REPORT TITLE:
Taxation


DESCRIPTION:
Replaces the qualified improvement tax credit with a 4 per cent
hotel construction and remodeling income tax credit.  (SB2781
HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2781
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 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-    Hotel construction and remodeling tax credit.
 
 5 (a)  There shall be allowed to each taxpayer subject to the taxes
 
 6 imposed by this chapter and chapter 237D, an income tax credit,
 
 7 which shall be deductible from the taxpayer's net income tax
 
 8 liability, if any, imposed by this chapter for the taxable year
 
 9 in which the credit is properly claimed.
 
10      The amount of the credit shall be four per cent of the
 
11 construction or renovation costs incurred during the taxable year
 
12 for each qualified hotel facility located in Hawaii, and shall
 
13 not include the construction or renovation costs for which
 
14 another credit was claimed under this chapter for the taxable
 
15 year.
 
16      In the case of a partnership, S corporation, estate, trust,
 
17 association of apartment owners of a qualified hotel facility,
 
18 time share owners association, or any developer of a time share
 
19 project, the tax credit allowable is for construction or
 
20 renovation costs incurred by the entity for the taxable year.
 

 
Page 2                                                     2781
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        
                                                             

 1 The cost upon which the tax credit is computed shall be
 
 2 determined at the entity level.  Distribution and share of credit
 
 3 shall be determined pursuant to section 235-110.7(a).
 
 4      If a deduction is taken under section 179 (with respect to
 
 5 election to expense depreciable business assets) of the Internal
 
 6 Revenue Code, no tax credit shall be allowed for that portion of
 
 7 the construction or renovation cost for which the deduction is
 
 8 taken.
 
 9      The basis of eligible property for depreciation or
 
10 accelerated cost recovery system purposes for state income taxes
 
11 shall be reduced by the amount of credit allowable and claimed.
 
12      (b)  The credit allowed under this section shall be claimed
 
13 against the net income tax liability for the taxable year.
 
14      (c)  If the tax credit under this section exceeds the
 
15 taxpayer's income tax liability, the excess of credit over
 
16 liability shall be carried over by the taxpayer to future taxable
 
17 years until exhausted.  All claims for a tax credit under this
 
18 section shall be filed on or before the end of the twelfth month
 
19 following the close of the taxable year for which the credit may
 
20 be claimed.  Failure to comply with the foregoing provision shall
 
21 constitute a waiver of the right to claim the credit.
 
22      (d)  The director of taxation shall prepare any forms that
 
23 may be necessary to claim a credit under this section.  The
 

 
Page 3                                                     2781
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        
                                                             

 1 director may also require the taxpayer to furnish information to
 
 2 ascertain the validity of the claim for credit made under this
 
 3 section and may adopt rules necessary to effectuate the purposes
 
 4 of this section pursuant to chapter 91.
 
 5      (e)  The tax credit allowed under this section shall be
 
 6 available for taxable years beginning after December 31, 1998,
 
 7 and shall not be available for taxable years beginning after
 
 8 December 31, 2006.
 
 9      (f)  To qualify for the income tax credit, the taxpayer
 
10 shall be in compliance with all applicable federal, state, and
 
11 county statutes, rules, and regulations.
 
12      (g)  As used in this section:
 
13      "Construction or renovation cost" means any costs incurred
 
14 after June 30, 1999, for plans, design, construction, and
 
15 equipment related to new construction, alterations, or
 
16 modifications to a qualified hotel facility where the cost
 
17 exceeds $1,000,000 for the project.
 
18      "Net income tax liability" means income tax liability
 
19 reduced by all other credits allowed under this chapter.
 
20      "Qualified hotel facility" means a hotel/hotel-condo as
 
21 defined in section 486K-1, and includes a time share owners
 
22 association."
 

 
 
 
Page 4                                                     2781
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        
                                                             

 1      SECTION 2.  Act 306, Session Laws of Hawaii 1999, is
 
 2 repealed.
 
 3      SECTION 3.  New statutory material is underscored.
 
 4      SECTION 4.  This Act shall take effect on July 1, 2005;
 
 5 provided that:
 
 6      (1)  This Act shall apply to taxable years beginning after
 
 7           December 31, 1998; and
 
 8      (2)  Section 1 shall be repealed on December 31, 2006.