REPORT TITLE:
Taxation


DESCRIPTION:
Establishes a qualified improvement tax credit for capitalized
costs of construction and equipment of a permanent nature related
to an existing or new hotel/hotel-condo, as well as related
improvements, located on property covered primarily under county
zoning for resort and hotel uses.  (HB136 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        136
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5                 QUALIFIED IMPROVEMENT TAX CREDIT
 
 6          -1  Definitions.  Whenever used in this chapter, unless
 
 7 the context otherwise requires:
 
 8      "Hotel/hotel-condo" shall have the same meaning as in
 
 9 section 486K-1.
 
10      "Net income tax liability" means income tax liability
 
11 reduced by all other allowed credits, as determined under chapter
 
12 235.
 
13      "Qualified facility" means:
 
14      (1)  Any new hotel/hotel-condo placed in service after the
 
15           effective date of this Act;
 
16      (2)  Any hotel/hotel-condo that was placed in service before
 
17           the effective date of this Act; or
 
18      (3)  Any property covered under county zoning primarily for
 
19           resort and hotel uses.
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      "Qualified improvement costs" means any capitalized costs
 
 2 for construction and equipment of a permanent nature related to a
 
 3 qualified facility, including infrastructure costs, but shall not
 
 4 include the costs for which another tax credit was claimed for
 
 5 the taxable year.
 
 6          -2  Qualified improvement tax credit.(a)  There shall
 
 7 be allowed to each taxpayer subject to the taxes imposed by
 
 8 chapters 235, 237, 237D, and 239, a qualified improvement tax
 
 9 credit, which shall be available to reduce the taxpayer's net
 
10 income tax liability, general excise tax, transient
 
11 accommodations tax, or public service company tax imposed by
 
12 these chapters.
 
13      (b)  The total amount of the qualified improvement tax
 
14 credit shall be determined by applying the applicable credit
 
15 percentage to the qualified improvement costs paid by the
 
16 taxpayer in the taxable year.  The applicable credit percentage
 
17 shall be determined as follows:
 
18            Qualified Improvement Cost    Applicable Credit
19                                             Percentage
20 
21            More than $150,000,000          100 per cent
 
22            $100,000,000 to $149,999,999     75 per cent
 
23            $50,000,000 to $99,999,999       50 per cent
 
24            $25,000,000 to $49,999,999       25 per cent
 

 
 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (c)  The tax credit allowed under this chapter may be taken
 
 2 over a period not to exceed ten consecutive taxable years.  The
 
 3 taxpayer shall elect the period and annual allocation of the tax
 
 4 credit in the initial year for which the credit is claimed.
 
 5      (d)  In the case of a partnership, S corporation, estate, or
 
 6 trust, the allowable tax credit is for qualified improvement
 
 7 costs incurred by the entity for the taxable year.  The costs
 
 8 upon which the tax credit is computed shall be determined at the
 
 9 entity level.  Distribution and share of the tax credit shall be
 
10 determined by rules adopted pursuant to section    -4.
 
11      (e)  If a deduction is taken under section 179 (with respect
 
12 to election to expense depreciable business assets) of the
 
13 Internal Revenue Code of 1986, as amended, no tax credit shall be
 
14 allowed for that portion of the qualified improvement costs for
 
15 which the deduction is taken.
 
16      (f)  The basis of eligible property for depreciation or
 
17 accelerated cost recovery system purposes for state income taxes
 
18 shall be reduced by the amount of credit allowed and claimed
 
19 under this chapter.
 
20      (g)  The tax credit allowed under this chapter shall be
 
21 claimed against any or all net income tax liability, general
 
22 excise tax, transient accommodations tax, or public service
 

 
 
 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 company tax for the taxable years over which the credit is
 
 2 claimed.
 
 3          -3  No refund; failure to file.  If the amount of the
 
 4 tax credit claimed in any year exceeds the total of the
 
 5 taxpayer's net income tax liability, general excise tax,
 
 6 transient accommodations tax, or public service company tax
 
 7 payable for that taxable year, the excess of credit over
 
 8 liability shall not be refunded to the taxpayer.  All claims for
 
 9 a tax credit under this chapter shall be filed on or before the
 
10 end of the twelfth month following the close of the initial
 
11 taxable year for which the credit may be claimed.  Failure to
 
12 comply with this section shall constitute a waiver of the right
 
13 to claim the credit.
 
14          -4  Forms; rules.  The director of taxation shall
 
15 prepare forms as may be necessary to claim a tax credit under
 
16 this chapter.  The director of taxation may also require the
 
17 taxpayer to furnish information to ascertain the validity of a
 
18 claim for a tax credit made under this chapter and may adopt
 
19 rules necessary to effectuate the purposes of this chapter
 
20 pursuant to chapter 91.
 
21          -5  Limitation period.  The tax credit allowed under
 
22 this chapter shall be available for qualified improvement costs
 

 
 
 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 incurred during taxable years beginning after December 31, 1998,
 
 2 and before January 1, 2004."
 
 3      SECTION  2.  This Act, upon its approval, shall apply to
 
 4 taxable years beginning after December 31, 1998.