STAND. COM. REP. NO. 775-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2204
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
2204, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO ETHANOL,"

begs leave to report as follows:

     The purpose of this bill is to stimulate private sector
investment in Hawaii-based ethanol production facilities by
establishing a non-refundable income tax credit for qualified
producers of fuel-grade ethanol in Hawaii.

     Testimony in support of the measure was received by the
Hawaii Farm Bureau, E D & F Man Alcohol, Inc., the `Aina
Institute for Bioconversion Technology, the Hawaii Renewable
Energy Alliance, the Hawaiian Commercial and Sugar Company, Gay &
Robinson, Inc., ILWU Local 142, and Worldwide Energy Group, Inc.
The Department of Business, Economic Development, and Tourism
testified in support of the intent of this measure.  The
Department of Taxation, the Tax Foundation of Hawaii, the Western
States Petroleum Association, and the Clean Fuels Development
Coalition submitted comments.

     Your Committee recognizes the need for mitigating some of
the deleterious effects of fossil fuel combustion, as well as the
need to attract private capital investment to the State.  Both of
these goals may be accomplished by providing tax credits to
ethanol production facilities in Hawaii.


 
 
 
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     Your Committee, therefore, has amended this bill by:

     (1)  Not specifying the amount of the tax credit to
          facilitate further discussion;

     (2)  Changing the tax credit from a non-refundable credit to
          a refundable credit;

     (3)  Adding the definition of "qualifying ethanol production
          facility" to mean a facility located in Hawaii that
          produces motor fuel grade ethanol meeting the minimum
          specifications by the American Society of Testing and
          Materials Standard D-4806;

     (4)  Deleting the sunset date and replacing it with a
          provision stipulating that the credit shall apply to a
          qualified producer no longer than ten years from the
          first taxable year in which the credit is claimed; and

     (5)  Making technical, nonsubstantive amendments for
          purposes of clarity and style.

     While acting favorably on this measure because of the
significant economic and energy self-sufficiency benefits to the
State, your Committee will most assuredly continue to address its
concerns relative to:

     (1)  The basis for a per-gallon tax credit;

     (2)  The probable range of the credits to be allowed
          (revenue loss); and

     (3)  Cash refund for credit in excess of net income
          liability.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2204, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 2204, H.D.
2.


 
 
 
 
 
 
 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair