STAND. COM. REP. NO.970

Honolulu, Hawaii

, 2003

RE: S.B. No. 918

S.D. 2

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Ways and Means, to which was referred S.B. No. 918, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO NONPROFIT CORPORATIONS AND ORGANIZATIONS,"

beg leave to report as follows:

The purpose of this measure is to ensure that people using their personal vehicles in the course of their work for nonprofit organizations have insurance at appropriate premiums and a corresponding tax deduction for those premiums.

Testimony in support of this measure was submitted by Hawaii Youth Services Network, PARENTS, Inc., Assistive Technology Resource Centers of Hawaii, Catholic Charities Hawaii, Comprehensive Counseling and Support Services, and Catholic Charities Family Services. The Department of Taxation and Tax Foundation of Hawaii submitted comments on the measure.

This measure is intended to address a concern that those using their own cars in the course of work for a nonprofit have insurance coverage because many nonprofits do not own vehicles for use by employees or volunteers. Although the concern is often stated as a fear that coverage may be lost if a personal car is used for business purposes, the Hawaii Motor Vehicle Insurance Law does not distinguish between personal and business use. The insurance policy on the car applies, except in a few specified situations. Business use is not one of those situations. Business use is actually a factor that affects the actuarial risk involved for the calculation of an appropriate premium. This measure therefore provides a means for insurers to charge an appropriate premium for the risks involved in extensively or predominately using a personal car to conduct the business of a nonprofit. This measure does not imply that casual or occasional business use as an employee or volunteer requires purchase of additional coverage.

This measure also apparently intends to allow nonprofit employees and volunteers who purchase such coverage to use this expense as a basis for reducing their tax liability. However, this purpose is not effected under the measure as currently drafted, which requires amounts paid for insurance coverage to be excluded from a taxpayer's income. Since the insurance payments are an expense, rather than income, they should be treated as a deduction, rather than excludable income. Therefore, this measure has been amended by replacing language that amends section 235 7(a), Hawaii Revised Statutes (HRS), with language that amends section 235-7(g), HRS, relating to allowable deductions.

Your Committees also inserted a delayed effective date into this measure to facilitate further review and discussion of unresolved issues, including the availability of separate insurance riders, whether a tax credit rather than a tax deduction should be authorized, and the potential fiscal impact of establishing such a tax credit. Your Committees believe these and other related issues merit further consideration.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Ways and Means that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 918, S.D. 1, as amended herein, and recommend that it pass Third Reading in the form attached hereto as S.B. No. 918, S.D. 2.

 

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection and Housing and Ways and Means,

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BRIAN T. TANIGUCHI, Chair

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RON MENOR, Chair