STAND. COM. REP. NO. 2540

Honolulu, Hawaii

RE:    S.B. No. 2886

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 2886 entitled:

"A BILL FOR AN ACT RELATING TO CONFORMITY OF THE HAWAII INCOME TAX LAW TO THE INTERNAL REVENUE CODE,"

begs leave to report as follows:

     The purpose and intent of this measure is update state income tax law to conform to changes made to the Internal Revenue Code in calendar year 2013.

     The Department of Taxation provided testimony in support of this measure.  The Tax Foundation of Hawaii provided comments on this measure.

     Your Committee finds that this measure is the annual tax conformity bill submitted by the Department of Taxation pursuant to section 235-2.5, Hawaii Revised Statutes, to maintain state income tax conformity with the federal Internal Revenue Code by adopting changes made during the previous year that are appropriate for Hawaii law.

     Your Committee has amended this measure by:

     (1)  Removing language intended to disallow a deduction under section 275 of the Internal Revenue Code if a taxpayer has taken the credit allowed under section 235-55, Hawaii Revised Statutes;

     (2)  Adding language to disallow the deduction under section 164(a)(3) of the Internal Revenue Code for amounts for which the credit under section 235-55, Hawaii Revised Statutes, has been claimed; and

     (3)  Making technical, nonsubstantive amendments for the purposes of consistency, clarity, 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. 2886, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2886, 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,

____________________________

DAVID Y. IGE, Chair