STAND. COM. REP. NO. 988

 

Honolulu, Hawaii

                  

 

RE:    H.B. No. 1043

       H.D. 1

       S.D. 1

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

 

Madam:

 

     Your Committee on Education and Housing, to which was referred H.B. No. 1043, H.D. 1, entitled:

 

"A BILL FOR AN ACT RELATING TO LOW-INCOME HOUSING TAX CREDITS,"

 

begs leave to report as follows:

 

     The purpose of this measure is to address state low-income housing tax credits by:

 

     (1)  Reducing the period over which credits may be claimed from ten years to five years; and

 

     (2)  Addressing the election of a federal grant in lieu of a portion of the state tax credit allocation for 2009, as authorized by the American Recovery and Reinvestment Act of 2009.

 

     Testimony in support of this measure was submitted by two state agencies and five private organizations.  Comments were submitted by one private organization.  Written testimony presented to the Committee may be reviewed on the Legislature's website.

 

     Your Committee finds that section 235-110.8, Hawaii Revised Statutes, allows an eligible taxpayer to claim fifty per cent of the federal low income housing credit over a period of ten years.  This measure would reduce that period to five years, making the credit far more attractive to investors.

 

     With regard to Part II of this measure, the American Recovery and Reinvestment Act of 2009 (the "Federal Stimulus Bill") allows states to elect to receive grants instead of tax credits to finance low-income housing for 2009.  Your Committee understands that the Department of Taxation is currently reviewing how the Federal Stimulus Bill might affect this measure and whether additional amendments may be necessary.

 

     In addition, your Committee has considered an amendment requested by the Department of Taxation to clarify that taxpayers may claim the Hawaii low-income housing tax credit in an amount equal to the federal low-income housing tax credit that may be claimed for the first five years of the ten-year federal credit period (not to be confused with the adjusted five year credit period defined in section 235-110.8(f), Hawaii Revised Statutes, as amended by this measure).  Your Committee notes that the Department is concerned that without this clarification, taxpayers may mistakenly believe that the federal low-income housing tax credit is first recomputed over a five-year credit period, and then the provisions of section 235-110.8(b), Hawaii Revised Statutes, are applied, which would effectively result in doubling the cost of the credit to Hawaii.

 

     Your Committee is strongly supportive of efforts to increase the development of low-income housing in Hawaii and believes this measure offers a practical means of doing so.

 

     Your Committee has amended this measure by:

 

     (1)  Further clarifying how the low-income housing tax credit is computed;

 

     (2)  Amending the effective date to July 1, 2030, for the purposes of continued discussion; and

 

     (3)  Making technical, nonsubstantive amendments for the purpose of style.

 

     Your Committee regards this measure as a work in progress, and requests that the Department of Taxation keep both this Committee and the Committee on Ways and Means informed of any additional changes that may be needed, particularly those that may be necessary to meet federal requirements.

 

     As affirmed by the record of votes of the members of your Committee on Education and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1043, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1043, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

 

Respectfully submitted on behalf of the members of the Committee on Education and Housing,

 

 

 

____________________________

NORMAN SAKAMOTO, Chair