Act 221 on the Brink

Act 221 is on the brink of being gutted. A bill that would hack out the heart of tax credits aimed at building and sustaining a high tech industry in Hawaii is expected to come to a floor vote tomorrow.

Hawaii's technology tax credits, generally referred to collectively as Act 221, have been under fire in the state Legislature. Of course, the government looks to boost revenue in the face of a contracting economy and looming deficits, every tax credit has been in the crosshairs. But Act 221 has been under especially harsh scrutiny, with critics seeing only wealthy outsiders reaping the financial benefits and not the very real jobs and companies it has fostered here in the islands.

Tech industry leaders and business lobbyists had been working with legislators to address some of their concerns, compromising on benefit caps and timetables. But according to Lisa Gibson of the Hawaii Science & Technology Council, the bill that came out of committee last week -- HB199 SD2 -- eviscerates a key part of the technology tax credit setup.

In an e-mail alert, Gibson said the House and Senate conferees rejected proposals from industry representatives that would have provided over $130 million in savings via an aggregate cap of $80 million. Instead, they replaced the 2:1 credit allocation policy with a 1:1 limit.

What does this mean?

"The intent has always been to kill Act 221, not provide savings," Gibson asserts. She also says it demonstrates that legislators are ignoring the input of local business and technology leaders who are adamant that the proposed policy change will reduce investment and hurt the industry.

"The state is needlessly breaking it's promise to investors and companies by changing this law one year prior to the 2010 sunset," Gibson added.

Gibson had expressed concerns about this outcome last week during our radio show, Bytemarks Cafe, while the conference committee was still deliberating. Now, she says the floor vote tomorrow is the last chance the tech industry will have to preserve the benefits of Act 221.

"We need to galvanize the tech community, employees, investors everyone to hold their legislators accountable," Gibson writes.

The Hawaii Science & Technology Council has posted an alert on its website, including ways to contact lawmakers and sample text to include.