STAND. COM. REP. NO. 1089

Honolulu, Hawaii

RE: S.B. No. 1035

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committees on Ways and Means and Commerce and Consumer Protection, to which was referred S.B. No. 1035, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

beg leave to report as follows:

The purpose and intent of this measure is to amend the general excise tax law.

More specifically, this measure exempts from the general excise tax amounts received by a hospital, infirmary, medical clinic, health care facility, pharmacy, or a medical practitioner for health care-related goods and services purchased under Medicaid, Medicare, or TRICARE.

Your Committees received written comments in support of this measure from the Office of the Mayor of the County of Hawaii; University of Hawaii; AARP Hawaii; Abinsay Pediatrics; Ahahui o na Kauka; Community First Hawaii; East Hawaii Independent Physicians Association; Hawaii Association of Professional Nurses; Hawaii Family Caregiver Coalition; Hawaii Independent Physicians Association; Hawaii Institute for Pain; Hawaii Medical Association; Hawaii Nurses Association-OPEIU Local 50; Hawaii Physician Shortage Crisis Task Force; Hawaii Provider Shortage Crisis Task Force; Hawaii Radiological Society; Hawaii Substance Abuse Coalition; Joyful Living, LLC; Maui Chamber of Commerce; Maui Lani Physicians and Surgeons; Pacific Radiology Group; Peter A. Matsuura, M.D.; Philippine Medical Association of Hawaii, and thirty-two individuals.

Your Committees received written comments in opposition to this measure from one individual.

Your Committees received written comments on this measure from the Department of Taxation, Grassroot Institute of Hawaii, Hawaii Dental Service, Hawaii Society of Naturopathic Physicians; and Tax Foundation of Hawaii.

Your Committees find that, under the existing general excise tax law, there is an incongruity in the way medical service providers are treated. Your Committees also find that medical services rendered at a nonprofit hospital, infirmary, or sanitarium are exempt from the general excise tax, whereas the same services rendered by individual or group practices or clinics are fully taxable. Your Committees further find that government programs, such as Medicare, Medicaid, and TRICARE, do not compensate for the tax differential, leading some health care providers to bear additional economic costs.

Your Committees have amended this measure by:

(1) Adding a sunset date of January 1, 2026; and

(2) Making technical nonsubstantive amendments for purposes of clarity, consistency, and style.

As affirmed by the records of votes of the members of your Committees on Ways and Means and Commerce and Consumer Protection that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1035, S.D. 1, as amended herein, and recommend that it pass Third Reading in the form attached hereto as S.B. No. 1035, S.D. 2.

Respectfully submitted on behalf of the members of the Committees on Ways and Means and Commerce and Consumer Protection,

________________________________ JARRETT KEOHOKALOLE, Chair

________________________________ DONOVAN M. DELA CRUZ, Chair