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The Honolulu Advertiser
Posted on: Friday, April 11, 2003

Senate OKs Act 221 measure

By Lynda Arakawa
Advertiser Capitol Bureau

The state Senate yesterday approved a bill to tighten requirements in the high-tech tax-credit law known as Act 221.

Gov. Linda Lingle had proposed closing what she said are loopholes in Act 221, saying the eligibility requirements were too broad and subject to abuse. The House and Senate previously rejected Lingle's proposal, but senators revived the idea on Tuesday by inserting it into an existing measure, House Bill 1225.

The Senate voted 17-8 to approve the amended bill yesterday, sending it back to the House. The measure will likely go to conference committee, where House and Senate lawmakers work to reconcile differences in their versions of bills.

The House and Senate had until midnight yesterday to pass bills and send it back to their originating houses. Both houses passed the bulk of more than 200 bills on Tuesday. Because the House and Senate passed different versions of most of the measures, many will go to conference committee.

The drafts agreed to by the conference committee must then be approved by both houses before they are sent to the governor.

House Bill 1225 would limit eligibility for tax credits under Act 221, including removing language in the act that says it will "be liberally construed." The amendments also include changing the existing 20 percent refundable credit on research activities to a nonrefundable credit applicable only to increased research activities.

Those who support the changes said the law had to be amended to ensure the tax credits are used as the Legislature intended. They also said limiting the eligibility would save the state about $55 million.

But others said Act 221 has helped businesses in the state and that it has potential to grow and diversify Hawai'i's economy.

The Senate also passed House Bill 389 that would require employers who provide sick leave for employees — including the state — to allow employees to use up to 10 days of sick leave to care for a family member. The bill allows for collective bargaining agreements to authorize more than 10 days of family leave.

The Senate did not make any changes to the house bill, so it now goes to the governor.

Reach Lynda Arakawa at 525-8070.