Report Title:

Capital Investment; Hawaii Private Investment Fund

Description:

Establishes state private investment fund (SPIF); provides tax credits for qualifying research activities; technology infrastructure renovations; high technology business investments; appropriates funds for the SPIF; repeals sunset of the Hawaii strategic development corporation. (SD1)

 

HOUSE OF REPRESENTATIVES

H.B. NO.

2396

TWENTY-SECOND LEGISLATURE, 2004

H.D. 2

STATE OF HAWAII

S.D. 1


 

A BILL FOR AN ACT

 

RELATING TO CAPITAL INVESTMENTS.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"chapter    

State private investment fund

part i. general definitions

§   -1 Definitions. As used in this chapter:

"Board" means the board of directors of the corporation.

"Corporation" means the Hawaii strategic development corporation, a public body corporate and politic and an instrumentality and agency of the State, established under chapter 211F.

"Director" means any person who is a member of the board.

"Equity capital" means capital invested in common or preferred stock, royalty rights, limited partnership interests, limited liability company interests, and any other securities or rights that evidence ownership in private business.

"Guarantee" means each guaranty or agreement issued by the corporation as authorized by this chapter.

"Investor group" means any person that is engaged or considered for engagement by the corporation as an investor group pursuant to this chapter.

"Near-equity capital" means capital invested in unsecured, undersecured, subordinated, or convertible loans, or debt securities.

"Person" means any individual, corporation, limited liability company, partnership, or other lawfully organized entity.

"Put option" means a right or privilege to sell an amount of tax credits during a time period ending on the expiration date of the option.

"State" means the State of Hawaii.

"Tax credits" means tax credits issued or transferred pursuant to this chapter and available against liabilities imposed by chapter 235 or 241.

"Taxpayer" means a person subject to a tax imposed by chapter 235 or 241.

§   -2 Short title. This chapter shall be known and may be cited as the "State private investment fund."

§   -3 Findings and purpose. A critical shortage of seed and venture capital resources exists in the State and that shortage is impairing the growth of commerce in the State. A need exists to increase the availability of venture equity capital for emerging, expanding, relocating, and restructuring enterprises in the State, and an increase in return-driven, venture capital investments in such enterprises in the State will help to diversify the State's economic base. Accordingly, this chapter is enacted to:

(1) Mobilize equity and near-equity capital for investment in a broad variety of venture capital partnerships in diversified industries;

(2) Retain the private sector culture of focusing on rate of return in the investing process;

(3) Secure the services of high quality managers in the venture capital industry;

(4) Enhance the venture capital culture and infrastructure in the State so as to increase venture capital investment and promote venture capital investing within the State; and

(5) Accomplish the foregoing purposes in a return-driven manner with the goal of minimizing any adverse impact on state tax revenues.

The legislature finds that the creation of a state private investment fund, as provided under this chapter, serves an important public purpose by answering the need to increase venture capital and expand the growth of commerce in the State.

§   -4 Mission of the corporation. The mission of the corporation, pursuant to this chapter and in addition to those set forth in chapter 211F, shall be to mobilize equity and near-equity capital for investment in such a manner that will result in a significant potential to diversify and stabilize the economy of the State. Notwithstanding anything to the contrary in chapter 211F or otherwise, the corporation shall carry out the purposes, mission, and provisions of this chapter.

PART II. IMPLEMENTATION

§   -11 Business plan. In order to fulfill its mission as the mobilizer of equity and near-equity capital, the implementation of this chapter by the corporation shall be subject to the supervision of the board. The corporation shall develop an annual business plan for the implementation of this chapter. The business plan shall be submitted to the board for its approval and shall be included in its annual report, which shall be published as provided in section    -14.

§   -12 Tax credits. (a) The State issues to the corporation tax credits that may be transferred or otherwise utilized to reduce the tax liability of any person pursuant to chapter 235 or 241. The total amount of tax credits that are issued, and which may be transferred pursuant to this chapter by the corporation is $          . The credits shall be freely transferable by the corporation to transferees and by transferees to subsequent transferees; however, the tax credits so transferred by the corporation shall not be exercisable before July 1, 2005, nor after July 1, 2030. The corporation shall not transfer tax credits except in conjunction with a legitimate call on a corporation guarantee or agreement. The corporation shall immediately notify the president of the senate of the State of Hawaii, the speaker of the house of representatives of the State of Hawaii, and the governor of the State of Hawaii in writing if any tax credit is transferred by the corporation in conjunction with a legitimate call on a corporation guarantee or agreement; provided that the corporation shall not be required to make that notification for transfers to subsequent transferees.

(b) The corporation shall determine the amount of individual tax credits to be transferred pursuant to this chapter and may negotiate for the sale of those credits subject only to the limits imposed by this chapter. The corporation shall limit to $20,000,000 transfers of tax credits that may be claimed and used to reduce the tax otherwise imposed by chapter 235 or 241 for one fiscal year (including any tax credits that are carried over by a taxpayer from a prior fiscal year and used to reduce taxes otherwise imposed in the current fiscal year, as permitted in subsection (f)). The board shall clearly indicate on the face of the certificate or other document transferring the tax credit the principal amount of the tax credit and the taxable year or years for which the credit may be claimed.

(c) The corporation, in conjunction with the department of taxation, shall develop a system for registration of any tax credits issued or transferred pursuant to this chapter and a system of certificates that permits verification that any tax credit claimed upon a tax return is validly issued, properly taken in the year of claim, and that any transfers of the tax credit are made in accordance with this chapter.

(d) The corporation may pay a fee and provide other consideration in connection with the purchase by the corporation of a put option or other agreement pursuant to which a transfer of tax credits authorized by this chapter may be made.

(e) The tax credits issued or transferred pursuant to this chapter, upon election by the taxpayer at utilization, shall be treated as a payment or prepayment in lieu of taxes imposed under chapter 235 or 241. Tax credits utilized pursuant to this chapter shall be claimed as a payment of tax or estimated tax for the purposes of chapter 235 or 241.

(f) If the tax credits under this section exceed the taxpayer's income tax liability under chapter 235 or 241 for any taxable year, or for any other reason is not claimed by a taxpayer in whole or in part in any taxable year, the excess of the tax credit over liability, or the amount of the unclaimed tax credit, as the case may be, may be carried over and used as a credit against the taxpayer's income tax liability in any subsequent year until exhausted, subject to:

(1) The deadline for the exercise of tax credits imposed by subsection (a); and

(2) The monetary limit imposed by subsection (b).

§   -13 Investment of capital. (a) The corporation may solicit investment plans from investor groups for the investment of capital in accordance with this chapter. The corporation shall establish criteria for the selection of persons, firms, corporations, or other entities. The criteria shall include the applicant's level of experience, quality of management, investment philosophy and process, probability of success in fundraising, plan for achieving the purposes of this chapter, and such other investment criteria as may be used in professional portfolio management that the corporation deems appropriate. If the corporation decides to engage one or more investor groups to deploy or generate capital, it shall consider and select one or more investment plans and investor groups that the corporation deems qualified to:

(1) Generate capital for investment with the most effective and efficient utilization of the guaranty;

(2) Invest the capital in private seed and venture capital entities in a manner mobilizing a wide variety of equity and near-equity investments in ventures promoting the economic development of the State; and

(3) Help build a significant, fiscally strong, and permanent resource to serve the objectives expressed in this chapter.

An investor group engaged by the corporation shall have a manager who is experienced in design and implementation, as well as the management of seed and venture capital investment programs and in capital formation. The corporation may remove and replace any investor group that has been engaged and effect the assignment of assets, liabilities, guarantees, and other contracts of this program to a new investor group, subject to such terms and conditions as may be set forth in the terms of engagement.

(b) The corporation may extend one or more guarantees and secure the performance of such guarantees in the form of a put option, as well as other arrangements selected by the corporation. Without limiting the foregoing:

(1) The corporation may guarantee loans, lines of credit, and other indebtedness and equity investments and may arrange for, pledge, and assign put options, as well as other agreements to purchase tax credits on such terms as the board may approve from time to time, in order to generate funds to deploy in a manner consistent with this chapter;

(2) The guarantees of loans, lines of credit, and other indebtedness may extend up to the principal amount plus interest over the term of the guarantee at a rate set by board resolution from time to time, a guarantee of a loan, lines of credit, or other indebtedness; and

(3) Guarantees of equity capital may extend up to the amount of the investment plus a rate of return set by board resolution from time to time.

Guarantees, in whatever form negotiated by the corporation, may be made for any period of time, but no term shall expire prior to January 1, 2006. The corporation may charge a reasonable fee for costs and the fair compensation of risks associated with its guarantee. The guarantees extended by the corporation shall in no way be an obligation of the State and may be restricted to specific funds or assets of the corporation; provided that proceeds from the sale of any tax credits may be used to satisfy the contractual guarantee obligations of the corporation. The corporation may contract freely to protect the interests of the State.

(c) If the corporation purchases any security pursuant to an agreement with an investor group, the corporation shall acquire the securities and may invest, manage, transfer, or dispose of the securities in accordance with policies for the management of assets adopted by the corporation.

(d) The corporation may make any contract, execute any document, charge reasonable fees for services rendered, perform any act or enter into any financial or other transaction necessary in order to carry out its mission. The corporation may employ such persons as may be required for the proper implementation of this chapter, the management of its assets, or the performance of any function authorized or required by this chapter necessary for the accomplishment of any such function. Those persons shall be selected by the corporation based upon outstanding knowledge and leadership in the field for which the person performs services for the board.

(e) In carrying out the mission of the corporation, as authorized in this chapter, neither the corporation nor its officers, directors, or employees shall be considered to be broker-dealers, agents, investment advisors, or investment adviser representatives under chapter 485. The tax credits issued or transferred pursuant to this chapter shall not be considered securities under chapter 485.

(f) Funds raised or arranged by the corporation pursuant to this chapter shall be invested in seed capital and venture capital investments, as such terms are defined in chapter 211F, which, to the extent consistent with this chapter, shall be governed by applicable provisions of chapter 211F.

§   -14 Annual reports; evaluation by the board. (a) The corporation shall publish a separate annual report, in conjunction with its annual audit, and present the report to the governor and legislature. The annual report shall review the mission of the board and programs implemented according to the objective measures set forth in the corporation's business plan. The corporation shall distribute this annual report by any means that will make it available to the financial community.

(b) Seven years after the corporation has begun operations under this chapter, the corporation shall review, analyze, and evaluate the extent to which the corporation has achieved its statutory mission. The evaluation shall include, but not be limited to, an examination of quantified results of the corporation's programs and plans.

§   -15 Spending authority. Notwithstanding other provisions of law, the corporation or any entity designated by the corporation may expend funds to administer and operate the programs of the corporation.

§   -16 Hawaii capital formation revolving fund. There is established a revolving fund for the corporation to be designated the Hawaii capital formation revolving fund. The following shall be deposited into the Hawaii capital formation revolving fund, all moneys:

(1) Appropriated by the legislature;

(2) Received as repayment of loans;

(3) Earned on instruments;

(4) Received pursuant to a venture agreement;

(5) Received as royalties;

(6) Received as premiums or fees charged by the corporation; or

(7) Otherwise received by the corporation.

§   -17 Construction. Nothing contained in this chapter is or shall be construed as a restriction or limitation upon any powers that the corporation might otherwise have under any other law of the State heretofore or hereafter enacted, and the provisions of this part are cumulative to those powers. To the extent consistent with this chapter, in administering, implementing, and carrying out the mission of the corporation pursuant to this chapter, the corporation shall be governed by and have the powers and authorities set forth in chapter 211F. This chapter does and shall be construed to provide an additional and alternative method for the doing of the things authorized and shall be regarded as supplemental and additional to powers conferred by any other laws.

§   -18 Adoption of rules, policies, procedures, and regulatory and administrative measures; enforceability of guarantees of corporation unaffected. (a) The corporation may adopt rules, policies, procedures, and regulatory and administrative measures necessary to administer the programs of the corporation or convenient for the organizational and internal management of the corporation's and board's responsibilities.

(b) The level, timing, or degree of success of the corporation in mobilizing or ensuring investment in Hawaii businesses or projects shall not compromise, diminish, invalidate, or affect the enforceability of any guarantee of the corporation."

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

"§235- Tax credits; liberal construction; substantial benefit requirement. (a) Sections 235-7.3, 235-9.5, 235-110.51, 235-110.9, 235-110.91, and 235-111.5, shall be liberally construed by the department of taxation, which is given latitude to interpret these sections to implement their provisions in light of applicable industry developments; provided that:

(1) Common law principles, including the doctrine of economic substance and business purpose shall apply to any tax credit allowed;

(2) A transaction satisfies paragraph (1) if the tax credit results in a tax credit ratio of 1.5 or less of credit for every qualified dollar expended by the taxpayer; provided that the department of taxation may review any credit applied for or received under paragraph (1), if the department deems it appropriate;

(3) A transaction that results in a tax credit ratio greater than 1.5 but not more than 2.0 of credit for every qualified dollar expended by the taxpayer may be reviewed by the department of taxation for applicable doctrines of economic substance and business purpose;

(4) If a transaction results in a tax credit ratio greater than 2.0 of credit for every qualified dollar expended by the taxpayer, the taxpayer shall be required to substantiate economic substance and business purpose consistent with this section;

(5) The tax credit allowed shall stimulate the real and sustainable growth of Hawaii's qualified high technology businesses and the expansion of domestic and external sources of venture capital financing for Hawaii companies; and

(6) The transaction involves additional or incremental capital to and for the use in the related business, but excluding transactions that result in additional or incremental capital due to reorganization or restructuring of businesses.

(b) For purposes of this section:

"Qualified dollar" means each dollar invested, expended, or otherwise counted by a taxpayer in a transaction that qualifies for a tax credit pursuant to the sections enumerated in subsection (a).

"Transaction" means any transaction for which a tax credit is claimed by a taxpayer pursuant to the sections enumerated in subsection (a) or a net operating loss sale occurs under section 235-111.5."

SECTION 3. There is appropriated out of the Hawaii strategic development corporation revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2004-2005, for carrying out the purposes of the state private investment fund. The sum appropriated shall be expended by the department of business, economic, development, and tourism for purposes of this Act.

SECTION 4. Section 235-110.51, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (b) to read as follows:

"(b) The amount of the credit shall be [four] ten per cent of the renovation costs incurred during the taxable year for each commercial building located in Hawaii."

2. By amending subsection (h) to read as follows:

"(h) 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.] 2007."

SECTION 5. Section 235-110.9, Hawaii Revised Statutes, is amended to read as follows:

"§235-110.9 High technology business investment tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter a high technology business investment 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 investment was made and the following four years provided the credit is properly claimed. The tax credit shall be as follows:

(1) In the year the investment was made, thirty-five per cent;

(2) In the first year following the year in which the investment was made, twenty-five per cent;

(3) In the second year following the investment, twenty per cent;

(4) In the third year following the investment, ten per cent; and

(5) In the fourth year following the investment, ten per cent;

of the investment made by the taxpayer in each qualified high technology business, up to a maximum allowed credit in the year the investment was made, $700,000; in the first year following the year in which the investment was made, $500,000; in the second year following the year in which the investment was made, $400,000; in the third year following the year in which the investment was made, $200,000; and in the fourth year following the year in which the investment was made, $200,000.

(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purpose of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability for any of the five years that the credit is taken, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. Every claim, 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) If at the close of any taxable year in the five-year period in subsection (a):

(1) The business no longer qualifies as a qualified high technology business;

(2) The business or an interest in the business has been sold by the taxpayer investing in the qualified high technology business; or

(3) The taxpayer has withdrawn the taxpayer's investment wholly or partially from the qualified high technology business;

the credit claimed under this section shall be recaptured. The recapture shall be equal to ten per cent of the amount of the total tax credit claimed under this section in the preceding two taxable years. The amount of the credit recaptured shall apply only to the investment in the particular qualified high technology business that meets the requirements of paragraph (1), (2), or (3). The recapture provisions of this subsection shall not apply to a tax credit claimed for a qualified high technology business that does not fall within the provisions of paragraph (1), (2), or (3). The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.

(e) Every taxpayer, before March 31 of each year in which an investment in a qualified high technology business was made in the previous taxable year, shall submit a written, certified statement to the director of business, economic development, and tourism identifying:

(1) Qualified investments, if any, expended in the previous taxable year; and

(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

(f) The department of business, economic development, and tourism shall:

(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified investment costs upon which the tax credit is based;

(2) Verify the nature and amount of the qualifying investments;

(3) Total all qualifying and cumulative investments that the department of business, economic development, and tourism certifies; and

(4) Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

Any other law to the contrary notwithstanding, any statement issued under this subsection shall be a public document.

Upon each determination, the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying the qualifying investment amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the department of business, economic development, and tourism's certification authority under this section, the director of taxation may audit and adjust certification to conform to the facts.

[(e)] (g) As used in this section:

"Qualified high technology business" means a business, employing or owning capital or property, or maintaining an office, in this State; provided that:

(1) More than fifty per cent of its total business activities are qualified research; and provided further that the business conducts more than seventy-five per cent of its qualified research in this State; or

(2) More than seventy-five per cent of its gross income is derived from qualified research; and provided further that this income is received from:

(A) Products sold from, manufactured in, or produced in this State; or

(B) Services performed in this State.

"Qualified research" means the same as defined in section 235-7.3.

[(f)] (h) This section shall [not] apply to investments made after June 30, 2004, and shall not apply to taxable years beginning after December 31, [2005.] 2010."

SECTION 6. Section 235-110.91, Hawaii Revised Statutes, is amended to read as follows:

"§235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for increasing research activities) and section 280C(c) (with respect to certain expenses for which the credit for increasing research activities are allowable) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this section; except that references to the base amount shall not apply and credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years. If section 41 of the Internal Revenue Code is repealed or terminated prior to January 1, 2006, its provisions shall remain in effect for purposes of the income tax law of the State as modified by this section[, as provided for in subsection (h)].

(b) All references to Internal Revenue Code sections within sections 41 and 280C(c) of the Internal Revenue Code shall be operative for purposes of this section.

(c) There shall be allowed to each taxpayer, subject to the tax imposed by this chapter, an income tax credit for qualified research activities equal to the credit for research activities provided by section 41 of the Internal Revenue Code and as modified by this section. The credit 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.

(d) As used in this section:

"Basic research" under section 41(e) of the Internal Revenue Code shall not include research conducted outside of the State.

"Qualified research" under section 41(d)(1) of the Internal Revenue Code shall not include research conducted outside of the State.

"Taxpayer" means a qualified high technology business as defined in section 235-7.3.

(e) There is an annual maximum tax credit that a corporation or an associated group or consolidated group of corporations can claim of $4,000,000.

[(e)] (f) If the tax credit for qualified research and development activities claimed by a taxpayer exceeds the amount of income tax payment due from the taxpayer, the excess of the tax credit over payments due shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

[(f)] (g) 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 properly claim the credit shall constitute a waiver of the right to claim the credit.

[(g)] (h) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section.

[(h) This section shall apply to taxable years beginning after December 31, 2000, but not to taxable years beginning after December 31, 2005.]

(i) 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 qualified high technology business to furnish information to ascertain the validity of the claims for credits made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

Every qualified high technology business, before March 31 of each year in which qualified research and development activity was expended in the previous taxable year, shall submit a written, certified statement to the director of business, economic development, and tourism identifying:

(1) Qualified expenditures, if any, expended in the previous taxable year; and

(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

(j) The department of business, economic development, and tourism shall:

(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified research and development activity costs upon which the tax credit is based;

(2) Verify the nature and amount of the qualifying costs or expenditures;

(3) Total all qualifying and cumulative costs or expenditures that the department of business, economic development, and tourism certifies; and

(4) Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

Any other law to the contrary notwithstanding, any statement issued under this subsection shall be a public document.

Upon each determination, the department of business, economic development, and tourism shall issue a certificate to the qualified high technology business verifying the qualifying costs or expenditure amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. The qualified high technology business shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the department of business, economic development, and tourism's certification authority under this section, the director of taxation may audit and adjust certification to conform to the facts."

SECTION 7. Act 178, Session Laws of Hawaii 2003, is amended as follows:

1. By amending section 8 to read as follows:

"SECTION 8. [Section 211F-5, Hawaii Revised Statutes, is repealed.] Repealed."

2. By amending section 66 to read as follows:

"SECTION 66. This Act shall take effect on July 1, 2003, provided that:

(1) Sections 1, 2, 3, 4, 5, and 6 shall take effect on June 29, 2003;

(2) Sections 9, 10, 11, 12, 13, 14, 15, and 16 shall take effect on June 30, 2003; and

(3) [Sections] Section 7 [and 8] shall take effect on July 1, 2004; provided further that any remaining [balances] balance in the Hawaii capital loan revolving fund [and the Hawaii strategic development corporation revolving fund] shall lapse to the general fund."

SECTION 8. Act 197, Session Laws of Hawaii 2000, is amended by amending section 10 to read as follows:

"SECTION 10. [It is the intention of the legislature in making amendments in this Part to sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes, that the amendments be liberally construed, and in this regard, the department of taxation is given latitude to interpret those amendments in light of current industry standards.] The amendments made in this Part to sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes, shall not be construed to disqualify any taxpayer who has received a favorable written determination from the department of taxation under the original provisions of those sections as enacted by Act 178, Session Laws of Hawaii, 1999."

SECTION 9. Act 221, Session Laws of Hawaii 2000, is amended by amending section 13 to read as follows:

"SECTION 13. [It is the intention of the legislature that the amendments in this Act be liberally construed. The department of taxation is further given latitude to interpret these amendments in light of industry developments.] The legislature does not intend by the amendments in this Act to opine on the interpretation taken by any taxpayer or the department of taxation on any issue arising under prior law."

SECTION 10. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2004-2005, for deposit into the Hawaii strategic development corporation revolving fund.

The sum appropriated shall be expended by the Hawaii strategic development corporation for the purposes of this Act.

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect on July 1, 2020; provided that:

(1) Section 5 shall take effect on January 1, 2006, and shall not apply to taxable years beginning after December 31, 2010.

(2) Section 6 shall not apply to taxable years beginning after December 31, 2010.

(3) Section 7 shall take effect on June 30, 2004.