average of the taxpayer's property, payroll, and sales factors.

As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of S.B. No. 394, S.D. 1, H.D. 1, as amended herein, and recommends that it pass Final Reading in the form attached hereto as S.B. No. 394, S.D. 1, H.D. 1, C.D. 1.

Respectfully submitted on behalf of the managers:

ON THE PART OF THE HOUSE

ON THE PART OF THE SENATE

____________________________ SYLVIA LUKE Chair	____________________________ DONOVAN M. DELA CRUZ Chair
	____________________________ GILBERT S.C. KEITH-AGARAN Co-Chair