THE SENATE

S.B. NO.

753

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to high technology.

 

 

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

 


     SECTION 1.  Research and Development (R&D) is the core of innovation and without innovation there is no technology industry and the subsequent growth of our economy is stunted with no new products, services, or processes.  R&D is the critical first step in the product development cycle.  During the R&D stage, ideas and theories are tested to determine feasibility.  Due to the increasing interconnected and competitive global economy, fostering and encouraging innovation is essential to a comprehensive economic strategy for our State.  The key to developing more jobs and more prosperity will be to create and deploy new products, services, and processes.  Some of the jobs do not exist today.

     Innovation is essential for creating new jobs in high tech and traditional sectors.  In recent years, innovation has led to new jobs in many different sectors as diverse as defense/dual‑use, software and information technology, life sciences and biotechnology, and clean energy.  At the same time, innovations ripple through the economy, creating jobs for workers building advanced infrastructure (clean energy solutions), installing broadband networks, and utilizing new devices and products in the service industries, such as health-care and tourism.

     Innovation is also critical for sustaining the vitality and resilience of our economy.  Future challenges (natural or man-made) are impossible to predict, but what is certain is that an economy better able to respond to such events by adapting innovative solutions and re-deploying old activities, jobs, and industries will be least susceptible to adversity.

     Innovation is the key to remaining competitive globally, new and better jobs, and a resilient economy.  The legislature recognizes this and supports R&D as the stimulant to our innovation economy.

     The current law parallels, with enhancements tailored to Hawaii's unique position, the Internal Revenue Code, providing support for scientific experimentation at twenty per cent of the cost of the qualified research.  The program cost to the State has averaged about $11,000,000 per year over the last nine years, and in 2006, provided funding to over four hundred companies.  This tax credit has been a great source of support for local companies, especially to the R&D companies that are still in the start-up and early stage, and is seen as helping to level the playing field of our high cost State, as Hawaii companies compete with national and international competition.  It has also been useful in providing support for early-stage R&D companies that are not yet profitable, and have few sources of funding.  Further, the refundable element is helping to attract new technology companies to Hawaii.

     In addition, in 2010, the senate committee on economic development and technology and the house committee on economic revitalization, business, and military affairs convened an informal small business discussion group to address the most critical issues facing the small business sectors within Hawaii's economy.  Representatives from the Chamber of Commerce of Hawaii, construction and trades industries, community nonprofits, the agricultural sector, food and restaurant industries, retailing, the science and technology sector, the commercial transportation industry, and interested stakeholders developed a package of bills that address the most pressing problems facing Hawaii's small business community.

     The purpose of this Act is to support the findings of the small business working group and recommendations to extend the income tax credit for qualified research activities for an additional five years and to add a ten per cent labor costs tax credit.

     SECTION 2.  Section 235-110.91, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (c) to read:

     "(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]:

     (1)  Qualified research activities equal to the credit for research activities provided by section 41 of the Internal Revenue Code and as modified by this section[.]; and

     (2)  Ten per cent of the qualified labor costs.

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."

     2.  By amending subsection (f) to read:

     "(f)  As used in this section:

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

     "Qualified labors costs" means the costs incurred by a qualified high technology business that are attributable to wages or salaries paid by the qualified high technology business for the first twelve months of employment of any full-time employee or any part-time employee who is also full-time student, and who is a resident of the State of Hawaii."

     3.  By amending subsection (j) to read:

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

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

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2010.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

High Technology; R&D Income Tax Credit

 

Description:

Establishes a tax credit for ten per cent of qualified labor costs; extends the tax credit for qualified research activities for five years.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.