Stance on Act 221 reversed
By Sean Hao
Advertiser Staff Writer
A key member of the Legislature came out yesterday in favor of releasing the names of investors benefiting from the state's high technology tax credit program known as Act 221.
"People have a right to know how their dollars are spent," said Rep. Brian Schatz, D-25th (Makiki, Tantalus), chairman of the economic development committee.
Last week Schatz's committee voted in favor of a five-year extension of Act 221 without including any requirement to disclose the names of beneficiaries. Schatz said at the time he did not think disclosure was necessary.
"While initially concerned about protecting the confidentiality of investors, those concerns must be weighed against the need for the public and decision makers to know how taxpayer dollars are spent," the statement from Schatz's office said.
Schatz said he intends to work during the next several weeks to get disclosure requirements included in the revised Act 221.
The Act 221 tax credit program began in 2001 as a way to spur the state's fledgling technology industry. The tax credits, which were set to expire in 2005, cost the state $21.9 million in the first year and will cost $48.4 million this fiscal year before rising to $76.7 million in fiscal 2005, according to state estimates.
Verifying the benefits of the program has proven difficult because much of the information — including identities of the companies involved, what they do, their investors and the amount of credits claimed — remains confidential.
The law says every dollar invested in qualifying high technology ventures, including film and television productions, can be used to reduce state tax obligations by $1. The tax credits are spread over a five-year period and are capped at $2 million per investment.
Proponents of Act 221 argue that the credits are a valuable economic tool for promoting business growth and creating new jobs in a state overly dependent on tourism and military dollars. Some supporters also argued that disclosure of who benefits from the credits could deter investors from participating.
Lawmakers now are considering a five-year extension and changes that would make the application of the act less liberal and provide guidance meant to curtail investment tax credit returns that in some cases have been higher than intended.
Yesterday, Senate Majority Leader Colleen Hanabusa, D-21st (Nanakuli, Makaha), agreed that the identities of those claiming Act 221 credits should be made public.
"I'm not sure we need to know all the details of the transactions, but there's got to be something like the name and how much are they getting," she said. "I hope that as people talk about extending Act 221, they look at it in this way."
Whether legislative leaders follow through remains to be seen. Despite similar talk earlier this session, neither House nor Senate versions of bills to amend Act 221 currently being debated contain provisions that would identify the program's beneficiaries.
Meanwhile, Gov. Linda Lingle's administration appears to favor disclosure.
Ted Liu, director for the state Department of Business, Economic Development and Tourism, has said, "What would be reasonable to know is who are the companies that are benefiting from 221."
Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com.
