STAND. COM. REP. NO. 1407

Honolulu, Hawaii

RE: H.B. No. 233

H.D. 2

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Health and Human Services, to which was referred H.B. No. 233, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO A CHILD TAX CREDIT,"

begs leave to report as follows:

The purpose and intent of this measure is to establish a refundable state child tax credit payable on a monthly basis.

Your Committee received testimony in support of this measure from the Office of the Governor; one member of the Hawai‘i County Council; Holomua Collaborative; Hawai‘i Workers Center; Hawaii Appleseed Center for Law & Economic Justice; Hawai‘i Health & Harm Reduction Center; Hawai‘i Public Health Institute; Hawai‘i State Coalition Against Domestic Violence; Hawai‘i Children's Action Network Speaks!; HPM Building Supply; Hawaiian Host Group; JN Group; aio; Education Caucus of the Democratic Party of Hawai‘i; Imua Alliance; Catholic Charities Hawai‘i; Hawai‘i Hunger Action Network; Title Guaranty of Hawaii; Hawai‘i Foodbank; Hawai‘i Alliance for Progressive Action; Tori Richard, Ltd.; and eighteen individuals. Your Committee received comments on this measure from the Department of Budget and Finance, Department of Taxation, and Tax Foundation of Hawaii.

Your Committee finds that in 2022, twenty-nine percent of Hawaii's residents were categorized as Asset Limited, Income Constrained, Employed (ALICE) and fifteen percent were living in poverty. Therefore, a total of forty-four percent of Hawaii's population struggled to afford basic necessities in 2022. Given that families with children experience higher rates of poverty than those without, your Committee recognizes the dire need for strategies and supports that address the financial hardships uniquely borne by families with children.

Pursuant to its testimony, the Department of Taxation recommends that the tax credit established by this measure be made nonrefundable, as refundable credits are more prone to fraudulent claims, and to remove the provision that requires the credit to be equally distributed to a qualifying individual taxpayer over twelve consecutive months due to concerns that the credit is claimed against the net income tax liability for the taxable year and would complicate any refund of the remainder of the credit over the twelve consecutive months. Amendments to this measure are therefore necessary to address this concern.

Accordingly, your Committee has amended this measure by:

(1) Deleting language that would have required the awarded tax credit to be equally distributed to a qualifying individual taxpayer over twelve consecutive months;

(2) Making the tax credit nonrefundable and conforming the measure accordingly;

(3) Inserting an effective date of June 30, 2050, to encourage further discussion; and

(4) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Health and Human Services that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 233, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 233, H.D. 2, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Health and Human Services,

________________________________

JOY A. SAN BUENAVENTURA, Chair