EDITORIAL
High-tech tax credit is in need of polishing

After an initial flurry of negative publicity that threatened to pull the plug entirely on Act 221, the state's innovative high-tech tax credit law, it appears lawmakers and policy-makers have come to a more reasoned approach.

And that's a good thing because Act 221, even if flawed, has indisputably put Hawai'i on the radar of a number of high-flying entrepreneurs. It is not only attracting business to our shores, it is attracting attention.

Staff writer Sean Hao reports that several changes are in store for Act 221, both administratively and legislatively. Together, they make a great deal of sense.

The Tax Department has ruled that one-shot movie productions in the Islands will no longer qualify for the lucrative tax breaks written into Act 221. While what the movie producers did was legal, it did not fit with the original intent of the law, which was to stimulate new high-tech businesses that would put down roots in the Islands.

However, it is still possible for filmmakers to win Act 221 credits if they set up business here on a permanent basis. In fact, Hao writes, several smaller film production companies are doing just that.

Meanwhile, the Lingle administration has introduced a bill that would substantially boost a specific movie production tax credit from 4 percent to 15 percent (20 percent on the Neighbor Islands).

Even one-shot productions would benefit from this. It makes sense to offer incentives to film and production companies that wish to shoot in the Islands. They generate well-paid jobs and help develop a sustainable talent pool.

As lawmakers smooth the rough edges of Act 221, one area they should review is the matter of public disclosure.

The Tax Department, aware of the importance of confidentiality in the handling of tax returns, has declined to release a list of the companies that have qualified under Act 221.

This goes too far. No one would expect to look over the books and tax returns of a private company. But a simple list of the companies that have qualified for Act 221 and a description of the kind of business they do would help policy-makers and the public determine whether they are getting their money's worth.