STAND. COM. REP. NO. 884

Honolulu, Hawaii

RE: S.B. No. 822

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 822, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CREATIVE DISTRICTS,"

begs leave to report as follows:

The purpose and intent of this measure is to encourage economic growth through the development of creative activities in the community.

More specifically, this measure:

(1) Creates a process for the establishment of a creative district;

(2) Establishes a five-year income tax credit for creative districts;

(3) Permits counties to enact incentives for creative districts; and

(4) Requires the State Foundation on Culture and the Arts to submit an annual report to the Legislature on creative districts.

Your Committee received written comments in support of this measure from the State Foundation on Culture and the Arts, Department of Planning of the County of Kauai, Ebb & Flow Arts, The Friends of Kamalani & Lydgate Park, Honolulu Printmakers, Kauai Museum, and six individuals.

Your Committee received written comments on this measure from the Department of Business, Economic Development, and Tourism and its Creative Industries Division; Department of Taxation; Office of Hawaiian Affairs; Office of Information Practices; and Tax Foundation of Hawaii.

Your Committee finds that, in many states, businesses within designated cultural or creative districts have evolved to improve the quality of life for residents of the area and have rejuvenated those communities. Your Committee also finds that creative districts utilize the cultural and artistic resources within designated areas to stimulate economic development, revitalize communities, and unleash the artistic and cultural potential of those who live, work, and play within the designated areas.

Your Committee has amended this measure by:

(1) Clarifying that petitions to establish a creative district shall initially be submitted to the State Foundation on Culture and the Arts;

(2) Clarifying that an advisory committee shall conduct a public meeting prior to rendering a decision on a petition to establish a creative district;

(3) Clarifying that a taxpayer claiming the tax credit established by the measure shall allocate and apportion the taxpayer's taxable income based on business conducted inside and outside of the creative district;

(4) Changing the effective date to July 1, 2050, to facilitate further discussion on the measure; and

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

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 822, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 822, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair