CONFERENCE COMMITTEE REP. NO. 88

Honolulu, Hawaii

, 2023

RE: S.B. No. 1437

S.D. 1

H.D. 2

C.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sirs:

Your Committee on Conference on the disagreeing vote of the Senate to the amendments proposed by the House of Representatives in S.B. No. 1437, S.D. 1, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO PASS-THROUGH ENTITY TAXATION,"

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

The purpose of this measure is to authorize certain pass-through entities to elect to pay Hawaii income tax at the entity level.

Your Committee on Conference finds that the federal Tax Cuts and Jobs Act of 2017 capped the state and local tax deduction for individuals at $10,000 for the 2018-2025 taxable years, which deprived individual taxpayers of significant federal tax benefits. Your Committee on Conference also finds that, in response, several states have enacted laws to authorize certain pass-through entities to elect to pay state income tax at the entity level, thus bypassing the $10,000 cap amount. Your Committee on Conference believes that this measure will help Hawaii's small businesses by allowing taxpayers to deduct Hawaii state income taxes paid on their federal income tax returns.

Your Committee on Conference has amended this measure by changing the effective date to January 1, 2024, and specifying that the measure shall apply to taxable years beginning after December 31, 2022.

As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of S.B. No. 1437, S.D. 1, H.D. 2, as amended herein, and recommends that it pass Final Reading in the form attached hereto as S.B. No. 1437, S.D. 1, H.D. 2, C.D. 1.

Respectfully submitted on behalf of the managers:

ON THE PART OF THE HOUSE

ON THE PART OF THE SENATE

____________________________ DANIEL HOLT Co-Chair	____________________________ GILBERT S.C. KEITH-AGARAN Chair
____________________________ KYLE T. YAMASHITA Co-Chair