STAND. COM. REP. NO. 318

Honolulu, Hawaii

RE: S.B. No. 100

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committee on Housing, to which was referred S.B. No. 100 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Eliminate the home mortgage interest deduction for second homes under Hawaii income tax law; and

(2) Require the Department of Taxation to annually calculate the amount of state revenue gained by eliminating the deduction and transfer an equivalent amount of income tax revenue to the rental housing revolving fund.

Your Committee received testimony in support of this measure from the League of Women Voters. Your Committee received testimony in opposition to this measure from the Hawai‘i Association of REALTORS. Your Committee received comments on this measure from the Department of Taxation, Hawaii Housing Finance and Development Corporation, and Tax Foundation of Hawaii.

Your Committee finds that Hawaii has one of the lowest homeownership rates in the United States. This issue is further exacerbated by the high cost of living in Hawaii, and specifically the high cost of housing in Hawaii. Your Committee further finds that the home mortgage income tax deduction was established to encourage homeownership for Hawaii residents. However, under existing law, individuals are able to purchase a second home for the same tax deduction, taking away potential housing for those hoping to purchase their first home. Your Committee finds that more incentives should be put toward helping residents purchase their first home, rather than encouraging ownership of a second home. This measure would result in increased tax revenue for the State and direct that additional revenue to the rental housing revolving fund, which will be used to assist those most in need of a primary housing residence.

Your Committee has amended this measure by:

(1) Deleting the provision requiring the Department of Taxation to annually calculate the amount of tax revenue gained due to the elimination of the home mortgage interest deduction for second homes and instead only requiring the revenue gained to be deposited into the rental housing revolving fund; and

(2) 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 Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 100, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 100, S.D. 1, and be referred to your Committee on Ways and Means.

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

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STANLEY CHANG, Chair