STAND. COM. REP. NO. 985

Honolulu, Hawaii

, 2005

RE: S.B. No. 1278

S.D. 2

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1278, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO QUALIFIED IMPROVEMENT TAX CREDIT,"

begs leave to report as follows:

The purpose of this measure is to provide an income tax credit for improvements made to federally qualified health centers.

Specifically, the measure establishes an expenditure threshold for the tax credit at $150,000, and specifies that the amount of the qualified improvement tax credit shall be equal to:

(1) Twenty-five per cent of the qualified improvement costs incurred up to $2,000,000;

(2) Fifteen per cent of the qualified improvement costs incurred that total between $2,000,000 and $5,000,000; and

(3) Ten per cent of the qualified improvement costs incurred that total $5,000,000 or more.

The tax credit would be available for ten consecutive taxable years, beginning with taxable years beginning after December 31, 2004, and would be applicable to qualified improvement costs associated with the construction, alteration, or modifications to a federally qualified health center facility and the purchase of qualified equipment.

Your Committee finds that Hawaii's federally qualified health centers, which are all not-for-profit Hawaii corporations, are in various stages of developing and improving their health care facilities. Federally qualified health centers are "safety net" primary health service providers serving predominantly uninsured, poor, and indigent people of Hawaii, regardless of their ability to pay. A federally mandated medical prospective payment system that began in 2001 for federally qualified health centers has effectively eliminated a mechanism for these centers to recoup costs associated with future capital improvements, thus severely limiting their ability to serve the public. This measure will provide a mechanism to help defray federally qualified health center capital costs, without putting undue strain on the State's budget.

Your Committee has amended the measure by:

(1) Clarifying that it is the taxpayer, not the federally qualified health center, that must comply with the requirements of the tax credit and that the taxpayer, not the federally qualified health center, shall receive the tax credit;

(2) Deleting the cap on the total amount of tax credits available over the ten-year period for each federally qualified health center and leaving the amount unspecified;

(3) Correcting the references to the taxable years during which the tax credit will be applicable, to coincide with the stated ten-year period duration of the tax credit;

(4) Changing the effective date of the tax credit so that the tax credit applies to taxable years beginning after December 31, 2050, to promote further discussion; and

(5) Making technical nonsubstantive amendments for the purposes of clarity 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. 1278, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1278, S.D. 2.

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

____________________________

BRIAN T. TANIGUCHI, Chair