REPORT TITLE:
New Economy


DESCRIPTION:
Transfers jurisdiction over digital communications to the DCCA.
Allows high tech businesses to sell their unused loss carryovers
and unused tax credits.  Requires employees' retirement system to
provide venture capital for high tech businesses.  Makes
appropriations for education and workforce development.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3143
THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE NEW ECONOMY.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The "New Economy" is an economy based on
 
 2 knowledge and ideas.  It is an economy where the keys to job
 
 3 creation and higher standards of living are innovative ideas and
 
 4 technology embedded in services and manufactured products.  It is
 
 5 an economy where risk, uncertainty, and constant change are the
 
 6 rule rather than the exception.  It is an economy in a world of
 
 7 innovation where there is rapid convergence of technology,
 
 8 telecommunications, and media.  As a result, partnerships, such
 
 9 as MSNBC and AOL-Time Warner, become staples of this rapidly
 
10 moving industry.
 
11      Hawaii is competing in this New Economy.  Hawaii offers
 
12 great advantages not available in other areas of the world:
 
13 unparalleled quality of life, rich and diverse cultures, and an
 
14 educated populace.  In 1999, the twentieth legislature, the
 
15 educational system, and administration partnered to demonstrate
 
16 their commitment of support for an aggressive development of high
 
17 technology resources.  Act 178, Session Laws of Hawaii 1999,
 
18 called for the integration of technology with some of Hawaii's
 
19 industries, the increase of technology professionals through work
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1 force development programs, and the creation of economic
 
 2 incentives for businesses to increase high technology research
 
 3 activities.
 
 4      Since geographic location and isolation are no longer
 
 5 detrimental factors when competing in a global market, the
 
 6 legislature believes that it must continue the effort started in
 
 7 1999.  The purpose of this Act is to encourage the continued
 
 8 growth and development of high technology businesses and
 
 9 associate industries relying on these in Hawaii by:
 
10      (1)  Consolidating state agencies that support technology-
 
11           related businesses to provide clear focus and
 
12           functions;
 
13      (2)  Creating tax credits to encourage research and
 
14           development for intellectual properties;
 
15      (3)  Providing for the issuance of special purpose revenue
 
16           bonds for support and assistance to developers and high
 
17           technology companies;
 
18      (4)  Providing for the continued funding for Act 178,
 
19           Session Laws of Hawaii 1999;
 
20      (5)  Creating partnerships with the tourist industry to
 
21           market and promote Hawaii's emerging technology
 
22           industries and Hawaii as an ideal venue to conduct
 
23           e-business; and
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1      (6)  Effectively developing the growth indicators of the New
 
 2           Economy.
 
 3                    PART I.  DIGITAL REGULATION
 
 4      SECTION 2.  The purpose of this part is to give the
 
 5 department of commerce and consumer affairs jurisdiction to
 
 6 regulate all digital communication.  The legislature finds that
 
 7 the department, which currently regulates cable television
 
 8 systems under chapter 440G, Hawaii Revised Statutes, is better
 
 9 equipped and staffed, and accordingly the more appropriate
 
10 agency, to regulate digital communications than the public
 
11 utilities commission.
 
12      SECTION 3.  Chapter 440G, Hawaii Revised Statutes, is
 
13 amended by amending the title to read as follows:
 
14              "DIGITAL AND CABLE TELEVISION SYSTEMS"
 
15      SECTION 4.  Chapter 440G, Hawaii Revised Statutes, is
 
16 amended by adding a new section to be appropriately designated
 
17 and to read as follows:
 
18      "440G-     Department of commerce and consumer affairs;
 
19 jurisdiction over digital communications.  (a)  Notwithstanding
 
20 any law to the contrary, the department of commerce and consumer
 
21 affairs shall have jurisdiction over, and the authority to
 
22 regulate, all forms of digital communication through rules
 
23 adopted under chapter 91.
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1      (b)  As used in this section, "digital communication" means
 
 2 any facilities or services that transmit, carry, or receive
 
 3 binary data that represents encoded information or interpersonal
 
 4 communications through wired or wireless transmission media,
 
 5 regardless of whether the unencoded content is text, audio,
 
 6 image, or video in its original format."
 
 7      SECTION 5.  Chapter 269, Hawaii Revised Statutes, is amended
 
 8 by adding a new section to be appropriately designated and to
 
 9 read as follows:
 
10      "269-    Public utilities commission; jurisdiction over
 
11 communications.  (a)  Notwithstanding any law to the contrary,
 
12 the commission shall have jurisdiction over, and the authority to
 
13 regulate, all forms of communication not regulated by the
 
14 department of commerce and consumer affairs.
 
15      (b)  As used in this section
 
16      "Communication" means any facilities or services that
 
17 transmit, carry, or receive data that represents encoded
 
18 information or interpersonal communications through wired or
 
19 wireless transmission media, regardless of whether the unencoded
 
20 content is text, audio, image, or video in its original format."
 
21      SECTION 6.  Section 269-1, Hawaii Revised Statutes, is
 
22 amended by amending the definitions of "public utility" to read
 
23 as follows:
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1      ""Public utility" includes every person who may own,
 
 2 control, operate, or manage as owner, lessee, trustee, receiver,
 
 3 or otherwise, whether under a franchise, charter, license,
 
 4 articles of association, or otherwise, any plant or equipment, or
 
 5 any part thereof, directly or indirectly for public use, for the
 
 6 transportation of passengers or freight, or the conveyance or
 
 7 transmission of telecommunications messages[,] other than
 
 8 telecommunications regulated by the department of commerce and
 
 9 consumer affairs; or the furnishing of facilities for the
 
10 transmission of intelligence by electricity by land or water or
 
11 air within the State, or between points within the State, or for
 
12 the production, conveyance, transmission, delivery, or furnishing
 
13 of light, power, heat, cold, water, gas, or oil, or for the
 
14 storage or warehousing of goods, or the disposal of sewage;
 
15 provided that the term:
 
16      (1)  Shall include any person insofar as that person owns or
 
17           operates a private sewer company or sewer facility;
 
18      (2)  Shall include telecommunications carrier or
 
19           telecommunications common carrier[;] other than
 
20           telecommunications carriers regulated by the department
 
21           of commerce and consumer affairs;
 
22      (3)  Shall not include any person insofar as that person
 
23           owns or operates an aerial transportation enterprise;
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1      (4)  Shall not include persons owning or operating taxicabs,
 
 2           as defined in this section;
 
 3      (5)  Shall not include common carriers transporting only
 
 4           freight on the public highways, unless operating within
 
 5           localities or along routes or between points that the
 
 6           public utilities commission finds to be inadequately
 
 7           serviced without regulation under this chapter;
 
 8      (6)  Shall not include persons engaged in the business of
 
 9           warehousing or storage unless the commission finds that
 
10           regulation thereof is necessary in the public interest;
 
11      (7)  Shall not include:
 
12           (A)  The business of any carrier by water to the extent
 
13                that the carrier enters into private contracts for
 
14                towage, salvage, hauling, or carriage between
 
15                points within the State and the carriage is not
 
16                pursuant to either an established schedule or an
 
17                undertaking to perform carriage services on behalf
 
18                of the public generally; and
 
19           (B)  The business of any carrier by water,
 
20                substantially engaged in interstate or foreign
 
21                commerce, transporting passengers on luxury
 
22                cruises between points within the State or on
 
23                luxury round-trip cruises returning to the point
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1                of departure;
 
 2      (8)  Shall not include any person who:
 
 3           (A)  Controls, operates, or manages plants or
 
 4                facilities for the production, transmission, or
 
 5                furnishing of power primarily or entirely from
 
 6                nonfossil fuel sources; and
 
 7           (B)  Provides, sells, or transmits all of that power,
 
 8                except such power as is used in its own internal
 
 9                operations, directly to a public utility for
 
10                transmission to the public;
 
11      (9)  Shall not include a telecommunications provider only to
 
12           the extent determined by the commission pursuant to
 
13           section 269-16.9[;] or already regulated by the
 
14           department of commerce and consumer affairs;
 
15     (10)  Shall not include any person who controls, operates, or
 
16           manages plants or facilities developed pursuant to
 
17           chapter 167 for conveying, distributing, and
 
18           transmitting water for irrigation and such other
 
19           purposes that shall be held for public use and purpose;
 
20           and
 
21     (11)  Shall not include any person who owns, controls,
 
22           operates, or manages plants or facilities for the
 
23           reclamation of wastewater; provided that:
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           (A)  The services of the facility shall be provided
 
 2                pursuant to a service contract between the person
 
 3                and a state or county agency and at least ten per
 
 4                cent of the wastewater processed is used directly
 
 5                by the State or county which has entered into the
 
 6                service contract;
 
 7           (B)  The primary function of the facility shall be the
 
 8                processing of secondary treated wastewater that
 
 9                has been produced by a municipal wastewater
 
10                treatment facility that is owned by a state or
 
11                county agency;
 
12           (C)  The facility shall not make sales of water to
 
13                residential customers;
 
14           (D)  The facility may distribute and sell recycled or
 
15                reclaimed water to entities not covered by a state
 
16                or county service contract; provided that, in the
 
17                absence of regulatory oversight and direct
 
18                competition, the distribution and sale of recycled
 
19                or reclaimed water shall be voluntary and its
 
20                pricing fair and reasonable.  For purposes of this
 
21                [[]subparagraph[]], "recycled water" and
 
22                "reclaimed water" mean treated wastewater that by
 
23                design is intended or used for a beneficial
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1                purpose; and
 
 2           (E)  The facility shall not be engaged, either directly
 
 3                or indirectly, in the processing of food wastes.
 
 4      In the event the application of this chapter is ordered by
 
 5 the commission in any case provided in paragraphs (5), (6), (9),
 
 6 and (10), the business of any public utility that presents
 
 7 evidence of bona fide operation on the date of the commencement
 
 8 of the proceedings resulting in the order shall be presumed to be
 
 9 necessary to public convenience and necessity, but any
 
10 certificate issued under this proviso shall nevertheless be
 
11 subject to such terms and conditions as the commission may
 
12 prescribe, as provided in sections 269-16.9 and 269-20."
 
13                PART II.  CONSOLIDATION OF AGENCIES
 
14      SECTION 7.  The purpose of this part is to require the
 
15 special advisor for technology development, which was established
 
16 within the office of the governor by Act 178, Session Laws of
 
17 Hawaii 1999, section 3, to develop a plan for the consolidation
 
18 of the Hawaii strategic development corporation, the natural
 
19 energy laboratory of Hawaii authority, and the high technology
 
20 development corporation, in order to facilitate the efforts of
 
21 the private sector in a manner that is coordinated, focused, and
 
22 responsive to the needs of the private sector.
 
23      SECTION 8.  Section 27-41, Hawaii Revised Statutes, is
 

 
Page 10                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 amended by amending subsection (b) to read as follows:
 
 2      "(b)  The duties of the special advisor shall include but
 
 3 not be limited to:
 
 4      (1)  Developing, coordinating, and implementing short- and
 
 5           long-range state policies and directions to enhance the
 
 6           development of high technology industries in Hawaii;
 
 7      (2)  Coordinating all state high technology agencies [while
 
 8           developing];
 
 9      (3)  Developing a plan for the reorganization or
 
10           consolidation of [these agencies] the Hawaii strategic
 
11           development corporation, the natural energy laboratory
 
12           of Hawaii authority, and the high technology
 
13           development corporation in the interests of greater
 
14           efficiency and cost effectiveness[;] and to facilitate
 
15           the efforts of the private sector in a manner that is
 
16           coordinated, focused, and responsive to the needs of
 
17           that sector.  The reorganization or consolidation of
 
18           these agencies shall include the following:
 
19           (A)  The creation of a clear sense of mission for the
 
20                resulting agency or agencies;
 
21           (B)  The development of user-friendly services;
 
22           (C)  The adoption of "best practices" of management and
 
23                operations and search for economies of scale;
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           (D)  The elimination of duplicative or outmoded
 
 2                functions and activities;
 
 3           (E)  The enhancement of productivity by consolidating
 
 4                functions;
 
 5           (F)  The elimination of unnecessary regulation;
 
 6           (G)  The redesigning of processes to increase
 
 7                efficiency;
 
 8           (H)  The exposure of government operations to
 
 9                competition; and
 
10           (I)  The realization of long-term savings;
 
11     [(3)] (4)  Advising the private sector in the development of
 
12           high technology activities and resources and providing
 
13           technical or other assistance to private industry upon
 
14           request;
 
15     [(4)] (5)  Creating, disseminating, and updating a listing of
 
16           all high technology assistance programs in the State
 
17           and where they can be reached;
 
18     [(5)] (6)  Pursuing appropriate public-private sector
 
19           business partnerships;
 
20     [(6)] (7)  Coordinating the State's promotion and marketing
 
21           of the high technology industry, including a review of
 
22           current marketing efforts;
 
23     [(7)] (8)  Arranging for the conduct of research through
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           contractual services with the University of Hawaii or
 
 2           any agency or other qualified persons;
 
 3     [(8)] (9)  Encouraging the development of educational,
 
 4           training, and career programs in high technology
 
 5           industries; and
 
 6     [(9)] (10)  Performing other necessary or desirable functions
 
 7           to facilitate the intent of this section."
 
 8                      PART III.  TAX CREDITS
 
 9      SECTION 9.  The purpose of this part is to:
 
10      (1)  Allow qualified high technology businesses to sell
 
11           their unused net operating loss carryover and unused
 
12           tax credits to any other taxpayer;
 
13      (2)  Amend the income tax exclusion for royalties and other
 
14           income from high technology businesses established by
 
15           Act 178, Session Laws of Hawaii 1999, section 22, by:
 
16           (A)  Expanding that exclusion to include royalties
 
17                derived from any patent or copyright for any
 
18                individual or other person who owns the patent or
 
19                copyright; and
 
20           (B)  Deleting the definitions of "computer software",
 
21                "qualified high technology business", and
 
22                "qualified research";
 
23      (3)  Amend the high-technology business investment tax
 

 
Page 13                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           credit established by Act 178, Session Laws of Hawaii
 
 2           1999, section 24, by amending the definition of
 
 3           "qualified high technology business" to mean a business
 
 4           that conducts a majority, rather than one hundred per
 
 5           cent, of its activities in performing qualified
 
 6           research in Hawaii, or receives a majority, rather than
 
 7           one hundred per cent, of its gross income derived from
 
 8           qualified research; and
 
 9      (4)  Amending the tax credit for increasing research
 
10           activities established by Act 178, Session Laws of
 
11           Hawaii 1999, section 25, by expanding that tax credit
 
12           from 2.5 to twenty per cent of the excess (if any) of
 
13           the qualified research expenses for the taxable year
 
14           over the base amount; and from 2.5 to twenty per cent
 
15           of the basic research payments determined under section
 
16           41(e)(1)(A) of the Internal Revenue Code.
 
17      SECTION 10.  Chapter 235, Hawaii Revised Statutes, is
 
18 amended by adding a new section to be appropriately designated
 
19 and to read as follows:
 
20      "235-    High technology; sale of unused net operating loss
 
21 carryover and unused tax credits.  (a)  As used in this section:
 
22      "Computer software" means a set of computer programs,
 
23 procedures, or associated documentation concerned with the
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1 operation and function of a computer system, and includes both
 
 2 systems and application programs and subdivisions, such as
 
 3 assemblers, compilers, routines, generators, and utility
 
 4 programs.
 
 5      "Qualified high technology business" means:
 
 6      (1)  A business, employing or owning capital or property, or
 
 7           maintaining an office, in this State; and which
 
 8      (2)  (A)  Conducts a majority of its activities in
 
 9                performing qualified research in this State; or
 
10           (B)  Receives a majority of its gross income derived
 
11                from qualified research; provided that the income
 
12                is received from products sold from, manufactured,
 
13                or produced in the State; or services performed in
 
14                this State.
 
15      The term "qualified high technology business" does not
 
16 include:
 
17      (1)  Any trade or business involving the performance of
 
18           services in the field of law, architecture, accounting,
 
19           actuarial science, performing arts, consulting,
 
20           athletics, financial services, or brokerage services;
 
21      (2)  Any banking, insurance, financing, leasing, rental,
 
22           investing, or similar business; any farming business,
 
23           including the business of raising or harvesting trees;
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           any business involving the production or extraction of
 
 2           products of a character with respect to which a
 
 3           deduction is allowable under section 611 (with respect
 
 4           to allowance of deduction for depletion), 613 (with
 
 5           respect to basis for percentage depletion), or 613A
 
 6           (with respect to limitation on percentage depleting in
 
 7           cases of oil and gas wells) of the Internal Revenue
 
 8           Code;
 
 9      (3)  Any business operating a hotel, motel, restaurant, or
 
10           similar business; and
 
11      (4)  Any trade or business involving a hospital, a private
 
12           office of a licensed health care professional, a group
 
13           practice of licensed health care professionals, or a
 
14           nursing home.
 
15      "Qualified research" means:
 
16      (1)  The same as in section 41(d) of the Internal Revenue
 
17           Code; or
 
18      (2)  Developing, designing, modifying, programming, and
 
19           licensing computer software;
 
20 except that it shall not include research conducted outside the
 
21 State.
 
22      (b)  A qualified high technology business may apply to the
 
23 department of taxation to sell its unused net operating loss
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1 carryover or unused tax credits to another taxpayer.  If approved
 
 2 by the department of taxation, a qualified high technology
 
 3 business may sell its unused net operating loss carryover or tax
 
 4 credit for private financial assistance from another taxpayer in
 
 5 an amount equal to at least seventy-five per cent of the amount
 
 6 of the surrendered tax benefit.  The tax benefit purchased by the
 
 7 buyer shall be claimed in the year the sale is approved by the
 
 8 department.  Any use of the purchased tax benefit for tax
 
 9 carryback or carryforward purposes shall comply with applicable
 
10 law.  The financial assistance gained by the seller qualified
 
11 high technology business shall be reported on its tax return but
 
12 shall not be considered taxable income.  The total amount of
 
13 unused net operating losses or tax credits sold annually pursuant
 
14 to this section shall not exceed $        .
 
15      (c)  No application for the sale of unused net operating
 
16 losses or tax credits shall be approved in which the seller
 
17 qualified high technology business:
 
18      (1)  Has demonstrated positive net income in any of the two
 
19           previous full years of ongoing operations as determined
 
20           on its financial statements; or
 
21      (2)  Has demonstrated a ratio in excess of one hundred ten
 
22           per cent or greater of operating revenues divided by
 
23           operating expenses in any of the two previous full
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           years of operations as determined on its financial
 
 2           statements; or
 
 3      (3)  Is directly or indirectly at least fifty per cent owned
 
 4           or controlled by another corporation that has
 
 5           demonstrated positive net income in any of the two
 
 6           previous full years of ongoing operations as determined
 
 7           on its financial statements or is part of a
 
 8           consolidated group of affiliate corporations, as filed
 
 9           for federal income tax purposes, that in the aggregate
 
10           has demonstrated positive net income in any of the two
 
11           previous full years of ongoing operations as determined
 
12           on its combined financial statements.
 
13      (d)  The department of taxation shall adopt rules pursuant
 
14 to chapter 91 to implement this section, which shall include the
 
15 following:
 
16      (1)  Procedure and criteria for the approval or disapproval
 
17           of applications filed by qualified high technology
 
18           businesses selling unused net operating losses or tax
 
19           credits; and
 
20      (2)  Criteria to provide for the equitable apportionment of
 
21           qualified sales allowed annually under this section to
 
22           eligible applicants."
 
23      SECTION 11.  Section 235-2.4, Hawaii Revised Statutes, is
 

 
Page 18                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 amended by amending subsection (q) to read as follows:
 
 2      "(q)  Section 1212 (with respect to capital loss carrybacks
 
 3 and carryforwards) of the Internal Revenue Code shall be
 
 4 operative for the purposes of this chapter; except that for the
 
 5 purposes of this chapter the capital loss carryback provisions of
 
 6 section 1212 shall not be operative and the capital loss
 
 7 carryforward allowed by section 1212(a) shall be limited to five
 
 8 years[.]; except for qualified high technology businesses under
 
 9 section 235-   , which shall be limited to fifteen years."
 
10      SECTION 12.  Section 235-7.3, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "[[]235-7.3[]]  Royalties [and other income from high
 
13 technology business] derived from patents or copyrights excluded
 
14 from gross income.  [(a)] In addition to the exclusions in
 
15 section 235-7, there shall be excluded from gross income,
 
16 adjusted gross income, and taxable income, amounts received by an
 
17 individual or [a qualified high technology business] other person
 
18 as defined in section 1-19 as royalties and other income derived
 
19 from any patents [and] or copyrights[:
 
20      (1)  Owned] owned by the individual or [qualified high
 
21           technology business; and
 
22      (2)  Developed and arising out of a qualified high
 
23           technology business.] other person.
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1      [(b)  For the purposes of this section:
 
 2      "Computer software" means a set of computer programs,
 
 3 procedures, or associated documentation concerned with the
 
 4 operation and function of a computer system, and includes both
 
 5 systems and application programs and subdivisions, such as
 
 6 assemblers, compilers, routines, generators, and utility
 
 7 programs.
 
 8      "Qualified high technology business" means a business
 
 9 performing qualified research.  The term "qualified high
 
10 technology business" does not include:
 
11      (1)  Any trade or business involving the performance of
 
12           services in the field of law, architecture, accounting,
 
13           actuarial science, performing arts, consulting,
 
14           athletics, financial services, or brokerage services;
 
15      (2)  Any banking, insurance, financing, leasing, rental,
 
16           investing, or similar business; any farming business,
 
17           including the business of raising or harvesting trees;
 
18           any business involving the production or extraction of
 
19           products of a character with respect to which a
 
20           deduction is allowable under section 611 (with respect
 
21           to allowance of deduction for depletion), 613 (with
 
22           respect to basis for percentage depletion), or 613A
 
23           (with respect to limitation on percentage depleting in
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           cases of oil and gas wells) of the Internal Revenue
 
 2           Code;
 
 3      (3)  Any business operating a hotel, motel, restaurant, or
 
 4           similar business; and
 
 5      (4)  Any trade or business involving a hospital, a private
 
 6           office of a licensed health care professional, a group
 
 7           practice of licensed health care professionals, or a
 
 8           nursing home.
 
 9      "Qualified research" means:
 
10      (1)  The same as in section 41(d) of the Internal Revenue
 
11           Code; or
 
12      (2)  Developing, designing, modifying, programming, and
 
13           licensing computer software.]"
 
14      SECTION 13.  Section 235-110.9, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "[[]235-110.9[]]  High-technology business investment tax
 
17 credit.(a)  There shall be allowed to each taxpayer, subject to
 
18 the taxes imposed by this chapter, a high technology investment
 
19 tax credit that shall be deductible from the taxpayer's net
 
20 income tax liability, if any, imposed by this chapter for the
 
21 taxable year in which the credit is properly claimed.  The tax
 
22 credit shall be an amount equal to ten per cent of the investment
 
23 made by the taxpayer in each qualified high technology business,
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1 up to a maximum allowed credit of $500,000 for the taxable year
 
 2 for the investment made by the taxpayer in a qualified high
 
 3 technology business.
 
 4      (b)  The credit allowed under this section shall be claimed
 
 5 against the net income tax liability for the taxable year.  For
 
 6 the purpose of this section, "net income tax liability" means net
 
 7 income tax liability reduced by all other credits allowed under
 
 8 this chapter.
 
 9      (c)  If the tax credit under this section exceeds the
 
10 taxpayer's income tax liability, the excess of the tax credit
 
11 over liability may be used as a credit against the taxpayer's
 
12 income tax liability in subsequent years until exhausted.  All
 
13 claims, including any amended claims, for tax credits under this
 
14 section shall be filed on or before the end of the twelfth month
 
15 following the close of the taxable year for which the credit may
 
16 be claimed.  Failure to comply with the foregoing provision shall
 
17 constitute a waiver of the right to claim the credit.
 
18      (d)  As used in this section:
 
19      "Computer software" means a set of computer programs,
 
20 procedures, or associated documentation concerned with the
 
21 operation and function of a computer system, and includes both
 
22 systems and application programs and subdivisions, such as
 
23 assemblers, compilers, routines, generators, and utility
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1 programs.
 
 2      "Investment" means a nonrefundable investment, at risk, as
 
 3 that term is used in section 465 (with respect to deductions
 
 4 limited to amount at risk) of the Internal Revenue Code, in a
 
 5 qualified high technology business, of cash that is transferred
 
 6 to the qualified high technology business, the transfer of which
 
 7 is in connection with a transaction in exchange for stock,
 
 8 interests in partnerships, joint ventures, or other entities,
 
 9 licenses (exclusive or nonexclusive), rights to use technology,
 
10 marketing rights, warrants, options, or any items similar to
 
11 those included herein, including but not limited to options or
 
12 rights to acquire any of the items included herein.  The
 
13 nonrefundable investment is entirely at risk of loss where
 
14 repayment depends upon the success of the qualified high
 
15 technology business.  If the money invested is to be repaid to
 
16 the taxpayer, no repayment except for dividends or interest shall
 
17 be made for at least three years from the date the investment is
 
18 made.  The annual amount of any dividend and interest payment to
 
19 the taxpayer shall not exceed twelve per cent of the amount of
 
20 the investment.
 
21      [(e)  For the purposes of this section:]
 
22      "Qualified high technology business" [means]:
 
23      (1)  Means:
 

 
Page 23                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           (A)  A business, employing or owning capital or
 
 2                property, or maintaining an office, in this State;
 
 3                and which
 
 4     [(2)  (A)] (B) (i)  Conducts [one hundred per cent] a
 
 5                majority of its activities in performing qualified
 
 6                research in this State; or
 
 7          [(B)] (ii)  Receives [one hundred per cent] a majority
 
 8                of its gross income derived from qualified
 
 9                research; provided that the income is received
 
10                from products sold from, manufactured, or produced
 
11                in the State; or services performed in this State.
 
12      [The term "qualified high technology business" does] (2)
 
13 Does not include:
 
14     [(1)] (A)  Any trade or business involving the performance of
 
15           services in the field of law, architecture, accounting,
 
16           actuarial science, performing arts, consulting,
 
17           athletics, financial services, or brokerage services;
 
18     [(2)] (B)  Any banking, insurance, financing, leasing,
 
19           rental, investing, or similar business; any farming
 
20           business, including the business of raising or
 
21           harvesting trees; any business involving the production
 
22           or extraction of products of a character with respect
 
23           to which a deduction is allowable under section 611
 

 
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                                     S.B. NO.           
                                                        
                                                        


 1           (with respect to allowance of deduction for depletion),
 
 2           613 (with respect to basis for percentage depletion),
 
 3           or 613A (with respect to limitation on percentage
 
 4           depleting in cases of oil and gas wells) of the
 
 5           Internal Revenue Code;
 
 6     [(3)] (C)  Any business operating a hotel, motel, restaurant,
 
 7           or similar business; and
 
 8     [(4)] (D)  Any trade or business involving a hospital, a
 
 9           private office of a licensed health care professional,
 
10           a group practice of licensed health care professionals,
 
11           or a nursing home.
 
12      "Qualified research" means:
 
13      (1)  The same as in section 41(d) of the Internal Revenue
 
14           Code; or
 
15      (2)  Developing, designing, modifying, programming, and
 
16           licensing computer software;
 
17 except that it shall not include research conducted outside the
 
18 State.
 
19      [(f)] (e)  This section shall not apply to taxable years
 
20 beginning after December 31, 2005."
 
21      SECTION 14.  Section 235-110.91, Hawaii Revised Statutes, is
 
22 amended by amending subsection (d) to read as follows:
 
23      "(d)  The tax credit for increased research activities shall
 

 
Page 25                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 be equal to the sum of:
 
 2      (1)  [2.5] Twenty per cent of the excess (if any) of:
 
 3           (A)  The qualified research expenses for the taxable
 
 4                year; over
 
 5           (B)  The base amount; and
 
 6      (2)  [2.5] Twenty per cent of the basic research payments
 
 7           determined under section 41(e)(1)(A) of the Internal
 
 8           Revenue Code."
 
 9             PART IV.  HIGH TECHNOLOGY INDUSTRY BONDS
 
10      SECTIONS 15 to 19  Reserved.
 
11                     PART V.  VENTURE CAPITAL
 
12      SECTION 20.  The legislature finds that the shortage of
 
13 venture capital in Hawaii makes it difficult for local high
 
14 technology businesses to obtain the necessary financing to
 
15 develop products, enter new markets, and expand on their early
 
16 success.  The purpose of this part is to require the board of
 
17 trustees of the employees' retirement system to invest employees'
 
18 retirement system funds in qualified high technology businesses,
 
19 subject to minimum and maximum limits, as a means of providing
 
20 venture capital for those businesses.
 
21      SECTION 21.  Section 88-119, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "88-119  Investments.  (a)  Investments may be made in:
 

 
Page 26                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1      (1)  Real estate loans and mortgages.  Obligations (as
 
 2           defined in section 431:6-101) of any of the following
 
 3           classes:
 
 4           (A)  Obligations secured by mortgages of nonprofit
 
 5                corporations desiring to build multirental units
 
 6                (ten units or more) subject to control of the
 
 7                government for occupancy by families displaced as
 
 8                a result of government action;
 
 9           (B)  Obligations secured by mortgages insured by the
 
10                Federal Housing Administration;
 
11           (C)  Obligations for the repayment of home loans made
 
12                under the Servicemen's Readjustment Act of 1944 or
 
13                under Title II of the National Housing Act;
 
14           (D)  Other obligations secured by first mortgages on
 
15                unencumbered improved real estate owned in fee
 
16                simple; provided that the amount of the obligation
 
17                at the time investment is made therein shall not
 
18                exceed eighty per cent of the value of the real
 
19                estate and improvements mortgaged to secure it,
 
20                and except that the amount of the obligation at
 
21                the time investment is made therein may exceed
 
22                eighty per cent but no more than ninety per cent
 
23                of the value of the real estate and improvements
 

 
Page 27                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1                mortgaged to secure it; provided further that the
 
 2                obligation is insured or guaranteed against
 
 3                default or loss under a mortgage insurance policy
 
 4                issued by a casualty insurance company licensed to
 
 5                do business in the State.  The coverage provided
 
 6                by the insurer shall be sufficient to reduce the
 
 7                system's exposure to not more than eighty per cent
 
 8                of the value of the real estate and improvements
 
 9                mortgaged to secure it.  The insurance coverage
 
10                shall remain in force until the principal amount
 
11                of the obligation is reduced to eighty per cent of
 
12                the market value of the real estate and
 
13                improvements mortgaged to secure it, at which time
 
14                the coverage shall be subject to cancellation
 
15                solely at the option of the board of trustees.
 
16                Real estate shall not be deemed to be encumbered
 
17                within the meaning of this subparagraph by reason
 
18                of the existence of any of the restrictions,
 
19                charges, or claims described in section 431:6-308;
 
20           (E)  Other obligations secured by first mortgages of
 
21                leasehold interests in improved real estate;
 
22                provided that:
 
23                (i)  Each such leasehold interest at such time
 

 
Page 28                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1                     shall have a current term extending at least
 
 2                     two years beyond the stated maturity of the
 
 3                     obligation it secures; and
 
 4               (ii)  The amount of the obligation at the time
 
 5                     investment is made therein shall not exceed
 
 6                     eighty per cent of the value of the
 
 7                     respective leasehold interest and
 
 8                     improvements, and except that the amount of
 
 9                     the obligation at the time investment is made
 
10                     therein may exceed eighty per cent but no
 
11                     more than ninety per cent of the value of the
 
12                     leasehold interest and improvements mortgaged
 
13                     to secure it;
 
14                provided further that the obligation is insured or
 
15                guaranteed against default or loss under a
 
16                mortgage insurance policy issued by a casualty
 
17                insurance company licensed to do business in the
 
18                State.  The coverage provided by the insurer shall
 
19                be sufficient to reduce the system's exposure to
 
20                not more than eighty per cent of the value of the
 
21                leasehold interest and improvements mortgaged to
 
22                secure it.  The insurance coverage shall remain in
 
23                force until the principal amount of the obligation
 

 
Page 29                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1                is reduced to eighty per cent of the market value
 
 2                of the leasehold interest and improvements
 
 3                mortgaged to secure it, at which time the coverage
 
 4                shall be subject to cancellation solely at the
 
 5                option of the board of trustees;
 
 6           (F)  Obligations for the repayment of home loans
 
 7                guaranteed by the department of Hawaiian home
 
 8                lands pursuant to section 214(b) of the Hawaiian
 
 9                Homes Commission Act, 1920; and
 
10           (G)  Obligations secured by second mortgages on
 
11                improved real estate for which the mortgagor
 
12                procures a second mortgage on the improved real
 
13                estate for the purpose of acquiring the
 
14                leaseholder's fee simple interest in the improved
 
15                real estate; provided that any prior mortgage does
 
16                not contain provisions that might jeopardize the
 
17                security position of the retirement system or the
 
18                borrower's ability to repay the mortgage loan.
 
19           The board of trustees may retain such real estate,
 
20           including leasehold interests therein, as it may
 
21           acquire by foreclosure of mortgages or in enforcement
 
22           of security, or as may be conveyed to it in
 
23           satisfaction of debts previously contracted; provided
 

 
Page 30                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           that all such real estate, other than leasehold
 
 2           interests, shall be sold within five years after
 
 3           acquiring the same, subject to extension by the
 
 4           governor for additional periods not exceeding five
 
 5           years each, and that all such leasehold interests shall
 
 6           be sold within one year after acquiring the same,
 
 7           subject to extension by the governor for additional
 
 8           periods not exceeding one year each;
 
 9      (2)  Government obligations, etc.  Obligations of any of the
 
10           following classes:
 
11           (A)  Obligations issued or guaranteed as to principal
 
12                and interest by the United States or by any state
 
13                thereof or by any municipal or political
 
14                subdivision or school district of any of the
 
15                foregoing; provided that principal of and interest
 
16                on such obligations are payable in currency of the
 
17                United States; or sovereign debt instruments
 
18                issued by agencies of, or guaranteed by foreign
 
19                governments;
 
20           (B)  Revenue bonds, whether or not permitted by any
 
21                other provision hereof, of the State or any
 
22                municipal or political subdivision thereof,
 
23                including the board of water supply of the city
 

 
Page 31                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1                and county of Honolulu, and street or improvement
 
 2                district bonds of any district or project in the
 
 3                State; and
 
 4           (C)  Obligations issued or guaranteed by any federal
 
 5                home loan bank including consolidated federal home
 
 6                loan bank obligations, the Home Owner's Loan
 
 7                Corporation, the Federal National Mortgage
 
 8                Association, or the Small Business Administration;
 
 9      (3)  Corporate obligations.  Below investment grade or
 
10           nonrated debt instruments, foreign or domestic, in
 
11           accordance with investment guidelines adopted by the
 
12           board of trustees;
 
13      (4)  Preferred and common stocks.  Shares of preferred or
 
14           common stock of any corporation created or existing
 
15           under the laws of the United States or of any state or
 
16           district thereof or of any country;
 
17      (5)  Obligations eligible by law for purchase in the open
 
18           market by federal reserve banks;
 
19      (6)  Obligations issued or guaranteed by the International
 
20           Bank for Reconstruction and Development, the Inter-
 
21           American Development Bank, the Asian Development Bank,
 
22           or the African Development Bank;
 
23      (7)  Obligations secured by collateral consisting of any of
 

 
Page 32                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           the securities or stock listed above and worth at the
 
 2           time the investment is made at least fifteen per cent
 
 3           more than the amount of the respective obligations;
 
 4      (8)  Insurance company obligations.  Contracts and
 
 5           agreements supplemental thereto providing for
 
 6           participation in one or more accounts of a life
 
 7           insurance company authorized to do business in Hawaii,
 
 8           including its separate accounts, and whether the
 
 9           investments allocated thereto are comprised of stocks
 
10           or other securities or of real or personal property or
 
11           interests therein;
 
12      (9)  Interests in real property.  Interests in improved or
 
13           productive real property in which, in the informed
 
14           opinion of the board of trustees, it is prudent to
 
15           invest funds of the system.  For purposes of this
 
16           paragraph, "real property" includes any property
 
17           treated as real property either by local law or for
 
18           federal income tax purposes.  Investments in improved
 
19           or productive real property may be made directly or
 
20           through pooled funds, including common or collective
 
21           trust funds of banks and trust companies, group or unit
 
22           trusts, limited partnerships, limited liability
 
23           companies, investment trusts, title-holding
 

 
Page 33                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           corporations recognized under section 501(c) of the
 
 2           Internal Revenue Code of 1986, as amended, similar
 
 3           entities that would protect the system's interest, and
 
 4           other pooled funds invested on behalf of the system by
 
 5           investment managers retained by the system;
 
 6     (10)  Other securities and futures contracts.  Securities and
 
 7           futures contracts in which in the informed opinion of
 
 8           the board of trustees it is prudent to invest funds of
 
 9           the system, including currency, interest rate, bond,
 
10           and stock index futures contracts and options on such
 
11           contracts to hedge against anticipated changes in
 
12           currencies, interest rates, and bond and stock prices
 
13           that might otherwise have an adverse effect upon the
 
14           value of the system's securities portfolios; covered
 
15           put and call options on securities; and stock; whether
 
16           or not the securities, stock, futures contracts, or
 
17           options on futures are expressly authorized by or
 
18           qualify under the foregoing paragraphs, and
 
19           notwithstanding any limitation of any of the foregoing
 
20           paragraphs (including paragraph (4)); and
 
21     (11)  Private placements.  Investments in institutional blind
 
22           pool limited partnerships or direct investments that
 
23           make private debt and equity investments in privately
 

 
Page 34                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           held companies.
 
 2      (b)  At least        per cent of assets at the start of a
 
 3 fiscal year, up to a maximum of $        per fiscal year, shall
 
 4 be dedicated as venture capital investments by the board of
 
 5 trustees in qualified high technology businesses.  Investment
 
 6 under this subsection shall be made under the condition that
 
 7 there shall be three or more unrelated investors other than the
 
 8 system involved in the investment.  The board, in making
 
 9 investments under this subsection, may consult with knowledgeable
 
10 state agencies, corporations, and financial institutions before
 
11 investing assets in qualified high technology businesses.
 
12      For the purposes of this subsection:
 
13      "Computer software" means a set of computer programs,
 
14 procedures, or associated documentation concerned with the
 
15 operation and function of a computer system, and includes both
 
16 systems and application programs and subdivisions, such as
 
17 assemblers, compilers, routines, generators, and utility
 
18 programs.
 
19      "Qualified high technology business":
 
20      (1)  Means:
 
21           (A)  A business, employing or owning capital or
 
22                property, or maintaining an office, in this State;
 
23                and which
 

 
Page 35                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           (B)  (i)  Conducts a majority of its activities in
 
 2                     performing qualified research in this State;
 
 3                     or
 
 4               (ii)  Receives a majority of its gross income
 
 5                     derived from qualified research; provided
 
 6                     that the income is received from products
 
 7                     sold from, manufactured, or produced in the
 
 8                     State; or services performed in this State.
 
 9      (2)  Does not include:
 
10           (A)  Any trade or business involving the performance of
 
11                services in the field of law, architecture,
 
12                accounting, actuarial science, performing arts,
 
13                consulting, athletics, financial services, or
 
14                brokerage services;
 
15           (B)  Any banking, insurance, financing, leasing,
 
16                rental, investing, or similar business; any
 
17                farming business, including the business of
 
18                raising or harvesting trees; any business
 
19                involving the production or extraction of products
 
20                of a character with respect to which a deduction
 
21                is allowable under section 611 (with respect to
 
22                allowance of deduction for depletion), 613 (with
 
23                respect to basis for percentage depletion), or
 

 
Page 36                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1                613A (with respect to limitation on percentage
 
 2                depleting in cases of oil and gas wells) of the
 
 3                Internal Revenue Code;
 
 4           (C)  Any business operating a hotel, motel, restaurant,
 
 5                or similar business; and
 
 6           (D)  Any trade or business involving a hospital, a
 
 7                private office of a licensed health care
 
 8                professional, a group practice of licensed health
 
 9                care professionals, or a nursing home.
 
10      "Qualified research" means:
 
11      (1)  The same as in section 41(d) of the Internal Revenue
 
12           Code; or
 
13      (2)  Developing, designing, modifying, programming, and
 
14           licensing computer software;
 
15 except that it shall not include research conducted outside the
 
16 State.
 
17      "Venture capital investment" means any of the following
 
18 investments in a qualified high technology business:
 
19      (1)  Common or preferred stock and equity securities without
 
20           a repurchase requirement for at least five years;
 
21      (2)  A right to purchase stock or equity securities;
 
22      (3)  Any debenture or loan, whether or not convertible or
 
23           having stock purchase rights, which are subordinated,
 

 
Page 37                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           together with security interests against the assets of
 
 2           the borrower, by their terms to all borrowings of the
 
 3           borrower from other institutional lenders, and that is
 
 4           for a term of not less than three years, and that has
 
 5           no part amortized during the first three years; and
 
 6      (4)  General or limited partnership interests."
 
 7                        PART VI.  EDUCATION
 
 8      SECTION 22.  The legislature finds that there is a need to
 
 9 expand educational programs in science and math at Hawaii's "E
 
10 Academies", which were established by Act 178, Session Laws of
 
11 Hawaii 1999, section 17 to afford students greater opportunities
 
12 in new educational technologies, and provide relevant,
 
13 challenging, and meaningful course offerings for students
 
14 interested in pursuing a career in advanced technology fields.
 
15 The legislature finds that the use of "E Academies", which are
 
16 virtual, site-based schools that provide students with industry
 
17 and academic standards-based instruction and assessments in
 
18 technology, science, math, and engineering, offer enhanced
 
19 opportunities to students who are interested in furthering their
 
20 preparation for technology positions or who are interested in
 
21 advanced studies in post secondary information technology,
 
22 science, engineering, and math.
 
23      SECTION 23.  There is appropriated out of the general
 

 
Page 38                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 revenues of the State of Hawaii the sum of $1,000,000, or so much
 
 2 thereof as may be necessary for fiscal year 2000-2001, for the
 
 3 expansion of the department of education's E Academies to provide
 
 4 students at virtual onsite locations based at selected high
 
 5 schools with industry and academic standards-based instruction
 
 6 and assessments in technology, science, math, and engineering.
 
 7 The sum appropriated shall be expended by the department of
 
 8 education for the purposes of this part.
 
 9                 PART VII.  WORKFORCE DEVELOPMENT
 
10      SECTION 24.  The legislature finds that there is a need to
 
11 expand the millennium workforce development training program,
 
12 which was created by Act 178, Session Laws of Hawaii 1999,
 
13 section 12, and placed within the department of labor and
 
14 industrial relations for administrative purposes.  In particular,
 
15 the legislature finds that there is a need for Hawaii's public
 
16 community colleges to develop training programs to improve the
 
17 skills of students in those colleges for jobs in the new economy,
 
18 in such industries as biotechnology, health care, information
 
19 technology, environmental science and technology, and
 
20 telecommunications.  The development of new or enhanced programs
 
21 in these and related areas at the State's community colleges will
 
22 help to lessen the need to import workers and increase job
 
23 opportunities for Hawaii's residents by improving their skills in
 

 
Page 39                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 these areas.
 
 2      SECTION 25.  There is appropriated out of the general
 
 3 revenues of the State of Hawaii the sum of $1,000,000, or so much
 
 4 thereof as may be necessary for fiscal year 2000-2001, to be
 
 5 expended by the University of Hawaii's community colleges for the
 
 6 purposes of establishing the Pacific center for advanced
 
 7 technology training where a coordinated statewide approach to
 
 8 designing and delivering customized training to the high
 
 9 technology industry in Hawaii will be implemented.  The sum
 
10 appropriated shall be expended by the University of Hawaii for
 
11 the purposes of this part.
 
12      SECTION 26.  There is appropriated out of the general
 
13 revenues of the State of Hawaii the sum of $         , or so much
 
14 thereof as may be necessary for fiscal year 2000-2001, to be
 
15 expended by Hawaii's public community colleges for the purposes
 
16 of the millennium workforce development program established in
 
17 section 371-17, Hawaii Revised Statutes, to prepare students for
 
18 the workforce of the new economy.  The sum appropriated shall be
 
19 expended by the department of labor and industrial relations for
 
20 the purposes of this part.
 
21           PART VIII.  UNIVERSITY RESEARCH AND TRAINING
 
22      SECTION 27.  The purpose of this part is to appropriate
 
23 funds to the University of Hawaii's college of engineering,
 

 
Page 40                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 college of business administration, college of medicine, and
 
 2 community colleges in order to develop new programs and enhance
 
 3 existing programs to enable Hawaii's students to more effectively
 
 4 compete for jobs in the new economy, in such industries as
 
 5 biotechnology, health care, information technology, environmental
 
 6 science and technology, and telecommunications.  The legislature
 
 7 finds that funding these programs for these colleges at the
 
 8 University of Hawaii will assist in lessening the need to import
 
 9 workers and increase job opportunities for Hawaii's residents by
 
10 improving their skills in these areas.
 
11      SECTION 28.  There is appropriated out of the general
 
12 revenues of the State of Hawaii the sum of $1,000,000, or so much
 
13 thereof as may be necessary for fiscal year 2000-2001, to conduct
 
14 advanced communications research at the University of Hawaii's
 
15 college of engineering.  The sum appropriated shall be expended
 
16 by the University of Hawaii for the purposes of this Act.
 
17      SECTION 29.  There is appropriated out of the general
 
18 revenues of the State of Hawaii the sum of $1,000,000, or so much
 
19 thereof as may be necessary for fiscal year 2000-2001, for the
 
20 expansion of research, scholarship, and instruction in electronic
 
21 commerce at the University of Hawaii's college of business
 
22 administration.  The sum appropriated shall be expended by the
 
23 University of Hawaii for the purposes of this Act.
 

 
Page 41                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1      SECTION 30.  There is appropriated out of the general
 
 2 revenues of the State of Hawaii the sum of $1,000,000, or so much
 
 3 thereof as may be necessary for fiscal year 2000-2001, to conduct
 
 4 research in molecular genetics at the University of Hawaii's
 
 5 school of medicine.  The sum appropriated shall be expended by
 
 6 the University of Hawaii for the purposes of this Act.
 
 7      SECTION 31.  There is appropriated out of the general
 
 8 revenues of the State of Hawaii the sum of $500,000, or so much
 
 9 thereof as may be necessary for fiscal year 2000-2001, to develop
 
10 new programs and enhance existing programs at the University of
 
11 Hawaii at Hilo to prepare students for the workforce of the new
 
12 economy.  The sum appropriated shall be expended by the
 
13 University of Hawaii for the purposes of this Act.
 
14             PART IX.  TECHNOLOGY ADVISORY COMMISSION
 
15      SECTION 32.  The legislature finds that the governor's
 
16 special advisory council for technology development, which was
 
17 established under Act 178, Session Laws of Hawaii 1999, section
 
18 3, has the potential to make significant contributions to the
 
19 development of the State's high technology industry.  While the
 
20 intent of the advisory council was to attract leaders in high
 
21 technology development from around the world to Hawaii, however,
 
22 the legislature finds it highly unlikely that these individuals
 
23 will come to Hawaii for this purpose if they are faced with a
 

 
Page 42                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 possibly lengthy senate confirmation process and must file
 
 2 financial disclosure forms with the state ethics commission.
 
 3      The legislature finds that there is no reason to subject
 
 4 these individuals to confirmation hearings and the filing of
 
 5 ethics disclosure forms, in view of the fact that the advisory
 
 6 council is strictly advisory in nature and the members of that
 
 7 council have no influence over spending or budgetary matters.
 
 8 The legislature also recognizes the need to bring in persons who
 
 9 have international prestige and expertise in high technology, and
 
10 it would be otherwise extremely difficult to find such highly
 
11 qualified people to serve on the council before its expiration on
 
12 December 31, 2005.  Accordingly, the purpose of this part is to
 
13 exempt the members of the governor's special advisory council for
 
14 technology development from the senate confirmation process and
 
15 from the need to file a disclosure of financial interests with
 
16 the state ethics commission.
 
17      SECTION 33.  Section 27-42, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "[[]27-42[]]  Governor's special advisory council for
 
20 technology development; establishment; appointment, number, and
 
21 term of members; duties.(a)  There is established within the
 
22 office of the governor, for administrative purposes, an advisory
 
23 council to be known as the governor's special advisory council
 

 
Page 43                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 for technology development, that shall review and make
 
 2 recommendations on matters relating to the marketing and
 
 3 promotion of Hawaii as a location for high technology companies.
 
 4 The council shall be composed of at least eleven but no more than
 
 5 twenty-five members [appointed in accordance with section 26-34],
 
 6 and shall include representatives of the high technology
 
 7 industry, business leaders, educators, government leaders, and
 
 8 legislators.
 
 9      (b)  The members shall be appointed by the governor for four
 
10 years, except that the terms of the members first appointed shall
 
11 be for two and four years, respectively, as designated by the
 
12 governor at the time of appointment.  The council shall elect a
 
13 chairperson from among its members.
 
14      (c)  In appointing members, the governor shall select
 
15 persons who have knowledge of the high technology industry, the
 
16 educational needs of the industry, or in the marketing and
 
17 promotion of high technology industries.  The members of the
 
18 council shall serve without compensation but shall be reimbursed
 
19 for expenses, including travel expenses, necessary for the
 
20 performance of their duties.
 
21      (d)  The council shall assist the special advisor for
 
22 technology development in developing and coordinating the
 
23 marketing and promotion of the high technology industry in
 

 
Page 44                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 Hawaii.
 
 2      (e)  In carrying out the duties of this section, the council
 
 3 shall seek and utilize any available funding sources, including
 
 4 grant moneys.
 
 5      [(e)] (f)  This section is repealed on December 31, 2005."
 
 6      SECTION 34.  Section 84-17, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (c) to read as follows:
 
 8      "(c)  The following persons shall file annually with the
 
 9 state ethics commission a disclosure of financial interests:
 
10      (1)  The governor, the lieutenant governor, the members of
 
11           the legislature, and delegates to the constitutional
 
12           convention; provided that delegates to the
 
13           constitutional convention shall only be required to
 
14           file initial disclosures;
 
15      (2)  The directors and their deputies, the division chiefs,
 
16           the executive directors and the executive secretaries
 
17           and their deputies, the purchasing agents and the
 
18           fiscal officers, regardless of the titles by which the
 
19           foregoing persons are designated, of every state agency
 
20           and department;
 
21      (3)  The permanent employees of the legislature and its
 
22           service agencies, other than persons employed in
 
23           clerical, secretarial, or similar positions;
 

 
Page 45                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1      (4)  The administrative director of the State, and the
 
 2           assistants in the office of the governor and the
 
 3           lieutenant governor, other than persons employed in
 
 4           clerical, secretarial, or similar positions;
 
 5      (5)  The hearings officers of every state agency and
 
 6           department;
 
 7      (6)  The president, the vice presidents, assistant vice
 
 8           presidents, the chancellors, and the provosts of the
 
 9           University of Hawaii and its community colleges;
 
10      (7)  The superintendent, the deputy superintendent, the
 
11           assistant superintendents, the district
 
12           superintendents, the state librarian, and the deputy
 
13           state librarian of the department of education;
 
14      (8)  The administrative director and the deputy director of
 
15           the courts;
 
16      (9)  The members of every state board or commission whose
 
17           original terms of office are for periods exceeding one
 
18           year and whose functions are not solely advisory;
 
19           provided that the governor's special advisory council
 
20           for technology development established pursuant to
 
21           section 27-42 shall be exempt from this subsection;
 
22     (10)  Candidates for state elective offices, including
 
23           candidates for election to the constitutional
 

 
Page 46                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1           convention, provided that candidates shall only be
 
 2           required to file initial disclosures; and
 
 3     (11)  The administrator and assistant administrator of the
 
 4           office of Hawaiian affairs."
 
 5            PART X.  MARKETING AND ELECTRONIC COMMERCE
 
 6      SECTION 35.  The legislature finds that the internet is a
 
 7 critical component of the new economy because of its enormous
 
 8 potential to increase efficiency and raise productivity.
 
 9 Internet commerce, which is probably the most significant
 
10 component of electronic commerce, or "e-commerce", includes such
 
11 areas as online financial services, consumer retain and business-
 
12 to-business transactions, media, infrastructure, and consumer and
 
13 business internet access services.
 
14      The legislature further finds that the total United States
 
15 internet economy more than doubled between 1996 and 1997, from
 
16 $15,500,000,000 to $38,800,000,000.  By 2001, it has been
 
17 projected that the total United States internet economy will be
 
18 over $350,000,000,000.  Of this amount, business-to-business e-
 
19 commerce is expected to account for the largest share, while
 
20 consumer retail activity is expected to emerge more slowly,
 
21 totaling over $18,000,000,000 in the year 2001.
 
22      The purpose of this part is to increase the State's share of
 
23 this significant economic activity and the facilitation of e-
 

 
Page 47                                                    3143
                                     S.B. NO.           
                                                        
                                                        


 1 commerce in Hawaii through the development of partnerships
 
 2 between the Hawaii tourism authority and Hawaii's business
 
 3 community to promote the State, through a coordinated statewide
 
 4 effort, as an internet and server-friendly place to conduct
 
 5 electronic commerce.
 
 6      SECTION 36.  Section 201B-7, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (a) to read as follows:
 
 8      "(a)  The authority may enter into contracts and agreements
 
 9 that include the following:
 
10      (1)  Tourism promotion, marketing, and development;
 
11      (2)  Market development-related research;
 
12      (3)  Product development and diversification issues;
 
13      (4)  Promotion, development, and coordination of sports-
 
14           related activities and events;
 
15      (5)  Promotion of Hawaii, through a coordinated statewide
 
16           effort, as an internet and server-friendly place to
 
17           conduct electronic commerce, including entering into
 
18           appropriate public-private sector business
 
19           partnerships.  As used in this paragraph, the terms
 
20           "electronic commerce" and "internet" have the same
 
21           meanings as defined in section 231-8.6(c);
 
22     [(5)] (6)  Reduction of barriers to travel;
 
23     [(6)] (7)  Tourism public information and educational
 

 
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 1           programs;
 
 2     [(7)] (8)  Programs to monitor and investigate complaints
 
 3           about the problems resulting from the tourism industry
 
 4           in the State; and
 
 5     [(8)] (9)  Any and all other activities necessary to carry
 
 6           out the intent of this chapter;
 
 7 provided that for the purposes of continuity, the Hawaii Visitors
 
 8 and Convention Bureau shall be the designated agency to conduct
 
 9 the marketing and promotion of the State until the end of fiscal
 
10 year 1998-1999 or until a date specified by the board."
 
11      SECTION 37.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 38.  This Act shall take effect upon its approval;
 
14 provided that:
 
15      (1)  Sections 23, 25, 26, 28, 29, 30, and 31 shall take
 
16           effect on July 1, 2000; and
 
17      (2)  Sections 10, 11, 12, 13, and 14 shall apply to taxable
 
18           years beginning after December 31, 1999.
 
19 
 
20                         INTRODUCED BY:  _________________________
 
21 
 
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