STAND. COM. REP. NO. 155

Honolulu, Hawaii

RE: S.B. No. 281

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Higher Education, to which was referred S.B. No. 281 entitled:

"A BILL FOR AN ACT RELATING TO THE COLLEGE SAVINGS PROGRAM,"

begs leave to report as follows:

The purpose and intent of this measure is to establish a state income tax deduction for Hawaii residents making eligible contributions into the HI529-Hawaii's College Savings Program.

Your Committee received testimony in support of this measure from one individual. Your Committee received comments on this measure from the Department of Taxation, Department of Budget and Finance, Department of the Attorney General, and Tax Foundation of Hawaii.

Your Committee finds that the HI529-Hawaii's College Savings Program assists and encourages individuals and families to save and invest funds for future higher education expenses. Most other states offer a state tax deduction or credit for contributions to state college savings programs to incentivize participation. As the cost of higher education continues to rise, this measure similarly will help incentivize Hawaii residents to save for higher education through contributions to an HI529 program account.

Your Committee recognizes that not all Hawaii residents make contributions into the HI529 program, but instead may contribute to other state college savings programs. To encourage these residents to continue making contributions, amendments to this measure are necessary to expand eligibility for the proposed state income tax deduction for eligible contributions to any college savings program under section 529 of the Internal Revenue Code. Your Committee further notes the concerns raised in the testimony submitted by the Department of the Attorney General raising constitutional concerns regarding equality of treatment for resident and nonresident taxpayers and therefore finds that amendments to this measure are necessary to address these concerns.

Accordingly, your Committee has amended this measure by:

(1) Clarifying the state income tax deduction shall be allowed for eligible contributions made to any college savings program established under section 529 of the Internal Revenue Code of 1986, as amended, rather than exclusively for contributions made to the HI529-Hawaii's College Savings Program;

(2) Deleting language that would have defined "qualified taxpayer" as a resident of the State;

(3) Amending section 1 to reflect its amended purpose;

(4) Inserting an unspecified taxable year for which the income tax deduction shall be allowed to commence; and

(5) 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 Higher Education that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 281, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 281, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Higher Education,

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DONNA MERCADO KIM, Chair