RELATING TO AN INTERSTATE COMPACT TO PHASE OUT CORPORATE WELFARE.

HB462

HOUSE OF REPRESENTATIVES

H.B. NO.

462

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to an interstate compact to phase out corporate Welfare
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The Hawaii
Revised Statutes is amended by adding a new chapter to be appropriately
designated and to read as follows:

"
Chapter

interstate
compact to phase out corporate welfare

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Short title.
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This chapter may be cited as the Interstate
Compact to Phase Out Corporate Welfare Act.

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Enactment of compact.
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The Interstate Compact to Phase Out Corporate
Welfare Act is hereby enacted into law and
entered into with all other
jurisdictions legally joining therein in the form substantially as follows:

PART

i.
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MEMBERSHIP

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-11
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Membership.
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Any state of the United States and the
District of Columbia may become a member of this compact by enacting this
compact.

PART II.
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DEFINITIONS

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Definitions.
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As used in this compact, unless the context
clearly requires a different meaning:

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"Company-specific grant" means
any disbursement of funds via property, cash, or deferred tax liability, by the
state government to a particular company.

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"Company-specific tax incentive"
includes:

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(1)
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Any
change in the general tax rate or valuation offered or presented to a specific
company that is not available to other similarly situated companies; and

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(2)
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Any
tax incentive that is part of a special agreement negotiated with an official
of the state government.

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"Corporate welfare" means any
company-specific or industry-specific disbursement of funds via property, cash,
or deferred or reduced tax liability, by a state or local government, to a
particular company or industry.

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"Located in any other member
state" means any office space, manufacturing facility, or company
headquarters that is physically located in another member state, whether or not
the company has other property in the member state.

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"Member state" means any state or
the District of Columbia that has enacted a statute agreeing to this compact.

PART

III.
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FINDINGS

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Findings.
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The member states find that:

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(1)
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Corporate
welfare as an economic development policy is among the least effective uses of
taxpayer dollars;

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(2)
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Local
and state leaders are in a prisoner's dilemma where it is in everyone's
interest to stop the practice of corporate welfare altogether and create a
level playing field for all employers, but each level of government has an
incentive to subsidize a company through a tax abatement, tax credit, or direct
subsidy, thereby generating a race to the bottom;

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(3)
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State
and local government cooperation to phase out all forms of corporate welfare,
including company-specific and industry-specific subsidies, is required to free
government leaders from the prisoner's dilemma;

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(4)
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While
it will take years to build a national consensus to phase out all forms of
corporate welfare, governments should begin to phase out the most egregious and
destructive forms of corporate welfare as soon as practicable, where agreement
among some governments to do so can be reached;

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(5)
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Companies
should grow and potentially relocate to other states based on the general
condition of those states (including but not limited to modern infrastructure,
an educated workforce, a clean environment, and a favorable tax and regulatory
climate), not based on the size of a specific grant for that company;

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(6)
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Company-specific
subsidies fuel business inequality because only the largest businesses tend to
receive these subsidies;

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(7)
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A
hopeful path toward ending the practice of corporate welfare altogether is to
begin with the most problematic of these practices, which are company-specific
offers to companies located in other states;

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(8)
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Creating
a national board of appointees from states that results in a permanent body
charged with finding consensus, and drafting improvements and revisions to this
compact, will assist governments in escaping from the prisoner's dilemma; and

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(9)
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This
compact is a collaborative approach toward building a national consensus for a
better, fairer economic development policy for all.

PART

IV.
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COMPANY-SPECIFIC SUBSIDIES TO
COMPANIES IN OTHER MEMBER STATES

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Company-specific subsidy; company facility
located in other member state.
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(a)
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Each member state agrees to
refrain from offering or providing any company-specific tax incentive,
company-specific grant, or other distribution of funds prohibited under this
compact, for any company facility currently located in any other member state.

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(b)
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Each member state agrees to refrain from offering or providing funds for
corporate headquarters, manufacturing facilities, office space, or other real
estate developments, for any company facility currently located in any other
member state, if that headquarters, facility, or office space will relocate to
the offering member state.

PART V.
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EXCLUSIONS

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Exclusions.
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(a)
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Workforce development grants for employee training shall not be subject
to this compact, as the company receiving the grant may benefit but the
employees receiving the training are the largest beneficiaries.

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(b)
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This
compact is not retroactive and existing company-specific grants shall not be impacted
by this compact; provided that any changes to the terms of any existing
company-specific grants shall be considered new company-specific grants and prohibited
under the terms of this compact.

PART

VI.
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WITHDRAWAL

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Withdrawal.
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Any member state may withdraw from this
compact with six months' written notice to the chief executive officer of every
other member state to this compact.

PART

VII.
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ENFORCEMENT

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Enforcement.
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(a)
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The chief law enforcement officer of each member state shall enforce
this compact.

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(b)
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A taxpaying resident of any member state shall have standing in the
courts of any member state to require the chief law enforcement officer of that
member state to enforce this compact.

PART

VIII.
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NATIONAL BOARD OF STATES TO DRAFT
AND DISSEMINATE

NEXT STEPS TO PHASE OUT CORPORATE WELFARE

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National board of states; establishment; purpose;
next steps.
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(a)
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A board of member states to the Interstate
Compact to Phase Out Corporate Welfare Act is established by this compact.

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(1)
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Each
chief executive officer of each member state shall appoint one member to the
board; and

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(2)
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The
board shall accept appointees from non-member states that wish to appoint a
member of the board.

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(b)
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The board's purpose shall be to publish suggested revisions to this
compact that relate to continuing to phase out all forms of corporate welfare,
including from local governments, for consideration by state legislatures.

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(c)
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The board shall:

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(1)
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Convene
at least annually;

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(2)
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Elect
officers from its membership;

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(3)
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Establish
rules and procedures for its governance;

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(4)
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Collect
testimony from all interested parties, including member states and
organizations, and associations representing state legislators, taxpayers, and
subject matter experts, on how this compact may be improved and strengthened;
and

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(5)
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Publish
a report in December of each year that includes suggested revisions and
improvements to this compact.

PART

IX.
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CONSTRUCTION AND SEVERABILITY

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Construction.
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The provisions of this compact shall be
liberally construed to effectuate its purposes.

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Severability.
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(a)
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If
any phrase, clause, sentence, or provision of this compact, or the
applicability of any phrase, clause, sentence, or provision therein to any
government, agency, person, or circumstance is declared in a final judgment by
a court of competent jurisdiction to be contrary to the constitution of the
United States or is otherwise held invalid, the validity of the remainder of
this compact and the applicability of the remainder of this compact to any
government, agency, person, or circumstance shall not be affected.

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(b)
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If this compact is held to be contrary to the constitution of any member
state, the compact shall remain in full force and effect as to:

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(1)
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The
remaining member states; and

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(2)
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The
affected member state as to all severable matters."

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SECTION 2.
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This Act shall take effect on July 1, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Corporate Welfare; Phase Out; Interstate Compact

Description:

Adopts
the Interstate Compact to Phase Out Corporate Welfare.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.