STAND. COM. REP. NO. 2168

Honolulu, Hawaii

RE: S.B. No. 2497

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committee on Energy, Economic Development, and Tourism, to which was referred S.B. No. 2497 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to amend the tax credit for research activities by:

(1) Increasing the total amount of certified credits to $10,000,000 through 2029;

(2) Extending the sunset date of the credit; and

(3) Amending the definition of qualified high technology businesses that are eligible to claim the credit.

Your Committee received testimony in support of this measure from the Hawaii Technology Development Corporation; Chamber of Commerce Hawaii; Makai Ocean Engineering, Inc.; Hawaii Fish Company, Inc.; Oceanit; Hawaii Aerospace Corporation; and PacMar Technologies.

Your Committee received comments on this measure from the Department of Taxation, Department of Attorney General, and Tax Foundation of Hawaii.

Your Committee finds that the original $5,000,000 annual cap for the income tax credit for research activities was reached almost as soon as online applications were opened. In 2022, out of the twenty-six companies that applied for the tax credit, only nine have received the credit due to the existing annual cap. This measure will support a wider distribution of tax credits to qualified companies for a longer period and will be effective in stimulating the local economy and creating quality jobs in the State.

Your Committee notes that the Senate Draft 1 of this measure contains an unspecified annual cap for the total amount of certified credits. Should your Committee on Ways and Means choose to deliberate on this measure, your Committee respectfully requests that it consider the annual total amount of certified credits to be $10,000,000 for the tax credit on research activities.

Your Committee has amended this measure by:

(1) Amending the definition of "qualified high technology business" by removing the word "domiciled";

(2) Replacing the $10,000,000 for the total amount of certified credits with an unspecified amount;

(3) Inserting an effective date of January 1, 2060, to encourage further discussion; 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 Energy, Economic Development, and Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2497, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2497, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Energy, Economic Development, and Tourism,

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LYNN DECOITE, Chair