STAND. COM. REP. NO. 1907

Honolulu, Hawaii

, 2019

RE: S.B. No. 394

S.D. 1

H.D. 1

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Finance, to which was referred S.B. No. 394, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to amend the way Hawaii taxes multistate business by:

(1) Replacing the current 3-factor formula for apportionment of business income with a single sales factor; and

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

The Department of Taxation and Tax Foundation of Hawaii provided comments.

Your Committee has amended this measure by changing the effective date to upon its approval and making it applicable to taxable years beginning after December 31, 2019.

As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 394, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 394, S.D. 1, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

____________________________

SYLVIA LUKE, Chair