STAND. COM. REP. NO. 357

Honolulu, Hawaii

RE: S.B. No. 338

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 Labor and Technology, to which was referred S.B. No. 338 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to, for taxable years beginning after December 31, 2025:

(1) Temporarily reinstate the Technology Infrastructure Renovation Tax Credit; and

(2) Expand the definition of "technology-enabled infrastructure" to include data servers.

Your Committee received testimony in support of this measure from Servpac, Charter Communications, and Hawaiian Telecom.

Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that investment in local data center infrastructure is needed to fuel the State's economy and expand the high-tech sector. Local development will reduce reliance on the continental United States and enhance resilience in the event of global supply chain disruptions. This measure incentivizes this progress by temporarily reinstating the Technology Infrastructure Renovation Tax Credit and including data centers in its applicable uses.

Your Committee has amended this measure by:

(1) Requiring the Department of Taxation to submit a report to the Legislature before the Regular Session of 2029 on the collection of the Technology Infrastructure Renovation Tax Credit;

(2) Inserting an effective date of July 1, 2050, to encourage further discussion; and

(3) 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 Labor and Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 338, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 338, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Labor and Technology,

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HENRY J.C. AQUINO, Chair