Creates a 4% hotel construction and remodeling income tax credit.

THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                
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-    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 the association of apartment owners of a qualified hotel
18 facility, or a time share owners association, the tax credit
19 allowable is for construction or renovation costs incurred by the
20 entity for the taxable year.  The cost upon which the tax credit

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 1 is computed shall be determined at the entity level.
 2 Distribution and share of credit shall be determined pursuant to
 3 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)  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      "Qualified hotel facility" means a hotel/hotel-condo as
19 defined in section 486K-1, and includes a time share owners
20 association
21      (c)  The credit allowed under this section shall be claimed
22 against the net income tax liability for the taxable year.  For
23 the purpose of this tax credit, "net income tax liability" means

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 1 net income tax liability reduced by all other credits allowed
 2 under this chapter.
 3      (d)  If the tax credit under this section exceeds the
 4 taxpayer's income tax liability, the excess of credit over
 5 liability shall be carried over by the taxpayer to future taxable
 6 years until exhausted.  All claims for a tax credit under this
 7 section must be filed on or before the end of the twelfth month
 8 following the close of the taxable year for which the credit may
 9 be claimed.  Failure to comply with the foregoing provision shall
10 constitute a waiver of the right to claim the credit.
11      (e)  The director of taxation shall prepare any forms that
12 may be necessary to claim a credit under this section.  The
13 director also may require the taxpayer to furnish information to
14 ascertain the validity of the claim for credit made under this
15 section and may adopt rules necessary to effectuate the purposes
16 of this section pursuant to chapter 91.
17      (f)  The tax credit allowed under this section shall be
18 available for taxable years beginning after December 31, 1998,
19 and shall not be available for taxable years beginning after
20 December 31, 2001."
21      SECTION 2.  Act 306, Session Laws of Hawaii 1999, is
22 repealed.
23      SECTION 3.  New statutory material is underscored.

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 1      SECTION 4.  This Act shall take effect upon its approval,
 2 and shall apply to taxable years beginning after December 31,
 3 1998.