Act 221 changes should
provide more disclosure
More detailed data on the cost and effectiveness of the Act 221 high-technology credits could be made public in the future as part of recently passed legislation tweaking the controversial business incentive system.
Act 221 redo
The Hawaii Technology Trade Association plans to explain the implications of the revised Act 221 tax-credit law during its annual meeting later this month.
When: May 28, 11 a.m. to 2 p.m.
Where: Waialae Country Club
Speakers: State Sen. David Ige, chairman of the Senate Committee on Science, Art & Technology; and Rep. Brian Schatz, chairman of the House Committee on Economic Development; Ted Liu, director of the state Department of Business, Economic Development and Tourism; former state Tax Director Ray Kamikawa; and David Watumull, president and CEO of Hawaii Biotech.Information: 547-5835.
The legislation, which Governor Linda Lingle has indicated she will sign, will allow tax officials to compile more data on tax-credit applicants. Lawmakers and the state tax director said some of this data would likely be allowed into the public arena.
"We think the public will have more data with respect to whether these incentives are working or not," said Rep. Brian Schatz (D-Tantalus, Makiki), chairman of the House committee on economic development.
The generous tax incentives enacted in 2001 have been mired in controversy since it emerged last year that some companies claiming them may have abused the spirit of Act 221, which was intended to help high-tech firms lure investment and create jobs.
Also, since each applicant's tax data is protected by privacy laws, there has been a lack of reliable information detailing the cost to the state and whether the credits are having the intended effect.
But the recently passed legislation, which goes into effect on July 1, has tightened the requirements for obtaining the tax credits.
It also would require Act 221 claimants to obtain prior certification from the state tax director that their claim is legitimate. To do so, they will have to supply the tax department with detailed information. Such information previously was not required under the Act and only 60 percent of claimants supplied it, according to state Tax Director Kurt Kawafuchi.
Kawafuchi said the names of applicants would still be confidential, but anonymous aggregate data on the credits could be made available in the Taxation Department's annual tax credit report in the future, possibly broken down by sector.
He said this may include specifics on the amount of jobs created by each applicant, though he is yet to work out precisely what kind of information he will request of applicants.
"We want to pin (jobs data) down tighter," he said. "I'd like to know how many jobs are going to be created and the salaries they will be paying.
"Aggregate data should be something we can share," he said.
"If it's in the best interests of the state, that's something we'd want to do. We want this to be as transparent as possible," he said.
The confidentiality of Act 221 tax information has fanned suspicions of abuse and thwarted a precise accounting of the law's costs and benefits. Earlier this year, the Department of Business, Economic Development & Tourism released figures saying Act 221 had created 600 to 800 new jobs but admitted the numbers were partly guesswork.
Rep. Schatz said the numbers were less than specific because the Tax Department was unable to share Act 221 information with the Department of Labor & Industrial Relations.
Schatz said he plans to enter wording into the House of Representatives Journal calling for greater sharing of data between government departments. Entries in the House Journal, though non-binding, are used as guidance in interpreting the meaning of legislation.
"The law as it was took the idea of taxpayer privacy too far and that put too much strain on the administration," he said.
