STAND. COM. REP. NO. 253

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1556
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Transportation and Intergovernmental
Affairs, to which was referred S.B. No. 1556 entitled: 

     "A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this measure is to exempt and exclude from
imposition of the general excise tax the income received by
resident licensed contractors and subcontractors from federal
construction contracts.

     Testimony in support of this measure was received from
Hawaii Masons Union.  The Construction Industry Legislative
Organization, Inc., and Contractors Association of Kauai
submitted testimony in support of the intent of this measure but
did not support the definition of resident contractor or
subcontractor in the measure.

     The Department of Taxation submitted testimony commenting on
this measure and indicated that this measure raises certain
constitutional concerns.

     Testimony indicated that some out-of-state contractors had a
bidding advantage over Hawaii contractors because they did not
factor in the state 4% general excise tax into their bids for
federal contracts.  This measure would help Hawaii contractors
submit more competitive bids on federal contracts.


 
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     Although the Department of Taxation raised possible
constitutional concerns regarding this measure, your Committee
finds that this measure will help Hawaii contractors and create
more opportunities for Hawaii's construction industry.
Therefore, your Committee has passed this measure for purposes of
further discussion.

     Your Committee has amended this bill by inserting a purpose
clause stating that the intent of this measure is to create more
business and employment opportunities for Hawaii's construction
industry.  Your Committee has also amended this measure by
clarifying that contractors and subcontractors working on federal
projects in Hawaii are included in the definition of "contractor"
for the purposes of and subject to the licensing requirements of
chapter 444, Hawaii Revised Statutes, only to the extent allowed
under federal law.

     As affirmed by the record of votes of the members of your
Committee on Transportation and Intergovernmental Affairs that is
attached to this report, your Committee is in accord with the
intent and purpose of S.B. No. 1556, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as S.B. No. 1556, S.D. 1, and be referred to the Committee
on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation
                                   and Intergovernmental Affairs,



                                   ______________________________
                                   CAL KAWAMOTO, Chair

 
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