STAND. COM. REP. NO. 571

Honolulu, Hawaii

RE: S.B. No. 662

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2021

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 662, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

begs leave to report as follows:

The purpose and intent of this measure is to encourage efficacy in the State's income taxation system by requiring new income tax credits to include a five-year sunset provision or a gradual reduction over a three-year period.

Your Committee received written comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that the impact of changes to the state tax code are not always apparent at the time that the change is first enacted. Specifically, it is often difficult to precisely predict how effectively a new income tax credit may accomplish its policy goal or what adverse impact the tax credit may have on the State's ability to collect revenue. Accordingly, this measure requires that any income tax credit established or renewed after December 31, 2021, either expire after five years or be reduced by one third each year after the fifth year of the credit.

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. 662, S.D. 1, and recommends that it pass 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