SB1501

SECTION 1. The Legislature has recognized the importance of promoting innovation and research-based activities with the enactment of several path-breaking tax credits and programs to promote growth in the technology and other innovation-related sectors. Likewise, the legislature has sought to encourage a range of industries and activities judged to be of value in creating a higher-wage and more knowledge-intensive economy.

It is important that the effectiveness of these efforts and other such incentives be evaluated. It is also of utmost importance to maintain taxpayer confidentiality. As a self-reporting, self-assessing tax system, the tax collections in Hawaii depend on confidentiality of the collection process in order to ensure the fullest compliance.

In order to assure accountability with the disposition of public funds, government must balance the confidentiality with the public's right to know.

The purpose of this bill is to improve the State's ability to measure the impact being made in using the high technology business investment tax credit and the tax credit for research activities as authorized in Sections 235-110.9 and 235-110.91, Hawaii Revised Statutes.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

”§235-___ High technology business investment tax credit and tax credit for research activities analysis and evaluation.

(a) For purposes of determining the economic impact of the credits provided in sections 235-110.9 and 235-110.91, the department of taxation is authorized to:

(1) Contract with technical experts at the national and international level knowledgeable in the field of technology and research investment for the purposes of evaluating existing and proposed tax incentives in Hawaii;

(2) Establish a working group of industry, tax, and economic development experts in Hawaii to identify and develop a set of standards, benchmarks, and data elements for the evaluation and quantification of the economic impacts of existing and proposed tax incentives in Hawaii;

(3) Coordinate and receive relevant information from other State agencies, including but not limited to, the department of labor and industrial relations and the department of business, economic development, and tourism to assist in the development of the benchmarks and evaluation methodologies and determine the measurement data that will need to be analyzed; and

(4) Review the returns of companies whose investors receive credits pursuant to section 235-110.9 and the returns of companies that receive credit pursuant to section 235-110.91 for the purposes of aggregating the impact data to determine the impacts. Such data may be sub-aggregated into industry sectors so as to delineate and differentiate between short-term and longer-term economic impacts.

(b) The department of taxation shall be responsible for preparing an annual report to the legislature identifying the findings of any analysis performed under this section. The report is due no later than twenty days prior to the start of the legislative session.

(c) The department of taxation may, from time to time, provide periodic updates to its annual analysis to assist bodies such as the tax review commission or the council on revenues in these bodies' respective deliberations."

SECTION 3. Nothing contained in this Act shall be interpreted as waiving any liability, as provided by other operative law, for the confidentiality and safeguarding of taxpayer information.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $250,000, or so much thereof as may be necessary, for fiscal year 2007-2008 and $250,000, or so much thereof as may be necessary, for fiscal year 2008-2009, to carry out the purposes of this Act.

The sums appropriated shall be expended by the department of taxation.

SECTION 5: This Act shall take effect on July 1, 2007 and shall be repealed on December 31, 2015.

INTRODUCED BY:

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BY REQUEST

THE SENATE	S.B. NO.	1501
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII