STAND. COM. REP. NO. 746

Honolulu, Hawaii

RE: S.B. No. 965

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 Ways and Means, to which was referred S.B. No. 965 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to extend the tax credit for research activities to an unspecified date and to increase the amount of the tax credit from one hundred percent to one hundred twenty-five percent of the allowed federal tax credit.

Your Committee received testimony in support of this measure from the Oahu County Committee on Legislative Priorities of the Democratic Party of Hawaii; Makai Ocean Engineering, Inc.; Maui Chamber of Commerce; and one individual.

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

Your Committee finds that state investments made through tax credits should be awarded to businesses that not only conduct research and development in Hawaii, but also remain in Hawaii after claiming the tax credits.

Your Committee has amended this measure by:

(1) Adding a recapture provision for businesses or taxpayers that claim the tax credit and leave the State within five years;

(2) Repealing the June 30 deadline for a qualified high technology business to file the annual survey required for claiming the tax credit;

(3) Changing the proportions of the federal tax credit that are allowed to be claimed to unspecified amounts; and

(4)  Changing the effective date to July 1, 2050, to facilitate further discussion on the measure.

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. 965, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 965, 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,

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DONOVAN M. DELA CRUZ, Chair