HOUSE OF REPRESENTATIVES

H.B. NO.

1594

TWENTY-SEVENTH LEGISLATURE, 2014

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. The legislature finds that the effects of the September 11, 2001, terrorist attacks upon the United States had a devastating effect on Hawaii's economy. In October of 2001, the legislature met in special session to approve emergency measures in response to the attacks. One response was the enactment of Act 10, Third Special Session Laws of Hawaii 2001, which increased the rate of the existing hotel construction and remodeling tax credit. Act 10 altered the tax credit from a four per cent refundable tax credit to a ten per cent nonrefundable credit for costs incurred prior to July 1, 2003, to assist the tourism industry in its efforts to attract more visitors to Hawaii. Act 10 provided the stimulus needed to boost Hawaii's workforce and economy during difficult economic times.

The legislature finds that a competitive tax credit like the one provided by Act 10 can provide an excellent means to boost Hawaii's tourism and construction industries. Construction activity in the visitor industry has demonstrated economic multiplier effects due to the maintenance and creation of construction employment and revenues from tourism activities.

In 2009, the legislature adopted senate concurrent resolution no. 132, S.D. 1, which established the construction industry task force (task force) to determine the economic value of the construction industry in Hawaii. As directed in the concurrent resolution, the task force was charged with developing a series of recommendations to stimulate the construction industry and create new jobs in the local construction industry. Unfortunately, to date, many of the task force's recommendations have yet to be enacted by the legislature. The intent of this Act is to enact and implement one of the recommendations of the task force in an effort to support the local construction industry.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"235-   Hotel construction and renovation tax credit. (a) There shall be allowed to each taxpayer, subject to the taxes imposed by this chapter, an income tax credit, which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

The amount of the tax credit shall be ten per cent of the construction or renovation costs incurred during the taxable year for each qualified hotel facility located in Hawaii, and shall not include the construction or renovation costs for which another credit was claimed under this chapter for the taxable year. The credit shall be available for taxable years beginning on or after January 1, 2015, and shall not be available for taxable years beginning after December 31, 2019.

In the case of a partnership, S corporation, estate, trust, association of a qualified hotel facility, time share owners association, or any developer of a time share project, the tax credit allowable is for construction or renovation costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined under section 704(b) (with respect to partner's distributive share) of the Internal Revenue Code.

If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the construction or renovation cost for which the deduction is taken.

(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for a tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(d) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section. The director may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(e) The taxpayer shall obtain pre-certification of the tax credit from the department of business, economic development, and tourism prior to incurring any construction costs for which the taxpayer intends to claim a tax credit under this section. Any construction costs that are not pre-certified may not be claimed for purposes of the tax credit on a tax return. The department of business, economic development, and tourism shall not pre-certify any construction costs that do not comply with the type of activity intended to be covered by the tax credit as set forth in this section.

(f) To qualify for the income tax credit, the taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations, including the Davis-Bacon Act and chapter 104.

(g) As used in this section:

"Construction or renovation cost" means any costs incurred during the taxable year for plans, design, construction, and equipment related to new construction of, alterations to, or modifications to a qualified hotel facility.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Qualified hotel facility" means:

(1) A hotel or hotel-condominium as defined in section 486K-1;

(2) A time share facility or project; or

(3) Commercial buildings and facilities located within a qualified resort area.

"Qualified resort area" means an area designated for hotel use, resort use, or transient vacation rentals, pursuant to county authority under section 46-4, or where the county, by its legislative process, designates hotel, transient vacation rental, or resort use.

"Taxpayer" means a taxpayer under this chapter, and includes:

(1) An association of apartment owners; or

(2) A time share owners association."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2014.


 


 

Report Title:

Construction Industry Task Force; Tax Credit; Hotel Construction; Remodeling; Resort Area

 

Description:

Creates a ten per cent tax credit for construction or renovation costs incurred on a qualified hotel facility before December 31, 2019. (HB1594 HD1)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.