STAND. COM. REP. NO. 59

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 Judiciary, to which was referred S.B. No. 662 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 require that new income tax credits include a five-year sunset or a gradual reduction over a three-year period.

Your Committee received comments on this measure from the Department of Taxation.

Your Committee finds that the impact of changes to the tax code are not always immediately apparent at the time the change is established. Specifically, it is often difficult to precisely predict how well a tax credit might accomplish the effect for which it was created and what adverse impact it may have on the State's ability to collect revenue. Therefore, this measure requires that new income tax credits sunset after five years or gradually reduce to increase the integrity of Hawaii's income tax system.

Your Committee has amended this measure by:

(1) Clarifying that the sunset or gradual reduction requirement applies only to tax credits established or renewed after December 31, 2021;

(2) Deleting unnecessary language relating to a trigger of legislative review; and

(3) 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 Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 662, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 662, S.D. 1, and be referred to your Committee on Ways and Means.

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

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KARL RHOADS, Chair