HOUSE OF REPRESENTATIVES
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO ECONOMIC DEVELOPMENT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that job growth in the Kapolei region is a matter of community and state concern that affects employers and employees alike as households continue to outgrow the number of employment opportunities in the region. According to estimates from the department of planning and permitting of the city and county of Honolulu and Permitting and Plash Econ Pacific LLC, in 2015, there were 34,341 households in the Kapolei region with a population of approximately 107,234. These numbers are expected to increase to 56,344 households and a population of 164,556 by 2035. This expansion in the number of households and the concomitant increase in population will create additional needs within the Kapolei region, including increased needs for goods and professional services. Without additional job growth and business opportunities for the people living in West Oahu, this population growth will result in increased traffic congestion for residents of West Oahu as many will need to continue commuting to downtown Honolulu.
The legislature further finds that the state enterprise zone program is restrictive and participation has been relatively low, particularly in the Leeward enterprise zone.
The purpose of this Act is to establish a five year Kapolei jobs initiative pilot program to increase the number of jobs in Kapolei by creating incentives for businesses to establish themselves or open a new location in the Kapolei region.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
KAPOLEI JOBS INITIATIVE
§ -1 Definitions. As used in this chapter:
"Designated geographic area" means the regions represented by the zip codes of 96706 and 96707.
"Establishment" means a single physical location where business is conducted; provided that a business may include one or more establishments.
"Full-time employee" means any employee, including a leased employee and an employee under a joint employment arrangement, for whom the employer is legally required to provide employee fringe benefits.
"Qualified business" means a business that:
(1) Establishes a new location within the designated geographic area or is already in existence in the designated geographic area and opens an additional location within the designated geographic area resulting in the net gain of at least one additional location for the business;
(2) If opening a new location within the designated geographic area, has a minimum of ten full-time employees working at the establishment in the designated geographic area; or, if already established in the designated geographic area and expanding or building a new establishment in the same area, has a net gain of ten full-time employees;
(3) Provides gross annual salaries of $35,000 or more to at least half of its employees at the establishment in the designated geographic area;
(4) Earns at least half of its gross annual revenue from its establishment in the designated geographic area;
(5) Is not participating in the state enterprise zone program pursuant to chapter 209E; and
(6) Excludes retail, except when greater than fifty per cent of sales are to Hawaii general excise tax licensees.
§ -2 Eligibility; qualified business. There is established within the department of business, economic development, and tourism, the Kapolei jobs initiative pilot program. Any qualified business is eligible to participate in the Kapolei jobs initiative pilot program and is eligible for the incentives available pursuant to this chapter.
§ ‑3 Kapolei jobs initiative income tax credit program. (a) Each qualified business may apply for and receive, in addition to any other incentive offered pursuant to this chapter, the Kapolei jobs initiative income tax credit as provided under section 235‑ ; provided that no more than twenty new qualified businesses may receive the credit per calendar year; provided further that no qualified business shall receive the credit after December 31, 2023.
(b) Each qualified business shall submit annually to the department of taxation, attached to its tax returns, an approved form supplied by the department that provides the information necessary for the department to prequalify the qualified business for the tax credit as provided in section 235- .
(c) Submission of a completed form referred to in subsection (b) shall be prima facie evidence of the eligibility of a qualified business for the purposes of this section.
§ ‑4 Adoption of rules. The department of business, economic development, and tourism may adopt rules, pursuant to chapter 91, to effectuate the purposes of this chapter."
SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Kapolei jobs initiative tax credit program. (a) There shall be allowed to each qualified business, as defined in section -1, subject to the tax imposed by this chapter, a Kapolei jobs initiative 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.
(b) The amount of the tax credit shall:
(1) Be equal to eighty per cent of any tax imposed by this chapter for the first tax year and ten per cent less for each of the immediately succeeding four years for any tax liability; and
(2) Include the amount of unemployment insurance accrued and paid by an employer under chapter 383 as follows:
(A) For the first year, eighty per cent of the amount accrued and paid;
(B) For the second year, seventy per cent of the amount accrued and paid;
(C) For the third year, sixty per cent of the amount accrued and paid;
(D) For the fourth year, fifty per cent of the amount accrued and paid; and
(E) For the fifth year, forty per cent of the amount accrued and paid;
provided that a qualified business shall be allowed to carry over any unused tax credits in accordance with subsection (d).
(c) Any qualified business having taxable income from an establishment's business activity, both within and without the designated geographic area, as defined in section -1, shall allocate and apportion its taxable income attributable to the conduct of business. Tax credits provided for in this section shall only apply to taxable income of a qualified business attributable to the conduct of business within the designated geographic area defined in section -1.
(d) If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of credit may be used as a tax credit against the taxpayer's net income tax liability in a subsequent taxable year; provided that no excess credit may be used after December 31, 2028.
All claims for a tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the tax credit.
(e) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for the costs of a qualified business incurred to participate in the Kapolei jobs initiative for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of the tax credit shall be determined pursuant to section 704(b) (with respect to partner's distributive share) of the Internal Revenue Code.
(f) To receive the tax credit, the qualified business shall first prequalify for the credit by registering with the department of business, economic development, and tourism during the stage of business development in the designated geographic area. Failure to comply with this provision may constitute a waiver of the right to claim the credit.
(g) Every qualified business claiming a tax credit under this section shall, no later than ninety days following the end of each taxable year in which business costs were expended and in which the tax credit can be claimed, submit a written, sworn statement to the department of business, economic development, and tourism identifying:
(1) Total expenditures incurred in the Kapolei jobs initiative and amount of expenditures applicable to the tax credit expended in the previous taxable year, if any;
(2) The amount of tax credits claimed pursuant to this section, if any, and the amount of total taxes paid, if any, in the previous taxable year;
(3) The amount of unemployment insurance accrued and paid by the qualified business in the previous taxable year;
(4) Hawaii employment and wage data, including the numbers of full-time and part-time employees retained, wages for each position, new jobs, temporary positions, external services procured by the qualified business, and payroll taxes; and
(5) Any other factors the department of business, economic development, and tourism deems relevant.
The above information may be reported from the department of business, economic development, and tourism to the legislature in redacted form pursuant to subsection (h)(4). The purpose of collecting the above information is to study the effectiveness of the tax credit. The department of business, economic development, and tourism may request any additional information necessary to measure the effectiveness of the tax credit.
(h) The department of business, economic development, and tourism shall:
(1) Maintain records of the names of the qualified businesses claiming the tax credits;
(2) Obtain and total the aggregate amounts of expenditures from all qualified businesses per taxable year;
(3) Provide a letter to the director of taxation specifying the amount of the tax credit per qualified business for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed; and
(4) Submit a report to the legislature no later than twenty days prior to the convening of each regular session detailing the non-aggregated expenditures of qualified businesses that form the basis of the tax credit, itemized by qualified business, in a redacted format to preserve the confidentiality of the qualified businesses claiming the credit.
(i) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for the tax credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.
(j) For the purposes of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter and chapter ."
SECTION 4. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2112, and shall apply to taxable years beginning after December 31, 2018; provided that section 3 shall be repealed on December 31, 2028.
Kapolei Jobs Initiative Pilot Program; Qualified Business; Income Tax Credit
Establishes a five-year Kapolei jobs initiative pilot program that offers incentives to increase the number of businesses willing to establish themselves or open a new location in the Kapolei region. Establishes a tax credit incentive. (HB2659 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.