STAND. COM. REP. NO. 3840

Honolulu, Hawaii

RE: H.B. No. 2466

H.D. 2

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2466, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TARO,"

begs leave to report as follows:

The purpose and intent of this measure is to establish a new general excise tax exemption to support taro production and consumption.

More specifically, the measure exempts from the general excise tax, with certain exceptions, the gross proceeds or income arising from the sale of any:

(1) Product derived from the cultivation and production of unprocessed taro; or

(2) Value-added product whose primary ingredient is taro or taro leaf.

Your Committee received written comments in support of this measure from Food+Policy Internship, Hawaii Alliance for Progressive Action, Hawaii Farm Bureau, Ka Ohana O Na Pua, Malu Aina, Na Kupuna Moku O Keawe, and numerous individuals.

Your Committee received written comments in opposition to this measure from the Department of Taxation.

Your Committee received written comments on this measure from the Department of Agriculture, Department of Budget and Finance, Department of the Attorney General, and Tax Foundation of Hawaii.

Your Committee finds that by reducing the tax burden on taro farmers, the general excise tax exemption created by this measure will help to create stronger economic incentives for new taro farmers, improve the livelihoods of existing taro farmers, and reduce the cost of poi for consumers in the State.

Your Committee notes that in its written comments in opposition to this measure, the Department of Taxation requested that, if a functional effective date is inserted into the measure, the new general excise tax exemption be made effective on January 1, 2023, rather than for taxable years beginning after December 31, 2021. The Department explained that using a specific date instead of a taxable year will both ensure that no taxpayer has a competitive advantage based on the taxpayer's tax year and provide the Department with sufficient time to complete the form and system changes that are necessary to properly administer this new general excise tax exemption.

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 H.B. No. 2466, H.D. 2, 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