Report Title:

Tax Credit; Employment of Individuals with Disabilities

Description:

Establishes a tax credit for employers who hire individuals with disabilities of twenty per cent of the qualified first-year wages for that year, not to exceed $6,000.

THE SENATE

S.B. NO.

1196

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to taxation.

 

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

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Credit for employment of persons with disabilities. (a) There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a credit for employment of an individual with disabilities which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The amount of the credit determined under this section for the taxable year shall be equal to twenty per cent of the qualified first-year wages for that year. The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed $6,000.

(c) For purposes of this section:

"Individual with disabilities" means any individual who has a physical or mental impairment that substantially limits one or more major life activities for which the individual receives compensation under a program administered by the State.

"Hiring date" has the same meaning as in section 235-55.91(c).

"Qualified first-year wages" means, with respect to any individual with disabilities, qualified wages attributable to service rendered during the one-year period beginning with the day the individual begins work for the employer.

"Qualified wages" means the wages paid or incurred by the employer during the taxable year to an individual with disabilities when more than one-half of the wages paid or incurred for such an individual is for services performed in a trade or business of the employer.

"Wages" has the meaning given to such term by section 3306(b) of the Internal Revenue Code (determined without regard to any dollar limitation contained in the Internal Revenue Code section). "Wages" shall not include:

(1) Amounts paid or incurred by an employer for any period to any individual with disabilities for whom the employer receives state or federally funded payments for on-the-job training of the individual for the period;

(2) Amounts paid to an employer (however utilized by the employer) for any individual with disabilities under a program established under section 414 of the Social Security Act; and

(3) If the principal place of employment is at a plant or facility, and there is a strike or lockout involving individuals with disabilities at the plant or facility, amounts paid or incurred by the employer to the individual with disabilities for services which are the same as, or substantially similar to, those services performed by employees participating in, or affected by, the strike or lockout during the period of strike or lockout.

(d) The following wages paid to individuals with disabilities are ineligible to be claimed by the employer for this credit:

(1) No wages shall be taken into account under this section with respect to an individual with disabilities who:

(A) Bears any of the relationships described in section 152(a)(1) to (8) of the Internal Revenue Code to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than fifty per cent in value of the outstanding stock of the corporation (determined with the application of section 267(c) of the Internal Revenue Code);

(B) If the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in section 152(a)(1) to (8) of the Internal Revenue Code to a grantor, beneficiary, or fiduciary of the estate or trust; or

(C) Is a dependent (described in section 152(a)(9) of the Internal Revenue Code) of the taxpayer, or, if the taxpayer is a corporation, of an individual described in subparagraph (A), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.

(2) No wages shall be taken into account under this section with respect to any individual with disabilities if, prior to the hiring date of the individual, the individual had been employed by the employer at any time during which the individual was not an individual with disabilities.

(3) No wages shall be taken into account under this section with respect to any individual with disabilities unless such individual either:

(A) Is employed by the employer at least ninety days; or

(B) Has completed at least one hundred-twenty hours of services performed for the employer.

(e) In the case of a successor employer referred to in section 3306(b)(1) of the Internal Revenue Code, the determination of the amount of the tax credit allowable under this section with respect to wages paid by the successor employer shall be made in the same manner as if the wages were paid by the predecessor employer referred to in the section.

(f) No credit shall be determined under this section with respect to wages paid by an employer to an individual with disabilities for services performed by the individual for another person unless the amount reasonably expected to be received by the employer for the services from the other person exceeds the wages paid by the employer to the individual for such services.

(g) The credit allowed under this section shall be claimed against net income tax liability for the taxable year. A tax credit under this section which exceeds the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

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

(i) No deduction shall be allowed for that portion of the wages or salaries paid or incurred for the taxable year that is equal to the amount of the credit determined under this section.

(j) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2004.

INTRODUCED BY:

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