Report Title:

Tax Credits; Hotel Construction and Remodeling

 

Description:

Expands the definition of "qualified hotel facility" to include property on which commercial or recreational use is permitted and offsite improvements necessary to service destination resort areas. (SD2)

THE SENATE

S.B. NO.

2383

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to taxation TO STIMULATE THE ECONOMY.

 

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

SECTION 1. In October 2001, the legislature met in special session to approve legislation designed to ameliorate the negative effects that the September 11, 2001, terrorist attacks had on Hawaii's economy. One measure, Act 8, Third Special Session 2001, raised the percentage of the tax credit for construction and remodeling of hotels from four to ten per cent to assist the tourism industry in its efforts to attract more visitors to Hawaii.

The legislature finds that this tax credit is an excellent means to boost Hawaii's tourism and construction industries, and should be expanded to include other tourism-related construction and renovation.

The purpose of this Act is to expand the facilities eligible for the hotel construction and renovation tax credit, and to create a commercial construction and remodeling tax credit.

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, a commercial construction and remodeling tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the tax credit claimed under this section by the taxpayer in all years for which the credit is available shall be four per cent of the commercial construction or remodeling costs incurred for each project of less than $10,000,000 and shall be ten per cent of the commercial construction or remodeling costs incurred for those projects that are $10,000 000 or more; provided that the costs are incurred before July 1, 2005.

In the case of a partnership, S corporation, estate, trust, or association of owners, the tax credit allowable is for construction or remodeling 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 remodeling 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, if any, imposed by this chapter for the taxable year in which the tax credit is properly claimed.

(c) If the tax credit under this section exceeds the taxpayer’s income tax liability, the excess of credit over liability may be used as a credit against the taxpayer’s income tax liability in subsequent years until exhausted. All claims, including amended 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, 2000, and shall not be available for taxable years beginning after December 31, 2005.

(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:

"Commercial construction or remodeling cost" means any costs incurred after December 31, 2000, for plans, design, construction, and equipment related to new construction, alterations, or modifications to commercial real property.

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

SECTION 3. Section 235-110.4, Hawaii Revised Statutes, is amended by amending the definition of "qualified hotel facility" in subsection (g) to read as follows:

""Qualified hotel facility" means [a]:

(1) A hotel/hotel-condo as defined in section 486K-1, and includes a time share facility or project[.];

(2) Any property on which commercial or recreational use is permitted to support or service a hotel/hotel-condo or resort use; or

(3) Offsite improvements necessary to service destination resort areas where a hotel/hotel-condo is situated."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2050.