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. (HB 2809 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

2809

TWENTY-SECOND LEGISLATURE, 2004

H.D. 1

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 and any taxes imposed by chapter 237D 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.

(c) The tax credit earned shall be based on the qualified costs incurred from July 1, 2004, through June 30, 2014, up to a maximum of $140,000,000 of credits in the aggregate for all qualified taxpayers for all years; provided that notwithstanding the amount of tax credits earned in any year, a maximum of $14,000,000 of tax credits in the aggregate for all qualified taxpayers may be used in any one taxable year. The credits over $14,000,000 shall be used as provided in subsection (d).

(d) If the tax credits allowed under this section exceed $14,000,000 in the aggregate for all qualified taxpayers for any taxable year, the department of business, economic development, and tourism shall apportion the allowed tax credits to all taxpayers claiming a tax credit pursuant to this section proportionately among the taxpayers. If an allowed tax credit exceeds the taxpayer's tax liability under this chapter or chapter 237D for any year for which the credit is taken, the excess of the tax credit may be used as a credit against the taxpayer's tax liability for the taxes set forth in this section in subsequent years until exhausted; provided that the taxpayer may continue to claim the credit provided in this section if the qualified costs are incurred before June 30, 2014, subject to the monetary ceilings in subsection (c).

(e) 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 $14,000,000 in credits in the aggregate each year for all taxpayers that qualify for the tax credit, pursuant to this section, and shall further certify the amount tax cent credit that qualifies for the carryover under subsection (d) as to a taxpayer.

(f) 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.

(g) 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.

(h) If any credit is claimed under this section, then no taxpayer shall claim a credit under any chapter contained in title 14 for the same qualified hotel project costs for which a credit is claimed under this section.

(i) If a deduction is taken under section 167 (with respect to depreciation) or 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.

(j) 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 July 1, 2004, and before June 30, 2014, for plans, design, construction, and equipment related to new construction, alterations, renovations, or modifications of a qualified hotel project.

"Qualified hotel project area" means any parcel zoned by a county for hotel, hotel/hotel-condo, or time share use and within:

(1) The Waikiki special district under chapter 21, Revised Ordinances of Honolulu, 1990, as amended;

(2) Kailua-Kona extending south to Keauhou, and Hilo on the island of Hawaii;

(3) Lahaina to Kaanapali on the island of Maui;

(4) The island of Molokai;

(5) The Coconut Plantation of the island of Kauai; and

(6) Other areas that are jointly designated by the department of business, economic development, and tourism and the county legislative body within which county the area is situated,

the exact boundaries of the designated areas in paragraphs (2) to (5) shall be as determined by the department of business, economic development, and tourism, based upon the need for renewal, renovation, redevelopment, or reinvestment.

(k) To qualify for the tax credit, a qualified hotel project shall pay all laborers and mechanics employed in the project no less than the prevailing wages established by the department of labor and industrial relations."

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 June 30, 2014; provided that:

(1) All tax credits allowed for qualified hotel project costs incurred up to June 30, 2014, shall be allowed to carry over until exhausted pursuant to section 2; and

(2) Section 235-2.45(e), Hawaii Revised Statutes, shall be reenacted in the form in which it read on June 30, 2004.