SB3146

SECTION 1. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to read as follows:

"§231-____ Tax expenditures. (a) All laws that enact, modify, or extend the availability of a tax expenditure shall include the following:

(1) An explanation of the intent in enacting each tax expenditure, including the expected economic and employment benefit to the State;

(2) An analysis of whether the economic or employment benefit to the State provided by the tax expenditure, if any, outweighs its cost;

(3) A repeal date that makes the tax expenditure available for no more than thirty-six months;

(4) A static revenue estimate of the tax expenditure for each of the fiscal years in the State's financial plan;

(5) For tax expenditures that are modified or extended:

(A) The total cost of the tax expenditure over the previous three fiscal years;

(B) A static revenue estimate for each of the fiscal years in the State's financial plan if the tax expenditure were repealed;

(C) An analysis describing the extent to which the tax expenditure is fulfilling its desired purpose, including whether the State has realized the anticipated economic benefit and increase in tax revenue. The analysis should also include the number of jobs created in the State and whether the cost of the tax expenditure is outweighed by its benefits.

(b) The director shall prescribe such rules as may be necessary or appropriate to carry out the purposes of this section.

(1) "State financial plan" refers to the financial plan required under section 37-69;

(2) "Static revenue estimate" means a revenue estimate that assumes that the gross domestic product will remain unchanged by the legislative proposal. A "static revenue estimate" may take into account taxpayers' likely behavioral responses to proposed changes in tax law. Behavioral effects can be broadly characterized as shifts in the timing of transactions and income recognition, shifts between business sectors and entity form, shifts in portfolio holdings, shifts in consumption, and tax planning and avoidance strategies.

(3) "Tax expenditure" means any credit, deduction, exclusion, exemption, or any other tax benefit that provides a preferential rate of tax or deferral of tax liability, authorized under title 14 for the purpose of incentivizing economic activity. The term "tax expenditure" does not include tax measures enacted as a result of conformity with the Internal Revenue Code, nor any modifications to tax measures required by the United States or state constitutions."

SECTION 2. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to read as follows:

"§231-____ Lawful disclosure of certain tax expenditure information. (a) Notwithstanding any law to the contrary, for tax expenditures that encourage certain economic activities, the claimant taxpayer's identity and the amount of tax expenditure claimed shall be subject to public disclosure under chapter 92F. The identity of any taxpayer to which a tax expenditure subject to this section flows through shall not be subject to public disclosure. For the purposes of this section, the definition of "tax expenditure" is the same as the term is defined in section 231- .

(b) For the purpose of this section, the tax expenditures that encourage certain industries or economic activities include:

(1) Exemption from general excise tax for eligible business activities in an enterprise zone under section 209E-11;

(2) Renewable energy technologies income tax credit under section 235-12.5(b)(1)(C), (2)(C), and (3)(C);

(3) Motion picture, digital media, and film production income tax credit under section 235-17;

(4) Renewable fuels production tax credit under section 235-110.31;

(5) Fuel tax credit for commercial fishers under section 235-110.6;

(6) Ship repair industry tax credit under section 235‑110.65;

(7) Tax credit for research activities under section 235‑110.91;

(8) Important agricultural land qualified agricultural cost tax credit under section 235-110.93;

(9) Organic foods production tax credit under section 235-110.94;

(10) Exemption from general excise tax for certain convention, conference, and trade show fees under section 237-16.8;

(11) Exemption from general excise tax for services related to ships and aircraft under section 237‑24.3(3);

(12) Exemption from general excise tax for labor organizations under section 237-24.3(9);

(13) Exemption from general excise tax for aircraft leasing under sections 237-24.3(11) and 238-1(6);

(14) Exemption from general excise tax for aircraft service and maintenance facilities under sections 237-24.9 and 238-1(8);

(15) Exemption from general excise tax for ship building and ship repair under section 237-28.1; and

(16) Exemption from general excise tax for affordable housing projects under sections 237-29 and 238-3(j).

(c) The director shall adopt such rules as may be necessary or appropriate to carry out the purposes of this section, including rules that subject other tax expenditures authorized under this title to this section."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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BY REQUEST

THE SENATE	S.B. NO.	3146
THIRTY-FIRST LEGISLATURE, 2022
STATE OF HAWAII