REPORT TITLE:
Taxation


DESCRIPTION:
Establishes a qualified improvement tax credit for capitalized
costs of construction and equipment related to an existing or new
facility located in Waikiki.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1681       
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      "Net income tax liability" means income tax liability
 
 9 reduced by all other allowed credits, as determined under chapter
 
10 235.
 
11      "Qualified facility" means any facility or improvement to a
 
12 facility located in Waikiki that was placed in service after the
 
13 effective date of this Act.
 
14      "Qualified improvement costs" means any capitalized costs
 
15 for construction and equipment related to an existing or new
 
16 qualified facility, but shall not include the costs for which
 
17 another tax credit was claimed for the taxable year.
 
18          -2  Qualified improvement tax credit.(a)  There shall
 
19 be allowed to each taxpayer subject to the taxes imposed by
 
20 chapters 235, 237, and 237D a qualified improvement tax credit,
 

 
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 1 which shall be available to reduce the taxpayer's net income tax
 
 2 liability, general excise tax, or transient accommodations tax
 
 3 imposed by such chapters.
 
 4      (b)  The total amount of the qualified improvement tax
 
 5 credit shall be determined by applying the applicable credit
 
 6 percentage to the qualified improvement costs paid by the
 
 7 taxpayer in the taxable year.  The applicable credit percentage
 
 8 shall be determined as follows:
 
 9            Qualified Improvement Cost    Applicable Credit
10                                             Percentage
11 
12            More than $                       100 per cent
 
13            $          to $                    75 per cent
 
14            $          to $                    50 per cent
 
15            $1,000,000 to $                    25 per cent
 
16      (c)  The tax credit allowed under this chapter may be taken
 
17 over a period not to exceed ten consecutive taxable years.  The
 
18 taxpayer shall elect the period and annual allocation of the tax
 
19 credit in the initial year for which the credit is claimed.
 
20      (d)  In the case of a partnership, S corporation, estate, or
 
21 trust, the allowable tax credit is for qualified improvement
 
22 costs incurred by the entity for the taxable year.  The costs
 
23 upon which the tax credit is computed shall be determined at the
 
24 entity level.  Distribution and share of credit shall be
 
25 determined by rules.
 

 
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 1      (e)  If a deduction is taken under section 179 (with respect
 
 2 to election to expense depreciable business assets) of the
 
 3 Internal Revenue Code of 1986, as amended, no tax credit shall be
 
 4 allowed for that portion of the qualified improvement costs for
 
 5 which the deduction is taken.
 
 6      (f)  The basis of eligible property for depreciation or
 
 7 accelerated cost recovery system purposes for state income taxes
 
 8 shall be reduced by the amount of credit allowable and claimed
 
 9 under this chapter.
 
10      (g)  The credit allowed under this chapter shall be claimed
 
11 against any or all net income tax liability, general excise tax,
 
12 or transient accommodations tax for the taxable years over which
 
13 the credit is claimed.
 
14          -3  No refund; failure to file.  If the amount of the
 
15 tax credit claimed in any year exceeds the total of the
 
16 taxpayer's net income tax liability, general excise tax, or
 
17 transient accommodations tax payable for that taxable year, the
 
18 excess of credit over liability shall not be refunded to the
 
19 taxpayer.  All claims for a tax credit under this chapter shall
 
20 be filed on or before the end of the twelfth month following the
 
21 close of the initial taxable year for which the credit may be
 
22 claimed.  Failure to comply with this section shall constitute a
 
23 waiver of the right to claim the credit.
 

 
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 1          -4  Forms; rules.  The director of taxation shall
 
 2 prepare forms as may be necessary to claim a credit under this
 
 3 chapter.  The director of taxation also may require the taxpayer
 
 4 to furnish information to ascertain the validity of the claim for
 
 5 the credit made under this chapter and may adopt rules necessary
 
 6 to effectuate the purposes of this chapter pursuant to chapter
 
 7 91.
 
 8          -5  Limitation period.  The tax credit allowed under
 
 9 this chapter shall be available for qualified improvement costs
 
10 incurred during taxable years beginning after December 31, 1998,
 
11 and before January 1, 2004."
 
12      SECTION  2.  This Act, upon its approval, shall apply to
 
13 taxable years beginning after December 31, 1998.
 
14 
 
15                           INTRODUCED BY:  _______________________