STAND. COM. REP. NO. 135-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2432
                                     




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Human Services and Housing, to which was
referred H.B. No. 2432 entitled: 

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

begs leave to report as follows:

     The purpose of this bill is to create additional low-income
housing by:

     (1)  Allowing partnership, limited liability company, and S
          corporation investors to claim the State's Low-income
          Housing tax credit whether or not they claim the
          Federal tax credit; and

     (2)  Giving ownership entities flexibility to separately
          allocate the State and Federal tax credit among its
          partners and members.

     The Housing and Community Development Corporation of Hawaii,
the Department of Taxation, and the Legal Aid Society of Hawaii
testified in support of this measure.

     The Tax Credit Program (Program) creates affordable housing
for persons earning less than sixty percent of the median income.
The Program provides investors in qualified affordable rental
housing developments with tax credits to offset income for a
period of ten years.  In return, the investors provide equity to

 
 
 
                                 STAND. COM. REP. NO. 135-00
                                 Page 2

 
these projects in exchange for tax credits being generated over
the following ten years.

     Your Committee finds that an investor may claim the State
tax credit only if the investor also claims the Federal tax
credit.  By allowing investors to claim the State tax credit
whether or not they claim the Federal tax credit, and by allowing
ownership entities the flexibility of separately allocating the
State and Federal tax credits among its partners and members, the
State will, among other things, infuse more capital into Hawaii's
affordable rental housing projects and increase leveraging of the
limited tax credits, ultimately resulting in the creation of
additional low-income units.

     As affirmed by the record of votes of the members of your
Committee on Human Services and Housing that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 2432 and recommends that it pass Second Reading and
be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Human Services
                                   and Housing,



                                   ______________________________
                                   DENNIS A. ARAKAKI, Chair