Hawaii Instrument Pool; High Technology Development Corporation
Establishes the Hawaii instrument pool into which individuals and companies may donate usage of their high technology instrument. Allows qualified borrowers to use the instruments for their ventures and research. Establishes a tax credit for donating into the Hawaii instrument pool usage of "industry entry" high technology instruments that will help Hawaii's technology companies enter into new and emerging markets. (SB425 SD2)
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
relating to high technology.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that Hawaii's high technology industry, thus the State as a whole, could benefit greatly from the further proliferation of research and development instrumentation throughout the State. Instrument availability lowers the barriers to entry for new technology development and increases the opportunities for Hawaii's business startups to receive additional funding, including grants. However, Hawaii's innovative individuals and businesses find themselves in a "Catch-22" situation. Their new promising ideas require financial sponsorship to prove their worth and financial sponsorship is not garnered without proof of concept data. In many cases, the only hindrance may be access to the right instruments.
Instrument pooling involves owners pooling their equipment and instruments and allowing other entities to use them when they are not in use and under specified conditions. This allows entities access to instruments and equipment that they did not have the capacity to purchase on their own. Instrument pooling has proven to be an effective approach to fostering collaboration, facilitating research and development, and creating new economic opportunities.
The purpose of this Act is to establish the Hawaii instrument pool and provide a tax incentive, in the form of a tax credit, for donating high technology instruments to the Hawaii instrument pool that will assist Hawaii's high technology companies to enter into new and emerging technology industries.
SECTION 2. Chapter 206M, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§206M- Hawaii instrument pool; established. (a) There is established the Hawaii instrument pool to be administered by the development corporation. The Hawaii instrument pool shall serve as a pool of high technology instruments owned by individuals and entities that are available for lending to and usage by qualified borrowers. The development corporation shall:
(1) Solicit the donation of the usage of instruments for the Hawaii instrument pool;
(2) Cooperate with the owners of the instruments in establishing the terms of their use; provided that the instrument owners shall have final approval of any instrument lending to qualified borrowers;
(3) Develop and establish a list of industry entry high technology instruments that, through their lending, would provide qualified borrowers the opportunity to enter into new and emerging technology industries. Industry entry high technology instruments shall be distinguished from all other instruments donated for use into the Hawaii instrument pool by:
(A) The high cost to purchase the instrument;
(B) The specialized function of the instrument;
(C) Scarcity of the instrument in the State; and
(D) The emerging economic opportunities of the high technology industry for which the instrument is being utilized;
(4) Compile a directory of the Hawaii instrument pool inventory, including industry entry high technology instruments, and make it publicly available, including on the Internet;
(5) Coordinate and manage lending of instruments from the Hawaii instrument pool pursuant to the terms of their use; and
(6) Promote and market the Hawaii instrument pool.
(b) Individuals and entities that donate use of industry entry high technology instruments shall be eligible for a tax credit under section 235- .
(d) In addition to the limitation on liability under section 206M-22, the development corporation shall not be held liable for any injuries or damages resulting from the lending or usage of any instrument from the Hawaii instrument pool.
(e) For purposes of this section:
"Lender" means an individual, corporation, limited liability company, or other legal entity that donates an instrument into the Hawaii instrument pool.
"Qualified borrower" means a borrower that is:
(1) An individual, corporation, limited liability company, or other legal for-profit business entity with twenty-five employees or less, and gross income of $5,000,000 or less; or
(2) A qualified high technology business as defined pursuant to section 235-7.3(c);
provided that the borrower shall not be related to the lender by blood, marriage, or adoption, in the case of individuals, or be an employee, subsidiary, parent, or part owner of the lender, in the case of business entities."
SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Hawaii instrument pool donation tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a credit deductible from the taxpayer's net income tax liability for donating use of a qualifying instrument owned by the taxpayer to the Hawaii instrument pool established by section 206M- .
(b) To qualify for the credit, the taxpayer shall:
(1) Commit to donating at least four months of use of the qualifying instrument to the Hawaii instrument pool during each of five consecutive twelve-month periods following the date of the initial donation; and
(2) Have not previously donated to the Hawaii instrument pool the qualifying instrument for which the credit is being claimed.
(c) The amount of the credit under this section shall be fifty per cent of the basis of the qualifying instrument at the time of the first loan from the Hawaii instrument pool and the tax credit shall be claimed in the taxable year in which the qualifying instrument is returned to the pool after its first loan; provided that the credit shall not exceed $50,000 or twenty-five per cent of the taxpayer's net income tax liability, whichever is less, in any one taxable year.
(d) If the tax credit under this section exceeds the maximum allowed under subsection (c), the excess of the tax credit may be used as a credit against the taxpayer's income tax liability in the four subsequent taxable years commencing after the date of initial donation.
(e) If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the cost of the qualifying instrument for which the deduction was taken. If a tax credit is claimed under this section for a qualifying instrument, no tax credit for that qualifying instrument shall be claimed under section 235-110.7 or 235-110.9.
(f) If at any time during the five consecutive twelve month periods in which the taxpayer committed its donation the taxpayer withdraws a qualified instrument from the Hawaii instrument pool, the taxpayer is disqualified for the credit, the credit claimed under this section shall be recaptured. The recapture shall be equal to one hundred per cent of all tax credits claimed for that qualified instrument under this section. 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.
(g) 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.
(h) 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 taxpayer to furnish information to ascertain the validity of the claims for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.
(i) For purposes of this section:
"High technology" shall have the same meaning as provided in section 206M-1.
"Qualifying instrument" means an industry entry high technology instrument designated by the high technology development corporation pursuant to 206M- (a)(3)."
SECTION 4. New statutory material is underscored.
SECTION 5. This Act shall take effect upon its approval; provided that section 3 of this Act shall apply to taxable years beginning after December 31, 2002, and shall apply to qualifying instruments donated to the Hawaii instrument pool after September 30, 2003.