REPORT TITLE:
Taxation


DESCRIPTION:
Creates a hotel construction and remodeling income tax credit;
provides for reimbursement of GET to the counties; exempts
certain activities of call centers from the GET and the public
service company tax; provides for GET exemption of certain health
care activities; adopts Internal Revenue Code section 911
exempting certain income of residents living abroad; clarifies
that income of attorneys-in fact for reciprocal insurers is
exempt from GET; provides income tax check-off for Hawaii human
services children's special fund and establishes the fund;
provides for a technology tax credit for venture capital
investment by financial institutions.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "235-     Hotel construction and remodeling tax credit.
 
 5 (a)  There shall be allowed to each taxpayer subject to the taxes
 
 6 imposed by this chapter and chapter 237D or the association of
 
 7 apartment owners of a hotel-condo as defined in section 486K-1 an
 
 8 income tax credit which shall be deductible from the taxpayer's
 
 9 or association of apartment owners' net income tax liability, if
 
10 any, imposed by this chapter for the taxable year in which the
 
11 credit is properly claimed.
 
12      The amount of the credit shall be four per cent of the
 
13 construction or renovation costs incurred during the taxable year
 
14 for each qualified hotel facility located in Hawaii, and shall
 
15 not include the construction or renovation costs for which
 
16 another credit was claimed under this chapter for the taxable
 
17 year.
 
18      In the case of a partnership, S corporation, estate, trust,
 
19 or the association of apartment owners of a hotel-condo as
 

 
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 1 defined in section 486K-1, the tax credit allowable is for
 
 2 construction or renovation costs incurred by the entity for the
 
 3 taxable year.  The cost upon which the tax credit is computed
 
 4 shall be determined at the entity level.  Distribution and share
 
 5 of credit shall be determined pursuant to section 235-110.7(a).
 
 6      If a deduction is taken under section 179 (with respect to
 
 7 election to expense depreciable business assets) of the Internal
 
 8 Revenue Code, no tax credit shall be allowed for that portion of
 
 9 the renovation cost for which the deduction is taken.
 
10      The basis of eligible property for depreciation or ACRS
 
11 purposes for state income taxes shall be reduced by the amount of
 
12 credit allowable and claimed.  Alternatively, the taxpayer shall
 
13 treat the amount of credit allowable and claimed as a taxable
 
14 income item for the taxable year in which it is properly
 
15 recognized under the method of accounting used to compute taxable
 
16 income.
 
17      (b)  As used in this section:
 
18      "Qualified hotel facility" means a hotel/hotel-condo as
 
19 defined in section 486K-1.
 
20      "Construction or renovation cost" means any costs for plans,
 
21 design, construction, and equipment related to new construction,
 
22 alterations, and modifications to a qualified hotel facility.
 
23      (c)  The credit allowed under this section shall be claimed
 

 
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 1 against the net income tax liability for the taxable year.  For
 
 2 the purpose of this tax credit, "net income tax liability" means
 
 3 net income tax liability reduced by all other credits allowed
 
 4 under this chapter.
 
 5      (d)  If the tax credit under this section exceeds the
 
 6 taxpayer's or association of apartment owners' income tax
 
 7 liability, the excess of credit over liability shall be refunded
 
 8 to the taxpayer or association of apartment owners; provided that
 
 9 no refunds or payment on account of the tax credit allowed by
 
10 this section shall be made for amounts less that $1.  All claims
 
11 for a tax credit under this section must be filed on or before
 
12 the end of the twelfth month following the close of the taxable
 
13 year for which the credit may be claimed.  Failure to comply with
 
14 the foregoing provision shall constitute a waiver of the right to
 
15 claim the credit.
 
16      (e)  The director of taxation shall prepare any forms that
 
17 may be necessary to claim a credit under this section.  The
 
18 director also may require the taxpayer to furnish information to
 
19 ascertain the validity of the claim for credit made under this
 
20 section and may adopt rules necessary to effectuate the purposes
 
21 of this section pursuant to chapter 91.
 
22      (f)  The tax credit allowed under this section shall be
 
23 available for taxable years beginning after December 31, 1998,
 

 
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 1 and shall not be available for taxable years beginning after
 
 2 December 31, 2001."
 
 3      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
 4 by adding a new section to be appropriately designated and to
 
 5 read as follows:
 
 6      "237-    Reimbursement for amounts of taxes passed on to
 
 7 county governments by licensees.  (a)  Each county shall be
 
 8 reimbursed for amounts of general excise taxes passed on to them
 
 9 by licensees under this chapter and paid by the county after
 
10 June 30, 1999.  Each county shall submit an itemized claim to and
 
11 in the form prescribed by the director of finance for
 
12 reimbursement of general excise taxes passed on to them by
 
13 licensees under this chapter and paid by the county after
 
14 June 30, 1999.  The claim shall be made within thirty days
 
15 following January 1 and July 1 of each year.  The director of
 
16 finance shall review the itemized claim and pay the amount due to
 
17 become a general realization of the county.  Payment shall be
 
18 made out of the special accounts created in section 237-31.
 
19      (b)  The director of finance may request supporting
 
20 documentation for any itemized claim, before making
 
21 reimbursement.
 
22      (c)  Reimbursements to each county shall be made for general
 
23 excise taxes passed on to each county by licensees after June 30,
 

 
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 1 1999, on the following schedule:
 
 2      (1)  For taxes passed on in fiscal years 1999-2000 and
 
 3           2000-2001, fifty per cent of the total itemized claim
 
 4           made by each county; and
 
 5      (2)  For taxes passed on in fiscal years 2001-2002 to
 
 6           2004-2005, one hundred per cent of the total itemized
 
 7           claim made by each county."
 
 8      SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended
 
 9 by adding a new section to be appropriately designated and to
 
10 read as follows:
 
11      "237-     Call centers; exemption; engaging in business;
 
12 definitions.  (a)  In addition to the amounts not taxable under
 
13 section 237-24, this chapter shall not apply to amounts received
 
14 from a person operating a call center by a person engaged in
 
15 business as a telecommunications common carrier for interstate or
 
16 foreign telecommunications services, including toll-free
 
17 telecommunications, telecommunication capabilities for electronic
 
18 mail, voice and data telecommunication, computerized telephone
 
19 support, facsimile, wide area telecommunication services, or
 
20 computer to computer communication.
 
21      (b)  The establishment of a call center in this State by any
 
22 person shall not be used by itself by the State to find that any
 
23 other part of the person's business is engaged in business in
 

 
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 1 this State for the purposes of this chapter.  Gross income or
 
 2 gross proceeds received by a call center for customer service and
 
 3 support shall be exempt from the measure of taxes imposed by this
 
 4 chapter.
 
 5      (c)  The department, by rule, may provide that the person
 
 6 providing the telecommunications service may take from the person
 
 7 operating a call center a certificate, in a form that the
 
 8 department shall prescribe, certifying that the amounts received
 
 9 for telecommunications services are for operating a call center.
 
10 If the certificate is required by rule of the department, the
 
11 absence of the certificate in itself shall give rise to the
 
12 presumption that the amounts received from the sale of
 
13 telecommunications services are not for operating a call center.
 
14      (d)  As used in this section:
 
15      "Call center" means a physical or electronic operation that
 
16 focuses on providing customer service and support for computer
 
17 hardware and software companies, software service organizations,
 
18 and telecommunications support services, within an organization
 
19 in which a managed group of individuals spend most of their time
 
20 engaging in business by telephone, usually working in a
 
21 computer-automated environment.
 
22      "Customer service and support" means product support,
 
23 technical assistance, sales support, phone or computer based
 

 
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 1 configuration assistance, software upgrade help lines, and
 
 2 traditional help desk services.
 
 3      "Telecommunications common carrier" means any person that
 
 4 owns, operates, manages, or controls any facility used to furnish
 
 5 telecommunications services for profit to the public, or to
 
 6 classes of users as to be effectively available to the public,
 
 7 engaged in the provision of services, such as voice, data, image,
 
 8 graphics, and video services, that make use of all or part of
 
 9 their transmission facilities, switches, broadcast equipment,
 
10 signalling, or control devices.
 
11      "Telecommunications service" or "telecommunications" means
 
12 the offering of transmission between or among points specified by
 
13 a user, of information of the user's choosing, including voice,
 
14 data, image, graphics, and video without change in the form or
 
15 content of the information, as sent and received, by means of
 
16 electromagnetic transmission, or other similarly capable means of
 
17 transmission, with or without benefit of any closed transmission
 
18 medium."
 
19      SECTION 4.  Chapter 237, Hawaii Revised Statutes, is amended
 
20 by adding a new grouping to be appropriately designated and to
 
21 read as follows:
 
22            "TREATMENT OF CERTAIN HEALTH CARE SERVICES
 
23      237-A  Definitions.  For sections 237-A and 237-B the
 

 
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 1 definitions contained in this section shall control.
 
 2      "Health" includes physical and mental health.
 
 3      "Health care facility" includes any program, institution,
 
 4 place, building, or agency, or portion thereof, private or
 
 5 public, whether organized for profit or not, used, operated, or
 
 6 designed to provide medical diagnosis, treatment, nursing,
 
 7 rehabilitative, or preventive care to any person or persons, that
 
 8 is subject to chapter 323D, is owned or operated by the federal
 
 9 or state government, or is affiliated with the John A. Burns
 
10 school of medicine at the University of Hawaii.  The term
 
11 includes, but is not limited to, health care facilities commonly
 
12 referred to as hospitals, extended care and rehabilitation
 
13 centers, nursing homes, skilled nursing facilities, intermediate
 
14 care facilities, hospices for the terminally ill that require
 
15 licensure or certification by the department of health or are
 
16 owned or operated by the federal or state government, kidney
 
17 disease treatment centers including freestanding hemodialysis
 
18 units, outpatient clinics, organized ambulatory health care
 
19 facilities, emergency care facilities and centers, home health
 
20 agencies, residency programs, faculty practice programs, health
 
21 maintenance organizations, and other similar facilities where
 
22 health care services are provided.
 
23      "Health care plan" means a written agreement under which
 

 
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 1 health care providers will provide health care services to
 
 2 patients who either pay a monthly payment or premium to a health
 
 3 plan provider or directly to health care providers in return for
 
 4 which:
 
 5      (1)  The health plan provider or the health care providers
 
 6           assume all or a portion of the risk for the cost of the
 
 7           health care services, without regard to type, value, or
 
 8           frequency of the services provided; or
 
 9      (2)  The health care services are provided under a written
 
10           agreement in which the health care providers are paid
 
11           either directly, or through a health plan provider, for
 
12           all or part of their services by a mutual benefit
 
13           society or health maintenance organization or under an
 
14           insurance contract.
 
15      "Health care provider" means a Hawaii health care facility,
 
16 physician, nurse, or any combination thereof.
 
17      "Health care services" means those services which health
 
18 care providers may legally provide to patients under federal and
 
19 state law.
 
20      "Health plan provider" means a person, including a
 
21 corporation, partnership, limited liability company, mutual
 
22 benefit society, health maintenance organization, or insurance
 
23 carrier, that offers the health care services of one or more
 

 
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 1 health care facilities and one or more physicians under a health
 
 2 care plan to members of the public, employers, employee
 
 3 organizations, government agencies, or other health plan
 
 4 providers.
 
 5      "Nurse" means:
 
 6      (1)  An individual licensed under chapter 457;
 
 7      (2)  A professional corporation incorporated under
 
 8           chapter 415A;
 
 9      (3)  A Hawaii general or limited liability partnership
 
10           formed under chapter 425;
 
11      (4)  A Hawaii limited partnership formed under chapter 425D;
 
12           or
 
13      (5)  A Hawaii limited liability company formed under chapter
 
14           428;
 
15 engaged in the practice of nursing in Hawaii.
 
16      "Physician" means:
 
17      (1)  An individual licensed under chapter 453 or 460;
 
18      (2)  A professional corporation incorporated under
 
19           chapter 415A;
 
20      (3)  A Hawaii general or limited liability partnership
 
21           formed under chapter 425; or
 
22      (4)  A Hawaii limited partnership formed under chapter 425D;
 
23 engaged in the practice of medicine or osteopathic medicine and
 

 
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 1 surgery in Hawaii.
 
 2      237-B  Treatment of gross income or gross proceeds of a
 
 3 health plan provider.(a)  Where a health plan provider receives
 
 4 gross proceeds or gross income that is taxable under this
 
 5 chapter, that is received from a health care plan or from another
 
 6 health plan provider, and all or part of which is paid to a
 
 7 Hawaii health care provider or to another health plan provider
 
 8 under a health care plan, the health plan provider shall deduct
 
 9 from the gross income or gross proceeds an amount equal to the
 
10 payment to the Hawaii health care provider or to the other health
 
11 plan provider under the health care plan.
 
12      If the health plan provider is a joint venture, the joint
 
13 venture may deduct from the gross proceeds or gross income that
 
14 is taxable under this chapter and that is received from a health
 
15 care plan or from another health plan provider, an amount equal
 
16 to the amount paid by the joint venture to a Hawaii health care
 
17 provider or to another health plan provider under a health care
 
18 plan, including payments to those health care providers or health
 
19 plan providers who may be partners, members, or managers of the
 
20 joint venture.  All these payments made to partners, members, or
 
21 managers shall be gross proceeds or gross income taxable under
 
22 this chapter to the receiving partner, member, or manager, but
 
23 may be deducted and become nontaxable under this section if:
 

 
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 1      (1)  The receiving partner, member, or manager is a person
 
 2           exempt from taxation under this chapter; and
 
 3      (2)  These payments are made for activities engaged in by
 
 4           the receiving partner, member, or manager and the
 
 5           activities are exempt from taxation under this chapter.
 
 6      (b)  As used in this section, "joint venture" means a
 
 7 domestic partnership or limited liability company, with at least
 
 8 one partner, member, or manager who is a Hawaii health care
 
 9 provider under a health care plan to which the joint venture is a
 
10 party."
 
11      SECTION 5.  Chapter 239, Hawaii Revised Statutes, is amended
 
12 by adding a new section to be appropriately designated and to
 
13 read as follows:
 
14      "239-     Call centers; exemption; engaging in business;
 
15 definitions.  (a)  This chapter shall not apply to amounts
 
16 received from a person operating a call center by a person
 
17 engaged in business as a telecommunications common carrier for
 
18 interstate or foreign telecommunications services, including
 
19 toll-free telecommunications, telecommunication capabilities for
 
20 electronic mail, voice and data telecommunication, computerized
 
21 telephone support, facsimile, wide area telecommunication
 
22 services, or computer to computer communication.
 
23      (b)  The department, by rule, may provide that the person
 

 
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 1 providing the telecommunications service may take from the person
 
 2 operating a call center a certificate, in a form that the
 
 3 department shall prescribe, certifying that the amounts received
 
 4 for telecommunications services are for operating a call center.
 
 5 If the certificate is required by rule of the department, the
 
 6 absence of the certificate in itself shall give rise to the
 
 7 presumption that the amounts received from the sale of
 
 8 telecommunications services are not for operating a call center.
 
 9      (c)  As used in this section:
 
10      "Call center" means a physical or electronic operation that
 
11 focuses on providing customer service and support for computer
 
12 hardware and software companies, software service organizations,
 
13 and telecommunications support services, within an organization
 
14 in which a managed group of individuals spend most of their time
 
15 engaging in business by telephone, usually working in a computer-
 
16 automated environment.
 
17      "Customer service and support" means product support,
 
18 technical assistance, sales support, phone or computer based
 
19 configuration assistance, software upgrade help lines, and
 
20 traditional help desk services."
 
21      SECTION 6.  Section 235-2.3, Hawaii Revised Statutes, is
 
22 amended by amending subsection (b) to read as follows:
 
23      "(b)  The following Internal Revenue Code subchapters, parts
 

 
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 1 of subchapters, sections, subsections, and parts of subsections
 
 2 shall not be operative for the purposes of this chapter, unless
 
 3 otherwise provided:
 
 4      (1)  Subchapter A (sections 1 to 59A) (with respect to
 
 5           determination of tax liability), except section 1(h)(3)
 
 6           (relating to net capital gain reduced by the amount
 
 7           taken into account as investment income), except
 
 8           section 42 (with respect to low-income housing credit),
 
 9           and except sections 47 and 48, as amended, as of
 
10           December 31, 1984 (with respect to certain depreciable
 
11           tangible personal property).  For treatment, see
 
12           sections 235-110.7 and 235-110.8;
 
13      (2)  Section 78 (with respect to dividends received from
 
14           certain foreign corporations by domestic corporations
 
15           choosing foreign tax credit);
 
16      (3)  Section 86 (with respect to social security and tier 1
 
17           railroad retirement benefits);
 
18      (4)  Section 103 (with respect to interest on state and
 
19           local bonds).  For treatment, see section 235-7(b);
 
20      (5)  Section 120 (with respect to amounts received under
 
21           qualified group legal services plans).  For treatment,
 
22           see section 235-7(a)(9) to (11);
 
23      (6)  Section 122 (with respect to certain reduced uniformed
 

 
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 1           services retirement pay).  For treatment, see section
 
 2           235-7(a)(3);
 
 3      (7)  Section 135 (with respect to income from United States
 
 4           savings bonds used to pay higher education tuition and
 
 5           fees).  For treatment, see section 235-7(a)(1);
 
 6      (8)  Subchapter B (sections 141 to 150) (with respect to tax
 
 7           exemption requirements for state and local bonds);
 
 8      (9)  Section 151 (with respect to allowance of deductions
 
 9           for personal exemptions).  For treatment, see section
 
10           235-54;
 
11     (10)  Section 196 (with respect to deduction for certain
 
12           unused investment credits);
 
13     (11)  Sections 241 to 247 (with respect to special deductions
 
14           for corporations).  For treatment, see section
 
15           235-7(c);
 
16     (12)  Section 280C (with respect to certain expenses for
 
17           which credits are allowable);
 
18     (13)  Section 291 (with respect to special rules relating to
 
19           corporate preference items);
 
20     (14)  Section 367 (with respect to foreign corporations);
 
21     (15)  Section 501(c)(12), (15), (16) (with respect to exempt
 
22           organizations);
 
23     (16)  Section 515 (with respect to taxes of foreign countries
 

 
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 1           and possessions of the United States);
 
 2     (17)  Subchapter G (sections 531 to 565) (with respect to
 
 3           corporations used to avoid income tax on shareholders);
 
 4     (18)  Subchapter H (sections 581 to 597) (with respect to
 
 5           banking institutions), except section 584 (with respect
 
 6           to common trust funds).  For treatment, see chapter
 
 7           241;
 
 8     (19)  Section 642(a) and (b) (with respect to special rules
 
 9           for credits and deductions applicable to trusts).  For
 
10           treatment, see sections 235-54(b) and 235-55;
 
11     (20)  Section 668 (with respect to interest charge on
 
12           accumulation distributions from foreign trusts);
 
13     (21)  Subchapter L (sections 801 to 848) (with respect to
 
14           insurance companies).  For treatment, see sections
 
15           431:7-202 and 431:7-204;
 
16     (22)  Section 853 (with respect to foreign tax credit allowed
 
17           to shareholders).  For treatment, see section 235-55;
 
18     (23)  Subchapter N (sections 861 to 999) (with respect to tax
 
19           based on income from sources within or without the
 
20           United States), except section 911 (with respect to
 
21           citizens or residents of the United States living
 
22           abroad), and except sections 985 to 989 (with respect
 
23           to foreign currency transactions).  For treatment, see
 

 
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 1           sections 235-4, 235-5, [and] 235-7(b), and 235-55;
 
 2     (24)  Section 1042(g) (with respect to sales of stock in
 
 3           agricultural refiners and processors to eligible farm
 
 4           cooperatives);
 
 5     (25)  Section 1055 (with respect to redeemable ground rents);
 
 6     (26)  Section 1057 (with respect to election to treat
 
 7           transfer to foreign trust, etc., as taxable exchange);
 
 8     (27)  Sections 1291 to 1298 (with respect to treatment of
 
 9           passive foreign investment companies);
 
10     (28)  Subchapter Q (sections 1311 to 1351) (with respect to
 
11           readjustment of tax between years and special
 
12           limitations); and
 
13     (29)  Subchapter U (sections 1391 to 1397F) (with respect to
 
14           designation and treatment of empowerment zones,
 
15           enterprise communities, and rural development
 
16           investment areas).  For treatment, see chapter 209E."
 
17      SECTION 7.  Section 237-29.7, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "[[]237-29.7[]]  Exemption of insurance companies.  This
 
20 chapter shall not apply to the gross income or gross proceeds of
 
21 insurance companies authorized to do business under chapter 431;
 
22 except this exemption shall not apply to any gross income or
 
23 gross proceeds received after December 31, 1991, as rents from
 

 
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 1 investments in real property in this State; provided that gross
 
 2 income or gross proceeds from investments in real property
 
 3 received by insurance companies after December 31, 1991, under
 
 4 written contracts entered into before January 1, 1992, that do
 
 5 not provide for the passing on of taxes or tax increases shall
 
 6 not be taxed until the contracts are renegotiated, renewed, or
 
 7 extended. 
 
 8      For purposes of this section, insurance companies include
 
 9 reciprocal insurers' bona fide attorneys-in-fact with respect to
 
10 income derived from their business as attorneys-in-fact for
 
11 reciprocal insurers."
 
12      SECTION 8.  Section 237-31, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "237-31  Remittances.  All remittances of taxes imposed by
 
15 this chapter shall be made by money, bank draft, check, cashier's
 
16 check, money order, or certificate of deposit to the office of
 
17 the department of taxation to which the return was transmitted.
 
18 The department shall issue its receipts therefor to the taxpayer
 
19 and shall pay the moneys into the state treasury as a state
 
20 realization, to be kept and accounted for as provided by law;
 
21 provided that [the]:
 
22      (1)  The sum from all general excise tax revenues realized
 
23           by the State that represents the difference between
 

 
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 1           $90,000,000 and the proceeds from the sale of any
 
 2           general obligation bonds authorized for that fiscal
 
 3           year for the purposes of the state educational
 
 4           facilities improvement special fund shall be deposited
 
 5           in the state treasury in each fiscal year to the credit
 
 6           of the state educational facilities improvement special
 
 7           fund; [provided further that a]
 
 8      (2)  A sum, not to exceed $5,000,000, from all general
 
 9           excise tax revenues realized by the State shall be
 
10           deposited in the state treasury in each fiscal year to
 
11           the credit of the compound interest bond reserve
 
12           fund[.]; and
 
13      (3)  A sum, necessary to make reimbursement payments to each
 
14           county under section 237-    , shall be kept by the
 
15           director of finance in separate accounts for
 
16           distribution as provided in section 237-   ."
 
17                              PART II
 
18      SECTION 9.  Chapter 235, Hawaii Revised Statutes, is amended
 
19 by adding a new section to be appropriately designated and to
 
20 read as follows:
 
21      "235-     Income tax refund check-off authorized; human
 
22 services.   Any individual who is entitled to a state income tax
 
23 refund under section 231-23 may designate $           of the
 

 
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 1 refund to be paid over to the Hawaii human services children's
 
 2 special fund, any other law to the contrary notwithstanding, when
 
 3 submitting a state income tax return to the department of
 
 4 taxation.  In the case of a joint return of a husband and wife
 
 5 entitled to a state income tax refund, each spouse may designate
 
 6 that $           be paid to the fund.  The director of taxation
 
 7 shall revise the individual state income tax form to allow the
 
 8 designation of contributions to the fund on the face of the tax
 
 9 return and immediately above the signature lines.  An explanation
 
10 shall be included which clearly states that the check-off does
 
11 not constitute an additional tax liability.  If no designation
 
12 was made on the original tax return when filed, a designation may
 
13 be made by the individual on an amended return filed within
 
14 twenty months and ten days after the due date for the original
 
15 return for that taxable year.  A designation once made whether by
 
16 an original or amended return may not be revoked."
 
17      SECTION 10.  Chapter 346, Hawaii Revised Statutes, is
 
18 amended by adding a new section to be appropriately designated
 
19 and to read as follows:
 
20      "346-    Hawaii human services children's special fund;
 
21 creation.  There is created in the state treasury, the Hawaii
 
22 human services children's special fund that shall be administered
 
23 by the department of human services, and into which shall be
 

 
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 1 deposited all moneys collected from persons who have designated a
 
 2 portion of their income tax refund to the fund as provided in
 
 3 section 235-    and any general fund revenues appropriated.
 
 4 Moneys in the fund shall be used solely to provide for childrens
 
 5 programs under the department, such as child care subsidies,
 
 6 accreditation mentoring, keiki/family mobile units, child care,
 
 7 financial assistance to child care providers, and other
 
 8 children's programs; provided that moneys in the fund shall not
 
 9 be used to offset or to reduce the budget of the department of
 
10 human services."
 
11                             PART III
 
12      SECTION 11.  Chapter 206M, Hawaii Revised Statutes, is
 
13 amended by adding a new section to be appropriately designated
 
14 and to read as follows:
 
15      "206M-     Financial institution technology tax credit.
 
16 (a)  The development corporation shall advise financial
 
17 institutions as defined in section 241-   in making venture
 
18 capital investments.  These venture capital investments shall be
 
19 in technology companies in Hawaii selected by the development
 
20 corporation.  The development corporation shall determine the
 
21 need for venture capital among technology companies.
 
22      Each financial institution that is interested in investing
 
23 as provided in this section shall notify the development
 

 
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 1 corporation by December 31 of each year.  The development
 
 2 corporation shall notify all financial institutions that have
 
 3 indicated an interest in investing in January of each year of the
 
 4 specific investment or investments, the amount of money needed,
 
 5 and award any certificate of tax credit under this section on a
 
 6 first come first served basis.  Each financial institution shall
 
 7 have the right to choose which company or companies in which to
 
 8 invest and how much of an investment will be made in each
 
 9 company.  Up to ten per cent of the total amount of money needed
 
10 shall be allotted to each financial institution that responds.
 
11      If insufficient funds are made available by the responding
 
12 financial institutions, the development corporation shall notify
 
13 financial institutions again and there shall be no restriction on
 
14 the amount of money a financial institution can invest in any
 
15 company or companies.
 
16      (b)  The development corporation shall certify the amount of
 
17 the monetary venture capital investment in technology companies
 
18 as the amount of the tax credit allowed under section 241-   
 
19 subject to subsection (c).
 
20      (c)  The amount of the technology tax credit certified by
 
21 the development corporation shall be apportioned among the
 
22 financial institutions investing in technology companies.  The
 
23 apportionment of the tax credit to each financial institution
 

 
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 1 shall be based on the percentage that each financial
 
 2 institution's monetary investment represents of the all monetary
 
 3 investment made in technology companies in a calendar year by all
 
 4 financial institutions.  The total amount of the tax credit for
 
 5 all financial institutions for any calendar year shall not exceed
 
 6 thirty per cent of the total amount of taxes paid under chapter
 
 7 241 for the preceding calendar year as reported by the department
 
 8 of taxation."
 
 9      SECTION 12.  Chapter 241, Hawaii Revised Statutes, is
 
10 amended by adding a new section to be appropriately designated
 
11 and to read as follows:
 
12      "241-     Technology tax credit.  (a)  Each financial
 
13 institution may claim a tax credit under this section to be
 
14 deducted from the tax liability on net income under this chapter.
 
15 Each claim for a tax credit shall be certified by the technology
 
16 development corporation and shall not exceed the amount of the
 
17 tax credit certified by the corporation or thirty per cent of the
 
18 tax liability of the financial institution under this chapter,
 
19 whichever is less.
 
20      (b)  In claiming the credit under this section, the
 
21 financial institution shall submit a copy of the technology
 
22 development corporation's certificate with a copy of the net
 
23 income tax return.  The director of taxation may request
 

 
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 1 additional information concerning the credit claimed.
 
 2      (c)  If the income tax credit claimed by the taxpayer under
 
 3 this section exceeds the amount of tax liability due from the
 
 4 taxpayer for the taxable year, the excess of the tax credit over
 
 5 payments due shall be carried forward and claimed against tax
 
 6 liability until exhausted. 
 
 7      (d)  Claims for the tax credit under this section, including
 
 8 any amended claims shall be filed on or before the end of the
 
 9 twelfth month following the taxable year for which the credit may
 
10 be claimed.
 
11      (e)  As used in this section, "financial institution" means
 
12 a bank, building and loan association, financial services loan
 
13 company, financial corporation, small business investment
 
14 company, trust company, mortgage loan company, financial holding
 
15 company, development company, or subsidiary."
 
16                              PART IV
 
17      SECTION 13.  In codifying the new sections added by section
 
18 4 and referred to in other sections of this Act, the revisor of
 
19 statutes shall substitute appropriate section numbers for the
 
20 letters used in designating the new sections in section 4 of this
 
21 Act.
 
22      SECTION 14.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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 1      SECTION 15.  This Act shall take effect on July 1, 1999;
 
 2 provided that:
 
 3      (1)  Sections 1, 6, and 9 of this Act shall apply to taxable
 
 4           years beginning after December 31, 1998;
 
 5      (2)  Sections 3, 4, and 7 of this Act shall apply to gross
 
 6           income or gross proceeds received after June 30, 1999;
 
 7      (3)  Sections 5 and 12 of this Act shall take effect on
 
 8           January 1, 2000, so that section 5 and 12 of this Act
 
 9           shall apply to the entire net income from all sources
 
10           for the calendar year 1999 and for calendar years
 
11           thereafter.  In the case of a taxpayer operating on a
 
12           fiscal year basis, sections 5 and 12 shall apply to the
 
13           entire net income from all sources received for the
 
14           fiscal year in which January 1, 2000, occurs and for
 
15           fiscal years thereafter.