HOUSE OF REPRESENTATIVES

H.B. NO.

1642

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO HIGH TECHNOLOGY.

 

 

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

 


SECTION 1. The legislature recognizes that research and development (R&D) is the core of innovation. Without innovation, there is no technology industry, and the subsequent growth of our economy is stunted with the lack of new products, services, or processes. During the R&D stage, ideas and theories are tested to determine feasibility. With an increasingly interconnected and competitive global economy, fostering and encouraging innovation is essential to creating new jobs in high-tech and traditional sectors.

In recent years, innovation has led to new jobs in many different sectors as diverse as defense/dual-use, software/information technology, life sciences/biotechnology, and clean energy. At the same time, innovations ripple through the economy, creating jobs for workers through the development of an advanced infrastructure, such as clean energy solutions, installing broadband networks, and using new devices and products in the service industries, such as healthcare and tourism.

The current law parallels with enhancements tailored to Hawaii's unique position and the Internal Revenue Code, providing support for scientific experimentation at twenty per cent of the cost of the qualified research. The program cost to the State averaged about $11,000,000 per year over the last nine years, and in 2006, the program provided funding to over four hundred companies. This tax credit has been a great source of support for local companies, especially to R&D companies that are still in the start-up stages.

The purpose of this Act is to extend the income tax credit for qualified research activities for an additional five years and place an annual aggregate cap on the tax credit.

SECTION 2. Section 235-110.91, Hawaii Revised Statutes, is amended to read as follows:

"235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for increasing research activities) and [section] Section 280C(c) (with respect to certain expenses for which the credit for increasing research activities are allowable) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this section; except that references to the base amount shall not apply and credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years. If [section] Section 41 of the Internal Revenue Code is repealed or terminated prior to January 1, 2011, its provisions shall remain in effect for purposes of the income tax law of the State as modified by this section, as provided for in subsection (j).

(b) All references to Internal Revenue Code [sections] Sections within [sections] Sections 41 and 280C(c) of the Internal Revenue Code shall be operative for purposes of this section.

(c) There shall be allowed to each qualified high technology business subject to the tax imposed by this chapter an income tax credit for qualified research activities equal to the credit for research activities provided by [section] Section 41 of the Internal Revenue Code and as modified by this section[.], up to an annual maximum of $ of credits in the aggregate for all qualified taxpayers. The credit 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.

(d) Every qualified high technology business, before March 31 of each year in which qualified research and development activity was conducted in the previous taxable year, shall submit a written, certified statement to the director of taxation identifying:

(1) Qualified expenditures, if any, expended in the previous taxable year; and

(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

(e) The department shall:

(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified research and development activity costs upon which the tax credit is based;

(2) Verify the nature and amount of the qualifying costs or expenditures;

(3) Total all qualifying and cumulative costs or expenditures that the department certifies; and

(4) Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

Upon each determination made under this subsection, the department shall issue a certificate to the taxpayer verifying information submitted to the department, including the qualifying costs or expenditure amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. The taxpayer shall file the certificate with the taxpayer's tax return with the department.

The director of taxation may assess and collect a fee to offset the costs of certifying tax credit claims under this section. All fees collected under this section shall be deposited into the tax administration special fund established under section 235-20.5.

(f) As used in this section:

"Basic research" under [section] Section 41(e) of the Internal Revenue Code shall not include research conducted outside of the State.

"Qualified high technology business" means the same as in section 235-110.9.

"Qualified research" under [section] Section 41(d)(1) of the Internal Revenue Code shall not include research conducted outside of the State.

(g) If the tax credit for qualified research activities claimed by a taxpayer exceeds the amount of income tax payment due from the taxpayer, the excess of the tax credit over payments due shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

(h) All claims for a tax credit under this section 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 properly claim the credit shall constitute a waiver of the right to claim the credit.

(i) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section.

(j) This section shall not apply to taxable years beginning after December 31, [2010.] 2015."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2010.

 

INTRODUCED BY:

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Report Title:

High Technology; Research & Development Income Tax Credit; Aggregate Cap

 

Description:

Extends the income tax credit for qualified research activities for five years and places an annual aggregate cap on the tax credit.

 

 

 

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