HB 796: Income Tax Credits; Sunset; Annual Reduction

A BILL FOR AN ACT

RELATING TO TAX CREDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The purpose of this Act is to require income tax credits existing on December 31, 2025, or established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three‑year period, beginning with the sixth year of the credit.

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

     "§235-     Tax credits; generally.  Any income tax credit either existing under this chapter on December 31, 2025, or established or renewed under this chapter after December 31, 2025, shall include either:

     (1)  A five-year sunset date; or

     (2)  Beginning with the sixth year of the credit, an annual one-third reduction in the credit amount allowed to be claimed, over a three-year period;

provided that this section shall not apply to section 235-15 or income tax credits codified under part III of this chapter."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

Income Tax Credits; Sunset; Annual Reduction

Description:

Requires that income tax credits existing on 12/31/2025 or established or renewed after 12/31/2025 include a 5-year sunset or an annual one-third reduction, beginning with the 6th year of the credit.  (CD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO TAX CREDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The purpose of this Act is to require income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three‑year period, beginning with the sixth year of the credit.

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

     "§235-     Tax credits; generally.  Any income tax credit either existing under this chapter on December 31, 2025, or established or renewed under this chapter after December 31, 2025, shall include either:

     (1)  A five-year sunset date; or

     (2)  Beginning with the sixth year of the credit, an annual one-third reduction in the credit amount allowed to be claimed, over a three-year period;

provided that this section shall not apply to section 235-15 or income tax credits codified under part III of this chapter."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000, and shall apply to taxable years beginning after December 31, 2025.

Report Title:

Income Tax Credits; Sunset; Annual Reduction

Description:

Requires that income tax credits existing on 12/31/2025 or established or renewed after 12/31/2025 include a 5-year sunset or an annual one-third reduction, beginning with the 6th year of the credit.  Effective 7/1/3000.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO TAX CREDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The purpose of this Act is to require income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three-year period, beginning with the sixth year of the credit.

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

     "§235-     Tax credits; generally.  Any income tax credit established or renewed under this chapter after December 31, 2025, shall include either:

     (1)  A five-year sunset date; or

     (2)  Beginning with the sixth year of the credit, an annual one-third reduction in the credit amount allowed to be claimed, over a three-year period."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Income Tax Credits; Sunset; Annual Reduction

Description:

Requires that income tax credits established or renewed after 12/31/2025 include a five-year sunset or an annual one-third reduction, beginning with the sixth year of the credit.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO TAX CREDITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The purpose of this Act is to require income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three-year period, beginning with the sixth year of the credit.

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

     "§235-     Tax credits; generally.  Any income tax credit established or renewed under this chapter after December 31, 2025, shall include either:

     (1)  A five-year sunset date; or

     (2)  Beginning with the sixth year of the credit, an annual one-third reduction in the credit amount allowed to be claimed, over a three-year period."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2025.

Report Title:

Income Tax Credits; Sunset; Annual Reduction

Description:

Requires that income tax credits established or renewed after 12/31/2025 include a five-year sunset or an annual one-third reduction, beginning with the sixth year of the credit.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

CONFERENCE COMMITTEE REP. NO. 245

Honolulu, Hawaii

                 , 2025

RE:    H.B. No. 796

       H.D. 1

       S.D. 1

       C.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madam and Sir:

     Your Committee on Conference on the disagreeing vote of the House of Representatives to the amendments proposed by the Senate in H.B. No. 796, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

     The purpose of this measure is to require that income tax credits existing on December 31, 2025, or established or renewed after December 31, 2025, include a five-year sunset or an annual one-third reduction, beginning with the sixth year of the credit.

     Your Committee on Conference has amended this measure by:

     (1)  Changing the effective date to upon approval; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of H.B. No. 796, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Final Reading in the form attached hereto as H.B. No. 796, H.D. 1, S.D. 1, C.D. 1.

Respectfully submitted on behalf of the managers:

STAND. COM. REP. NO. 1668

Honolulu, Hawaii

RE:    H.B. No. 796

       H.D. 1

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B. No. 796, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

begs leave to report as follows:

     The purpose and intent of this measure is to encourage efficacy in the State's income taxation system by requiring new income tax credits to include a five-year sunset provision or a gradual reduction over a three-year period.

     Your Committee received testimony in support of this measure from two individuals.

     Your Committee received testimony in opposition to this measure from the Honolulu Film Office, Democratic Party of Hawaii Education Caucus, Democratic Party of Hawaii Labor Caucus, Hawaii Children's Action Network Speaks!, IATSE Local 665, Island Film Group, Pride at Work - Hawaii, SAG-AFTRA Hawaii Local, and numerous individuals.

     Your Committee received comments on this measure from the Department of Business, Economic Development, and Tourism; Department of Taxation; Catholic Charities Hawaii; Tax Foundation of Hawaii; and one individual.

     Your Committee finds that the impact of changes to the state tax code are not always apparent at the time that the change is first enacted.  Specifically, it is often difficult to precisely predict how effectively a new income tax credit may accomplish its policy goal or what adverse impact the tax credit may have on the State's ability to collect revenue.  Accordingly, this measure requires that any income tax credit established or renewed after December 31, 2025, either expire after five years or be reduced by one third each year after the fifth year of the credit.

     Your Committee has amended this measure by:

     (1)  Clarifying that the measure shall also apply to income tax credits in existence on December 31, 2025;

     (2)  Exempting certain income tax credits from the measure; and

     (3)  Specifying the taxable years to which the measure applies.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 796, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 796, H.D. 1, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO.  986

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 796

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 796, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

begs leave to report as follows:

     The purpose of this measure is to require income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three-year period, beginning with the sixth year of the credit.

     Your Committee received testimony in opposition to this measure from the Honolulu Film Office of the City and County of Honolulu; Catholic Charities Hawaiʻi; Hawaiʻi Children's Action Network Speaks!; SAG-AFTRA Hawaii Local; Democratic Party of Hawaiʻi Education Caucus; Coalition Earth; IATSE Local 665; Democratic Party of Hawaiʻi Labor Caucus; Pride at Work – Hawaiʻi; Hawaiʻi Ironworkers Stabilization Fund; and numerous individuals.  Your Committee received comments on this measure from the Department of Taxation; Department of Business, Economic Development, and Tourism; Tax Foundation of Hawaii; and one individual.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 796, H.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  337

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 796

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Economic Development & Technology, to which was referred H.B. No. 796 entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

begs leave to report as follows:

     The purpose of this measure is to require income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three-year period, beginning with the sixth year of the credit.

     Your Committee received testimony in opposition to this measure from HCANSpeaks!; SAG-AFTRA; Catholic Charities Hawaiʻi; Democratic Party of Hawaiʻi Labor Caucus; IATSE Local 665; Democratic Party of Hawaiʻi Education Caucus; and six individuals.  Your Committee received comments on this measure from the Department of Taxation; Department of Business, Economic Development, and Tourism; and Tax Foundation of Hawaii.

     Your Committee finds that the State must establish a more fiscally responsible phase-out process for tax credits to ensure the States's long-term economic well-being.  This measure addresses this need by requiring income tax credits established or renewed after December 31, 2025, to include a five-year sunset or a gradual reduction over a three-year period, beginning with the sixth year of the credit.

     Your Committee has amended this measure by changing the effective date to July 1, 3000, to encourage further discussion.

     As affirmed by the record of votes of the members of your Committee on Economic Development & Technology that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 796, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 796, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Development & Technology,