However, members of the Senate Ways & Means Committee reduced the duration of the proposed extension from two years to one.

The bill, which now goes to the Senate floor, gives hotel developers a 10 percent income tax credit to offset costs associated with building or upgrading a hotel or other facility within a resort area. The current tax credit expires this summer.

The state's myriad business tax credits have come under criticism in recent months because of accountability concerns and suspicions that they are cutting into tax collections.

Still, one supporter of the tax credit said a one-year extension of the hotel tax credit is not long enough to generate the millions in hotel improvements needed in Hawai'i.

"A one-year tax credit is better than no credit, but the benefit is bigger when it's spread out over a period of time," said Joseph Toy, president of hotel consultant Hospitality Advisors LLC.

Hotels saved $7.4 million on their tax bills in 2001, the most recent year for which figures are available. That amount has likely grown significantly because lawmakers increased the size of the hotel tax credit from 4 percent to 10 percent after the Sept. 11 terrorist attacks.

The Department of Taxation estimates that extending the credit will reduce state tax collections by $32.9 million a year. But Toy and others in the industry contend that the tax credits increase tax revenues by attracting higher-spending visitors and increasing room rates.

Toy cites a study conducted by the industry estimating that nine hotel properties statewide spent $233 million renovating hotels since 2000. That resulted in $6.2 million a year in additional general excise and room taxes for the state, Toy said.