Report Title:

Tax Credit; Revitalization; Standard Deduction; Low Income

 

Description:

Establishes a tax credit for revitalization of older commercial facilities. Also increases the standard deduction and provides a low income tax credit. (HB938 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

938

TWENTY-FIRST LEGISLATURE, 2001

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO TAXATION.

 

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

SECTION 1. The legislature finds that the effects of Hawaii's recent economic stagnation still linger in our community. Although the economy appears to have turned the corner to better times, government incentives are still needed to stimulate economic growth as well as to provide financial assistance to taxpayers, especially the less fortunate.

An objective of this Act is to stimulate economic growth by providing tax incentives to tenants and building owners to redevelop and improve older established commercial districts such as Hilo town, Kailua-Kona, Wailuku, Kahului, Lahaina, Lihue, Kaimuki, Kapahulu, Waikiki, McCully, Kapiolani-Keeaumoku, Kakaako, downtown Honolulu-Chinatown, Kalihi, Aiea, Pearl City, Waipahu, Wahiawa, Haleiwa, the Honolulu Airport Industrial area, and Mapunapuna. These districts face increasing competition from larger new shopping centers and often do not have the means to improve their facilities to compete effectively.

This Act provides tax incentives to tenants and building owners to redevelop and improve older established commercial districts to not only better compete and stimulate economic growth, but to also revitalize the personal pride that was and still is the backbone and genesis of commerce in our State.

The Act also provides direct tax support to taxpayers; especially the less fortunate, by increasing the standard deduction and providing tax credits for low-income households.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Commercial construction and remodeling tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter and chapter 237, an income tax credit that may be claimed against the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the tax credit is properly claimed.

The amount of the tax credit shall be five per cent of the construction or renovation costs incurred during the taxable year for each qualified facility located in Hawaii, and shall not include the construction or renovation costs for which another credit was claimed under this chapter for the taxable year.

For any construction or renovation project with total costs of over $2,500,000, the taxpayer shall:

(1) Pay all employees the prevailing wages under chapter 104 if the taxpayer is the general contractor on the project; or

(2) Provide, in any contract let in connection with the project, stipulations requiring the general contractor and any subcontractor to pay the prevailing wages under chapter 104 for the employees working on the project.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for construction or renovation costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a).

If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the construction or renovation cost for which the deduction is taken.

The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. In the alternative, the taxpayer shall treat the amount of the credit allowable and claimed as a taxable income item for the taxable year in which it is properly recognized under the method of accounting used to compute taxable income.

(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability shall be carried over by the taxpayer to future taxable years until exhausted. All claims for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(d) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(e) The tax credit allowed under this section shall be available for taxable years beginning after December 31, 1999, and shall not be available for taxable years beginning after December 31, 2007.

(f) To qualify for the income tax credit, the taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations.

(g) As used in this section:

"Construction or renovation cost" means any costs incurred after December 31, 1999, for plans, design, construction, and equipment related to new construction, alterations, or modifications to a qualified facility.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Qualified facility" means a commercial, retail, hotel, warehouse, or industrial facility; provided that either the facility or the commercial district where the facility is located is at least twenty-five years old.

"Taxpayer" means a taxpayer under this chapter.

(h) No taxpayer that claims a credit under this section shall claim a credit under chapter 235D.

(i) This section shall be repealed on December 31, 2007."

SECTION 3. Following each year in which a tax credit under section 2 of this Act has been claimed, the director of taxation shall submit a written report to the governor and the legislature, which shall include all projects qualifying for the tax credit, the commercial district where each project is located, the annual and projected total costs of each project, and the amount of the tax credit for each project.

At the termination of the tax credit under section 2 of this Act in 2007, the legislature may evaluate the overall impact of the tax credit in revitalizing Hawaii's older commercial districts and determine if the tax credit should be extended.

SECTION 4. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Low income tax credit. (a) Each resident individual taxpayer may claim tax credits for each adjusted gross income bracket as shown in the schedule below multiplied by the number of qualified exemptions to which the taxpayer is entitled; provided that each taxpayer sixty-five years of age or over may claim double the tax credit set forth in the following tax credit schedule:

TAX CREDIT SCHEDULE

Adjusted Gross Income Tax Credit

Under $15,000 $100

$15,000 to $ 20,000 $ 75

provided that a husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled under this subsection had a joint return been filed.

(b) For the purposes of this section, a qualified exemption is defined to include those exemptions permitted under this chapter; provided that a person for whom exemption is claimed has physically resided in the State for more than nine months during the taxable year; and provided further that multiple exemptions shall not be granted because of deficiencies in vision or hearing, or other disability. For purposes of claiming the credit only, a minor child receiving support from the department of human services of the State, Social Security survivor's benefits, and the like may be considered a dependent and a qualified exemption of the parent or guardian.

(c) The tax credit under this section shall not be available to:

(1) Any person who has been convicted of a felony and who has been committed to prison and has been physically confined for the full taxable year;

(2) Any person who would otherwise be eligible to be claimed as a dependent but who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or

(3) Any misdemeanant who has been committed to jail and has been physically confined for the full taxable year.

(d) The tax credits claimed by a resident taxpayer pursuant to this section shall apply against the resident taxpayer's individual income tax liability, if any, for the tax year in which they are properly claimed. If the tax credits claimed by a resident taxpayer exceed the amount of income tax payment due from the resident taxpayer, the excess of credits over payments due shall be refunded to the resident taxpayer; provided that tax credits properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1.

(e) All claims for tax credits under this section, including any amended claims, must be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit."

SECTION 5. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Section 63 (with respect to taxable income defined) of the Internal Revenue Code shall be operative for the purpose of this chapter, except that the standard deduction amount in section 63(c) of the Internal Revenue code shall instead mean:

(1) [$1,900] $2,600 in the case of:

(A) A joint return as provided by section 235-93; or

(B) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);

(2) [$1,650] $2,350 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);

(3) [$1,500] $2,200 in the case of an individual who is not married and who is not a surviving spouse or head of household; or

(4) [$950] $1,650 in the case of a married individual filing a separate return.

Section 63(c)(4) shall not be operative in this State. Section 63(c)(5) shall be operative, except that the limitation on basic standard deduction in the case of certain dependents shall be the greater of $500 or such individual's earned income. Section 63(f) shall not be operative in this State.

The standard deduction amount for nonresidents shall be calculated pursuant to section 235-5."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval; provided that:

(1) Section 2 shall apply to taxable years beginning after December 31, 1999; and

(2) Section 4 and 5 shall apply to taxable years beginning after December 31, 2000.