Report Title:

Disaster Relief; Tax Credit for Earthquake Victims

 

Description:

Creates a one-time tax credit for victims of the October 15, 2006, earthquakes.  (SD1)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

149

TWENTY-FOURTH LEGISLATURE, 2007

H.D. 2

STATE OF HAWAII

S.D. 2

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO DISASTER RELIEF.

 

 

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

 


     SECTION 1.  (a)  There shall be allowed to each taxpayer who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes, who files a net income tax return for a taxable year, a one-time nonrefundable earthquake victim tax credit, except as otherwise provided in this Act.

     A qualifying taxpayer may claim either a credit equal to a percentage of the costs incurred in repairing damage to a residential structure pursuant to subsection (b) or, in the alternative, a qualifying taxpayer may claim a credit equal to a percentage of loss incurred as defined in subsection (d).

     The tax credit shall be deductible from the taxpayer's net income tax liability imposed by chapter 235, Hawaii Revised Statutes.

     (b)  The amount of the tax credit for costs incurred in damage repair shall be            per cent of the repair costs directly related to the damage directly caused by the earthquakes occurring on the dates specified in subsection (c) to the taxpayer's residential structure situated in the county of Hawaii; provided that:

     (1)  The expenses or costs are not reimbursable by insurance proceeds or disaster relief payments from government agencies or nonprofit organizations;

     (2)  The tax credit shall not exceed $           per individual taxpayer;

     (3)  The tax credit shall not exceed $           per trust, estate, partnership, association, company, or corporation, as determined at the entity level;

     (4)  No claim for credit based upon loss is claimed under subsection (d); and

     (5)  No refund as provided in subsection (g) or payment on account of the tax credit allowed by this Act shall be made for amounts less than $1.

     (c)  The tax credit shall apply to a taxpayer who suffered earthquake damage to the taxpayer's residential structure that is situated in the county of Hawaii, having occurred on October 15, 2006.

     (d)  The amount of tax credit for loss shall be            per cent of the loss directly related to the damage directly caused by the earthquakes occurring on the date specified in subsection (c) to the taxpayer's residential structure situated in the county of Hawaii; provided that:

     (1)  The loss is not reimbursable by insurance proceeds or disaster relief payments from government agencies or nonprofit organizations or any other source of reimbursement for the loss.  For purposes of this subsection, "loss" means the decrease in value as measured by the fair market value of the property immediately prior to the earthquakes identified in subsection (c) and the fair market value immediately after the earthquakes; provided that the loss shall not exceed the taxpayer's adjusted tax basis in the property;

     (2)  The tax credit shall not exceed $           per individual taxpayer;

     (3)  The tax credit shall not exceed $           per trust, estate, partnership, association, company, or corporation, as determined at the entity level;

     (4) No claim for credit based costs incurred in repairing damage is claimed under subsection (b);

(5) Any taxpayer claiming credit under this subsection shall attach to the taxpayer's return an appraisal of the loss, as defined in paragraph (1), determined by a qualified appraiser.  The term "qualified appraiser" means an individual who includes on the appraisal a declaration that:

          (A)  The individual either holds the individual's self out to the public as an appraiser and performs appraisals on a regular basis;

          (B)  Summarizes the appraiser's qualifications to render appraisals of the type required by this Act;

          (C)  The appraiser is qualified to make appraisals of the type of property being valued;

          (D)  The appraiser is not the taxpayer and does not have a "financial interest" in the property, as that term is defined in section 84-3, Hawaii Revised Statutes, and further as the term may apply to the circumstances; and

          (E)  The appraiser understands that an intentionally false or fraudulent overstatement of the value of the property described in the appraisal may subject the appraiser to a penalty under section 231-36, Hawaii Revised Statutes, for aiding and abetting an understatement of tax liability and that the appraisal may be disregarded; and

(6)  No refund as provided in subsection (g) or payment on account of the tax credit allowed by this Act shall be made for amounts less than $1;

     (e)  To qualify for the income tax credit, the taxpayer shall sign a statement and provide information determined by the department of taxation as necessary to claim the credit under penalties of perjury.

     (f)  If the tax credit under this section exceeds the taxpayer's net income tax liability, any excess of the tax credit over liability may be carried forward until exhausted; provided that tax credits properly claimed by a taxpayer shall be refunded to the taxpayer after being credited against the taxpayer's income tax liability for the taxable year, if the taxpayer qualifies under one of the following tests:

     (1)  All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3), Hawaii Revised Statutes; or

     (2)  The taxpayer's adjusted gross income is $20,000 or less.

     (g)  In the case of a partnership, S corporation, estate, trust, or association of apartment owners, the tax credit allowable is for expenses incurred and paid for or loss sustained by the entity for the taxable year.  The cost or loss upon which the tax credit is computed shall be determined at the entity level.

     (h)  If a deduction is taken under section 179 (with respect to election to expense certain depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for that portion of the expenses for which the deduction is taken.

     The basis of property shall be decreased by any amount for which the credit is 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.

     (i)  No taxpayer who claims the tax credit under this section shall claim any other credit or deduction for the same loss or other expenses or costs.

     (j)  Every claim, including amended claims, for the tax credit under this section shall be filed on or before December 31, 2008.  Failure to meet the filing requirements of this subsection shall constitute a waiver of the right to claim the tax credit.

     (k)  If at any time after claiming the tax credit, the taxpayer no longer qualifies for the credit because of subsequent recovery for expenses used to calculate the credit, the credits claimed shall be recaptured.  The recapture shall be equal to one hundred per cent of the tax credits that were subsequently ineligible as a result of later recovery.  The amount of the recaptured tax credits shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs.

     (l)  In the case of fraud, making of a false statement, or wilful disregard for the facts, associated with making a return or otherwise claiming the tax credit, there shall be added to the amount wrongfully claimed on a return a penalty of fifty per cent of the amount of such credit claimed.

     (m)  The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section, may require proof of the claim for the tax credit, and may adopt rules without regard to chapter 91 to effectuate the purposes of this section.

SECTION 2.  This Act shall take effect on January 1, 2015, and shall apply to the taxable years beginning after December 31, 2005, and before January 1, 2009.