STAND. COM. REP. NO. 3197

Honolulu, Hawaii

RE: H.B. No. 1939

H.D. 2

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committee on Economic Development and Tourism, to which was referred H.B. No. 1939, H.D. 2, 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 Motion Picture, Digital Media, and Film Production Income Tax Credit (film tax credit) by:

(1) Providing additional credits to qualified productions that have a workforce of at least eighty percent local hires in the first taxable year or second consecutive taxable year and meet other specific requirements, then increasing the local workforce threshold to eighty-two percent in the third or fourth consecutive taxable year and eighty-five percent in the fifth consecutive taxable year, that the additional credit is claimed;

(2) Requiring independent third-party certification of qualified production costs for all film productions claiming the film tax credit;

(3) Authorizing the Department of Business, Economic Development, and Tourism to waive the credit cap per qualified production for one qualified production each fiscal year; and

(4) Requiring the Hawaii Film Office to submit an annual report to the Legislature.

Your Committee received testimony in support of this measure from the Office of the Governor; Honolulu Film Office; Ala Moana-Kakaʻako Neighborhood Board No. 11; Hawaiʻi Film Alliance; Hawaii Teamsters Local 996; SAG-AFTRA Hawaiʻi Local; Hawaii State AFL-CIO; Aloha Aina Party; Tyler Young Films, LLC; Sacred Light ʻOhana; and forty-three individuals.

Your Committee received comments on this measure from the Department of Taxation; Department of the Attorney General; Creative Industries Division of the Department of Business, Economic Development, and Tourism; and Tax Foundation of Hawaii.

Your Committee finds that the film industry faces a crucial juncture that requires industry-supportive legislative measures to address market changes and remain competitive. Your Committee further finds that, without targeted incentives, many studios continue to rely on imported labor rather than local talent for their productions. This measure links enhanced film tax credits to increased local participation to attract more productions to the State, while strengthening career pathways for residents, retaining wages within the local economy, and building long-term industry capacity.

Your Committee has amended this measure by:

(1) Inserting an effective date of July 1, 3050, to encourage further discussion;

(2) Making it applicable to costs incurred after December 31, 2025, rather than taxable years beginning after that date; and

(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Economic Development and Tourism that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1939, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1939, 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 Economic Development and Tourism,

________________________________

LYNN DECOITE, Chair