Report Title:

High Technology Tax Credits; Extension; Recapture; Workforce

 

Description:

Extends the technology infrastructure renovation tax credit and the tax credit for research activities until 2015. Requires a ten per cent increase in workforce to continue claiming the research activited tax credit after two years. Provides for recapture of these tax credits if the business leaves Hawaii. Precludes claiming the high technology business investment tax credit for taxable years beginning after December 31, 2008.

 


HOUSE OF REPRESENTATIVES

H.B. NO.

1451

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

relating to taxation.

 

 

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

 


SECTION 1. Section 235-110.51, Hawaii Revised Statutes, is amended to read as follows:

"235-110.51 Technology infrastructure renovation tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter[,] 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[.]; provided that to qualify for the tax credit after the effective date of this Act, the taxpayer shall have increased its workforce by ten per cent from what it was at the beginning of the tax year for two consecutive years beginning after December 31, 2009.

(b) The amount of the credit shall be four per cent of the renovation costs incurred during the taxable year for each commercial building located in Hawaii.

(c) In the case of a partnership, S corporation, estate, trust, or any developer of a commercial building, the tax credit allowable is for 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).

(d) 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 renovation cost for which the deduction is taken.

(e) 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.

(f) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.

(g) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be carried forward until exhausted.

(h) If a business that received a technology infrastructure renovation tax credit moves its research and development, or manufacturing components out of Hawaii within five years of receiving the tax credit, one hundred per cent of the tax credit received under this section shall be recaptured.

[(h)](i) The tax credit allowed under this section shall not be available for taxable years beginning after December 31, [2010] 2015.

[(i)](j) As used in this section:

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

"Renovation costs" means costs incurred after December 31, 2000, to plan, design, install, construct, and purchase technology-enabled infrastructure equipment to provide a commercial building with technology-enabled infrastructure.

"Technology-enabled infrastructure" means:

(1) High speed telecommunications systems that provide Internet access, direct satellite communications access, and videoconferencing facilities;

(2) Physical security systems that identify and verify valid entry to secure spaces, detect invalid entry or entry attempts, and monitor activity in these spaces;

(3) Environmental systems to include heating, ventilation, air conditioning, fire detection and suppression, and other life safety systems; and

(4) Backup and emergency electric power systems.

(j) No taxpayer that claims a credit under this section shall claim any other credit under this chapter."

SECTION 2. Section 235-110.9, Hawaii Revised Statutes, is amended by amending subsection (i) to read as follows:

"(i) This section shall not apply to taxable years beginning after December 31, [2010]2008."

SECTION 3. Section 235-110.91, Hawaii Revised Statutes, is amended to read as follows:

"235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for increasing research activities) and [section] Section 280C(c) (with respect to certain expenses for which the credit for increasing research activities are allowable) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this section; except that references to the base amount shall not apply and credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years. If [section] Section 41 of the Internal Revenue Code is repealed or terminated prior to January 1, 2011, its provisions shall remain in effect for purposes of the income tax law of the State as modified by this section, as provided for in subsection [(j).](k).

(b) All references to Internal Revenue Code sections within [sections] Sections 41 and 280C(c) of the Internal Revenue Code shall be operative for purposes of this section.

(c) There shall be allowed to each qualified high technology business subject to the tax imposed by this chapter an income tax credit for qualified research activities equal to the credit for research activities provided by [section] Section 41 of the Internal Revenue Code and as modified by this section. The credit 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[.]; provided that to qualify for the tax credit after the effective date of this Act, the taxpayer shall have increased its workforce by ten per cent from what it was at the beginning of the tax year for two consecutive years beginning after December 31, 2009.

(d) Every qualified high technology business, before March 31 of each year in which qualified research and development activity was conducted in the previous taxable year, shall submit a written, certified statement to the director of taxation identifying:

(1) Qualified expenditures, if any, expended in the previous taxable year; and

(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

(e) The department shall:

(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified research and development activity costs upon which the tax credit is based;

(2) Verify the nature and amount of the qualifying costs or expenditures;

(3) Total all qualifying and cumulative costs or expenditures that the department certifies; and

(4) Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

Upon each determination made under this subsection, the department shall issue a certificate to the taxpayer verifying information submitted to the department, including the qualifying costs or expenditure amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. The taxpayer shall file the certificate with the taxpayer's tax return with the department.

The director of taxation may assess and collect a fee to offset the costs of certifying tax credit claims under this section. All fees collected under this section shall be deposited into the tax administration special fund established under section 235-20.5.

(f) As used in this section:

"Basic research" under [section] Section 41(e) of the Internal Revenue Code shall not include research conducted outside of the [State] state.

"Qualified high technology business" means the same as in section 235-110.9.

"Qualified research" under section 41(d)(1) of the Internal Revenue Code shall not include research conducted outside of the State.

(g) If a business that received a tax credit for research activities moves its research and development, or manufacturing components out of the state within five years of receiving the tax credit, one hundred per cent of the tax credit received under this section shall be recaptured.

[(g)](h) If the tax credit for qualified research activities claimed by a taxpayer exceeds the amount of income tax payment due from the taxpayer, the excess of the tax credit over payments due shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

[(h)](i) All 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 properly claim the credit shall constitute a waiver of the right to claim the credit.

[(i)](j) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section.

[(j)](k) This section shall not apply to taxable years beginning after December 31, [2010]2015."

SECTION 4. Act 206, Session Laws of Hawaii 2007, is amended by amending section 8 to read as follows:

"SECTION 8. This Act shall take effect on July 1, 2007, and shall apply to investments received by a qualified high technology business after June 30, 2007; provided that this Act shall be repealed on January 1, 2011, and [sections]section 235-20.5 [and 235-110.9(b)], Hawaii Revised Statutes, shall be reenacted in the form in which [they]it read on the day before the effective date of this Act."

SECTION 5. This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________