STAND. COM. REP. NO. 2966

Honolulu, Hawaii

RE: S.B. No. 2599

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2599 entitled:

"A BILL FOR AN ACT RELATING TO THE TAX CREDIT FOR RESEARCH ACTIVITIES,"

begs leave to report as follows:

The purpose and intent of this measure is to amend certain requirements and limitations of the tax credit for research activities.

More specifically, this measure:

(1) Establishes a cap on the amount of tax credits for research activities that an eligible taxpayer and the taxpayer's related entities may receive per taxable year;

(2) Requires every qualified high technology business, to be eligible to receive tax credits for research activities, to submit additional information to the Department of Business, Economic Development, and Tourism;

(3) Amends the annual aggregate cap on tax credits for research activities that the Department of Business, Economic Development, and Tourism may certify; and

(4) Requires certification of tax credits for research activities on a first-come, first-served basis to be based on the date and time that a complete application is received, subject to certain conditions.

Your Committee received testimony in support of this measure from the Hawaii Technology Development Corporation; Oceanit Laboratories, Inc.; Nalu Scientific, LLC; Simonpietri Enterprises, LLC; and one individual.

Your Committee received comments on this measure from the Department of Budget and Finance; Department of Business, Economic Development, and Tourism; Department of Taxation; and Tax Foundation of Hawaii.

Your Committee finds that establishing a cap amount on the tax credit for research activities will allow a greater number of companies to receive the tax credit.

Your Committee has amended this measure by:

(1) Clarifying the entities that are subject to the cap amount on the tax credit for research activities;

(2) Clarifying that the Department of Business, Economic Development, and Tourism shall certify the tax credit for research activities on a first-come, first-served basis, based on the date that a complete application is received; provided that complete applications received on the same date shall be certified on a pro rata basis;

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

(4) Making technical nonsubstantive changes 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. 2599, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2599, 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