Report Title:

Tax Credits; Tax Exemptions; Evaluation; Report

 

Description:

Requires the department of taxation to evaluate certain tax credits and tax exemptions and report to the legislature.  Requires the department of taxation to give recommendations and for the legislature to implement those recommendations prior to the mandate for those tax credits and tax exemptions to sunset.

 


THE SENATE

S.B. NO.

1247

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to The economy.

 

 

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

 


     SECTION 1.  The legislature finds that tax credits and tax exemptions provide an important set of tools for Hawaii's economic diversification.  At the same time, especially during economic downturns, it is incumbent on state policymakers to thoroughly evaluate existing tax credits and tax exemptions to determine whether they are fulfilling the purposes for which they were adopted, as well as providing solid returns on public investment.

     The purposes of this Act are to institute an ongoing program of evaluation of those tax credits and tax exemptions that have no sunset dates, require the department of taxation to compile the necessary information to enable the legislature to evaluate tax credits and exemptions with consistent standards, and to sunset those credits and exemptions that the department of taxation and legislature do not believe should be extended.  Over time, as economic conditions change, different combinations of tax credits and tax exemptions serve as the State's key tools to promote or discourage particular behavior among residents and businesses.

     For existing tax credits and tax exemptions that have a sunset date, the purpose of this Act is to require the department of taxation to compile accurate information on their usage and whether they are fulfilling the purposes for which they were adopted, as well as providing solid returns on public investment.

     SECTION 2.  Section 235-20.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-20.5  Tax administration special fund; established.  There is established a tax administration special fund, into which shall be deposited fees collected under sections 235-20, 235‑110.9, and 235-110.91, and penalties collected under section 2 of Act 206, [[]Session Laws of Hawaii 2007[]].  The moneys in the fund shall be expended by the department to offset the costs associated with:

     (1)  Issuing comfort letters;

     (2)  Administering the tax credit under [section] sections 235-110.9[,] and 235-110.91, including issuing certificates; and

     (3)  [Issuing certificates under section 235-110.91.] Compiling usage and other relevant economic data to analyze the costs and benefits of the State's tax laws."

     SECTION 3.  Tax credits and exemptions; evaluation; report.  (a)  The department of taxation shall perform an evaluation of the following tax credits or tax exemptions and submit a report of the evaluation and a progress report on the planned uses and actual expenditures associated with the reports required by this section to the legislature by no later than twenty days prior to the convening of the regular session of 2010; provided that if the department of taxation does not submit a complete and accurate evaluation of the following tax credits and tax exemptions by no later than twenty days prior to the convening of the regular session of 2011 and the legislature fails to implement the department of taxation's recommendations pursuant to the evaluation, then each of the applicable tax credits and tax exemptions shall not be available to be claimed for taxable years beginning after December 31, 2010:

     (1)  Section 235-12.5, Hawaii Revised Statutes (renewable energy technologies; income tax credit);

     (2)  Section 235-15, Hawaii Revised Statutes (tax credits to promote the purchase of child passenger restraint systems);

     (3)  Section 235-110.2, Hawaii Revised Statutes (credit for school repair and maintenance);

     (4)  Section 235-110.51, Hawaii Revised Statutes (technology infrastructure renovation tax credit);

     (5)  Section 235-110.8, Hawaii Revised Statutes (low-income housing tax credit);

     (6)  Section 237-24, Hawaii Revised Statutes (general excise tax; amounts not taxable), except for section 237-24(6) (salaries or wages for services rendered);

     (7)  Section 237-24.3, Hawaii Revised Statutes (general excise tax; additional amounts not taxable);

     (8)  Section 237-24.9, Hawaii Revised Statutes (general excise tax; aircraft service and maintenance facility);

     (9)  Section 237-29.53, Hawaii Revised Statutes (general excise tax; exemption for contracting or services exported out of state);

    (10)  Section 237-29.55, Hawaii Revised Statutes (general excise tax; exemption for sale of tangible personal property for resale at wholesale);

    (11)  Section 237-29.8, Hawaii Revised Statutes (general excise tax; call centers; exemption; engaging in business; definitions);

    (12)  Section 239-6.5, Hawaii Revised Statutes (public service company tax; tax credit for lifeline telephone service subsidy); and

    (13)  Section 239-12, Hawaii Revised Statutes (public service company tax; call centers; exemption; engaging in business; definitions).

     (b)  The department of taxation shall perform an evaluation of the following tax credits or tax exemptions and submit a report of the evaluation and a progress report on the planned uses and actual expenditures associated with the reports required by this section to the legislature by no later than twenty days prior to the convening of the regular session of 2011; provided that if the department of taxation does not submit a complete and accurate evaluation of the following tax credits and tax exemptions by no later than twenty days prior to the convening of the regular session of 2012 and the legislature fails to implement the department of taxation's recommendations pursuant to the evaluation, then each of the applicable tax credits and tax exemptions shall not be available to be claimed for taxable years beginning after December 31, 2011:

     (1)  Section 235-110.6, Hawaii Revised Statutes (fuel tax credit for commercial fishers);

     (2)  Section 235-110.7, Hawaii Revised Statutes (capital goods excise tax credit);

     (3)  Section 237-16.8, Hawaii Revised Statutes (general excise tax; exemption of certain convention, conference, and trade show fees);

     (4)  Section 237-23, Hawaii Revised Statutes (general excise tax; exemptions, persons exempt, applications for exemption), except for section 237-23(a)(1) (public service companies);

     (5)  Section 237-23.5, Hawaii Revised Statutes (general excise tax; related entities; common paymaster; certain exempt transactions);

     (6)  Section 237-24.5, Hawaii Revised Statutes (general excise tax; additional exemptions);

     (7)  Section 237-24.7, Hawaii Revised Statutes (general excise tax; additional amounts not taxable);

     (8)  Section 237-24.75, Hawaii Revised Statutes (general excise tax; additional exemptions);

     (9)  Section 237-25, Hawaii Revised Statutes (general excise tax; exemptions of sales and gross proceeds of sales to federal government, and credit unions);

    (10)  Section 237-28.1, Hawaii Revised Statutes (general excise tax; exemption of certain shipbuilding and ship repair business); and

    (11)  Section 237-29.5, Hawaii Revised Statutes (general excise tax; exemption for sales of tangible personal property shipped out of the state).

     (c)  The department of taxation shall perform an evaluation of the following tax credits or tax exemptions and submit a report of the evaluation to the legislature by no later than twenty days prior to the convening of the regular session of 2012; provided that if the department of taxation does not submit a complete and accurate evaluation of the following tax credits and tax exemptions by no later than twenty days prior to the convening of the regular session of 2013 and the legislature fails to implement the department of taxation's recommendations pursuant to the evaluation, then each of the applicable tax credits and tax exemptions shall not be available to be claimed for taxable years beginning after December 31, 2012:

     (1)  Section 209E-10, Hawaii Revised Statutes (state business tax credit);

     (2)  Section 209E-11, Hawaii Revised Statutes (state general excise exemptions);

     (3)  Section 235-55.85, Hawaii Revised Statutes (Refundable Food/Excise Tax Credit);

     (4)  Section 235-55.91, Hawaii Revised Statutes (Credit for Employment of Vocational Rehabilitation Referrals);

     (5)  Section 235-71, Hawaii Revised Statutes (Tax on Corporations; Rates; Credit of Shareholder of Regulated Investment Company);

     (6)  Section 235-110.3, Hawaii Revised Statutes (Ethanol Facility Tax Credit);

     (7)  Section 237-26, Hawaii Revised Statutes (general excise tax; exemption of certain scientific contracts with the United States);

     (8)  Section 237-27, Hawaii Revised Statutes (general excise tax; exemption of certain petroleum refiners);

     (9)  Section 237-27.5, Hawaii Revised Statutes (general excise tax; air pollution control facility);

    (10)  Section 237-27.6, Hawaii Revised Statutes (general excise tax; solid waste processing, disposal, and electric generating facility; certain amounts exempt);

    (11)  Section 237-29, Hawaii Revised Statutes (general excise tax; exemptions for certified or approved housing projects);

    (12)  Section 241-4.7, Hawaii Revised Statutes (low-income housing; income tax credit); and

    (13)  Section 244D-4.3, Hawaii Revised Statutes (liquor tax; exemption for sales of liquor out of the State).

     (d)  The department of taxation shall perform an evaluation of the following tax credits and submit a report of the evaluation to the legislature by no later than twenty days prior to the convening of the regular session of 2013; provided that if the department of taxation does not submit a complete and accurate evaluation of the following tax credits by no later than twenty days prior to the convening of the regular session of 2014 and the legislature fails to implement the department of taxation's recommendations pursuant to the evaluation, then each of the applicable tax credits shall not be available to be claimed for taxable years beginning after December 31, 2013:

     (1)  Section 235-55, Hawaii Revised Statutes (Tax Credits for Resident Taxpayers);

     (2)  Section 235-55.6, Hawaii Revised Statutes (Expenses for Household and Dependent Care Services Necessary for Gainful Employment); and

     (3)  Section 235-55.7, Hawaii Revised Statutes (Income Tax Credit for Low-Income Household Renters).

     (e)  The reports submitted by the department of taxation under this part shall provide data, economic analyses, and other information sufficient to enable the legislature to determine whether the tax credits and tax exemptions evaluated have achieved or are achieving their intended objectives, whether they are consistent with public policies, and whether they should be continued, modified, or repealed.

     If the department of taxation recommends that a tax credit or tax exemption should be modified, it shall include in its report, with the assistance of the departments listed in subsection (f)(2), the proposed draft legislation to implement the recommended modifications.

     If the department of taxation recommends that the law establishing a tax credit or tax exemption should be continued in its current form, it shall make appropriate recommendations, with assistance of the departments listed in subsection (f)(2), to improve the operation of the tax credit or tax exemption, including, but not limited to, recommendations for appropriate restrictions to be placed on the tax credit or tax exemption and whether to use a five-year or ten-year sunset provision.  In accordance with this section, the recommendation from the department of taxation to continue the tax credit or tax exemption in its current form or recommendation to modify the credit shall be received before the applicable tax credit or tax exemption is scheduled to sunset pursuant to this section.

     The reports submitted by the department of taxation under this part may also include recommendations for the evaluation of other tax credits and exemptions in the future.

     (f)  In evaluating the tax credits and tax exemptions the department of taxation may:

     (1)  Contract with recognized technical experts knowledgeable in the field of economics;

     (2)  Establish a technical advisory group, which may include the department of labor and industrial relations, department of agriculture, department of commerce and consumer affairs, department of transportation, department of human services, and department of business, economic development, and tourism, to help identify and develop the data elements needed for the analyses; and

     (3)  Collect, process, and analyze data from federal, State, and local government sources.

     SECTION 4.  (a)  The department of taxation shall perform an evaluation of the following tax credits or tax exemptions and submit a report of the evaluation to the legislature by no later than twenty days prior to the convening of the regular session as specified below:

     (1)  Section 235-17, Hawaii Revised Statutes (Motion picture, digital media, and film production income tax credit), one year before the expiration date, as specified in that section;

     (2)  Section 235-110.46, Hawaii Revised Statutes (Attractions and Educational Facilities Tax Credit; Ko Olina Resort and Marina; Makaha Resort), one year before the expiration date, as specified in that section;

     (3)  Section 235-110.51, Hawaii Revised Statutes (Technology Infrastructure Renovation Tax Credit), one year before the expiration date, as specified in that section;

     (4)  Section 235-110.9, Hawaii Revised Statutes (High Technology Business Investment Tax Credit), one year before the expiration date, as specified in that section; and

     (5)  Section 235-110.91, Hawaii Revised Statutes (Tax Credit for Research Activities), one year before the expiration date, as specified in that section.

     The tax credits indentified in this subsection are not being extended in any manner.  The tax credits indentified in this subsection are existing tax credits with expiration dates that shall be reviewed in a uniform and systematic manner prior to their respective repeal dates, similar to those tax credits evaluated that do not have expiration dates, to determine whether those tax credits have fulfilled the purposes for which they were enacted.

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2009.

 

INTRODUCED BY:

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