Report Title:

Tax Credit; Hotel

Description:

Provides a qualified hotel project tax credit for qualified costs relating to the plans, design, construction, and equipment needed to construct, alter, renovate or modify a hotel project.

HOUSE OF REPRESENTATIVES

H.B. NO.

2809

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO THE HOTEL PROJECT TAX CREDIT.

 

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

SECTION 1. The legislature finds that the tourism industry contributes substantially to the State's economy and employment, but that many areas of the State that serve this industry are in need of renewal, renovation, redevelopment, and reinvestment. Examples include areas such as Waikiki on the island of Oahu, Kailua-Kona and Hilo on the island of Hawaii, Lahaina on the island of Maui, Coconut Plantation on the island of Kauai, and the island of Molokai. Large hotels and commercial facilities in these areas provide the physical assets that will best maintain Hawaii as a premier tourist destination and contribute to overall economic activity. The legislature finds that a new tax credit is necessary to stimulate large hotel and commercial construction, renovation, and redevelopment projects in these areas.

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

"§235- Qualified hotel project tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter and chapter 237D, a qualified hotel project 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.

(b) The amount of the credit claimed under this section shall be the applicable credit percentage of the qualified hotel project costs incurred in a taxable year as follows:

(1) For qualified hotel project costs of less than $10,000,000 over a five consecutive year period, the applicable credit percentage shall be four per cent of the qualified hotel project costs incurred in each taxable year over the five consecutive year period;

(2) For qualified hotel project costs incurred of $10,000,000 or more over a five consecutive year period, the applicable credit percentage shall be four per cent for the qualified hotel project costs incurred in the taxable year below $10,000,000 over the five consecutive year period, and eight per cent of the qualified hotel project costs incurred in the taxable year for qualified hotel project costs incurred of $10,000,000 or more over the five consecutive year period;

provided that, for qualified hotel project costs to be incurred of $10,000,000 or more over a five consecutive year period, the eight per cent credit claimed by all taxpayers, in the aggregate, shall not exceed $10,000,000 in any year. If the credits exceed $10,000,000 in any year, or exceed the taxpayer's tax liability under this section for any year, the excess of the credits may be carried forward indefinitely until exhausted.

(c) The department of business, economic development, and tourism shall maintain records of the names of taxpayers eligible for the credits and the total amount of qualified hotel project costs incurred. The department of business, economic development, and tourism shall verify all qualified hotel project costs and, upon each determination, shall issue a certificate to the taxpayer certifying:

(1) The amount of the qualified hotel project costs; and

(2) The amount of credits that the taxpayer is allowed to use for the taxable year.

The department of business, economic development, and tourism shall certify no more than $10,000,000 in credits in the aggregate each year for all taxpayers that qualify for the eight per cent credit, and shall further certify the amount of the eight per cent credit that qualifies for the carryover under subsection (b) as to a taxpayer.

(d) All claims for the credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit is claimed. Failure to meet the filing requirements of this subsection shall constitute a waiver of the right to claim the credit.

(e) In the case of a partnership, S corporation, estate, or trust, the credit is for qualified hotel project costs incurred by the entity for the taxable year. The costs upon which the tax credit is computed shall be determined at the entity level.

(f) If any credit is claimed under this section, then no taxpayer shall claim a credit under any chapter identified in this section for the same qualified hotel project costs for which a credit is claimed under this section.

(g) If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no credit shall be allowed for that portion of the qualified hotel project costs for which the deduction is taken.

(h) As used in this section:

"Qualified hotel project" means a hotel/hotel-condo as defined in section 486K-1, including associated commercial buildings and facilities, and may be a single or multiple phase development or renovation project, situated within a qualified hotel project area. "Qualified hotel project" includes a time share facility or project. But does not include "residential real property" as defined in section 508D-1.

"Qualified hotel project costs" means any costs incurred after June 30, 2004, and before January 1, 2012, for plans, design, construction, and equipment related to new construction, alterations, renovations, or modifications of a qualified hotel project.

"Qualified hotel project area" means:

(1) The area known as the Waikiki special district under chapter 21, Revised Ordinances of Honolulu, 1990, as amended, and

(2) Any other area designated for hotel use, pursuant to county authority under section 46-4, or where the county, by its legislative process, designates hotel use, or any area within that area, and where that area is determined by the department of business, economic development, and tourism, as in need of renewal, renovation, redevelopment, or re-investment."

SECTION 3. Section 235-2.45, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Section 704 of the Internal Revenue Code (with respect to a partner's distributive share) shall be operative for purposes of this chapter; except that section 704(b)(2) shall not apply to:

(1) Allocations of the high technology business investment tax credit allowed by section 235-110.9;

(2) Allocations of net operating loss pursuant to section 235-111.5; [or]

(3) Allocations of the attractions and education facilities tax credit allowed by section 235-110.46 [.]; or

(4) Allocations of the qualified hotel project tax credit allowed by section 235-  ."

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

SECTION 5. This Act shall take effect on July 1, 2004, and shall be repealed on January 1, 2012.

INTRODUCED BY:

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