Tourism; Tax Credit

Establishes an income tax credit for creating hotel rooms.

THE SENATE                              S.B. NO.           48
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that Hawaii's economy
 2 depends upon the health of the visitor industry, which needs a
 3 considerable amount of revitalization.  In addition, the
 4 legislature finds that more new hotel rooms are needed.
 5      One step toward improving the State's fiscal health that
 6 will increase long-term revenue while providing jobs in the
 7 construction industry is to encourage visitor accommodations to
 8 create new hotel rooms.  A tax credit aimed at creating new rooms
 9 will encourage the owners of hotels to move forward in this area.
10 In turn, these new rooms will generate additional tax revenues
11 providing a sound return on the State's initial investment.
12      The purpose of this Act is to establish a tax credit for the
13 creation of new hotel rooms.
14      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
15 by adding a new section to be appropriately designated and to
16 read as follows:
17      "235-     Hotel room creation tax credit.  (a)  There shall
18 be allowed to each taxpayer subject to the taxes imposed by this
19 chapter and chapter 237D an income tax credit which shall be

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                                     S.B. NO.           48

 1 deductible from the taxpayer's net income tax liability, if any,
 2 imposed by this chapter for the taxable year in which the credit
 3 is properly claimed.
 4      The amount of the credit shall be four per cent of the cost
 5 of creating a new room during the taxable year for each qualified
 6 hotel facility located in Hawaii.  The credit shall not include
 7 the cost of creating a new room for which another credit was
 8 claimed under this chapter for the taxable year.  The total
 9 amount of the credit shall be further limited by an amount that
10 shall not exceed ten per cent of the transient accommodations tax
11 paid by the taxpayer in the preceding taxable year that is
12 attributable to the qualified hotel facility.
13      In the case of a partnership, S corporation, estate, or
14 trust, the tax credit allowable is for cost of creating a new
15 room incurred by the entity for the taxable year.  The cost upon
16 which the tax credit is computed shall be determined at the
17 entity level.  Distribution and share of credit shall be
18 determined pursuant to section 235-110.7(a).
19      If a deduction is taken under section 179 (with respect to
20 election to expense depreciable business assets) of the Internal
21 Revenue Code of 1986, as amended, no tax credit shall be allowed
22 for that portion of the renovation cost for which the deduction
23 is taken.

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 1      The basis of eligible property for depreciation or ACRS
 2 purposes for state income taxes shall be reduced by the amount of
 3 credit allowable and claimed.
 4      (b)  As used in this section:
 5      "Cost of creating a new room" means any costs for plans,
 6 design, construction, and equipment related to the addition of a
 7 new room to an existing qualified hotel facility.
 8      "Qualified hotel facility" means a hotel/hotel-condo as
 9 defined in section 486K-1 and which was placed in service before
10 January 1, 1999.
11      (c)  The credit allowed under this section shall be claimed
12 against the net income tax liability for the taxable year.  For
13 the purpose of this tax credit, "net income tax liability" means
14 net income tax liability reduced by all other credits allowed
15 under this chapter.
16      (d)  If the tax credit under this section exceeds the
17 taxpayer's income tax liability, the excess of credit over
18 liability shall be refunded to the taxpayer; provided that no
19 refunds or payment on account of the tax credit allowed by this
20 section shall be made for amounts less than $1.  All claims for a
21 tax credit under this section must be filed on or before the end
22 of the twelfth month following the close of the taxable year for
23 which the credit may be claimed.  Failure to comply with the

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 1 foregoing provision shall constitute a waiver of the right to
 2 claim the credit.
 3      (e)  The director of taxation shall prepare any forms that
 4 may be necessary to claim a credit under this section.  The
 5 director also may require the taxpayer to furnish information to
 6 ascertain the validity of the claim for credit made under this
 7 section and may adopt rules necessary to effectuate the purposes
 8 of this section pursuant to chapter 91.
 9      (f)  The tax credit allowed under this section shall be
10 available for taxable years beginning after December 31, 1998,
11 and shall not be available for taxable years beginning after
12 December 31, 2001."
13      SECTION 3.  New statutory material is underscored.
14      SECTION 4.  This Act shall apply to taxable years beginning
15 after December 31, 1998, and shall be repealed on December 31,
16 2001.
18                           INTRODUCED BY:  _______________________