STAND. COM. REP. NO. 421-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2901
                                     H.D. 1




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

Sir:

     Your Committees on Economic Development and Business
Concerns and Higher Education, to which was referred H.B. No.
2901 entitled: 

     "A BILL FOR AN ACT RELATING TO THE NEW ECONOMY,"

beg leave to report as follows:

     The purpose of this bill is to encourage the continued
growth and development of high technology businesses and
associate industries relying on these businesses in Hawaii by:

     (1)  Giving the Department of Commerce and Consumer Affairs
          (DCCA) jurisdiction to regulate all digital
          communications;

     (2)  Requiring the Special Advisor for Technology
          Development to develop a plan to consolidate the
          functions of the Hawaii Strategic Development
          Corporation under Chapter 211F, Hawaii Revised Statutes
          (HRS), the Natural Energy Laboratory of Hawaii
          Authority under Chapter 227D, HRS, and the High
          Technology Development Corporation (HTDC) under Chapter
          206M, HRS;

     (3)  Allowing qualified high technology businesses to sell
          their unused net operating loss carryover and unused
          tax credits to any other taxpayer;


 
 
 
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     (4)  Amending:

          (a)  The income tax exclusion for royalties and other
               income from high technology businesses;

          (b)  The high-technology business investment tax
               credit; and

          (c)  The tax credit for increasing research activities;

          established by Act 178, Session Laws of Hawaii 1999;

     (5)  Requiring the Board of Trustees of the Employees'
          Retirement System (ERS) to invest employees' retirement
          system funds in qualified high technology businesses,
          subject to minimum and maximum limits;

     (6)  Appropriating moneys for education, workforce
          development, and University of Hawaii (UH) research and
          training;

     (7)  Exempting members of the Governor's Special Advisory
          Council for Technology Development from the Senate
          confirmation process and from the need to file a
          disclosure of financial interest with the State Ethics
          Commission; and

     (8)  Authorizing the Hawaii Tourism Authority to enter into
          contracts and agreements with regard to the promotion
          of Hawaii through a coordinated statewide effort, as an
          Internet and server-friendly place to conduct
          electronic commerce.

     HTDC, UH, and the Hawaii Technology Trade Association
testified in support of this measure.  The Department of
Business, Economic Development, and Tourism testified in support
of the intent of this measure.  Comments were submitted by the
Department of Taxation, DCCA, the Department of Labor and
Industrial Relations, the Public Utilities Commission, GTE
Hawaiian Telephone, Oceanic Communications, the Hawaii State
Teachers Association-Retired, and Employees' Retirement System.

     Your Committees have amended this bill by, among other
things:

     (1)  Deleting provisions giving DCCA jurisdiction to
          regulate all digital communications;


 
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     (2)  Allowing the Board of Trustees of the Employees'
          Retirement System (ERS) to invest ten percent of ERS
          funds in high qualified technology businesses, rather
          than requiring the ERS Board of Trustees to invest ERS
          funds in qualified high technology businesses, subject
          to minimum and maximum limits;

     (3)  Repealing the provisions allowing qualified high
          technology businesses to sell their unused tax credits
          to other taxpayers;

     (4)  Consolidating all of the high technology definitions in
          the Income Tax Law in its definition section, repealing
          those definitions from the high technology tax credit
          section, and adding new definitions of "computer data"
          and "computer program";

     (5)  Allowing partnership investors the flexibility of
          allocating the high technology investment tax credit
          among partners without regard to their proportionate
          interests in their partnership investment vehicle;

     (6)  Expanding the income tax exclusion from the income of
          royalties derived from patents and copyrights to
          include income derived from trade secrets;

     (7)  Amending the high technology business investment tax
          credit and the tax credit for increasing research
          activities by making the credit refundable to the
          taxpayer or allowing the credit to be used against the
          taxpayer's income tax liability in subsequent years
          until exhausted; and

     (8)  Making technical, nonsubstantive amendments for
          clarity, consistency, and style.

     As affirmed by the records of votes of the members of your
Committees on Economic Development and Business Concerns and
Higher Education that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
2901, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 2901, H.D. 1, and
be referred to the Committees on Labor and Public Employment and
Finance.


 
 
 
 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Economic
                                   Development and Business
                                   Concerns and Higher Education,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DAVID MORIHARA, Chair              ROBERT N. HERKES, Chair