Income Tax Construction Credit

Establishes an income tax credit for the construction and
renovation of qualified commercial facilities.

HOUSE OF REPRESENTATIVES                H.B. NO.1360       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to provide an
 2 incentive to attract investment to Hawaii.  Economic conditions
 3 in Japan have created an investment vacuum in Hawaii.  In order
 4 to attract new sources of investment, Hawaii must be competitive
 5 with other locations.  Hawaii continues to have higher
 6 construction costs than other competitive destinations.  In other
 7 states, local sales tax does not apply to construction costs as
 8 the general excise tax does in this State.  Therefore, for a
 9 limited time, the legislature finds that it would be beneficial
10 to the State to authorize an income tax credit that reflects the
11 amount of general excise tax paid by taxpayers for commercial
12 construction costs.
13      The purpose of this Act is to establish a temporary income
14 tax credit equal to the amount of general excise tax paid for
15 commercial construction projects in Hawaii.
16      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
17 by adding a new section to be appropriately designated and to
18 read as follows:
19      "235-    Commercial construction tax credit.  (a)  There

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                                     H.B. NO.1360       

 1 shall be allowed to each taxpayer subject to the taxes imposed by
 2 this chapter an income tax credit which shall be deductible from
 3 the taxpayer's net income tax liability, if any, imposed by this
 4 chapter for the taxable year in which the credit is properly
 5 claimed.
 6      The amount of the credit shall be equal to the gross general
 7 excise tax paid on the commercial construction costs incurred
 8 during the taxable year for each qualified commercial
 9 construction project located in Hawaii, and shall not include
10 commercial construction costs claimed under any other credit in
11 this chapter for the taxable year.
12      In the case of a partnership, S corporation, estate, or
13 trust, the tax credit allowable is for improvement costs incurred
14 by the entity for the taxable year.  The cost upon which the tax
15 credit is computed shall be determined at the entity level.
16 Distribution and share of credit shall be determined pursuant to
17 rules adopted under section 235-110.7(a).
18      If a deduction is taken under section 179 (with respect to
19 election to expense depreciable business assets) of the Internal
20 Revenue Code of 1986, as amended, no tax credit shall be allowed
21 for that portion of the commercial construction costs for which
22 the deduction is taken.
23      The basis of eligible property for depreciation or ACRS

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                                     H.B. NO.1360       

 1 purposes for state income taxes shall be reduced by the amount of
 2 credit allowable and claimed.
 3      (b)  As used in this section:
 4      "Qualified commercial construction project" means any
 5 addition, improvement, or new construction to real property in
 6 the State:
 7      (1)  For the purpose of licensed activity subject to the
 8           taxes under chapter 237; and
 9      (2)  Started after December 31, 1999, and completed before
10           January 1, 2007.
11      "Commercial construction cost" means any costs involved in a
12 qualified commercial construction project, including the plans,
13 design, labor, materials, and equipment related to the building
14 of a new qualified commercial construction project, the
15 acquisition and development of land, and the renovation or
16 additions.
17      (c)  The credit allowed under this section shall be claimed
18 against the net income tax liability for the taxable year.  For
19 the purpose of this tax credit, "net income tax liability" means
20 net income tax liability reduced by all other credits allowed
21 under this chapter.
22      (d)  If the tax credit under this section exceeds the
23 taxpayer's income tax liability, the excess of credit over

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                                     H.B. NO.1360       

 1 liability shall be refunded to the taxpayer; provided that no
 2 refunds or payment on account of the tax credit allowed by this
 3 section shall be made for amounts less than $1.  All claims for a
 4 tax credit under this section must be filed on or before the end
 5 of the twelfth month following the close of the taxable year for
 6 which the credit may be claimed.  Failure to comply with the
 7 foregoing provision shall constitute a waiver of the right to
 8 claim the credit.
 9      (e)  The director of taxation shall prepare such forms as
10 may be necessary to claim a credit under this section.  The
11 director may also require the taxpayer to furnish information to
12 ascertain the validity of the claim for credit made under this
13 section and may adopt rules necessary to effectuate the purposes
14 of this section pursuant to chapter 91.
15      (f)  The tax credit allowed under this section shall be
16 available for taxable years beginning after December 31, 1999,
17 and shall be repealed on January 1, 2007."
18      SECTION 3.  New statutory material is underscored.
19      SECTION 4.  This Act, upon its approval, shall apply to
20 taxable years beginning after December 31, 1999, and shall be
21 repealed on January 1, 2007.
23                           INTRODUCED BY:  _______________________