Report Title:

Taxation; Aircraft Leases

Description:

Provides an aircraft operating lease investment income tax credit for lessee's of aircraft with reduced noise levels. (SD1)

THE SENATE

S.B. NO.

1206

TWENTY-SECOND LEGISLATURE, 2004

S.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 geographical nature of Hawaii is unique in that it is composed of separate and distinct islands and therefore travel among these islands, and between the islands and distant points, is dependent solely on the availability of commercial modes of transportation, primarily air travel.

The legislature further finds that the transportation needs of Hawaii's residents, as well as those tourists who wish to experience the beauty of each island, are currently served by commercial air carriers that provide frequent, affordable, and necessary means of intrastate and interstate transportation to residents and tourists alike, thus differentiating these air carriers by the necessary service they provide.

The legislature finds that Hawaii is currently served by several major air carriers that have made and will continue to make capital investments to ensure that our residents continue to be best served in their transportation needs. In addition, the service provided by air carriers in the State also provides a necessary service to Hawaii's tourists and supports the tourism market on each major island.

Finally, the legislature finds that the use of aircraft that operate with reduced noise levels is desirable and should be encouraged by an operating lease investment income tax credit.

The purpose of this Act is to give taxpayers an aircraft operating lease investment income tax credit that is deductible from the net income tax liability of a lessee of a reduced noise aircraft under an operating lease.

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

"§235-   Aircraft operating lease investment tax credit. (a) There shall be allowed to each lessee of an aircraft under an operating lease who is subject to the tax imposed by this chapter an aircraft operating lease investment tax credit, that shall be deductible from the lessee's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The credit shall be an amount equal to two per cent of the lease rent paid by the lessee to a lessor for an aircraft under an operating lease during the taxable year.

(c) If the aircraft operating lease investment tax credit allowed under subsection (a) exceeds the lessee's net income tax liability, the excess of credit over liability shall be refunded to the lessee; provided that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

(d) All claims for tax credits under this section, including any amended claims, shall 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.

(e) Application for the aircraft operating lease investment tax credit shall be upon forms provided by the department of taxation.

(f) As used in this section:

"Aircraft" means any craft or artificial contrivance used for navigation through the air, all related components, including without limitation, engines, hydraulic and electrical systems, and all other components that are or are designed to be an integral part of an aircraft that:

(1) Are leased to a lessee under an operating lease entered into before or after the effective date of this section;

(2) Are used by the lessee for commercial transportation for compensation or hire of passengers or goods or other tangible personal property; and

(3) Incorporate "quiet technology" as defined by the Federal Aviation Administration pursuant to section 804 of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, P.L. 106-181, irrespective of the number or type of engines.

"Operating lease" means a lease for an aircraft:

(1) The lease rent from which is subject to the general excise tax under chapter 237 at the rate of four per cent; and

(2) That is not a financing, capital, or other lease which would allow the lessee to claim a capital goods excise tax credit under section 235-110.7."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on February 23, 2020, and apply to:

(1) Taxable years beginning after December 31; 2003; and

(2) Lease rent paid under an operating lease subject to section 235-     , Hawaii Revised Statutes, after June 30, 2004.