STAND. COM. REP. NO. 2056

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 2402

       S.D. 1

 

 

 

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

 

Sir:

 

     Your Committee on Housing, to which was referred S.B. No. 2402 entitled:

 

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

 

begs leave to report as follows:

 

     The purpose and intent of this measure is to specify that certain provisions of the Internal Revenue Code related to at-risk rules and deductions and to passive activity loss do not apply with respect to claims for the state low-income housing tax credit.

 

     Your Committee received testimony in support of this measure from InState Partners.  Your Committee received comments on this measure from the Department of Taxation, Hawaii Housing Finance and Development Corporation, and Tax Foundation of Hawaii.

 

     Your Committee finds that under existing law, the state low-income housing tax credit is difficult to use for Hawaii taxpayers other than large corporations or financial institutions.  As a result, this lowers the demand and equity that can be generated for each dollar of this tax credit that is issued.

 

     Your Committee further finds that Act 129, Session Laws of Hawaii 2016, addressed an aspect of this issue by accelerating the low-income housing tax credit from ten to five years.  This acceleration makes the tax credit available to smaller taxpayers who are better able to forecast their income tax liability over a five-year, rather than ten-year, span.  This measure builds on the incentives provided under Act 129, Session Laws of Hawaii 2016, by eliminating the applicability of the at-risk and passive activity loss rules to the low-income housing tax credit.  This will allow affordable rental housing developers to decouple the tax credit from an ownership share in affordable rental projects being financed, thereby allowing any Hawaii taxpayer with income tax liability to use the low-income housing tax credit.

 

     Your Committee has amended this measure by:

 

     (1)  Deleting its contents and inserting the contents of S.B. No. 2759 (Regular Session of 2018), a substantially similar measure, which also eliminates the applicability of the at-risk and passive activity loss rules to the low-income housing tax credit, but makes this elimination subject to repeal when section 235-110.8, Hawaii Revised Statutes, is reenacted on December 31, 2021, pursuant to section 4 of Act 129, Session Laws of Hawaii 2016; and

 

     (2)  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 Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2402, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2402, S.D. 1, and be referred to your Committee on Ways and Means.

 

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

 

 

 

________________________________

WILL ESPERO, Chair