STAND. COM. REP. NO. 2301

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2796
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Education and Technology, to which was
referred S.B. No. 2796 entitled: 

     "A BILL FOR AN ACT RELATING TO THE COLLEGE SAVINGS PROGRAM,"

begs leave to report as follows:

     The purpose of this measure is to make technical amendments
to the Hawaii College Savings Program (Program).

     Your Committee received testimony in support of this measure
from the Department of Taxation (DOTAX), Department of Budget and
Finance, and University of Hawaii.

     The Program was established by Act 81, Session Laws of
Hawaii 1999, to enable families to benefit from tax incentives
provided for qualified State tuition programs under the Internal
Revenue Code.  Under this program, money can be placed in a
savings account for the purpose of meeting college expenses of a
designated beneficiary.  The tax benefit is that earnings in
these accounts are not subject to either federal or state taxes
until withdrawal for education expenses.  When withdrawn, the
income tax rate of the student applies, which is normally lower
than the parents' tax rate.

     The Department of Budget and Finance found certain unclear
provisions in Act 81 while in the process of implementing it.
This measure is intended to clarify those provisions.            


 
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     Your Committee has amended this measure on the
recommendation of DOTAX by:

     (1)  Repealing the requirement that the account owner pay
          any unpaid penalty directly to the Program;

     (2)  Clarifying a citation to the Internal Revenue Code; and

     (3)  Making technical, nonsubstantive changes to reflect
          clarity and statutory language.

     As affirmed by the record of votes of the members of your
Committee on Education and Technology that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 2796, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 2796,
S.D. 1, and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Education and
                                   Technology,



                                   ______________________________
                                   DAVID Y. IGE, Chair

 
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