REPORT TITLE:
Enterprise Zones


DESCRIPTION:
Expands the enterprise zones law to allow businesses engaged in
research, development, sale, or production of all types of
genetically-engineered medical, agricultural, or maritime
biotechnology products.  Includes call centers and businesses
that repair assisted technology equipment under the enterprise
zones law.  Allows business firms to be designated qualified
businesses on a yearly basis with the approval of the applicable
governing county body and the department of business, economic
development, and tourism upon the business firm providing
satisfactory proof of its eligibility.  (HB2438 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2438
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO STATE ENTERPRISE ZONES.



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

 1      SECTION 1.  The legislature finds that the state enterprise
 
 2 zones law offers state and county tax and other incentives to
 
 3 certain types of businesses that increase their hiring in the
 
 4 zones selected by the counties and approved by the governor.
 
 5 Enterprise zones are intended to stimulate business and
 
 6 industrial growth in low-income or high unemployment areas to
 
 7 help revitalize those areas.  The legislature further finds that
 
 8 it is necessary to make several changes to the enterprise zones
 
 9 law to accomplish the law's intended purpose.
 
10      The purpose of this Act is to enhance the effectiveness,
 
11 clarify the administration of, and expand the enterprise zones
 
12 law.
 
13      SECTION 2.  Section 209E-2, Hawaii Revised Statutes, is
 
14 amended as follows:
 
15      1.  By adding a new definition to be appropriately inserted
 
16 and to read:
 
17      ""Call center" means a business providing service at an
 
18 establishment in which customer and technical support service for
 
19 manufactured products, computer hardware and software companies,
 
20 credit collection services, product fulfillment services, or
 

 
Page 2                                                     2438
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 disaster management services, are provided by telephone; provided
 
 2 that the business shall not include telemarketing or sales."
 
 3      2.  By amending the definitions of "enterprise zone",
 
 4 "qualified business", "service business", and "telecommunications
 
 5 services" to read:
 
 6      ""Enterprise zone" means an area nominated by, and within
 
 7 the jurisdiction of, a county government, and subsequently
 
 8 declared by the governor to be eligible for the benefits of this
 
 9 chapter.
 
10      "Qualified business" means any corporation, partnership, or
 
11 sole proprietorship authorized to do business in the State
 
12 [which] that is qualified under section 209E-9 and is:
 
13      (1)  Subject to the state corporate or individual income tax
 
14           under chapter 235; and
 
15      (2)  Engaged in manufacturing, the wholesale sale of
 
16           tangible personal property as defined in section 237-4,
 
17           or a service business as defined in this chapter; [or]
 
18      (3)  Engaged in producing agricultural products where the
 
19           business is a producer as defined in section 237-5[.];
 
20           or
 
21      (4)  Engaged in research, development, sale, or production
 
22           of all types of genetically-engineered medical,
 
23           agricultural, or maritime biotechnology products.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Service business" [for the purposes of this chapter] means
 
 2 any corporation, partnership, or sole proprietorship that repairs
 
 3 ships [or], aircraft, or assisted technology equipment, provides
 
 4 telecommunication services, information technology design and
 
 5 production services, medical and health care services, or
 
 6 education and training services as defined in this chapter.
 
 7      "Telecommunication services" means terrestrial (copper and
 
 8 optical fiber cable) and satellite information delivery systems,
 
 9 switching systems, [and] ground stations, and call centers, but
 
10 not consumer services."
 
11      SECTION 3.  Section 209E-9, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "209E-9  Eligibility[.]; qualified business; sale of
 
14 property or services.  (a)  Any business firm may be eligible to
 
15 be designated a ["qualified business"] qualified business for
 
16 purposes of this chapter if the business:
 
17      (1)  Begins the operation of a trade or business within an
 
18           enterprise zone;
 
19      (2)  During each taxable year has at least fifty per cent of
 
20           its enterprise zone establishment's gross receipts
 
21           attributable to the active conduct of trade or business
 
22           within the enterprise zone;
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (3)  Increases its average annual number of full-time
 
 2           employees by at least ten per cent by the end of its
 
 3           first tax year of participation; and
 
 4      (4)  During each subsequent tax year at least maintains that
 
 5           higher level of employment.
 
 6      (b)  A business firm also may be eligible to be designated a
 
 7 ["qualified business"] qualified business for purposes of this
 
 8 chapter if the business:
 
 9      (1)  Is actively engaged in the conduct of a trade or
 
10           business in an area immediately prior to an area being
 
11           designated an enterprise zone;
 
12      (2)  Meets the requirements of subsection (a)(2);
 
13      (3)  Increases its average annual number of full-time
 
14           employees employed at the business' establishment or
 
15           establishments located within the enterprise zone by at
 
16           least ten per cent annually.
 
17      (c)  After designation [as] of an enterprise zone, each
 
18 business firm eligible to be a qualified business [firm] in the
 
19 zone shall submit [annually] to the department an approved
 
20 application form supplied by the department [which] that provides
 
21 the information necessary for the department to determine if the
 
22 business firm meets the definition of ["qualified business".]
 
23 qualified business.  The [approved] application form shall be
 

 
Page 5                                                     2438
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 initially submitted by each business firm to the governing body
 
 2 of the county in which the enterprise zone is located, then
 
 3 forwarded to the department by the governing body of the county.
 
 4      (d)  The application form referred to in subsection (c)
 
 5 shall be prima facie evidence of the eligibility of a business
 
 6 firm for the purposes of this section.  A business firm may be
 
 7 designated a qualified business on a yearly basis by obtaining
 
 8 the approval of the applicable governing county body and the
 
 9 department upon providing satisfactory proof that the business
 
10 firm is eligible to be a qualified business and satisfies the
 
11 definition of qualified business provided in this chapter.  Upon
 
12 initial approval as a qualified business for the first year from
 
13 the applicable county governing body and the department, the
 
14 business firm shall resubmit an application on an annual basis to
 
15 continue its designation as a qualified business for each
 
16 subsequent year.
 
17      (e)  Tangible personal property [must] shall be sold [by] at
 
18 an establishment of a qualified business within an enterprise
 
19 zone and the transfer of title [must] shall take place in the
 
20 same enterprise zone in which the tangible personal property is
 
21 sold.  Services [must] shall be sold [by] at an establishment of
 
22 a qualified business engaged in a service business within an
 
23 enterprise zone and the services [must] shall be delivered in the
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 same enterprise zone in which sold.  Any services rendered
 
 2 outside of an enterprise zone shall not be deemed to be the
 
 3 services of a qualified business."
 
 4      SECTION 4.  Section 209E-11, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "209E-11  State general excise and use tax exemptions.  The
 
 7 department shall certify annually to the department of taxation
 
 8 that any qualified business is exempt from the payment of general
 
 9 excise taxes on the gross proceeds from the manufacture of
 
10 tangible personal property, the wholesale sale of tangible
 
11 personal property, [or] the engaging in a service business by a
 
12 qualified business[in the enterprise zone and], or the engaging
 
13 in research, development, sale, or production of all types of
 
14 genetically-engineered medical, agricultural, or maritime
 
15 biotechnology products.  The department shall also certify
 
16 annually to the department of taxation that any qualified
 
17 business is exempt from the use tax for purchases by [a] the
 
18 qualified business.  The gross proceeds received by a contractor
 
19 licensed under chapter 444 shall be exempt from the general
 
20 excise tax for construction within an enterprise zone performed
 
21 for a qualified business within an enterprise zone.  The
 
22 exemption shall extend for a period not to exceed seven years."
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 5.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 6.  This Act shall take effect upon its approval.