Report Title:

Income Tax Credit for Creating High Paying Jobs

Description:

Provides an entrepreneur tax credit for taxpayers that create and maintain high paying jobs in Hawaii. Applies to full-time employees hired after July 1, 2003, and before July 1, 2008. (SD1)

THE SENATE

S.B. NO.

836

TWENTY-SECOND LEGISLATURE, 2003

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to ECONOMIC DEVELOPMENT.

 

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

SECTION 1. The legislature finds that the "New Economy" is a knowledge- and idea-based economy where the key to higher standards of living and job creation is the extent to which innovative ideas and technologies are embedded in services, products, and manufacturing processes. Its characteristics include an increase in knowledge-based jobs, higher levels of entrepreneurial dynamism and competition, faster times to market, increased product and service diversity, constant technological innovation, globalization, the replacement of hierarchical organization structures with networked learning organizations, and relentless economic churning. As Hawaii embarks on its aggressive economic agenda, it is imperative that our entrepreneurs, investors, and businesses have the necessary tools to prosper in the New Economy.

The legislature further finds now more than ever that Hawaii's public policies and legislative initiatives must foster not only a positive business climate, but provide the necessary building blocks for competing in the New Economy. Workforce development, investing in our public schools and the University of Hawaii, creating business incentives to further investment in high-technology companies, ensuring availability of investment capital, and modernizing government operations are essential acts that need to be further developed. The result will be an economic infrastructure and culture that breeds innovation, entrepreneurship, investment, creativity, and knowledge-based jobs that ultimately lead to higher wages, enhanced quality of life, and economic prosperity for Hawaii.

The New Economy, however, is not merely about high-technology industries. Every facet of our existing economy–-tourism, agriculture, government services, nonprofit organizations-–everything is engulfed in the New Economy.

The purpose of this Act is to assist Hawaii's small business entrepreneurs in all industries, including technology, in expanding and growing their businesses by providing a tax credit for creating and maintaining high-paying jobs.

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

"§235-    Entrepreneur tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an entrepreneur 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.

To qualify for the credit, the taxpayer shall be:

(1) A qualified high technology business as defined pursuant to section 235-7.3(c); or

(2) A small business that has less than twenty-five full-time employees after hiring full-time employees qualifying for the credit under this section and a gross annual income of $5,000,000 or less.

(b) In addition qualifications in subsection (a), to qualify for the credit provided by this section the taxpayer shall:

(1) Have at least three full-time employees and hire an additional full-time employee during the taxable year prior to the taxable year in which the credit is claimed;

(2) Hire the additional full-time employee for a position that garners a wage of at least thirty per cent above the state average wage; and

(3) Continue to employ at least the number of full-time employees the taxpayer had upon hiring the additional full-time employee for twelve consecutive months or more.

(c) The amount of the credit shall be ten per cent of the taxpayer's net income tax liability for the taxable year after all other credits and deductions have been applied.

(d) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit may be used as a credit against the taxpayer's income tax liability in subsequent taxable years until exhausted.

(e) 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.

(f) 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.

(g) For purposes of this section,

"Full-time employee" shall have the same meaning as provided in section 209E-2."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2002, and shall apply to full-time employees hired after June 30, 2003, and before July 1, 2008.