STAND. COM. REP. NO.514

Honolulu, Hawaii

, 2003

RE: S.B. No. 425

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Science, Arts, and Technology and Economic Development, to which was referred S.B. No. 425 entitled:

"A BILL FOR AN ACT RELATING TO HIGH TECHNOLOGY,"

beg leave to report as follows:

The purpose of this measure is to establish a Hawaii instrument pool (HIP) into which individuals and companies may donate usage of their high technology instruments.

Testimony supporting this measure was received from the Department of Business, Economic Development and Tourism, High Technology Development Corporation, Hawaii Technology Trade Association, Hoana Medical, Oceanit, Maui Scientific Research Center, Maui Light, Lasers and Electronic Design, and Pacific Marine/Navatek. The Department of Taxation took no position on this measure but provided comments. The Tax Foundation of Hawaii submitted additional comments.

The measure provides that qualified high technology businesses (QHTB) who donate "industry entry" high technology instruments as designated by the High Technology Development Corporation shall be eligible to receive a tax credit; provided that the QHTB commits to donating the instrument for at least four months of its use per year for five consecutive years.

Your Committees find that a variety of small, start-up technology companies in Hawaii face the problem of acquiring and having access to specialized instruments. These instruments are very costly, rare, or only used occasionally so that purchasing is impractical. However, these specialized instruments are needed by small companies engaged in electronics, biotechnology, software, computers, telecommunication, and other related technologies. In most instances, access to these instruments is the only barrier for a small company to enter into new industries, diversify its products and services, and rise to the next level of success.

Your Committees find that this measure provides an attractive incentive for companies to make their specialized technology instruments available on loan for smaller companies to use.

Your Committees have amended this measure by:

(1) Providing that to be a "qualified borrower", the borrower shall not be related to the lender and shall be:

(a) A small business with twenty-five or less employees and annual gross revenues of $5,000,000 or less; or

(b) A QHTB as defined pursuant to section 237-7.3(c), Hawaii Revised Statutes;

(2) Deleting the requirement that a taxpayer must be a QHTB to qualify for the tax credit;

(3) Clarifying that the taxpayer must commit to donating use of the qualifying instrument to HIP at least four months of use during the five consecutive twelve-month periods following the initial date of donation;

(4) Providing that the tax credit amount shall be fifty per cent of the basis of the qualifying instrument at the time it is first loaned from HIP;

(5) Providing that the tax credit shall be claimed in the taxable year in which the qualifying instrument is returned to HIP after its first loan;

(6) Specifying that if a deduction is taken under section 179 of the Internal Revenue Code (with respect to election to expense depreciable business assets), no credit may be claimed for that portion of the cost of the qualifying instrument for which the deduction was taken; and

(7) Providing that the tax credit shall be applicable to taxable years beginning after December 31, 2002, and to instruments donated to HIP after September 30, 2003.

As affirmed by the records of votes of the members of your Committees on Science, Arts, and Technology and Economic Development that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 425, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 425, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Science, Arts, and Technology and Economic Development,

____________________________

CAROL FUKUNAGA, Chair

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DAVID Y. IGE, Chair