Report Title:

Taxation

Description:

Amends definition of "cost" with regard to eligible depreciable tangible personal property for purposes of the capital goods excise tax credit.

THE SENATE

S.B. NO.

1624

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to taxation.

 

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

SECTION 1. Section 235-110.7, Hawaii Revised Statutes, provides that a capital goods excise tax credit of four per cent shall be deductible from the taxpayer's net income tax liability, if any. The credit shall be determined against the "cost of eligible tangible personal property used ... in a trade or business and placed in service within Hawaii ..."

The intention of the capital goods excise tax credit was to reimburse the purchaser of capital goods the amount of the general excise or use tax paid on tangible personal property. However, cost is defined as "the invoice price" of the tangible personal property, which has caused an unintended consequence of uncertainty over what is eligible for the capital goods excise tax credit. For example, for imported tangible personal property, only the invoice price of the tangible good is eligible, rather than the landed value that includes shipping and handling fees, insurance costs, and customs duty. Also, installation costs that are not included in the vendor's price are not eligible even though these costs are required to be capitalized into the basis of the property for depreciation purposes.

The purpose of this Act is to make the definition of cost consistent with the basis for depreciation, thereby eliminating inconsistencies in the treatment of eligible property.

SECTION 2. Section 235-110.7(e), Hawaii Revised Statutes, is amended by amending the definition of "cost" to read as follows:

"Cost" means [(1)] the [actual invoice price] basis of the tangible personal property[, or (2) the basis] from which depreciation is taken under section 167 (with respect to depreciation) or from which a deduction may be taken under section 168 (with respect to accelerated cost recovery system) of the Internal Revenue Code of 1954, as amended[, whichever is less]."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval, and shall apply to taxable years beginning after December 31, 2002.

INTRODUCED BY:

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