Investment Attraction

Provides a commercial construction income tax credit.  (SD1)

THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                     A BILL FOR AN ACT



 1      SECTION 1.  The legislature finds that economic conditions
 2 in Japan have created an investment vacuum in Hawaii, and in
 3 order to attract new sources of investment, Hawaii must be
 4 competitive with other locations.  In addition, Hawaii continues
 5 to have higher construction costs than other competitive
 6 destinations, for example, local sales taxes usually do not apply
 7 to construction costs in other states.  The purpose of this Act
 8 is to provide an incentive to attract investment to Hawaii by
 9 exempting moneys expended for commercial construction from the
10 general excise tax.
11      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
12 by adding a new section to be appropriately designated and to
13 read as follows:
14      "235-    Commercial construction tax credit.  (a)  There
15 shall be allowed to each resident taxpayer subject to the taxes
16 imposed by this chapter an income tax credit which shall be
17 deductible from the taxpayer's net income tax liability, if any,
18 imposed by this chapter for the taxable year in which the credit
19 is properly claimed.

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 1      The amount of the credit shall be for the general excise tax
 2 on the construction costs passed on to and paid by the taxpayer
 3 during the taxable year for each qualified project located in
 4 Hawaii, and shall not include the construction costs for which
 5 another credit was claimed under this chapter for the taxable
 6 year.
 7      In the case of a partnership, S corporation, estate, or
 8 trust, the tax credit allowable is for construction costs
 9 incurred by the entity for the taxable year.  The cost upon which
10 the tax credit is computed shall be determined at the entity
11 level.  Distribution and share of credit shall be determined
12 pursuant to section 235-110.7(a).
13      If a deduction is taken under section 179 (with respect to
14 election to expense depreciable business assets) of the Internal
15 Revenue Code of 1986, as amended, no tax credit shall be allowed
16 for that portion of the renovation cost for which the deduction
17 is taken.
18      The basis of eligible property for depreciation or ACRS
19 purposes for state income taxes shall be reduced by the amount of
20 credit allowable and claimed.
21      (b)  As used in this section:
22      "Commercial facility" means any structure, addition, or
23 other improvement to real property in the State, to the extent

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 1 constructed for the purpose of buying or selling goods and
 2 services.
 3      "Qualified project" means any commercial facility completed
 4 after December 31, 1999, and before January 1, 2007.
 5      "Construction cost" means any costs for plans, design,
 6 labor, materials, and equipment related to the building of a new
 7 commercial facility, or any alterations, modifications, or
 8 renovations to an existing qualified commercial facility.
 9      (c)  The credit allowed under this section shall be claimed
10 against the net income tax liability for the taxable year.  For
11 the purpose of this tax credit, net income tax liability means
12 net income tax liability reduced by all other credits allowed
13 under this chapter.
14      (d)  If the tax credit under this section exceeds the
15 taxpayer's income tax liability, the excess of credit over
16 liability shall be refunded to the taxpayer; provided that no
17 refunds or payment on account of the tax credit allowed by this
18 section shall be made for amounts less than $1.  All claims for a
19 tax credit under this section must be filed on or before the end
20 of the twelfth month following the close of the taxable year for
21 which the credit may be claimed.  Failure to comply with the
22 foregoing provision shall constitute a waiver of the right to
23 claim the credit.

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 1      (e)  The director of taxation shall prepare forms that may
 2 be necessary to claim a credit under this section.  The director
 3 also may require the taxpayer to furnish information to ascertain
 4 the validity of the claim for credit made under this section and
 5 may adopt rules necessary to effectuate the purposes of this
 6 section pursuant to chapter 91.
 7      (f)  The tax credit allowed under this section shall be
 8 available for taxable years beginning after December 31, 1999,
 9 and shall not be available for taxable years beginning after
10 December 31, 2006."
11      SECTION 3.  New statutory material is underscored.
12      SECTION 4.  This Act, upon its approval, shall apply to
13 taxable years beginning after December 31, 1999, and shall be
14 repealed on December 31, 2006.