Income Tax Credit

Expands income tax credit for employment of vocational referrals
to those who hire public assistance recipients.

HOUSE OF REPRESENTATIVES                H.B. NO.1699       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 235-55.91, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "235-55.91  Credit for employment of vocational
 4 rehabilitation referrals[.]; public assistance recipients.  (a)
 5 There shall be allowed to each taxpayer subject to the tax
 6 imposed by this chapter, a credit for employment of vocational
 7 rehabilitation referrals or public assistance recipients which
 8 shall be deductible from the taxpayer's net income tax liability,
 9 if any, imposed by this chapter for the taxable year in which the
10 credit is properly claimed.
11      (b)  The amount of the credit determined under this section
12 for the taxable year shall be equal to twenty per cent of the
13 qualified first-year wages for that year.  The amount of the
14 qualified first-year wages which may be taken into account with
15 respect to any individual shall not exceed $6,000.
16      (c)  For purposes of this section:
17      "Hiring date" means the day the vocational rehabilitation
18 referral or public assistance recipient is hired by the employer.
19      "Public assistance recipient" means an individual receiving

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 1 any form of public assistance administered by the department of
 2 human services under chapter 346 who has been unemployed for not
 3 less than            months.
 4      "Qualified first-year wages" means, with respect to any
 5 vocational rehabilitation referral[,] or public assistance
 6 recipient, qualified wages attributable to service rendered
 7 during the one-year period beginning with the day the individual
 8 begins work for the employer.
 9      "Qualified wages" means the wages paid or incurred by the
10 employer during the taxable year to an individual who is a
11 vocational rehabilitation referral or public assistance recipient
12 and more than one-half of the wages paid or incurred for such an
13 individual is for services performed in a trade or business of
14 the employer.
15      "Vocational rehabilitation referral" means any individual
16 who is certified by the department of human services vocational
17 rehabilitation and services for the blind division in
18 consultation with the Hawaii state employment service of the
19 department of labor and industrial relations as:
20      (1)  Having a physical or mental disability which, for such
21           individual, constitutes or results in a substantial
22           handicap to employment; and
23      (2)  Having been referred to the employer upon completion of

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 1           (or while receiving) rehabilitative services pursuant
 2           to:
 3           (A)  An individualized written rehabilitation plan
 4                under the State's plan for vocational
 5                rehabilitation services approved under the
 6                Rehabilitation Act of 1973, as amended; or
 7           (B)  A program of vocational rehabilitation carried out
 8                under chapter 31 of title 38, United States Code.
 9      "Wages" has the meaning given to such term by section
10 3306(b) of the Internal Revenue Code (determined without regard
11 to any dollar limitation contained in the Internal Revenue Code
12 section).  "Wages" shall not include:
13      (1)  Amounts paid or incurred by an employer for any period
14           to any vocational rehabilitation referral for whom the
15           employer receives state or federally funded payments
16           for on-the-job training of the individual for the
17           period;
18      (2)  Amounts paid to an employer (however utilized by the
19           employer) for any vocational rehabilitation referral
20           under a program established under section 414 of the
21           Social Security Act; and
22      (3)  If the principal place of employment is at a plant or
23           facility, and there is a strike or lockout involving

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 1           vocational rehabilitation referrals at the plant or
 2           facility, amounts paid or incurred by the employer to
 3           the vocational rehabilitation referral for services
 4           which are the same as, or substantially similar to,
 5           those services performed by employees participating in,
 6           or affected by, the strike or lockout during the period
 7           of strike or lockout.
 8      (d)  The following shall apply to certifications of
 9 vocational rehabilitation referrals[:] or public assistance
10 recipient employees:
11      (1)  An individual shall not be treated as [a vocational
12           rehabilitation referral] a qualified employee for the
13           tax credit under this section unless, on or before the
14           day on which the individual begins work for the
15           employer, the employer:
16           (A)  Has received a certification from the department
17                of human services [vocational rehabilitation and
18                services for the blind division] that the
19                individual is [a] qualified [vocational
20                rehabilitation referral]; or
21           (B)  Has requested in writing the certification from
22                the department of human services [vocational
23                rehabilitation and services for the blind

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 1                division] that the individual is [a] qualified
 2                vocational rehabilitation referral].
 3           For purposes of the preceding sentence, if on or before
 4           the day on which the individual begins work for the
 5           employer, the individual has received from the
 6           department of human services [vocational rehabilitation
 7           and services for the blind division] a written
 8           preliminary determination that the individual is [a
 9           vocational rehabilitation referral,] qualified then
10           "the fifth day" shall be substituted for "the day" in
11           the preceding sentence.
12      (2)  If an individual has been certified [as a vocational
13           rehabilitation referral] and the certification is
14           incorrect because it was based on false information
15           provided by the individual, the certification shall be
16           revoked and wages paid by the employer after the date
17           on which notice of revocation is received by the
18           employer shall not be treated as qualified wages.
19      (3)  In any request for a certification of an individual [as
20           vocational rehabilitation referral,] for qualification
21           under this section, the employer shall certify that a
22           good faith effort was made to determine that such
23           individual is a vocational rehabilitation referral[.]

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 1           or public assistance recipient.
 2      (e)  The following wages paid to vocational rehabilitation
 3 referrals or public assistance recipient are ineligible to be
 4 claimed by the employer for this credit:
 5      (1)  No wages shall be taken into account under this section
 6           with respect to a vocational rehabilitation referral or
 7           public assistance recipient who:
 8           (A)  Bears any of the relationships described in
 9                section 152(a)(1) to (8) of the Internal Revenue
10                Code to the taxpayer, or, if the taxpayer is a
11                corporation, to an individual who owns, directly
12                or indirectly, more than fifty per cent in value
13                of the outstanding stock of the corporation
14                (determined with the application of section 267(c)
15                of the Internal Revenue Code);
16           (B)  If the taxpayer is an estate or trust, is a
17                grantor, beneficiary, or fiduciary of the estate
18                or trust, or is an individual who bears any of the
19                relationships described in section 152(a)(1) to
20                (8) of the Internal Revenue Code to a grantor,
21                beneficiary, or fiduciary of the estate or trust;
22                or
23           (C)  Is a dependent (described in section 152(a)(9) of

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 1                the Internal Revenue Code) of the taxpayer, or, if
 2                the taxpayer is a corporation, of an individual
 3                described in subparagraph (A), or, if the taxpayer
 4                is an estate or trust, of a grantor, beneficiary,
 5                or fiduciary of the estate or trust.
 6      (2)  No wages shall be taken into account under this section
 7           with respect to any vocational rehabilitation referral
 8           or public assistance recipient if, prior to the hiring
 9           date of the individual, the individual had been
10           employed by the employer at any time during which the
11           individual was not a vocational rehabilitation
12           referral[.] or public assistance recipient.
13      (3)  No wages shall be taken into account under this section
14           with respect to any vocational rehabilitation referral
15           or public assistance recipient unless such individual
16           either:
17           (A)  Is employed by the employer at least ninety days;
18                or
19           (B)  Has completed at least one hundred-twenty hours of
20                services performed for the employer.
21      (f)  In the case of a successor employer referred to in
22 section 3306(b)(1) of the Internal Revenue Code, the
23 determination of the amount of the tax credit allowable under

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 1 this section with respect to wages paid by the successor employer
 2 shall be made in the same manner as if the wages were paid by the
 3 predecessor employer referred to in the section.
 4      (g)  No credit shall be determined under this section with
 5 respect to wages paid by an employer to a vocational
 6 rehabilitation referral or public assistance recipient for
 7 services performed by the individual for another person unless
 8 the amount reasonably expected to be received by the employer for
 9 the services from the other person exceeds the wages paid by the
10 employer to the individual for such services.
11      (h)  The credit allowed under this section shall be claimed
12 against net income tax liability for the taxable year.  A tax
13 credit under this section which exceeds the taxpayer's income tax
14 liability may be used as a credit against the taxpayer's income
15 tax liability in subsequent years until exhausted.
16      (i)  All claims for tax credits under this section,
17 including any amended claims, shall be filed on or before the end
18 of the twelfth month following the close of the taxable year for
19 which the credits may be claimed.  Failure to comply with the
20 foregoing provision shall constitute a waiver of the right to
21 claim the credit.
22      (j)  No deduction shall be allowed for that portion of the
23 wages or salaries paid or incurred for the taxable year that is

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 1 equal to the amount of the credit determined under this section.
 2      (k)  The director of taxation may adopt any rules under
 3 chapter 91 and forms necessary to carry out this section."
 4      SECTION 2.  Statutory material to be repealed is bracketed.
 5 New statutory material is underscored.
 6      SECTION 3.  This Act shall take effect upon its approval,
 7 shall apply to taxable years beginning after December 31, 1998.
 9                              INTRODUCED BY:______________________