REPORT TITLE:
Tax Credits; Felons


DESCRIPTION:
Tax credits for employers hiring furloughed inmates or recently
released persons who have been incarcerated for conviction of
felonies. (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        63
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
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-    Credit for employment of parolees, furloughed
 
 5 inmates.  (a)  There shall be allowed to each taxpayer subject to
 
 6 the tax imposed by this chapter, a credit for employment of a
 
 7 qualified parolee or furloughed inmate participating in a work
 
 8 release program.  The credit shall be deductible from the
 
 9 taxpayer's net income tax liability, if any, imposed by this
 
10 chapter for the taxable year in which the credit is properly
 
11 claimed.
 
12      (b)  The amount of the credit determined under this section
 
13 for the taxable year shall be equal to twenty per cent of the
 
14 qualified first-year wages for that year.  The amount of the
 
15 qualified first-year wages that may be taken into account with
 
16 respect to any person shall not exceed $6,000.
 
17      (c)  For purposes of this section:
 
18      "Furloughed inmate" means a person who has been granted a
 
19 furlough for the purpose of employment under section 353-17.
 

 
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 1      "Hiring date" means the day a qualified parolee or
 
 2 furloughed inmate participating in a work release program is
 
 3 employed by the employer.
 
 4      "Qualified first-year wages" means, with respect to a
 
 5 qualified parolee or furloughed inmate participating in a work
 
 6 release program, qualified wages attributable to service rendered
 
 7 during the first twelve months from the hiring date.
 
 8      "Qualified parolee" means a person incarcerated for any
 
 9 felony conviction who was released from incarceration within the
 
10 twelve months preceding the hiring date.
 
11      "Qualified wages" means the wages paid or owed by the
 
12 employer during the taxable year to a qualified parolee or
 
13 furloughed inmate and more than one-half of the wages paid or
 
14 owed to a qualified parolee or furloughed inmate is for services
 
15 performed in a trade or business of the employer.
 
16      "Wages" has the meaning given to terms by section 3306(b) of
 
17 the Internal Revenue Code (determined without regard to any
 
18 dollar limitation contained in the Internal Revenue Code
 
19 section).  "Wages" shall not include:
 
20      (1)  Amounts paid or owed by an employer for any period to a
 
21           qualified parolee or furloughed inmate for whom the
 
22           employer receives state or federally funded payments
 
23           for on-the-job training of the qualified parolee or
 
24           furloughed inmate for the period; and
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  If the principal place of employment is at a plant or
 
 2           facility, and there is a strike or lockout involving a
 
 3           qualified parolee or furloughed inmate at the plant or
 
 4           facility, amounts paid or owed by the employer to the
 
 5           qualified parolee or furloughed inmate for services
 
 6           which are the same as, or substantially similar to,
 
 7           those services performed by employees participating in,
 
 8           or affected by, the strike or lockout during the period
 
 9           of strike or lockout.
 
10      (d)  The following wages paid to a qualified parolee or
 
11 furloughed inmate are ineligible to be claimed by the employer
 
12 for this credit:
 
13      (1)  No wages shall be taken into account under this section
 
14           with respect to a qualified parolee or furloughed
 
15           inmate who:
 
16           (A)  Bears any of the relationships described in
 
17                section 152(a)(1) to (8) of the Internal Revenue
 
18                Code to the taxpayer, or, if the taxpayer is a
 
19                corporation, to an individual who owns, directly
 
20                or indirectly, more than fifty per cent in value
 
21                of the outstanding stock of the corporation
 
22                (determined with the application of section 267(c)
 
23                of the Internal Revenue Code);
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           (B)  If the taxpayer is an estate or trust, is a
 
 2                grantor, beneficiary, or fiduciary of the estate
 
 3                or trust, or is an individual who bears any of the
 
 4                relationships described in section 152(a)(1) to
 
 5                (8) of the Internal Revenue Code to a grantor,
 
 6                beneficiary, or fiduciary of the estate or trust;
 
 7                or
 
 8           (C)  Is a dependent (described in section 152(a)(9) of
 
 9                the Internal Revenue Code) of the taxpayer, or, if
 
10                the taxpayer is a corporation, of an individual
 
11                described in subparagraph (A), or, if the taxpayer
 
12                is an estate or trust, of a grantor, beneficiary,
 
13                or fiduciary of the estate or trust.
 
14      (2)  No wages shall be taken into account under this section
 
15           with respect to a qualified parolee or furloughed
 
16           inmate unless the qualified parolee or furloughed
 
17           inmate either:
 
18           (A)  Is employed by the employer at least ninety days;
 
19                or
 
20           (B)  Has completed at least one hundred-twenty hours of
 
21                services performed for the employer.
 
22      (e)  An employer claiming tax credits under this section
 
23 shall:
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (1)  Obtain written certification from the Hawaii paroling
 
 2           authority that the qualified parolee was released, in
 
 3           fact, from incarceration within the twelve months
 
 4           immediately preceding employment by the employer; or
 
 5      (2)  Obtain written certification from the director of
 
 6           public safety that the furloughed inmate has been
 
 7           granted, in fact, a furlough under section 353-17.
 
 8      (f)  In the case of a successor employer referred to in
 
 9 section 3306(b)(1) of the Internal Revenue Code, the
 
10 determination of the amount of the tax credit allowable under
 
11 this section with respect to wages paid by the successor employer
 
12 shall be made in the same manner as if the wages were paid by the
 
13 predecessor employer referred to in the section.
 
14      (g)  No credit shall be determined under this section with
 
15 respect to wages paid by an employer to a qualified parolee or
 
16 furloughed inmate for services performed by the qualified parolee
 
17 or furloughed inmate for another person unless the amount
 
18 reasonably expected to be received by the employer for the
 
19 services from the other person exceeds the wages paid by the
 
20 employer to the qualified parolee or furloughed inmate for those
 
21 services.
 
22      (h)  The credit allowed under this section shall be claimed
 
23 against net income tax liability for the taxable year.  A tax
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 credit under this section that exceeds the taxpayer's income tax
 
 2 liability may be used as a credit against the taxpayer's income
 
 3 tax liability in subsequent years until exhausted.
 
 4      (i)  All claims for tax credits under this section,
 
 5 including any amended claims, shall be filed on or before the end
 
 6 of the twelfth month following the close of the taxable year for
 
 7 which the credits may be claimed.  Failure to comply with the
 
 8 foregoing provision shall constitute a waiver of the right to
 
 9 claim the credit.
 
10      (j)  No deduction shall be allowed for that portion of the
 
11 wages or salaries paid or incurred for the taxable year that is
 
12 equal to the amount of the credit determined under this section.
 
13      (k)  The director of taxation may adopt any rules under
 
14 chapter 91 and forms necessary to carry out this section."
 
15      SECTION 2.  Chapter 353, Hawaii Revised Statutes, is amended
 
16 by adding a new section to Part II to be appropriately designated
 
17 and to read as follows:
 
18      "353-    Certification of parole for employment tax credit.
 
19 The Hawaii paroling authority shall provide, upon request by an
 
20 employer pursuant to section 235-  (e), a written certification
 
21 of the parole status of the person for whom the employer submits
 
22 the request."
 
23      SECTION 3.  Section 353-17, Hawaii Revised Statutes, is
 
24 amended to read as follows:
 

 
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 1      "353-17  Committed persons, furlough, employment.(a)  The
 
 2 director or a designated agent may grant furloughs to committed
 
 3 persons with a minimum or lower security classification in any
 
 4 correctional facility of the department for the purpose of
 
 5 employment, social reorientation, education, or training, or any
 
 6 other valid purpose as determined by the director.  Special out-
 
 7 of-state furloughs may be granted to those already otherwise
 
 8 furloughed, at no cost to the State, when death or critical
 
 9 illness or injury to the committed person's immediate family
 
10 including a reciprocal beneficiary, occurs.  Any committed person
 
11 who is engaged in private employment, by contract or otherwise,
 
12 not under the immediate custody of the State shall not be
 
13 considered an agent or employee of the State.  Any moneys earned
 
14 from employment by such person shall be used to satisfy a
 
15 restitution order and to reimburse the State for the cost of room
 
16 and board.  If any earned moneys remain after these expenses have
 
17 been paid, that amount shall be held in an individual account for
 
18 the committed person.
 
19      When an inmate is granted a special out-of-state furlough,
 
20 the director shall inform the authorities of the state to which
 
21 the inmate is to be furloughed of the inmate's arrival.
 
22      (b)  Full power to enforce the terms and conditions of
 
23 furlough and to retake and reincarcerate a furloughed committed
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 person is conferred upon the director or designated agent.  The
 
 2 director or a designated agent, at any time, may issue a warrant
 
 3 authorizing the arrest and return to actual custody of any
 
 4 furloughed committed person for the purpose of ascertaining
 
 5 whether or not the terms and conditions of furlough have been
 
 6 violated so as to justify revoking the furlough and to retake and
 
 7 reincarcerate the furloughed committed person.  The
 
 8 administrators of all of the correctional facilities of the
 
 9 State, the chief of police of each county, all police officers of
 
10 the State, and all correctional facility officials shall execute
 
11 any such warrant of arrest in like manner as an ordinary criminal
 
12 process.
 
13      (c)  Any furloughed committed person retaken and
 
14 reincarcerated as provided in this chapter shall be confined
 
15 according to the committed person's sentence for that portion of
 
16 the committed person's term remaining unserved at the time of
 
17 furlough, but subsequent furloughs, in the discretion of the
 
18 director or designated agent, may be granted to a committed
 
19 person during the life and in respect of sentence. 
 
20      (d)  The director shall provide, upon request by an employer
 
21 pursuant to section 235-   (e), a written certification of the
 
22 furlough status of the person for whom the employer submits the
 
23 request."
 

 
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 1      SECTION 4.  New statutory material is underscored.
 
 2      SECTION 5.  This Act shall take effect upon approval;
 
 3 provided that section 1 shall apply to taxable years beginning
 
 4 after December 31, 1998.