Report Title:

Investment Tax Credit; Motor Sports Facility; Kalaeloa, Parcel 9

Description:

Establishes an income tax credit for taxpayers investing in the motor sports facility to be developed at Kalaeloa, parcel 9. (SD1)

THE SENATE

S.B. NO.

1734

TWENTY-THIRD LEGISLATURE, 2005

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO TAXATION.

 

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

SECTION 1. The State and the city and county of Honolulu have established and implemented plans to direct growth to the secondary urban center of Kapolei. The State and county conducted, and participated extensively in, the closure process of Naval Air Station, Barbers Point, which is the largest single event affecting growth in Kapolei. During the base closure process, the State and county recognized the need to replace the existing motor sports facility at Campbell Industrial Park.

The existing motor sports facility offers an inexpensive place for racing motorized vehicles under safe conditions, and provides a vital service to the community by keeping racing and all of its inherent dangers off our public streets and freeways. The existing facility also aids in public safety by providing a place to safely train law enforcement personnel from the State and the county, as well as the general public.

Although the existing facility meets minimum safety standards, it was built over forty years ago, and does not include many of the more desirable current safety standards that would be incorporated into a new motor sports facility. The remaining term of the lease on the existing facility is very short and does not afford enough time to amortize any major costs. Additionally, any rebuilding of the existing facility would require its closure for at least a few months, which likely would increase racing on our public streets and freeways during the interim.

Accordingly, the base closure commission directed that a portion of the former Naval Air Station, Barbers Point military base be redeveloped into a motor sports facility. The location has been specified as Kalaeloa, parcel 9, and the Navy has completed the federally mandated environmental impact evaluation process.

The closure of Naval Air Station, Barbers Point removed approximately 2,800 military personnel from the area along with hundreds of employees of businesses serving the base. This has caused a severe loss of jobs and wages for the residents in the area, resulting in personal hardships and greater demands on the State for social and other services.

The development of the planned motor sports facility will provide a temporary boost of jobs in planning and construction, and provide permanent jobs during the ongoing operations of the new facility.

The purpose of this Act is to establish investment tax credits for Hawaii taxpayers who invest in the private development of the motor sports recreation and public safety training and educational facility at Kalaeloa, parcel 9.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Motor sports recreation and public safety training and educational facility investment tax credit; Kalaeloa parcel 9. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter a motor sports recreation and public safety training and educational facility investment tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter or, at the election of the taxpayer, from the tax liability imposed by chapter 237. The motor sports recreation and public safety training and educational facility investment tax credit shall be available for the taxable year in which the qualified investment was made and for additional qualified investments made in any of the following five consecutive years; provided that the credit is properly claimed, does not exceed the limits as specified under this section, and is not limited by the amount of general excise and transient accommodation tax generated as further specified under this section. If the rate of general excise and transient accommodation taxes generated by the motor sports recreation and public safety training and educational facility is less than $10,000,000 annually, the tax credit shall be deductible for tax years beyond December 31, 2013; provided that the total tax credit shall not exceed $60,000,000 in the aggregate for all qualified taxpayers.

(b) The tax credit shall be equal to the qualified investment made by the taxpayer in the project for any one or more years in the six consecutive years beginning after December 31, 2004 through December 31, 2010. The total tax credits claimed shall not exceed $60,000,000 in the aggregate for all qualified taxpayers for all six years; provided that notwithstanding the amount of tax credit earned in any year, a maximum of $10,000,000 of tax credit in the aggregate for all qualified taxpayers may be utilized in any one year; provided further that the amount of tax credit used in any one taxable year is limited to the amount of general excise and transient accommodations tax generated by the construction and operation of the motor sports recreation and public safety training and educational facility. Any tax credits over $10,000,000 in any one year shall be used as provided in subsection (d).

(c) To qualify for the investment tax credit, a taxpayer shall have invested in the qualified project as defined in subsection (i).

(d) If the tax credit under this section exceeds $10,000,000 in the aggregate for all qualified taxpayers for any taxable year or exceeds the taxpayer's income tax liability for any year for which the tax credit is taken, the excess of the tax credit may be used as a tax credit against the taxpayer's tax liability in subsequent years until exhausted.

(e) Every claim, including amended claims, for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the tax credit.

(f) If at any time during the six-year period in which the investment tax credits are earned under this section the investment no longer meets the definition of qualified investment, due to:

(1) The sale by the taxpayer of the taxpayer's interest in the qualified project; or

(2) The withdrawal by the taxpayer of the taxpayer's investment wholly or partially from the qualified project;

the tax credit claimed under this section shall be recaptured. The recapture shall be equal to one hundred per cent of the total tax credits claimed under this section for the taxable year in which the investment fails to meet the definition of a qualified investment. The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs.

(g) If at any time during the six-year period in which the investment tax credits are earned under this section the project no longer qualifies as a qualified project, the tax credit claimed under this section shall be recaptured. The recapture shall be equal to one hundred per cent of the total tax credit claimed under this section for the taxable year in which the project ceases to qualify and the remainder of the six-year period.

(h) This section shall apply to qualified investments made after December 31, 2004, and shall not apply to qualified investments made after December 31, 2010.

(i) If any credit is claimed under this section, then no taxpayer shall claim a credit under any other chapter for the same qualified costs for which a credit is claimed under this section.

The qualified taxpayer, no later than March 31 of each year in which qualified investments were made in the previous taxable year, shall submit a written, certified statement to the director of taxation, identifying:

(1) The qualified investments, if any, made in the previous taxable year; and

(2) The amount of tax credit claimed pursuant to this section, if any, in the previous taxable year.

(j) As used in this section:

"Kalaeloa, parcel 9" or the "project" means the property identified in the NAS Barbers Point Community Redevelopment Plan and Amendment (Helber Hastert & Fee, Planners, March and December 1997), and as designated in the special area plan of the city and county of Honolulu on which the motor sports recreation and public safety training and educational facility is to be developed.

"Qualified investment" means any investment in the qualified project.

"Qualified project" means the development of a motor sports recreation and public safety training and educational facility at Kalaeloa, parcel 9, including expenditures for land acquisition and closing costs, studies, design and engineering, infrastructure and construction directly related thereto, including:

(1) Multi-purpose driving surfaces, barriers, fencing, lighting, and driver communication systems;

(2) Training and educational facilities, including classrooms;

(3) Safety and first response medical facility, safety containment systems;

(4) Participant and spectator accommodations, including maintenance, security, storage, and other supporting facilities; and

(5) Equipment intended for permanent use in the facility.

"Qualified taxpayer" means a person who fulfills the requirements of subsection (c).

(k) The department of business, economic development, and tourism shall calculate the amount of tax credit allowed in any one year by using existing models to determine the rate of general excise tax and transient accommodation tax earned as a percentage of construction, commerce, and visitor counts directly generated by the construction and operation of the motor sports recreation and public safety training and educational facility."

SECTION 3. Section 235-2.45, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Section 704 of the Internal Revenue Code (with respect to a partner's distributive share) shall be operative for purposes of this chapter; except that section 704(b)(2) shall not apply to:

(1) Allocations of the high technology business investment tax credit allowed by section 235-110.9;

(2) Allocations of net operating loss pursuant to section 235-111.5; [or]

(3) Allocations of the attractions and educational facilities tax credit allowed by section 235-110.46[.]; or

(4) Allocations of the motor sports recreation and public safety training and educational facility investment tax credit allowed by section 235-  ."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2005 and shall apply to taxable years beginning after December 31, 2004.