Hotel tax bill advances

By Kelly Yamanouchi
Advertiser Staff Writer

State lawmakers yesterday moved forward with a proposal to raise and extend tax credits for hotel construction and renovation in aging tourist spots. The credits could result in a drop of up to $140 million in tax revenue over the next 10 years.

House tourism committee chairman Jerry Chang, D-2nd (Hilo), plans to take up the proposal in his committee Tuesday. The bill provides a hotel tax credit for Waikiki; Kailua and Hilo on the Big Island; Lahaina, Maui; Moloka'i; Coconut Plantation on Kaua'i; and other designated areas.

Chang said he thinks the tax credit would allow renovated hotels to charge higher rates, attract more conventioneers to Waikiki and support other areas in the state.

"A lot of hotels are being converted to time-shares and condos. Every time we do that we reduce our hotel pool," Chang said.

The House tourism committee voted yesterday not to move forward on three alternative measures that would have extended a statewide tax credit until 2010, granted a tax credit for Waikiki alone, or provide a tax credit for resorts in Waikiki that comply with the Waikiki Special District.

Chang said the bill the committee will consider mirrors a Ko Olina tax credit passed last session, though it covers more areas and has a cap almost twice as high.

Chang said the proposal, including a $140 million cap, addresses the governor's concern about a hotel tax-credit bill she vetoed last year that had no limit on the cost of the credit.

But the Department of Taxation testified that the bill could still cut into the state budget.

"We cannot afford to expand tax credits beyond what is already available," said Department of Taxation Director Kurt Kawafuchi. He said the department's position may change if the legislation is written to keep hoteliers from claiming double tax credits for the same project.

The legislation would put in place a nonrefundable credit of up to $14 million a year for 10 years that applies to hotels, hotel-condos, commercial buildings and time-share developments.

A statewide hotel construction and renovation tax credit of 4 percent is set to be in place until the end of 2005.

The new proposal is for projects in the specified areas valued at less than $10 million over a five-year period, which would be eligible for a 4 percent credit. Projects valued at $10 million or more would qualify for an 8 percent credit.

Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.