HOUSE OF REPRESENTATIVES

H.B. NO.

2218

TWENTY-SIXTH LEGISLATURE, 2012

 

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 purpose of this Act is to spur economic growth through the establishment of a state income tax credit that is available to qualified taxpayers who purchase or remodel a qualified principal residence after March 31, 2012, and before January 1, 2014.  The Act also places a $10,000,000 annual limitation on the available aggregate amount of those tax credits.

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

     "§235-     Residential property purchase, construction, and remodeling tax credit.  (a)   There shall be allowed to each qualified taxpayer subject to the tax imposed by this chapter a residential construction and remodeling tax credit that 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)  For purposes of this section:

     "Construction or remodeling cost" means any costs incurred after December 31, 2011, for the plans, design, construction, or equipment that is permanently affixed to a building or structure related to new construction, alterations, or modifications of a residential apartment unit or house, and performed by a licensed contractor, and shall not include any costs for which another credit is claimed under this chapter.

     "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

     "Purchase price" means all direct and indirect costs associated with the purchase of a qualified principal residence, excluding land acquisition costs and escrow closing costs.

     "Qualified principal residence" means a dwelling or residential unit that:

     (1)  Is located in the State;

     (2)  Did not previously exist and has been constructed from the ground up;

     (3)  Receives a certificate of completion after March 31, 2012;

     (4)  Is occupied by the owner as the owner's primary residence for no less than two hundred seventy days per year in each of the two consecutive years immediately following close of escrow; and

     (5)  Is eligible for a county homeowner's exemption.

A "qualified principal residence" includes a single family home, duplex, condominium, manufactured home, or townhouse.

     "Qualified taxpayer" means an individual who:

     (1)  Signs a binding contract to purchase a qualified principal residence with a purchase price of $800,000 or less after March 31, 2012, and before January 1, 2014; provided that the individual closes escrow on the purchase of the individual's newly constructed principal residence after March 31, 2012, and before March 1, 2014; or

     (2)  Owns residential real property and incurs construction or remodeling costs during the taxable year for which the credit is claimed; provided that the taxpayer is in compliance with all applicable federal, state, and county statutes rules and regulations and occupies the residential real property as a primary residence; provided further that the costs shall not exceed $250,000 in the aggregate for each residential unit and that the costs are incurred before January 1, 2014;

     (c)  The amount of the tax credit shall be equal to:

    (1)  The lesser of $9,000 or four per cent of the purchase price of the qualified principal residence; provided that the tax credit shall be available in two equal installments over two consecutive taxable years beginning with the taxable year in which the binding contract to purchase the qualified principal residence is signed; or

    (2)  The lesser of $3,000 or four per cent of the residential construction or remodeling costs during the taxable year for which the credit is claimed; provided further that the tax credit may be claimed only once for a single residential property; and provided further that if a deduction is taken under section 179 (with respect to election to expense certain depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the construction or remodeling cost for which the deduction is taken.

     (d)  If the amount of tax credit available under this chapter exceeds the taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

     (e)  All claims, including amended claims, for a tax credit available under this chapter shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit, except as provided in subsection (d).

     (f)  If a qualified taxpayer sells or no longer resides in the qualified principal residence within seven hundred thirty days after closing escrow on the qualified principal residence, then the taxpayer shall be subject to recapture of the previously claimed credit under this section on a pro rata basis.

     (g)  One hundred per cent of the total tax credit claimed for construction or remodeling shall be recaptured if, within the two-year period from completion of the construction or remodeling for which the credit has been claimed, the taxpayer sells the residential real property upon which the construction or remodeling was performed.  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 under this subsection.

     (h)  The director of taxation shall prepare any forms that may be necessary to claim a credit under this section.  The director may also require the taxpayer to furnish information to ascertain the validity of the claim for the tax credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

     (i)  The department of business, economic development, and tourism shall:

(1)  Maintain records of each qualified taxpayer's total amount of purchase prices and construction or remodeling costs;

     (2)  Verify the total amount of purchase prices and construction or remodeling costs;

     (3)  Certify the total amount of the tax credit for each taxable year, and the cumulative amount of the tax credit during the credit period.

     Upon each determination, the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying the qualifying amounts of purchase prices and construction or remodeling costs, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period.  The qualified taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.  Notwithstanding the department of business, economic development, and tourism's certification authority under this section, the director of taxation may audit and adjust certification to conform to the facts.

     (j)  If in any year, the annual amount of credits certified pursuant to subsection (i) reaches $10,000,000 in the aggregate, the department of business, economic development, and tourism shall immediately discontinue certifying credits and notify the department of taxation.  In no instance shall the total amount of certified credits exceed $10,000,000 per year.  To comply with this restriction, the department of business, economic development, and tourism shall certify credits on a first come, first served basis.

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2011.

INTRODUCED BY:

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Report Title:

Tax Credit; Residential Construction and Remodeling

 

Description:

Provides qualified homeowners temporary tax credits for purchases of new residential properties and for new construction and remodeling projects on residential properties.

 

 

 

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