Report Title:

Tax Credit; Hotel Construction and Remodeling

Description:

Adjusts the 4% hotel construction and remodeling tax credit to 8% on 1/1/08 and repeals the tax on. (SD2)

THE SENATE

S.B. NO.

1186

TWENTY-THIRD LEGISLATURE, 2005

S.D. 2

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO HOTEL CONSTRUCTION AND REMODELING TAX CREDIT.

 

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

SECTION 1. In October of 2001, the legislature met in special session to approve legislation designed to ameliorate the negative effects that the September 11, 2001, terrorist attacks had on Hawaii's economy. Act 10, Third Special Session 2001, raised the percentage of the tax credit for construction and remodeling of qualified hotel facilities from four to ten per cent for costs incurred prior to July 1, 2003, to assist the tourism industry in its efforts to attract more visitors to Hawaii. The legislature finds that this tax credit is an excellent means to boost Hawaii's tourism and construction industries, and that extension of this tax credit is warranted.

SECTION 2. Section 235-110.4, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter and chapter 237D, an income tax credit, which 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.

The amount of the credit shall be four per cent through December 31, 2007, eight per cent from January 1, 2008 through December 31, 2010, and shall not be available for taxable years beginning after December 31, 2010, of the construction or renovation costs incurred during the taxable year for each qualified full service hotel facility located in Hawaii, and shall not include the construction or renovation costs for which another credit was claimed under this chapter for the taxable year.

In the case of a partnership, S corporation, estate, trust, association of apartment owners of a qualified hotel facility, time share owners association, or any developer of a time share project, the tax credit allowable is for construction or renovation costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a).

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 construction or renovation cost for which the deduction is taken.

The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. In the alternative, the taxpayer shall treat the amount of the credit allowable and claimed as a taxable income item for the taxable year in which it is properly recognized under the method of accounting used to compute taxable income."

2. By amending subsection (e) to read:

"(e) The tax credit allowed under this section shall be available [for taxable years beginning after December 31, 1998, and shall not be available for taxable years beginning after December 31, 2005.] as provided under subsection (a)."

3. By amending subsection (g) to read:

"(g) As used in this section:

"Construction or renovation cost" means any costs incurred after December 31, 1998, for plans, design, construction, and equipment related to new construction, alterations, or modifications to a qualified full service hotel facility.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Qualified full service hotel facility" [means a hotel/hotel-condo as defined in section 486K-1, and includes

a time share facility or project.] has the same meaning as a "hotel" as defined in section 467-1, but excluding time share interests as defined in section 514E-1.

"Taxpayer" means a taxpayer under this chapter, and includes[:

(1) Association] an association of apartment owners[; or

(2) Time share owners association]."

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

SECTION 4. This Act shall take effect on July 1, 2050 and shall apply to taxable years beginning after December 31, 2005 and ending before January 1, 2011.