Report Title:

Individual Development Account Tax Credit; Extension

Description:

Extends the individual development account tax credit for five years. Authorizes financial institutions to claim the tax credit and use part of the private funds contributed for ministerial purposes. Raises contribution ceiling from $1 million to $2 million. (SD1)

THE SENATE

S.B. NO.

1009

TWENTY-THIRD LEGISLATURE, 2005

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to individual development accounts.

 

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

SECTION 1. Chapter 241, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§241-   Individual development account contribution tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed under this chapter, an individual development account contribution tax credit certified under chapter 257 that shall be applied against the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The individual development account contribution tax credit shall be equal to fifty per cent of the amount contributed by the taxpayer to a fiduciary organization as defined by and in the manner prescribed in chapter 257. If a deduction is taken under section 170 (with respect to charitable contributions and gifts) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the contribution for which the deduction was taken.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims, including any amended claims, for tax credits 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.

(d) Application for the credit under this section shall be upon forms provided by the department.

(e) The credit under this section shall be available for taxable years beginning after December 31, 2005, but shall not be available for taxable years beginning after December 31, 2009."

SECTION 2. Section 235-5.6, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) The credit under this section shall be available for taxable years beginning after December 31, 1999, but shall not be available for taxable years beginning after December 31, [2004.] 2009."

SECTION 3. Section 257-3, Hawaii Revised Statutes, is amended to read as follows:

"[[]§257-3[]] Fiduciary organizations. (a) Fiduciary organizations shall serve as [an] the intermediary between individual development account holders and financial institutions holding accounts. The fiduciary organization's responsibilities may include:

(1) Marketing participation;

(2) Soliciting matching contributions;

(3) Counseling program participants; and

(4) Conducting verification and compliance activities.

(b) Locally-based organizations shall enter into a competitive process for the right to become fiduciary organizations for a portion of the state matching dollars that would be authorized initially. Fiduciary organization proposals shall be evaluated and participation rights awarded on the basis of such items as:

(1) Their ability to market the program to potential individual development account holders and potential matching fund contributors;

(2) Their ability to provide safe and secure investments for individual development accounts;

(3) Their overall administrative capacity, including:

(A) Certifications or verifications required to assure compliance with eligibility requirements;

(B) Authorized uses of the accounts matching contributions by individuals or businesses; and

(C) Penalties for unauthorized distributions;

(4) Their capacity to provide financial counseling and other related services to potential participants; and

(5) Their links to other activities designed to increase the independence of individuals and families through high return investments, including homeownership, education and training, and small business development.

(c) If the State approves an application to fund an individual development account project under this section, the State shall, not later than one month after June 28, 1999, authorize the applicant to conduct the project with state funds for five project years in accordance with the approved application and this section; provided that an applicant may apply for funding during future fiscal years for five project years if the State lacks the resources to fund an individual development account project pursuant to this subsection.

(d) For each individual development account program approved under this section, the State shall make a grant to the qualified entity or collaboration of entities authorized to conduct the project on the first day of the project year in an amount not to exceed $100,000 per year for five years.

(e) From among the individuals eligible for assistance under the Hawaii individual development account program, each selected fiduciary organization shall select the individuals whom the fiduciary organization deems to be best suited to receive such assistance.

(f) A fiduciary organization may expend up to twenty-five per cent of the private moneys collected under this chapter to defray operating expenses of its individual development account program."

SECTION 4. Section 257-7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§257-7[]] Assets; disregarded. The department of human services and the housing and community development corporation of Hawaii shall collaborate with individual development account fiduciary organizations to ensure that the accounts as provided for in this chapter, including any earned interest, shall be disregarded in the determination of benefits or eligibility for services account holders may receive from [said] those agencies as allowed by federal and state laws and regulations.

The department of human services shall establish rules to be aligned with individual development accounts after June 28, [1999.] 2004."

SECTION 5. Section 257-10, Hawaii Revised Statutes, is amended to read as follows:

"§257-10 Tax credit. (a) Taxpayers subject to the tax imposed under [chapter] chapters 235 and 241 [who contribute] that make matching [funds] contributions for individual development accounts may be eligible for the tax credit provided under section 235-5.6[.] or section 241-  .

(b) Individuals, organizations, and businesses seeking the tax credit can contribute a matching share to designated individuals or contribute to a fiduciary organization and permit it to allocate the funds to all of its participants on a proportionate basis.

(c) The administrator of the fiduciary organization, with the cooperation of the participating organizations, shall maintain records of the names of contributors and the total amount each contributor contributes to an individual development account match fund for the taxable year. All contributions shall be verified by the department of human services. The department of human services shall total all contributions that the department certifies. Upon each determination, the department of human services shall issue a certificate to the taxpayer. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.

When the total amount of certified contributions reaches [$1,000,000,] $2,000,000, the department of human services shall immediately discontinue certifying contributions and notify the department of taxation. In no instance, shall the total amount of certified contributions exceed [$1,000,000] $2,000,000 over the five-year period between January 1, 2000, and December 31, 2004[.], or $2,000,000 over the five-year period between January 1, 2005 and December 31, 2009.

(d) The State shall provide no more than $1,000,000 in tax credits for private individuals, businesses, and organizations contributing funds to individual development account programs.

(e) Not more that twenty-five per cent of private contributions raised under section 235-5.6 shall be used for:

(1) Assisting eligible individuals in obtaining the skills (including financial management, budgeting, and credit counseling) and information necessary to achieve economic self-sufficiency through activities requiring qualified expenditures; and

(2) Program administration and management, case management, reporting requirements, recruitment and enrollment of individuals, marketing, and conducting required compliance and verification activities.

If two or more fiduciary organizations are jointly administering a project, neither fiduciary organization shall use more than its proportionate share for the purposes described in paragraphs (1) and (2)."

SECTION 6. Act 184, Session Laws of Hawaii 2000, is amended by amending section 5 to read as follows:

"SECTION 5. This Act, upon its approval, shall apply to taxable years beginning after December 31, 1999, and before January 1, [2005;] 2010; provided that section 3 shall take effect retroactive to June 28, 1999."

SECTION 7. All rules adopted under chapter 91, Hawaii Revised Statutes, regarding the administration of individual development accounts established pursuant to chapter 257, Hawaii Revised Statutes, by the department of human services shall remain in full force and effect until such time that the department of business, economic development, and tourism adopts new rules under chapter 91, Hawaii Revised Statutes.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect upon approval; provided that section 3 shall apply retroactively to taxable years beginning after December 31, 2004.