STAND. COM. REP. NO. 3009

Honolulu, Hawaii

RE: S.B. No. 2602

S.D. 1

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 S.B. No. 2602 entitled:

"A BILL FOR AN ACT RELATING TO ESTATE TAX INFLATION ADJUSTMENT,"

begs leave to report as follows:

The purpose and intent of this measure is to amend the state estate and generation-skipping transfer tax law.

Specifically, this measure indexes the Hawaii estate tax applicable exclusion amount to inflation by applying the Internal Revenue Service inflation adjustment mechanism.

Your Committee received comments on this measure from the Department of Taxation, Hawaii Appleseed Center for Law and Economic Justice, Tax Foundation of Hawaii, and one individual.

Your Committee finds that, under current state estate and generation-skipping transfer tax law, the applicable exclusion amount, which is the amount of wealth that can be transferred free of Hawaii estate tax, is fixed at $5,490,000. The intent of this measure is to index this amount for inflation.

Your Committee has amended this measure by:

(1) Making a conforming amendment to the definition of "applicable generation-skipping transfer tax rate" in section 236E-2, Hawaii Revised Statutes;

(2) Clarifying that the measure applies to decedents dying and taxable transfers occurring after December 31, 2020;

(3) Changing the effective date to July 1, 2050, to facilitate further discussion on the measure; and

(4) 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 S.B. No. 2602, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2602, 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