For a very long time, Hawaii has had revenue tax incentives to encourage tv, motion pictures, and different productions to work their magic right here in Hawaii. The manufacturing credit score was enacted in 1988, at which era it was 4% of normal manufacturing prices plus 6% of transient lodging, mirroring the GET and TAT charges on the time. The credit score was regularly sweetened over time and was boosted to 22% in Honolulu and 27% in another county simply final yr (Act 217, SLH 2022).
This session, there’s a invoice threatening to make main adjustments to the tax credit score scheme, Home Invoice 1373. By the point this text goes to press, the Legislature may have lastly determined what to do about this invoice. However earlier than then, we are able to describe what is going on with this invoice, hopefully to forestall the identical sort of hijinks from taking place once more.
HB 1373, as launched, proposed a workforce growth incentive as a substitute for the manufacturing credit score as a result of the latter is sophisticated, costly, and time-consuming. As a sensible matter it’s powerful to cope with except your manufacturing is backed by a significant studio. Thus, the inducement was proposed primarily for smaller, impartial movie and TV productions. That invoice sailed by means of the Home with minor amendments and crossed over to the Senate.
Within the meantime, Senate Invoice 1237, as launched, proposed establishing a Hawaii movie fee that will substitute the present Hawaii movie workplace. That measure handed the Senate financial growth committee (EET) with no adjustments and headed to Methods & Means (WAM). After deferring the measure a number of occasions, WAM amended the invoice so as to add two new provisions: a bit permitting tax credit for constructing a movie studio, and a bit making intensive amendments to the administration of the present manufacturing credit score. This was executed with out the good thing about a public listening to, ostensibly as a result of the invoice was already heard in a single earlier committee. It crossed over to the Home in that type, the place the Home financial growth committee refused to listen to the invoice.
The Senate, apparently incensed over the roadblock within the Home, took up HB 1373. It was not heard by its first assigned committees, EET and Labor, and was technically lifeless after the Second Crossover deadline. However the Senate revived it by re-referring it to joint consideration by WAM and EET. These committees then shoved the studio credit score and the manufacturing credit score amendments into it. The invoice did have a listening to, however on the model containing the workforce growth incentive solely. No proposed draft of the amended invoice was launched earlier than the listening to. The brand new elements of the invoice had not been heard in any respect.
Some additional amendments have been made on the Senate flooring, and the invoice went again to the Home. Each chambers now have to appoint convention committee members to hash out the variations between variations, and that’s the place the invoice stood as of the story deadline.
This invoice now has issues. One among them is the shortage of alternative for public participation in two of the important thing elements of the invoice because it exists now.
The second subject is the invoice’s title, “Referring to Workforce Growth.” The workforce growth incentive clearly suits the invoice’s title. The opposite two elements, not a lot.
Subsequent, there are federal constitutional points with the manufacturing credit score amendments. The manufacturing credit score as amended would give a 20% credit score on out-of-state payroll and a 25% credit score on in-state payroll, for instance. That will be an issue below the U.S. Structure’s Commerce Clause, which principally says we’re all Individuals and States shouldn’t be discriminating in opposition to one another. It’s like telling Hawaiians from Papakolea that they’re going to be taxed extra closely than Hawaiians from Waimanalo.
Notice to lawmakers: There are explanation why our Structure has public listening to necessities. Our supreme courtroom banned gut-and-replacing for these causes. Do you want extra convincing?