STAND. COM. REP. NO. 1383

Honolulu, Hawaii

RE: H.B. No. 351

H.D. 2

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 Commerce and Consumer Protection, to which was referred H.B. No. 351, H.D. 2, 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 establish a nonrefundable income tax credit for owners of condominium units whose association is increasing maintenance fees to comply with a county ordinance requiring an automatic fire sprinkler system or alternative fire prevention and fire safety system.

Your Committee received testimony in support of this measure from four individuals. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that due to a City and County of Honolulu ordinance, certain condominiums are required to make fire safety upgrades unless the condominium meets specified exceptions. These fire safety upgrades can cost a condominium association millions of dollars and, as a result, force it to drastically increase its maintenance fees on the unit owners. This measure will provide some financial relief to condominium unit owners who have incurred extra maintenance fees to make their condominiums safer.

Your Committee notes the concerns raised in testimony that condominium boards can also raise money for fire safety upgrades by imposing special assessments on unit owners; however, this measure as currently drafted provides tax credits for increases in maintenance fees only. Your Committee also notes the testimony of the Department of Taxation, proposing amendments that would facilitate the administration of the tax credit created by this measure. Therefore, amendments to this measure are necessary to address these matters.

Accordingly, your Committee has amended this measure by:

(1) Clarifying that the tax credit established by this measure shall also apply to a qualified taxpayer who is an owner of a unit whose condominium association is imposing a special assessment to comply with a county ordinance requiring an automatic sprinkler system or alternative fire prevention and fire safety system;

(2) Inserting language requiring the Department of Taxation to certify the tax credits established by this measure;

(3) Inserting language to apply the tax credit to taxable years beginning after December 31, 2023; and

(4) Making a technical, nonsubstantive amendment for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 351, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 351, H.D. 2, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

________________________________

JARRETT KEOHOKALOLE, Chair