Tax credits part of Lingle's proposals
By Sean Hao
Advertiser Staff Writer
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Lingle's remarks on her business initiatives came during yesterday's State of the State address, which included modest proposals to strengthen Hawai'i's economy by cutting business fees and granting the state insurance commissioner broader powers to investigate workers' compensation insurance fraud.
Lingle also supported the use of a 20 percent, nonrefundable investment tax credit for individuals and companies that invest in University of Hawai'i research.
The GOP governor's proposals, if adopted by a Democrat-controlled Legislature, would carry forward her campaign promise to change Hawai'i's image as a place where it's difficult to do business.
Lingle's most significant measure, at least for cash-strapped businesses, would be the push to allow the state to borrow money for venture capital funds. The funds would invest in Hawai'i companies, with the loans backed by tax credits.
"The objective would be to help not only startup firms, but also more mature companies that are ready to launch a product or service," Lingle said.
Ted Liu, director for the Department of Business, Economic Development and Tourism, said the program would be run by the Hawaii Strategic Development Corp. and could initially involve borrowing $10 million to $15 million. If the program is successful, that figure could rise to $50 million over 10 years.
Lingle's support for the tax-credit backed fund was welcomed by local technology-industry leaders, who helped develop the proposal.
"There's a lack of capital here so any way in which to bring capital to Hawai'i is a good thing," said Ann Chung, executive director of the Hawai'i Technology Trade Association. "We're looking forward to working with the governor and the Legislature to get this implemented."
At the same time the administration is proposing changes to the Act 221 tax-credit program that would extend the research credit portion of the act for an additional five years, but limit the credits to certain companies, such as those engaged in technology, Liu said. Act 221 will terminate at the end of 2005 unless extended by lawmakers.
The proposed Act 221 changes would also 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.
Lingle's proposal to trim Department of Commerce and Consumer Affairs fees, including charges for financial institutional examination fees and online license renewals, could save businesses about $6.7 million by June 2005.
Lingle said she also wanted to eliminate a $25 charge that businesses must pay for certificates of good standing. The certificates, which are needed to bid on certain contracts, generate about $75,000 in fees annually.
The changes are designed to bring the department's fees in line with its operating costs, Lingle said. "The business community should be our partner in economic development, not a profit center for government bureaucracy," she said.
The comment drew praise from Jim Tollefson, president of the Chamber of Commerce of Hawai'i.
"That one I think I'll put on my wall," he said. "We feel like government should be run like a business so that's a positive step."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
