STAND. COM. REP. NO. 2258

Honolulu, Hawaii

RE:    S.B. No. 3082

       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 Economic Development, Government Operations and Housing, to which was referred S.B. No. 3082 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to establish an income tax credit for taxpayers who incur certain expenses for manufacturing products in Hawaii beginning after December 31, 2014.

     Your Committee received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; High Technology Development Corporation; Hawaii Strategic Development Corporation; Hawaii Food Industry Association; Cut Collective; Hawaii Food Manufacturers Association; Green Ohana Recycling; The Chamber of Commerce of Hawaii; ALLISON IZU, LLC; KYD, Inc.; Oceanit; and three individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that a diversified economy and a business-friendly tax climate are key factors in keeping unemployment low.  Allowing current manufacturers in the State to grow their businesses can open the door for even more production in Hawaii and reduce Hawaii's reliance on imported goods, which currently account for over ninety percent of the State's products.  Importing less and producing more can have wide reaching, positive impacts for manufacturers and consumers.

     Your Committee has amended this measure by:

     (1)  Inserting language to specify that qualified manufacturer costs eligible for the tax credit proposed by this measure do not include any costs claimed under another income tax credit;

     (2)  Clarifying that the distribution and share of the qualified manufacturing costs tax credit shall be determined by Section 704 of the Internal Revenue Code;

     (3)  Inserting an effective date of July 1, 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 Economic Development, Government Operations and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3082, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3082, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Economic Development, Government Operations and Housing,

____________________________

DONOVAN M. DELA CRUZ, Chair