STAND. COM. REP. NO. 1744

Honolulu, Hawaii

RE: H.B. No. 1369

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1369, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to repeal certain credits, deductions, and exemptions under the income tax, general excise tax, and use tax laws.

Your Committee received testimony in opposition to this measure from Airlines for America; Alaska Airlines and Hawaiian Airlines; The Chamber of Commerce of Hawaii; Charter Communications; Chou Marine Chemist Service; Gather Federal Credit Union; Hawaii Farm Bureau; Hawaii Federal Credit Union; Hawaii Food Industry Association; Hawaii Gas; Hawaii Island Chamber of Commerce; Hawaii Marine Cleaning; Hawaii Military Affairs Council; Hawaii Renewable Fuels Coalition; Ko Hana Farms; Kohala Coast Resort Association; Local Food Coalition; Lokahi Federal Credit Union; Matson Navigation Company, Inc.; Maui Chamber of Commerce; Par Hawaii; Park Hotels and Resorts; Mauna Kea Resort; Pono Pacific; Prince Resorts Hawaii, Inc.; Ship Repair Association of Hawaii; Watanabe Floral, Inc.; and six individuals.

Your Committee received comments on this measure from the Department of Agriculture; Department of Business, Economic Development, and Tourism; Department of Taxation; Hawaii State Energy Office; Hawaii Alliance of Nonprofit Organizations; Hawaii Aquaculture and Aquaponics Association; Hawaii Credit Union League; Hawaii Crop Improvement Association; Hawaii Farmers Union; Hawaii Harbors Users Group; Simonpietri Enterprises; and Tax Foundation of Hawaii.

Your Committee finds that certain tax credits, deductions, and exemptions under the income, general excise, and use tax laws contribute to losses of revenue to the State and should be examined periodically for their efficacy.

Your Committee further finds that the Department of Agriculture can certify the tax exemptions assigned to the Department through waybill and manifest records.

Your Committee has amended this measure by:

(1) Deleting the language repealing sections 237-16.8, 237-24(14), 237-24.3(1), 237-25(3), and 237-28.1, Hawaii Revised Statutes, and amending those sections to remain operative until January 1, 2031;

(2) Deleting the language repealing section 209E-11, Hawaii Revised Statutes, and amending the definition of "eligible business activity" under section 209E-2, Hawaii Revised Statutes, to include the manufacture or production of Hawaii-made or Hawaii-processed products that fulfill the requirements of section 486-119, Hawaii Revised Statutes;

(3) Deleting the language repealing section 235-110.7, Hawaii Revised Statutes, and amending that section to apply only to agricultural equipment and manufacturing equipment;

(4) Deleting the language repealing section 235-110.32, Hawaii Revised Statutes, and amending that section to include a requirement that a taxpayer use an unspecified percentage of feedstocks grown or produced in the State;

(5) Deleting the language repealing sections 237-24.9 and 237-24.3(11), Hawaii Revised Statutes, and paragraphs (6) and (8) of the definition of "use" under section 238-1, Hawaii Revised Statutes, and amending those statutes to include a requirement that a taxpayer that engages in business as an airline shall:

(A) Fulfill a quota for the purchase of fresh local agricultural products and local value-added, processed, agricultural, or food products; and

(B) Charge discounted rates for the transportation of agricultural products, including live products;

(6) Deleting the language repealing section 237-27, Hawaii Revised Statutes, and amending that section to include a requirement that a taxpayer claiming the exemption also produce renewable fuels for the purpose of generating electricity; and

(7) Making technical nonsubstantive amendments for the purposes of consistency.

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. 1369, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1369, H.D. 1, 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,

________________________________

DONOVAN M. DELA CRUZ, Chair