REPORT TITLE:
Job creation tax credit.


DESCRIPTION:
Provides a job creation income tax credit for large and small
businesses.  Caps the total amount of tax credit that may be
claimed in any one year.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           495
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.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4             "PART  . JOB CREATION INCOME TAX CREDIT
 
 5      235-   Definitions.  As used in this part:
 
 6      "Base year" means:
 
 7      (1)  The taxable year immediately preceding a business
 
 8           firm's first taxable year of credit eligibility; or
 
 9      (2)  At the option of the business firm, the next preceding
 
10           taxable year.
 
11      "Business firm" means any corporation, partnership, S
 
12 corporation, limited liability company, or sole proprietorship
 
13 subject to this chapter.
 
14      "First year of credit eligibility" means the first full
 
15 fiscal or calendar taxable year for which the business firm was
 
16 both eligible and applied for a credit under this part.
 
17      "Large business firm" means any business firm that employs
 
18 at any time in the preceding taxable year, fifty or more persons
 
19 in permanent full-time positions.
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1      "Permanent full-time position" means a job of indefinite
 
 2 duration at a business firm located within the State, and
 
 3 requiring either:
 
 4      (1)  A minimum of thirty-five hours of an employee's time a
 
 5           week for the entire taxable year of the business firm,
 
 6           where the taxable year consists of not less than forty-
 
 7           eight weeks;
 
 8      (2)  A minimum of thirty-five hours of an employee's time a
 
 9           week for the portion of the taxable year in which the
 
10           employees was initially hired for, or transferred to,
 
11           the business firm; or
 
12      (3)  A minimum of 1,680 hours a year if the standard fringe
 
13           benefits are paid by the business firm for the
 
14           employee.
 
15 Seasonal or temporary positions, or a position created when a job
 
16 function is shifted from a location not in this State to a
 
17 location within the State shall not qualify as a permanent full-
 
18 time position.  Employees in permanent full-time positions shall
 
19 be employed within the State.
 
20      "Small business firm" means any business firm that employs
 
21 at any time in the preceding taxable year, less than fifty
 
22 persons in permanent full-time positions.
 
23      "Wages" has the meaning set forth in section 235-61(a)(1).
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1      235-   Job creation tax credit.(a)  A business firm
 
 2 shall be eligible to apply for a job creation tax credit for
 
 3 three taxable years commencing with the first year of the
 
 4 application.  Once a business firm has applied for one year of
 
 5 credit, the business firm shall apply for the next two following
 
 6 taxable years or lose any tax credits for which it did not apply.
 
 7      (b)  The amount of the job creation tax credit shall be
 
 8          per cent of the total wages of all employees in
 
 9 permanent full-time positions hired during the taxable year to
 
10 which the credit applies.  The job creation tax credit shall be
 
11 taken against income tax liability after all other credits have
 
12 been taken.  Any tax credit that exceeds the taxpayer's income
 
13 tax liability may be used as a credit against the taxpayer's
 
14 income tax liability in subsequent years until exhausted.  No
 
15 unused and carried over credit shall be applied to the total
 
16 aggregate credit ceiling set in section 235-   .
 
17      (c)  The total wages of all employees in permanent full-time
 
18 positions hired during the taxable year shall be determined by
 
19 multiplying the total wages of all employees in permanent full-
 
20 time positions by a fraction.  The numerator of the fraction
 
21 shall be the total wages of all employees in permanent full-time
 
22 positions in the business firm from January 1 of the applicable
 
23 base year to December 31 of the taxable year for which the tax
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1 credit is requested, or if a fiscal year taxpayer, then for the
 
 2 twenty-four months, which shall include the applicable base year,
 
 3 preceding the end of the taxable year for which the tax credit is
 
 4 requested.  The denominator of the fraction shall be the total
 
 5 wages of all employees in permanent full-time positions hired by
 
 6 the business firm during the taxable year.
 
 7      (d)  The amount of the credit for which a business firm is
 
 8 eligible with respect to any employee who is employed in a
 
 9 permanent full-time position for less than twelve full months
 
10 during the taxable year shall be determined by multiplying the
 
11 full taxable year's wages for that employee by a fraction, the
 
12 numerator of which is the number of full months that the employee
 
13 worked for the business firm during the taxable year, and the
 
14 denominator of which is twelve.  The sum of the multiplication
 
15 shall be multiplied by the percentage in subsection (b) to obtain
 
16 the amount of the credit.
 
17      (e)  In no event shall any business firm be eligible for a
 
18 credit under this section exceeding $        .
 
19      235-   Application for credit.(a)  Each business firm
 
20 intending to apply for a job creation tax credit shall submit a
 
21 reservation notifying the department of an intention to do so no
 
22 later then December 1 of the taxable year, or if a fiscal year
 
23 taxpayer, then the first day of the month preceding the end of
 
24 the taxable year.
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1      (b)  All small business firms shall be allowed job creation
 
 2 tax credits for any calendar year in the aggregate not to exceed
 
 3 $        .  All large business firms shall be allowed job
 
 4 creation tax credits for any calendar year in the aggregate not
 
 5 to exceed $        .
 
 6      (c)  If the total aggregate job creation tax credits for
 
 7 which all small business firms apply exceeds $         for any
 
 8 calendar year in which the total aggregate amount of tax credits
 
 9 for which large business firms apply for under subsection (b) is
 
10 less than $        , then the total amount of tax credits
 
11 available for small business firms shall be increased by the
 
12 amount by which all tax credits applied for by large business
 
13 firms is less than $        .
 
14      If the total aggregate job creation tax credits for which
 
15 all large business firms apply exceeds $         for any calendar
 
16 year in which the total aggregate amount of tax credits for which
 
17 small business firms apply for under subsection (b) is less than
 
18 $        , then the total amount of tax credits available for
 
19 large business firms shall be increased by the amount by which
 
20 all tax credits applied for by small business firms is less than
 
21 $        .
 
22      (d)  The department shall adopt policies and procedures
 
23 under chapter 91 to provide:
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1      (1)  Requirements for notifying the department of intent to
 
 2           apply for credit and the application forms and
 
 3           procedures;
 
 4      (2)  A system for allocating the available amount of tax
 
 5           credits among eligible taxpayers;
 
 6      (3)  A method for carrying forward eligibility for tax
 
 7           credits to subsequent periods if an eligible taxpayer
 
 8           does not obtain a reservation of a tax credit or any
 
 9           portion thereof for which the taxpayer is eligible in
 
10           any year as a result of oversubscription of the tax
 
11           credits due to the tax credit limitations under
 
12           subsections (b) and (c);
 
13      (4)  Priorities for allocating reservations to taxpayers
 
14           whose eligibility for reservations of tax credits was
 
15           carried forward from a preceding year but who did not
 
16           receive a tax credit to which they were otherwise
 
17           eligible;
 
18      (5)  A method for the issuance of reservations to eligible
 
19           taxpayers who did not initially receive a reservation
 
20           in any year, if the department determines that tax
 
21           credit reservations were issued to other taxpayers who
 
22           did not use, or were determined to wholly or partially
 
23           ineligible for a reserved tax credit;
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1      (6)  A procedure for the cancellation and reallocation of
 
 2           tax credit reservations allocated to applicants who,
 
 3           after reserving tax credits, have been determined to be
 
 4           ineligible for all or a portion of the tax credits
 
 5           reserved; and
 
 6      (7)  Reporting requirements for full-time positions, number
 
 7           of employees, and wages paid to assist the department
 
 8           in carrying out this part.
 
 9 The department shall not be subject to chapter 91 in applying
 
10 these policies and procedures in approving and denying
 
11 applications for reservations and tax credits.
 
12      (e)  Claims for tax credits under this part, including
 
13 amended claims, shall be filed on or before the end of the
 
14 twelfth month following the taxable year for which the tax credit
 
15 may be claimed.
 
16      235-   Duplication of tax credit.  No business firm
 
17 applying for a job creation tax credit and deemed eligible for a
 
18 tax credit shall claim a tax credit or use an exemption under
 
19 section 209E-10, 209E-11, or 235-55.91."
 
20      SECTION 2.  This Act shall take effect upon its approval;
 
21 provided that this Act shall apply to taxable years beginning
 
22 after December 31, 1998; provided further that this Act shall be
 
23 repealed on December 31, 2001; provided further that even though
 

 
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                                     S.B. NO.           495
                                                        
                                                        

 
 1 this Act is repealed all unexhausted tax credits allowed under
 
 2 this Act shall be valid until exhausted; and provided further
 
 3 that applications for tax credits and tax credits claimed under
 
 4 this Act for taxable years ending before January 1, 2002, shall
 
 5 be valid even though claimed after December 31, 2001.
 
 6 
 
 7                           INTRODUCED BY:  _______________________