Report Title:

Tax Credits; Partner's Distributive Share

 

Description:

Provides temporary treatment for pass-through entities, for income tax credit allocation purposes. Establishes a temporary 90% tax credit cap and restricts any carryover credits for the high technology business investment tax credit and the technology infrastructure renovation tax credit. Temporarily removes the partner distributive share tax incentive for the high technology business investment tax credit. Temporarily suspends the capital goods excise tax credit for one year. (SB199 CD1)

 


THE SENATE

S.B. NO.

199

TWENTY-FIFTH LEGISLATURE, 2009

S.D. 1

STATE OF HAWAII

H.D. 1

 

C.D. 1

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"235-A Income tax credit allocation; temporary treatment for pass-through entities. Notwithstanding any other law to the contrary, for taxable years beginning January 1, 2009, and ending before January 1, 2011, allocation of tax credits under this chapter shall be made in accordance with subchapter K, subchapter J, or subchapter S of the Internal Revenue Code.

235-B  Credits against income; claim limitation. (a) Notwithstanding any law to the contrary providing for a tax credit that may be claimed against a taxpayer's net income tax liability under section 235-110.51, 235-110.9, 241-4.8, or 431:7-209 for taxable years beginning on or after January 1, 2009, and ending before January 1, 2011, no claim for these tax credits, including carryover tax credits from prior taxable years, shall exceed ninety per cent of the taxpayer's tax liability for the taxable year in which the credit is claimed.

(b) Any tax credits under section 235-110.51, 235-110.9, 241-4.8, or 431:7-209, generated between January 1, 2009, and December 31, 2010, shall be subject to the credit claim limitation provided in subsection (a) and shall not result in a credit carryover in subsequent taxable years.

(c) Any tax credits generated under section 235-110.51, 235-110.9, 241-4.8, or 431:7-209, in taxable years beginning before January 1, 2009, that resulted in a credit carryover shall be subject to the credit claim limitation provided in subsection (a); provided that notwithstanding any provision creating a waiver of a tax credit by failing to make a claim within a specified period of time for any tax credit, a tax credit carryover generated under section 235-110.51, 235-110.9, 241-4.8, or 431:7-209, that is applicable to a taxable year beginning before January 1, 2009, may be used against tax liability in taxable years beginning on or after January 1, 2011, until exhausted.

(d) Tax credits generated under section 235-110.51, 235‑110.9, 241-4.8, or 431:7-209, during taxable years beginning on or after January 1, 2009, and ending before January 1, 2011, shall be claimed first, and tax credits generated in taxable years beginning prior to January 1, 2009, shall be claimed thereafter; provided that, with regard to any tax credit under section 235-110.51, 235‑110.9, 241-4.8, or 431:7-209, that is properly claimed for a taxable year beginning before January 1, 2009, the specified period of time established to exhaust the tax credit shall be tolled until such time that the tax credits accrued for the period beginning January 1, 2009, and ending January 1, 2011, have been exhausted."

SECTION 2. Section 235-2.45, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Section 704 of the Internal Revenue Code (with respect to a partner's distributive share) shall be operative for purposes of this chapter; except that section 704(b)(2) shall not apply to:

[(1) Allocations of the high technology business investment tax credit allowed by section 235-110.9;]

[(2)] (1) Allocations of net operating loss pursuant to section 235-111.5;

[(3)] (2) Allocations of the attractions and educational facilities tax credit allowed by section 235-110.46; or

[(4)] (3) Allocations of low-income housing tax credits among partners under section 235-110.8."

SECTION 3. Section 235-110.7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There shall be allowed to each taxpayer subject to the tax imposed by this chapter a capital goods excise 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 tax credit shall be determined by the application of the following rates against the cost of the eligible depreciable tangible personal property used by the taxpayer in a trade or business and placed in service within Hawaii after December 31, 1987. For calendar years beginning after:

(1) December 31, 1987, the applicable rate shall be three per cent;

(2) December 31, 1988, [and thereafter,] the applicable rate shall be four per cent[.];

(3) December 31, 2008, the applicable rate shall be zero per cent; and

(4) December 31, 2009, and thereafter, the applicable rate shall be four per cent.

For taxpayers with fiscal taxable years, the applicable rate shall be the rate for the calendar year in which the eligible depreciable tangible personal property used in the trade or business is placed in service within Hawaii.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for eligible depreciable tangible personal property which is placed in service by the entity. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rules.

In the case of eligible depreciable tangible personal property for which a credit for sales or use taxes paid to another state is allowable under section 238-3(i), the amount of the tax credit allowed under this section shall not exceed the amount of use tax actually paid under chapter 238 relating to such tangible personal property.

If a deduction is taken under section 179 (with respect to election to expense certain depreciable business assets) of the Internal Revenue Code of 1954, as amended, no tax credit shall be allowed for that portion of the cost of property for which the deduction was taken."

SECTION 4. Section 241-4.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]241-4.5[]] Capital goods excise tax credit. The capital goods excise tax credit provided under section 235-110.7 shall be operative for this chapter after December 31, 1987[.]; provided that the capital goods excise tax credit shall be inoperative after December 31, 2008, and before January 1, 2010."

SECTION 5. Section 241-4.8, Hawaii Revised Statutes, is amended to read as follows:

"[[]241-4.8[]] High technology business investment tax credit. The high technology business investment tax credit provided under section 235-110.9 shall be operative for this chapter on July 1, 1999[.]; provided that this section shall be subject to section 235-B."

SECTION 6. Section 431:7-209, Hawaii Revised Statutes, is amended to read as follows:

"[[]431:7-209[]] High technology business investment tax credit. The high technology business investment tax credit provided under section 235-110.9 shall be operative for this chapter on July 1, 1999[.]; provided that this section shall be subject to section 235-B."

SECTION 7. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

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

SECTION 9. This Act shall take effect upon its approval and shall apply to taxable years beginning on or after January 1, 2009; provided that this Act shall be repealed on January 1, 2012, and sections 235-2.45, 235-110.7, 241-4.5, 241-4.8, and 431:7-209, Hawaii Revised Statutes, shall be reenacted in the forms in which they read on the day before the effective date of this Act.