STAND. COM. REP. NO.1164

Honolulu, Hawaii

, 2003

RE: H.B. No. 291

H.D. 2

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Economic Development and Labor, to which was referred H.B. No. 291, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO THE JOB CREATION INCOME TAX CREDIT,"

beg leave to report as follows:

The purpose of this measure is to establish a temporary job creation income tax credit equal to $5,000 per employee, provided that certain economic conditions are met, the Governor declares that the tax credit is operative, and that two-thirds of this credit is used for workforce training.

Specifically, the measure also:

(1) Promotes the creation of more stable, higher paying jobs by allowing the tax credit to be applied only to full-time employees whose annual wages are $25,000 or higher and who remain employed by the taxpayer for at least two years;

(2) Allows the tax credit to be claimed only upon declaration by the Governor, required when the general fund revenue collections exceed 7.5 per cent of the general fund revenues at the end of two successive fiscal years; and

(3) Requires the Department of Taxation to submit a yearly report to the Legislature outlining the use and effect of the tax credit.

The Chamber of Commerce of Hawaii and the Building Industry Association of Hawaii submitted testimony in support of this measure. Enterprise Honolulu submitted testimony in support of the intent of this measure with recommendations for amendments.

The Department of Taxation submitted testimony in opposition to this measure. The Tax Foundation of Hawaii submitted comments on the measure.

Your Committees find that our economy has suffered greatly in the wake of the events of September 11, 2001. Although some recovery has occurred, the effects of the present war make the future of our economy extremely uncertain. Your Committees determine that action must be taken to promote job growth in Hawaii, which should include the offering of incentives such as tax credits for job creation.

Your Committees also find that for Hawaii to be competitive in the global economy, there must be a transition to a knowledge-based and idea-based economy where innovative ideas and technologies are embedded in services, products, and manufacturing processes. Your Committees further find that in order to compete in this new economy, public policies and legislative incentives must be established to provide a foundation to ensure that entrepreneurs, investors, and businesses are equipped with the necessary tools to prosper. The provision of incentives for small business entrepreneurs of all industries, as well as businesses of all sizes in the industry of high-technology, will encourage businesses in Hawaii to continue to invest in our workers, and the resulting increase in disposable income will further spur growth in our economy.

Your Committees have amended this measure by replacing its contents with the contents of S.B. No. 836, S.D. 1 (modified only by renaming the credit), which provides as follows:

(1) Creates a job creation tax credit for taxpayers that create and maintain high paying jobs in Hawaii;

(2) Confines this tax credit to qualified high technology businesses, and small businesses with twenty-five employees or less and a gross annual income of $5,000,000 or less;

(3) Requires qualified taxpayers to employ at least three full-time employees and hire an additional full-time employee, earning at least thirty per cent above the state average wage, during the taxable year prior to that in which the credit is sought, and requires the taxpayer to maintain the same number of full-time employees for at least twelve consecutive months thereafter;

(4) Allows a tax credit of ten per cent of the taxpayer's net income tax liability for the taxable year, after credits and deductions; and

(5) Requires this measure to apply to taxable years beginning after December 31, 2002, and apply to full-time employees hired after June 30, 2003, and before July 1, 2008.

As affirmed by the records of votes of the members of your Committees on Economic Development and Labor that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 291, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 291, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Economic Development and Labor,

____________________________

BRIAN KANNO, Chair

____________________________

CAROL FUKUNAGA, Chair