HOUSE OF REPRESENTATIVES
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII
A BILL FOR AN ACT
relating to business development at barbers point.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds the federal Tax Cuts and Jobs Act of 2017, P.L. 115-97, authorized a community economic development program called the opportunity zones program to encourage long-term investments in economically distressed communities nationwide.
The legislature also finds that the program provides for incentives for investors to re-invest unrealized capital gains into "opportunity funds" established by the private sector in exchange for temporary tax deferral and other tax benefits.
Hawaii has nominated, and the United States Department of the Treasury has already designated, twenty-five census tracts as opportunity zones. One of these is the Kalaeloa district. The former Naval Air Station at Barbers Point is in the Kalaeloa district. Barbers Point was decommissioned by the United States Navy in 1998 and was turned over to the State of Hawaii.
The legislature further finds that Barbers Point has the potential for business development but needs upgrades to its infrastructure, especially its electrical system, as the area presently uses its own electrical grid. The need for these costly upgrades at Barbers Point has hindered development.
The purpose of this Act is to incentivize investments in the area for business development and housing and to incentivize businesses or owner-occupants to invest in electrical and water upgrades at Barbers Point.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part VI to be appropriately designated and to read as follows:
"§235- Barbers Point upgrade tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed under this chapter, a tax credit that 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.
In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified expenses incurred by the entity for the taxable year. The expenses upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.
(b) The amount of the tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of $50,000.
(c) Every taxpayer claiming a credit under this section, before March 31 of each year in which qualified expenses were incurred by the taxpayer in the previous taxable year, shall submit a written, certified statement to the director of business, economic development, and tourism identifying:
(1) Qualified expenses incurred in the previous taxable year; and
(2) The amount of the tax credit claimed by the taxpayer pursuant to this section, if any, in the previous taxable year.
(d) The department of business, economic development, and tourism 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 expenses upon which the tax credits are based;
(2) Verify the nature and amount of the qualified expenses;
(3) Total all qualified and cumulative expenses that the department certifies; and
(4) Certify the amount of the tax credit for each taxpayer for each taxable year and the cumulative amount of the tax credit.
Upon each determination made under this subsection, the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying information submitted to the department of business, economic development, and tourism, including amounts of qualified expenses, the credit amount certified for the taxpayer for each taxable year, and the cumulative amount of tax credits certified. The director of business, economic development, and tourism may adopt rules under chapter 91 as necessary to implement the certification requirements under this section.
The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.
(e) The director of taxation:
(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;
(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and
(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.
(f) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for the 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 credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.
(g) As used in this section, "qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading the electrical and water systems at Barbers Point in the Kalaeloa opportunity zone."
SECTION 3. Section 237-23, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) This chapter shall not apply to the following persons:
(1) Public service companies as that term is defined in section 239-2, with respect to the gross income, either actual gross income or gross income estimated and adjusted, that is included in the measure of the tax imposed by chapter 239;
(2) Public utilities owned and operated by the State or any county, or other political subdivision thereof;
(3) Fraternal benefit societies, orders, or associations, operating under the lodge system, or for the exclusive benefit of the members of the fraternity itself, operating under the lodge system, and providing for the payment of death, sick, accident, a legal service plan, or other benefits to the members of the societies, orders, or associations, and to their dependents;
(4) Corporations, associations, trusts, or societies organized and operated exclusively for religious, charitable, scientific, or educational purposes, as well as that of operating senior citizens housing facilities qualifying for a loan under the laws of the United States as authorized by section 202 of the Housing Act of 1959, as amended, as well as that of operating a legal service plan, as well as that of operating or managing a homeless facility, or any other program for the homeless authorized under part XVII of chapter 346;
(5) Business leagues, chambers of commerce, boards of trade, civic leagues, agricultural and horticultural organizations, and organizations operated exclusively for the benefit of the community and for the promotion of social welfare that shall include the operation of a legal service plan, and from which no profit inures to the benefit of any private stockholder or individual;
(6) Hospitals, infirmaries, and sanitaria;
(7) Companies that provide potable water to residential communities that lack any access to public utility water services and are tax exempt under section 501(c)(12) of the Internal Revenue Code of 1986, as amended;
(8) Cooperative associations incorporated under chapter 421 or Code section 521 cooperatives which fully meet the requirements of section 421-23, except Code section 521 cooperatives need not be organized in Hawaii; provided that:
(A) The exemption shall apply only to the gross income derived from activities that are pursuant to purposes and powers authorized by chapter 421, except those provisions pertaining to or requiring corporate organization in Hawaii do not apply to Code section 521 cooperatives;
(B) The exemption shall not relieve any person who receives any proceeds of sale from the association of the duty of returning and paying the tax on the total gross proceeds of the sales on account of which the payment was made, in the same amount and at the same rate as would apply thereto had the sales been made directly by the person, and all those persons shall be so taxable; and
(C) As used in this paragraph, "Code section 521 cooperatives" mean associations that qualify as a cooperative under section 521 (with respect to exemption of farmers' cooperatives from tax) of the Internal Revenue Code of 1986, as amended;
(9) Persons affected with Hansen's disease and kokuas, with respect to business within the county of Kalawao;
companies, associations, or trusts organized for the establishment and conduct
of cemeteries no part of the net earnings of which inures to the financial
benefit of any private stockholder or individual; provided that the exemption
shall apply only to the activities of those persons in the conduct of
cemeteries and shall not apply to any activity the primary purpose of which is
to produce income, even though the income is to be used for or in the
furtherance of the exempt activities of those persons; [
(11) Nonprofit shippers
associations operating under part 296 of the Civil Aeronautics Board Economic
(12) Businesses investing more than $500,000 over a ten-year period and creating a minimum of fifty job positions for the purpose of business development at Barbers Point, located in the Kalaeloa opportunity zone."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect upon its approval; provided that section 2 shall apply to taxable years beginning after December 31, 2020.
General Excise Tax Exemption; Tax Credit; Businesses Development; Barbers Point; Kalaeloa Opportunity Zone
Authorizes a GET exemption for businesses investing more than $500,000 over a 10-year period and creating a minimum of 50 job positions for the purpose of business development at Barbers Point in the Kalaeloa opportunity zone. Establishes a tax credit for upgrading infrastructure at Barbers Point.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.