Hawaii-2019-SR87-Introduced

WHEREAS, in the last twenty years, there has been an increase in on-line sales and a decline in sales at physical brick and mortar stores; and

WHEREAS, it is in the State's interest to achieve parity in corporate income tax assessment from all vendors, regardless of whether the sale is on-line or in a physical location; and

WHEREAS, changes in corporate business models over the past twenty years have impacted tax collections and tax laws have not kept pace with the evolution of business practices; and

WHEREAS, some large corporations that maintain a physical presence in Hawaii sell goods and services in the State, but reduce their tax exposure on those sales by shifting income to offshore subsidiaries and, thereby, put smaller companies who are entirely domestic at an unfair disadvantage; and

WHEREAS, a January 2019 report, authored by the Institute on Taxation and Economic Policy and the U.S. PIRG Education Fund, entitled " A Simple Fix for a $17 Billion Loophole: How States Can Reclaim Revenue Lost to Tax Havens," estimates that Hawaii is losing $38,000,000 annually by not updating tax laws to mandate worldwide combined reporting of corporate income, as opposed to the current combined reporting standards; and

WHEREAS, the authors of the January 2019 report recommend that states amend tax statutes to require worldwide reporting of income so that profits shifted to a "tax haven" are not exempted by virtue of being outside of the United States; and

WHEREAS, corporations that sell goods in Hawaii are expected to contribute to the tax base, regardless of the size of the corporation or where its profits are located, because corporations benefit from tax dollars spent on regulated markets, enforcement of laws, and the general public welfare; and

WHEREAS, more than half of all states have passed legislation to increase corporate tax fairness and to close tax loopholes; now, therefore,

BE IT RESOLVED by the Senate of the Thirtieth Legislature of the State of Hawaii, Regular Session of 2019, that the Director of Taxation is requested to convene a task force to determine if worldwide combined reporting, also known as "complete reporting," would be a more fair and effective form of calculating corporate taxation; and

BE IT FURTHER RESOLVED that the task force is also requested to compare worldwide combined reporting to other methods, such as a tax haven list approach, to evaluate whether either method would be suitable for Hawaii; and

BE IT FURTHER RESOLVED that, in comparing the various methods of calculating corporate income tax, the task force is requested to evaluate each approach for:

(1) The cost of administration and auditing;

(2) The burden of the requirements to corporations of different sizes;

(3) The expected increase in tax revenue; and

(4) Other criteria deemed important for decision making; and

BE IT FURTHER RESOLVED that the task force is requested to determine:

(1) Which policy suggestions made in the January 2019 report of the Institute on Taxation and Economic Policy would be appropriate for the State; and

(2) Other proposals to address the evolution of corporate business models; and

BE IT FURTHER RESOLVED that the task force is requested to include:

(1) The Director of Taxation, or the Director's designee, who shall serve as chairperson of the task force;

(2) The President of the Senate, or the President's designee;

(3) The Speaker of the House of Representatives, or the Speaker's designee;

(4) The Chief State Economist of the Research and Economic Analysis Division of the Department of Business, Economic Development, and Tourism, or the Chief State Economist's designee;

(5) One economist appointed by the Governor from a list of no more than three nominees submitted by the University of Hawaii; and

(6) A member of the Tax Foundation of Hawaii, to be invited by the Chairperson of the Task Force.

BE IT FURTHER RESOLVED that the task force is requested to submit a report of its findings and recommendations, including any proposed legislation, to the Legislature no later than twenty days prior to the convening of the Regular Session of 2020; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Governor; President of the Senate; Speaker of the House of Representatives; Director of Business, Economic Development, and Tourism; Director of

Taxation; Chairperson of the Board of Regents of the University of Hawaii; and President of the Tax Foundation of Hawaii.

	OFFERED BY:	_____________________________

Report Title:

Taxation; Corporate Income Tax; Task Force

THE SENATE	S.R. NO.	87
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII