STAND. COM. REP. NO. 393

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 136
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Tourism, to which was referred H.B. No.
136 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to encourage hotel renovation
and construction to boost the State's tourism industry by
providing a tax incentive for the improvement costs of hotels and
hotel-condos.

     Under this bill, qualified taxpayers may claim a four
percent income tax credit for applicable costs involved in
building capital facilities, including the acquisition and
development of land, the design and construction of new
facilities, and the renovation or making of additions to existing
facilities.  The income tax credit would only be available for
taxable years beginning after December 31, 1999, and end December
31, 2003.

     The Department of Business, Economic Development, and
Tourism, Hawaii Business Roundtable, and the Hawaii Hotel
Association submitted testimony in support of the measure.  The
Department of Taxation, Outrigger Enterprises, Inc., and the
Waikiki Improvement Association submitted testimony in support of
the intent of the measure.  Comments were received from the Tax
Foundation of Hawaii.


 
 
 
                                 STAND. COM. REP. NO. 393
                                 Page 2

 
     Your Committee has amended this bill by:

     (1)  Extending the tax credit to associations of apartment
          owners of a hotel-condo as defined in section 486K-1,
          Hawaii Revised Statutes;

     (2)  Disallowing land acquisition costs from the tax
          incentive;

     (3)  Making the tax credit available for taxable years
          beginning after December 31, 1998, rather than
          beginning after December 31, 1999; and

     (4)  Making technical, nonsubstantive amendments for clarity
          and style.

     As affirmed by the record of votes of the members of your
Committee on Tourism that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
136, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 136, H.D. 1, and
be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Tourism,



                                   ______________________________
                                   JERRY L. CHANG, Chair