STAND. COM. REP. NO. 3722

Honolulu, Hawaii

RE: H.B. No. 1469

H.D. 2

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2020

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1469, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE COLLEGE SAVINGS PROGRAM,"

begs leave to report as follows:

The purpose and intent of this measure is to assist families to save money for the purpose of college attendance:

Specifically, this measure:

(1) Establishes a state income tax deduction for contributions made to a taxpayer's Hawaii college savings program account;

(2) Sets limits on the amount of Hawaii college savings program contributions that may be claimed as a tax deduction; and

(3) Makes nonqualified withdrawals from a taxpayer's Hawaii college savings program account subject to recapture and penalties.

Your Committee received written comments in support of this measure from the Department of Taxation.

Your Committee received written comments in opposition to this measure from the Securities Industry and Financial Markets Association.

Your Committee received written comments on this measure from the Department of Budget and Finance, Tax Foundation of Hawaii, and Savingforcollege.com.

Your Committee finds that authorizing a tax deduction for contributions to any of the various college savings programs offered by other states will further encourage saving money for college attendance and allow families to select a program that is most appropriate for their needs.

Your Committee has amended this measure by:

(1) Making contributions to any college savings program established under section 529 of the Internal Revenue Code of 1986 deductible from Hawaii adjusted gross income for state tax purposes, instead of limiting deductions to contributions to the Hawaii college savings program;

(2) Establishing an unspecified adjusted gross income limit to claim the Hawaii adjusted gross income deduction for contributions made to a college savings program;

(3) Conforming the term "qualified higher education expenses" with existing Hawaii law;

(4) Allowing a four-year carry-forward of deductions made in excess of annual deduction limits;

(5) Making the recapture of nonqualified withdrawals subject to federal law, instead of Hawaii law;

(6) Updating the measure's provisions that specify from which taxable year the measure will apply to reference taxable years beginning after December 31, 2020; and

(7) Making technical nonsubstantive amendments for 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. 1469, 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. 1469, 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