Provides a two-tiered tax credit system to employers
participating in school-to-work (STW); biennium appropriation for
STW, including funding to increase eight regional STW
coordinators from ten to twelve months.

THE SENATE                              S.B. NO.           173
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended
 2 by adding a new section to be appropriately designated and to
 3 read as follows:
 4      "235-     Credit for employment of school-to-work
 5 opportunities referrals.  (a)  There shall be allowed to each
 6 taxpayer subject to the tax imposed by this chapter, a credit for
 7 employment of school-to-work opportunities referrals which shall
 8 be deductible from the taxpayer's net income tax liability, if
 9 any, imposed by this chapter for the taxable year in which the
10 credit is properly claimed.
11      (b)  The amount of the credit determined under this section
12 for the taxable year shall be:
13      (1)  Equal to fifty per cent of the student's wages paid by
14           the taxpayer for that taxable year if the hours worked
15           by the participating school-to-work opportunities
16           student equals or exceeds one hundred-sixty hours
17           during the taxable year; or
18      (2)  Equal to $50 if the hours worked by the participating
19           school-to-work opportunities student equals twenty

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 1           hours or less during the taxable year.
 2      (c)  For purposes of this section:
 3      "Hiring date" means the day the school-to-work opportunities
 4 referral is hired by the employer.
 5      "School-to-work opportunities referral" means any individual
 6 who is certified by the department of education or the University
 7 of Hawaii as participating in the Hawaii school-to-work
 8 opportunities system.
 9      "Wages" has the meaning given to the term by section 3306(b)
10 of the Internal Revenue Code (determined without regard to any
11 dollar limitation contained in the Internal Revenue Code
12 section).
13      (d)  The following shall apply to certifications of school-
14 to-work opportunities referrals:
15      (1)  An individual shall not be treated as a school-to-work
16           opportunities referral unless, on or before the day on
17           which the individual begins work for the employer, the
18           employer:
19           (A)  Has received a certification from the department
20                of education or the University of Hawaii that the
21                individual is a qualified school-to-work
22                opportunities referral; or
23           (B)  Has requested in writing the certification from

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 1                the department of education or the University of
 2                Hawaii that the individual is a qualified school-
 3                to-work opportunities referral.
 4           For purposes of the preceding sentence, if on or before
 5           the day on which the individual begins work for the
 6           employer, the individual has received from the
 7           department of education or the University of Hawaii a
 8           written preliminary determination that the individual
 9           is a school-to-work opportunities referral, then "the
10           fifth day" shall be substituted for "the day" in the
11           preceding sentence.
12      (2)  If an individual has been certified as a school-to-work
13           opportunities referral and the certification is
14           incorrect for any reason, the certification shall be
15           revoked and wages paid by the employer after the date
16           on which notice of revocation is received by the
17           employer shall not be treated as wages that are
18           eligible for the tax credit authorized under this
19           section.
20      (3)  In any request for a certification of an individual as
21           a school-to-work opportunities referral, the employer
22           shall certify that a good faith effort was made to
23           determine that the individual is a school-to-work

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 1           opportunities referral.
 2      (e)  The following wages paid to school-to-work
 3 opportunities referrals are ineligible to be claimed by the
 4 employer for this credit:
 5      (1)  No wages shall be taken into account under this section
 6           with respect to a school-to-work opportunities referral
 7           who:
 8           (A)  Bears any of the relationships described in
 9                section 152(a)(1) to (8) of the Internal Revenue
10                Code to the taxpayer, or, if the taxpayer is a
11                corporation, to an individual who owns, directly
12                or indirectly, more than fifty per cent in value
13                of the outstanding stock of the corporation
14                (determined with the application of section 267(c)
15                of the Internal Revenue Code);
16           (B)  If the taxpayer is an estate or trust, is a
17                grantor, beneficiary, or fiduciary of the estate
18                or trust, or is an individual who bears any of the
19                relationships described in section 152(a)(1) to
20                (8) of the Internal Revenue Code to a grantor,
21                beneficiary, or fiduciary of the estate or trust;
22                or
23           (C)  Is a dependent (described in section 152(a)(9) of

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                                     S.B. NO.           173

 1                the Internal Revenue Code) of the taxpayer, or, if
 2                the taxpayer is a corporation, of an individual
 3                described in subparagraph (A), or, if the taxpayer
 4                is an estate or trust, of a grantor, beneficiary,
 5                or fiduciary of the estate or trust.
 6      (2)  No wages shall be taken into account under this section
 7           with respect to any school-to-work opportunities
 8           referral if, prior to the hiring date of the
 9           individual, the individual had been employed by the
10           employer at any time during which the individual was
11           not a school-to-work opportunities referral.
12      (f)  In the case of a successor employer referred to in
13 section 3306(b)(1) of the Internal Revenue Code, the
14 determination of the amount of the tax credit allowable under
15 this section with respect to wages paid by the successor employer
16 shall be made in the same manner as if the wages were paid by the
17 predecessor employer referred to in the section.
18      (g)  No credit shall be determined under this section with
19 respect to wages paid by an employer to a school-to-work
20 opportunities referral for services performed by the individual
21 for another person unless the amount reasonably expected to be
22 received by the employer for the services from the other person
23 exceeds the wages paid by the employer to the individual for

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 1 those services.
 2      (h)  The credit allowed under this section shall be claimed
 3 against net income tax liability for the taxable year.  A tax
 4 credit under this section which exceeds the taxpayer's income tax
 5 liability may be used as a credit against the taxpayer's income
 6 tax liability in subsequent years until exhausted.
 7      (i)  All claims for tax credits under this section,
 8 including any amended claims, shall be filed on or before the end
 9 of the twelfth month following the close of the taxable year for
10 which the credits may be claimed.  Failure to comply with the
11 foregoing provision shall constitute a waiver of the right to
12 claim the credit.
13      (j)  No deduction shall be allowed for that portion of the
14 wages or salaries paid or incurred for the taxable year that is
15 equal to the amount of the credit determined under this section.
16      (k)  The director of taxation may adopt rules under chapter
17 91 and forms necessary to carry out this section."
18      SECTION 2.  There is appropriated out of the general
19 revenues of the State of Hawaii the sum of $1,356,000, or so much
20 thereof as may be necessary for fiscal year 1999-2000, and the
21 sum of $2,206,000, or so much thereof as may be necessary for
22 fiscal year 2000-2001, to provide funds for the school-to-work
23 opportunities pilot project; provided that $76,000 in each fiscal

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                                     S.B. NO.           173

 1 year shall be used to increase eight regional school-to-work
 2 coordinator positions from ten to twelve month positions.
 3      SECTION 3.  The sum appropriated shall be expended by the
 4 department of education for the purposes of this Act.
 5      SECTION 4.  New statutory material is underscored.
 6      SECTION 5.  This Act shall take effect on July 1, 1999,
 7 provided that section 1 shall apply to taxable years beginning
 8 after December 31, 1998.
10                           INTRODUCED BY:  _______________________