Bill Text: HI SB1532 | 2011 | Regular Session | Introduced
Bill Title: Income Tax; General Excise Tax; Credits; Exemptions
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2011-01-28 - (S) Referred to WAM. [SB1532 Detail]
Download: Hawaii-2011-SB1532-Introduced.html
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THE SENATE |
S.B. NO. |
1532 |
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TWENTY-SIXTH LEGISLATURE, 2011 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO taxation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I. INCOME TAX CREDITS
SECTION 1. Section 235-71, Hawaii Revised Statutes, is amended to read as follows:
"§235-71 Tax on corporations; rates[;
credit of shareholder of regulated investment company]. (a) A tax at
the rates herein provided shall be assessed, levied, collected, and paid for
each taxable year on the taxable income of every corporation, including a
corporation carrying on business in partnership, except that in the case of a
regulated investment company the tax is as provided by subsection (b) and
further that in the case of a real estate investment trust as defined in
section 856 of the Internal Revenue Code of 1954 the tax is as provided in
subsection (d). "Corporation" includes any professional corporation
incorporated pursuant to chapter 415A.
The tax on all taxable income shall be at the rate of 4.4 per cent if the taxable income is not over $25,000, 5.4 per cent if over $25,000 but not over $100,000, and on all over $100,000, 6.4 per cent.
(b) In the case of a regulated investment company there is imposed on the taxable income, computed as provided in sections 852 and 855 of the Internal Revenue Code but with the changes and adjustments made by this chapter (without prejudice to the generality of the foregoing, the deduction for dividends paid is limited to such amount of dividends as is attributable to income taxable under this chapter), a tax consisting in the sum of the following: 4.4 per cent if the taxable income is not over $25,000, 5.4 per cent if over $25,000 but not over $100,000, and on all over $100,000, 6.4 per cent.
[(c) In the case of a shareholder of a
regulated investment company there is hereby allowed a credit in the amount of
the tax imposed on the amount of capital gains which by section 852(b)(3)(D) of
the Internal Revenue Code is required to be included in the shareholder's
return and on which there has been paid to the State by the regulated
investment company the tax at the rate imposed by subsection (b); the amount of
this credit may be applied or refunded as provided in section 235-110.
(d)] (c) In the case of a real
estate investment trust there is imposed on the taxable income, computed as
provided in sections 857 and 858 of the Internal Revenue Code but with the
changes and adjustments made by this chapter (without prejudice to the
generality of the foregoing, the deduction for dividends paid is limited to
such amount of dividends as is attributable to income taxable under this
chapter), a tax consisting in the sum of the following: 4.4 per cent if the
taxable income is not over $25,000, 5.4 per cent if over $25,000 but not over
$100,000, and on all over $100,000, 6.4 per cent. In addition to any other
penalty provided by law any real estate investment trust whose tax liability
for any taxable year is deemed to be increased pursuant to section 859(b)(2)(A)
or 860(c)(1)(A) after December 31, 1978, (relating to interest and
additions to tax determined with respect to the amount of the deduction for
deficiency dividends allowed) of the Internal Revenue Code shall pay a penalty
in an amount equal to the amount of interest for which such trust is liable
that is attributable solely to such increase. The penalty payable under this
subsection with respect to any determination shall not exceed one-half of the
amount of the deduction allowed by section 859(a), or 860(a) after December 31,
1978, of the Internal Revenue Code for such taxable year.
[(e)] (d) Any corporation acting
as a business entity in more than one state and which is required by this
chapter to file a return and whose only activities in this State consist of
sales and which does not own or rent real estate or tangible personal property
and whose annual gross sales in or into this State during the tax year are not
in excess of $100,000 may elect to report and pay a tax of .5 per cent of such
annual gross sales."
SECTION 2. Section 235-5.6, Hawaii Revised Statutes, is repealed.
["[§235-5.6] Individual
development account contribution tax credit. (a) There shall be
allowed to each taxpayer subject to the tax imposed under this chapter, an
individual development account contribution tax credit certified under chapter
257 which shall be applied against 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 individual development account
contribution tax credit shall be equal to fifty per cent of the amount
contributed by the taxpayer to a fiduciary organization as defined by and in
the manner prescribed in chapter 257. If a deduction is taken under section
170 (with respect to charitable contributions and gifts) of the Internal
Revenue Code, no tax credit shall be allowed for that portion of the
contribution for which the deduction was taken.
(c) If the tax credit under this section
exceeds the taxpayer's income tax liability, the excess of the tax credit over
liability may be used as a credit against the taxpayer's income tax liability
in subsequent years until exhausted. All claims, including any amended claims,
for tax credits 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 comply with the foregoing provision shall constitute a
waiver of the right to claim the credit.
(d) Application for the credit under this
section shall be upon forms provided by the department.
(e) The credit under this section shall be
available for taxable years beginning after December 31, 1999, but shall not be
available for taxable years beginning after December 31, 2004."]
SECTION 3. Section 235-12, Hawaii Revised Statutes, is repealed.
["§235-12 Energy
conservation; income tax credit. (a) For taxable years ending
before January 1, 1990, except in the case of ice storage systems for taxable
years ending before January 1, 1991, each individual and corporate resident
taxpayer who files an individual or corporate net income tax return for a
taxable year, may claim a tax credit under this section against the Hawaii
state individual or corporate net income tax. The tax credit may be claimed
for any solar or wind energy device, heat pump, or ice storage system in an
amount not to exceed ten per cent of the total cost of the device, heat pump,
or ice storage system; provided that the tax credit shall apply only to the
actual cost of the solar or wind energy device, the heat pump, or ice storage
system, their accessories, and installation and shall not include the cost of
consumer incentive premiums unrelated to the operation of the solar or wind
energy device, the heat pump, or ice storage system offered with the sale of
the solar or wind energy device, the heat pump, or ice storage system. The
credit shall be claimed against net income tax liability for the year in which
the solar or wind energy device, the heat pump, or ice storage system was
purchased and placed in use; provided:
(1) The tax credit shall be applicable only
with respect to solar devices, which are erected and placed in service after
December 31, 1974, but before January 1, 1990;
(2) In the case of wind energy devices and
heat pumps, the tax credit shall be applicable only with respect to wind energy
devices and heat pumps which are installed and placed in service after December
31, 1980, but before January 1, 1990; and
(3) In the case of ice storage systems, the
tax credit shall be applicable only with respect to ice storage systems which
are installed and placed in service after December 31, 1985, but before January
1, 1990.
Tax credits which exceed the taxpayer's income
tax liability may be used as a credit against the taxpayer's income tax
liability in subsequent years until exhausted. If federal energy tax credits
are not extended beyond December 31, 1985, are not retroactively extended or
reenacted, or federal energy tax credits the same as or less in amount than the
credits in effect during the 1985 taxable year are not enacted during the
taxable year 1986, then the state tax credit shall be increased to fifteen per
cent of the total cost after December 31, 1985, but before January 1, 1990.
As used in this subsection:
"Solar or wind energy device"
means any new identifiable facility, equipment, apparatus, or the like which
makes use of solar or wind energy for heating, cooling, or reducing the use of
other types of energy dependent upon fossil fuel for their generation.
"Heat pump" means and refers to an
electric powered compression heating system which extracts energy from warm
ambient air or recovers waste heat to assist in the production of hot water.
"Ice storage system" refers to ice
banks or other cool energy storage tanks, containers, accessories, and controls
that are specifically designed to store ice or chilled fluids for the express
purpose of shifting the consumption of energy to off-peak periods.
(b) For taxable years beginning after
December 31, 1989, each individual or corporate resident taxpayer who files an
individual or corporate net income tax return for a taxable year, may claim a
tax credit under this section against the Hawaii state individual or corporate
net income tax. The tax credit may be claimed as follows:
(1) For wind energy systems that are
installed and placed in service after December 31, 1989, but before July 1,
2003, the credit shall be twenty per cent of the actual cost;
(2) For solar energy systems that are
installed and placed in service after December 31, 1989, but before July 1,
2003, on new and existing single family residential buildings, the credit shall
be in an amount not to exceed thirty-five per cent or $1,750, whichever is
less, of the actual cost of the solar energy system;
(3) For solar energy systems that are
installed and placed in service after December 31, 1989, but before July 1,
2003, on new and existing multiunit buildings used primarily for residential
purposes, the credit shall be in an amount not to exceed thirty-five per cent
or $350 per building unit, whichever is less, of the actual cost of the solar
energy system;
(4) For solar energy systems that are
installed and placed in service after December 31, 1989, but before July 1,
2003, in new and existing hotel, commercial, and industrial facilities, the
credit shall be in an amount not to exceed thirty-five per cent of the actual
cost of the solar energy system;
(5) For heat pumps that are installed and
placed in service after December 31, 1989, but before July 1, 2003, in new and
existing single-family residential buildings, the credit shall be in an amount
not to exceed twenty per cent or $400, whichever is less, of the actual cost of
the heat pump;
(6) For heat pumps that are installed and
placed in service after December 31, 1989, but before July 1, 2003, in new and
existing multiunit buildings used primarily for residential purposes, the
credit shall be in an amount not to exceed twenty per cent or $200 per building
unit, whichever is less, of the actual cost of the heat pump; provided that a
licensed professional engineer reviews the design of the system and provides a
written opinion that the system, in accordance with recognized engineering
practice, is designed to provide not less than ninety per cent of the daily
annual average hot water needs of all of the occupants of the building;
(7) For heat pumps that are installed and
placed in service after December 31, 1989, but before July 1, 2003, in new and
existing hotel, commercial, and industrial facilities, the credit shall be in
an amount not to exceed twenty per cent of the actual cost of the heat pump;
and
(8) For ice storage systems that are
installed and placed in service after December 31, 1990, but before July 1,
2003, the credit shall be in an amount not to exceed fifty per cent of the
actual cost of the ice storage system.
The per unit of actual cost of a solar energy
system or heat pump referred to in subsection (b)(3) and (6) shall be
determined by multiplying the actual cost of the solar energy system or heat
pump installed and placed in service in the multiunit building by a fraction,
the numerator being the total square feet of that unit in the multiunit
building, and the denominator being the total square feet of all the units in
the multiunit building.
If federal energy tax credits similar to any
of those provided in paragraphs (1) to (8) are established after June 30, 1998,
but before July 1, 2003, then the state tax credit provided in the respective
paragraph or paragraphs shall be reduced by the amount of the applicable
federal energy tax credit.
(c) Tax credits shall apply only to the
actual cost of the solar or wind energy system, heat pump, or ice storage
system, including their accessories and installation, and shall not include the
cost of consumer incentive premiums unrelated to the operation of the system or
offered with the sale of the system or heat pump. The tax credit shall be
claimed against net income tax liability for the year in which the solar or wind
energy system, heat pump, or ice storage system was purchased and placed in use
in Hawaii. Tax credits that exceed the taxpayer's income tax liability may be
used as credit against the taxpayer's income tax liability in subsequent years
until exhausted.
(d) The director of taxation shall prepare
such forms as may be necessary to claim a credit under this section. The
director may also require the taxpayer to furnish reasonable information to
ascertain the validity of the claim for credit made under this section and may
adopt rules necessary to effectuate the purposes of this section pursuant to
chapter 91.
(e) As used in this section:
"Solar or wind energy system"
means any new identifiable facility, equipment, apparatus, or the like that
converts solar insolation or wind energy to useful thermal or electrical energy
for heating, cooling, or reducing the use of other types of energy dependent
upon fossil fuel for their generation.
"Heat pump" means an electric
powered compression heating system that extracts energy from warm ambient air
or recovers waste heat to assist in the production of hot water.
"Ice storage system" refers to ice
banks or other cool energy storage tanks, containers, accessories, and controls
that are specifically designed to store ice or chilled fluids for the express
purpose of shifting the consumption of energy to off-peak periods."]
SECTION 4. Section 235-12.5, Hawaii Revised Statutes, is repealed.
["§235-12.5 Renewable energy
technologies; income tax credit. (a) When the requirements of
subsection (d) are met, each individual or corporate taxpayer that files an
individual or corporate net income tax return for a taxable year may claim a
tax credit under this section against the Hawaii state individual or corporate
net income tax. The tax credit may be claimed for every eligible renewable
energy technology system that is installed and placed in service in the State
by a taxpayer during the taxable year. The tax credit may be claimed as
follows:
(1) For each solar energy system:
thirty-five per cent of the actual cost or the cap amount determined in
subsection (b), whichever is less; or
(2) For each wind-powered energy system:
twenty per cent of the actual cost or the cap amount determined in subsection
(b), whichever is less;
provided that multiple owners of a single system
shall be entitled to a single tax credit; and provided further that the tax
credit shall be apportioned between the owners in proportion to their
contribution to the cost of the system.
In the case of a partnership, S corporation,
estate, or trust, the tax credit allowable is for every eligible renewable
energy technology system that is installed and placed in service in the State
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 pursuant to section 235-110.7(a).
(b) The amount of credit allowed for each
eligible renewable energy technology system shall not exceed the applicable cap
amount, which is determined as follows:
(1) If the primary purpose of the solar
energy system is to use energy from the sun to heat water for household use,
then the cap amounts shall be:
(A) $2,250 per system for
single-family residential property;
(B) $350 per unit per system for
multi-family residential property; and
(C) $250,000 per system for
commercial property;
(2) For all other solar energy systems, the
cap amounts shall be:
(A) $5,000 per system for
single-family residential property; provided that if all or a portion of
the system is used to fulfill the substitute renewable energy technology
requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by
thirty-five per cent of the actual system cost or $2,250, whichever is less;
(B) $350 per unit per system for
multi-family residential property; and
(C) $500,000 per system for
commercial property; and
(3) For all wind-powered energy systems,
the cap amounts shall be:
(A) $1,500 per system for
single-family residential property; provided that if all or a portion of
the system is used to fulfill the substitute renewable energy technology
requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by
twenty per cent of the actual system cost or $1,500, whichever is less;
(B) $200 per unit per system for
multi-family residential property; and
(C) $500,000 per system for
commercial property.
(c) For the purposes of this section:
"Actual cost" means costs related
to the renewable energy technology systems under subsection (a), including
accessories and installation, but not including the cost of consumer incentive
premiums unrelated to the operation of the system or offered with the sale of
the system and costs for which another credit is claimed under this chapter.
"Household use" means any use to
which heated water is commonly put in a residential setting, including
commercial application of those uses.
"Renewable energy technology
system" means a new system that captures and converts a renewable source
of energy, such as solar or wind energy, into:
(1) A usable source of thermal or
mechanical energy;
(2) Electricity; or
(3) Fuel.
"Solar or wind energy system"
means any identifiable facility, equipment, apparatus, or the like that
converts solar or wind energy to useful thermal or electrical energy for
heating, cooling, or reducing the use of other types of energy that are
dependent upon fossil fuel for their generation.
(d) For taxable years beginning after
December 31, 2005, the dollar amount of any utility rebate shall be deducted
from the cost of the qualifying system and its installation before applying the
state tax credit.
(e) The director of taxation shall prepare
any forms that may be necessary to claim a tax credit under this section,
including forms identifying the technology type of each tax credit claimed
under this section, whether for solar or wind. The director may also require
the taxpayer to furnish reasonable information to ascertain the validity of the
claim for credit made under this section and may adopt rules necessary to
effectuate the purposes of this section pursuant to chapter 91.
(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, unless otherwise elected by the taxpayer
pursuant to subsection (g) or (h). 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 this subsection shall constitute a waiver
of the right to claim the credit.
(g) For solar energy systems, a taxpayer may
elect to reduce the eligible credit amount by thirty per cent and if this
reduced amount exceeds the amount of income tax payment due from the taxpayer,
the excess of the credit amount over payments due shall be refunded to the
taxpayer; provided that tax credit amounts properly claimed by a taxpayer who
has no income tax liability shall be paid to the taxpayer; and provided further
that no refund on account of the tax credit allowed by this section shall be
made for amounts less than $1.
The election required by this subsection
shall be made in a manner prescribed by the director on the taxpayer's return
for the taxable year in which the system is installed and placed in service. A
separate election may be made for each separate system that generates a
credit. An election once made is irrevocable.
(h) Notwithstanding subsection (g), for any
renewable energy technology system, an individual taxpayer may elect to have
any excess of the credit over payments due refunded to the taxpayer, if:
(1) All of the taxpayer's income is exempt
from taxation under section 235-7(a)(2) or (3); or
(2) The taxpayer's adjusted gross income is
$20,000 or less (or $40,000 or less if filing a tax return as married filing
jointly);
provided that tax credits properly claimed by a
taxpayer who has no income tax liability shall be paid to the taxpayer; and
provided further that no refund on account of the tax credit allowed by this
section shall be made for amounts less than $1.
A husband and wife who do not file a joint
tax return shall only be entitled to make this election to the extent that they
would have been entitled to make the election had they filed a joint tax
return.
The election required by this subsection
shall be made in a manner prescribed by the director on the taxpayer's return
for the taxable year in which the system is installed and placed in service. A
separate election may be made for each separate system that generates a
credit. An election once made is irrevocable.
(i) No taxpayer shall be allowed a credit
under this section for the portion of the renewable energy technology system
required by section 196-6.5 that is installed and placed in service on any
newly constructed single-family residential property authorized by a building
permit issued on or after January 1, 2010.
(j) To the extent feasible, using existing
resources to assist the energy-efficiency policy review and evaluation, the
department shall assist with data collection on the following for each taxable
year:
(1) The number of renewable energy
technology systems that have qualified for a tax credit during the calendar
year by:
(A) Technology type; and
(B) Taxpayer type (corporate and
individual); and
(2) The total cost of the tax credit to the
State during the taxable year by:
(A) Technology type; and
(B) Taxpayer type.
(k) This section shall apply to eligible
renewable energy technology systems that are installed and placed in service on
or after July 1, 2009."]
SECTION 5. Section 235-15, Hawaii Revised Statutes, is repealed.
["[§235-15] Tax credits to
promote the purchase of child passenger restraint systems. (a) Any
taxpayer who files an individual income tax return for a taxable year may claim
an income tax credit under this section against the Hawaii state individual net
income tax.
(b) The tax credit shall be $25; provided
that the taxpayer purchases one or more new child passenger restraint systems
in the tax year for which the credit is properly claimed; and provided that
such restraint system can be shown to be in substantial conformity with
specifications for such restraint systems set forth by the federal motor
vehicle safety standards which were in effect at the time of such purchase.
(c) If the tax credit claimed by the
taxpayer under this section exceeds the amount of the income tax payments due
from the taxpayer, the excess of credit over payments due shall be refunded to
the taxpayer; provided that the tax credit properly claimed by a taxpayer who
has no income tax liability shall be paid to the taxpayer; and provided that no
refunds or payments on account of the tax credit allowed by this section shall
be made for amounts less than $1.
(d) The director of taxation shall prepare
such forms as may be necessary to claim a credit under this section, may
require proof of the claim for the tax credit, and may adopt rules pursuant to
chapter 91.
(e) All of the provisions relating to
assessments and refunds under this chapter and under section 231-23(c)(1) shall
apply to the tax credit under this section.
(f) Claims for the tax credit under this
section, including any amended claims, shall be filed on or before the end of
the twelfth month following the taxable year for which the credit may be
claimed."]
SECTION 6. Section 235-17, Hawaii Revised Statutes, is repealed.
["§235‑17 Motion
picture, digital media, and film production income tax credit. (a)
Any law to the contrary notwithstanding, 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. The amount of the credit shall be:
(1) Fifteen per cent of the qualified
production costs incurred by a qualified production in any county of the State
with a population of over seven hundred thousand; or
(2) Twenty per cent of the qualified
production costs incurred by a qualified production in any county of the State
with a population of seven hundred thousand or less.
A qualified production occurring in more than one
county may prorate its expenditures based upon the amounts spent in each
county, if the population bases differ enough to change the percentage of tax
credit.
In the case of a partnership, S corporation,
estate, or trust, the tax credit allowable is for qualified production 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 by rule.
If a deduction is taken under section 179
(with respect to election to expense depreciable business assets) of the
Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for
those costs for which the deduction is taken.
The basis for eligible property for
depreciation of accelerated cost recovery system purposes for state income
taxes shall be reduced by the amount of credit allowable and claimed.
(b) The credit allowed under this section
shall be claimed against the net income tax liability for the taxable year.
For the purposes of this section, "net income tax liability" means
net income tax liability reduced by all other credits allowed under this
chapter.
(c) If the tax credit under this section
exceeds the taxpayer's income tax liability, the excess of credits over
liability shall be refunded to the taxpayer; provided that no refunds or
payment on account of the tax credits allowed by this section shall be made for
amounts less than $1. All claims, including any amended claims, for tax
credits 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 comply with the foregoing provision shall constitute a
waiver of the right to claim the credit.
(d) To qualify for this tax credit, a
production shall:
(1) Meet the definition of a qualified
production specified in subsection (l);
(2) Have qualified production costs
totaling at least $200,000;
(3) Provide the State, at a minimum, a
shared-card, end-title screen credit, where applicable;
(4) Provide evidence of reasonable efforts
to hire local talent and crew; and
(5) Provide evidence of financial or
in-kind contributions or educational or workforce development efforts, in
partnership with related local industry labor organizations, educational
institutions, or both, toward the furtherance of the local film and television
and digital media industries.
(e) On or after July 1, 2006, no qualified
production cost that has been financed by investments for which a credit was
claimed by any taxpayer pursuant to section 235-110.9 is eligible for credits
under this section.
(f) To receive the tax credit, the taxpayer
shall first prequalify the production for the credit by registering with the
department of business, economic development, and tourism during the
development or preproduction stage. Failure to comply with this provision may
constitute a waiver of the right to claim the credit.
(g) The director of taxation shall prepare
forms as 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 credit made under this section and may adopt rules necessary
to effectuate the purposes of this section pursuant to chapter 91.
(h) Every taxpayer claiming a tax credit
under this section for a qualified production shall, no later than ninety days
following the end of each taxable year in which qualified production costs were
expended, submit a written, sworn statement to the department of business,
economic development, and tourism, identifying:
(1) All qualified production costs as
provided by subsection (a), if any, incurred in the previous taxable year;
(2) The amount of tax credits claimed
pursuant to this section, if any, in the previous taxable year; and
(3) The number of total hires versus the
number of local hires by category (i.e., department) and by county.
(i) The department of business, economic
development, and tourism shall:
(1) Maintain records of the names of the
taxpayers and qualified productions thereof claiming the tax credits under
subsection (a);
(2) Obtain and total the aggregate amounts
of all qualified production costs per qualified production and per qualified
production per taxable year; and
(3) Provide a letter to the director of
taxation specifying the amount of the tax credit per qualified production for
each taxable year that a tax credit is claimed and the cumulative amount of the
tax credit for all years claimed.
Upon each determination required under this
subsection, the department of business, economic development, and tourism shall
issue a letter to the taxpayer, regarding the qualified production, specifying
the qualified production costs and the tax credit amount qualified for in each
taxable year a tax credit is claimed. The taxpayer for each qualified
production shall file the letter with the taxpayer's tax return for the
qualified production to 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.
(j) Total tax credits claimed per qualified
production shall not exceed $8,000,000.
(k) Qualified productions shall comply with
subsections (d), (e), (f), and (h).
(l) For the purposes of this section:
"Commercial":
(1) Means an advertising message that is
filmed using film, videotape, or digital media, for dissemination via
television broadcast or theatrical distribution;
(2) Includes a series of advertising
messages if all parts are produced at the same time over the course of six consecutive
weeks; and
(3) Does not include an advertising message
with Internet‑only distribution.
"Digital media" means production
methods and platforms directly related to the creation of cinematic imagery and
content, specifically using digital means, including but not limited to digital
cameras, digital sound equipment, and computers, to be delivered via film,
videotape, interactive game platform, or other digital distribution media
(excluding Internet-only distribution).
"Post production" means production
activities and services conducted after principal photography is completed,
including but not limited to editing, film and video transfers, duplication,
transcoding, dubbing, subtitling, credits, closed captioning, audio production,
special effects (visual and sound), graphics, and animation.
"Production" means a series of
activities that are directly related to the creation of visual and cinematic
imagery to be delivered via film, videotape, or digital media and to be sold,
distributed, or displayed as entertainment or the advertisement of products for
mass public consumption, including but not limited to scripting, casting, set
design and construction, transportation, videography, photography, sound
recording, interactive game design, and post production.
"Qualified production":
(1) Means a production, with expenditures
in the State, for the total or partial production of a feature-length motion
picture, short film, made-for-television movie, commercial, music video,
interactive game, television series pilot, single season (up to twenty‑two
episodes) of a television series regularly filmed in the State (if the number
of episodes per single season exceeds twenty‑two, additional episodes for
the same season shall constitute a separate qualified production), television
special, single television episode that is not part of a television series
regularly filmed or based in the State, national magazine show, or national
talk show. For the purposes of subsections (d) and (j), each of the
aforementioned qualified production categories shall constitute separate,
individual qualified productions; and
(2) Does not include: daily news; public
affairs programs; non-national magazine or talk shows; televised sporting
events or activities; productions that solicit funds; productions produced
primarily for industrial, corporate, institutional, or other private purposes;
and productions that include any material or performance prohibited by chapter
712.
"Qualified production costs" means
the costs incurred by a qualified production within the State that are subject
to the general excise tax under chapter 237 or income tax under this chapter
and that have not been financed by any investments for which a credit was or
will be claimed pursuant to section 235‑110.9. Qualified production
costs include but are not limited to:
(1) Costs incurred during preproduction
such as location scouting and related services;
(2) Costs of set construction and
operations, purchases or rentals of wardrobe, props, accessories, food, office
supplies, transportation, equipment, and related services;
(3) Wages or salaries of cast, crew, and
musicians;
(4) Costs of photography, sound
synchronization, lighting, and related services;
(5) Costs of editing, visual effects,
music, other post-production, and related services;
(6) Rentals and fees for use of local
facilities and locations;
(7) Rentals of vehicles and lodging for
cast and crew;
(8) Airfare for flights to or from Hawaii,
and interisland flights;
(9) Insurance and bonding;
(10) Shipping of equipment and supplies to
or from Hawaii, and interisland shipments; and
(11) Other direct production costs specified
by the department in consultation with the department of business, economic
development, and tourism."]
SECTION 7. Section 235-110.51, Hawaii Revised Statutes, is repealed.
["§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.
(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) The tax credit allowed under this
section shall not be available for taxable years beginning after December 31,
2010.
(i) 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 8. Section 235-55, Hawaii Revised Statutes, is repealed.
["§235-55 Tax credits for
resident taxpayers. (a) Whenever an individual or person liable to
the taxes imposed upon individuals, who is a resident of the State or who has
filed a joint resident return under section 235-93, has become liable for
income taxes to a state, or to the District of Columbia, Puerto Rico, or any
other territory or possession of the United States, or to a foreign country
upon any part of the individual's or person's taxable income for the taxable
year, derived or received from sources without the State and taxed under the
laws of such other jurisdiction irrespective of the residence or domicile of
the recipient, there shall be credited against the tax payable by the
individual or person under this chapter the tax so paid by the individual or
person to the other jurisdiction upon the individual's or person's producing
for the department of taxation satisfactory evidence:
(1) Of such tax payment; and
(2) That the laws of the other jurisdiction
do not allow the individual or person a credit against the taxes imposed by
such jurisdiction for the taxes paid or payable under this chapter, or do allow
such credit in an amount which has been deducted in computing the amount of
credit sought under this section.
(b) The application of such credit,
however:
(1) Shall not be allowed with respect to
any taxable income or any tax which under subchapter N of chapter 1 of the
Internal Revenue Code of 1954 (which is applicable for federal purposes but not
for state purposes) is or may be the subject of an exclusion, exemption, or tax
credit; and
(2) Shall not operate to reduce the tax
payable under this chapter to an amount less than that which would have been
payable had the taxpayer been taxable only on the income from property owned,
personal services performed, trade or business carried on, and other sources in
the State.
(c) If any taxes paid to another
jurisdiction for which a taxpayer has been allowed a credit under this section
are at any time credited or refunded to the taxpayer, such fact shall be
reported by the taxpayer to the department within twenty days after the credit
or refund. Failure to make such report shall be deemed failure to make a
return and subject to the penalties imposed by law in such cases. A tax equal
to the credit allowed for the taxes so credited or refunded shall be due and
payable from the taxpayer upon notice and demand from the department. If the
amount of such tax is not paid within ten days from the date of the notice and
demand, the taxpayer shall be subject to the usual penalties and interest for
delinquency in payment.
(d) Nothing in this section shall be
construed to permit a credit against the taxes imposed by this chapter on
account of federal income taxes."]
SECTION 9. Section 235-55.6, Hawaii Revised Statutes, is repealed.
["§235-55.6 Expenses for
household and dependent care services necessary for gainful employment.
(a) Allowance of credit.
(1) In general. For each resident
taxpayer, who files an individual income tax return for a taxable year, and who
is not claimed or is not otherwise eligible to be claimed as a dependent by
another taxpayer for federal or Hawaii state individual income tax purposes,
who maintains a household which includes as a member one or more qualifying
individuals (as defined in subsection (b)(1)), there shall be allowed as a
credit against the tax imposed by this chapter for the taxable year an amount
equal to the applicable percentage of the employment-related expenses (as
defined in subsection (b)(2)) paid by such individual during the taxable year.
If the tax credit claimed by a resident taxpayer exceeds the amount of income
tax payment due from the resident taxpayer, the excess of the credit over
payments due shall be refunded to the resident taxpayer; provided that tax
credit properly claimed by a resident individual who has no income tax
liability shall be paid to the resident individual; and provided further that
no refunds or payment on account of the tax credit allowed by this section
shall be made for amounts less than $1.
(2) Applicable percentage defined. For
purposes of paragraph (1), the term "applicable percentage" means
twenty-five per cent reduced (but not below fifteen per cent) by one percentage
point of each $2,000 (or fraction thereof) by which the taxpayer's adjusted
gross income for the taxable year exceeds $22,000.
(b) Definitions of qualifying individual
and employment- related expenses. For purposes of this section:
(1) Qualifying individual. The term
"qualifying individual" means:
(A) A dependent of the taxpayer who
is under the age of thirteen and with respect to whom the taxpayer is entitled
to a deduction under section 235-54(a),
(B) A dependent of the taxpayer who
is physically or mentally incapable of caring for oneself, or
(C) The spouse of the taxpayer, if
the spouse is physically or mentally incapable of caring for oneself.
(2) Employment-related expenses.
(A) In general. The term
"employment-related expenses" means amounts paid for the following
expenses, but only if such expenses are incurred to enable the taxpayer to be
gainfully employed for any period for which there are one or more qualifying
individuals with respect to the taxpayer:
(i) Expenses for household services,
and
(ii) Expenses for the care of a
qualifying individual.
Such term shall not include any
amount paid for services outside the taxpayer's household at a camp where the
qualifying individual stays overnight.
(B) Exception. Employment-related
expenses described in subparagraph (A) which are incurred for services outside
the taxpayer's household shall be taken into account only if incurred for the
care of:
(i) A qualifying individual described
in paragraph (1)(A), or
(ii) A qualifying individual (not
described in paragraph (1)(A)) who regularly spends at least eight hours each
day in the taxpayer's household.
(C) Dependent care centers.
Employment-related expenses described in subparagraph (A) which are incurred
for services provided outside the taxpayer's household by a dependent care
center (as defined in subparagraph (D)) shall be taken into account only if:
(i) Such center complies with all
applicable laws, rules, and regulations of this State, if the center is located
within the jurisdiction of this State; or
(ii) Such center complies with all
applicable laws, rules, and regulations of the jurisdiction in which the center
is located, if the center is located outside the State; and
(iii) The requirements of subparagraph
(B) are met.
(D) Dependent care center defined.
For purposes of this paragraph, the term "dependent care center"
means any facility which:
(i) Provides care for more than six
individuals (other than individuals who reside at the facility), and
(ii) Receives a fee, payment, or grant
for providing services for any of the individuals (regardless of whether such
facility is operated for profit).
(c) Dollar limit on amount creditable. The
amount of the employment-related expenses incurred during any taxable year
which may be taken into account under subsection (a) shall not exceed:
(1) $2,400 if there is one qualifying
individual with respect to the taxpayer for such taxable year, or
(2) $4,800 if there are two or more
qualifying individuals with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2)
(whichever is applicable) shall be reduced by the aggregate amount excludable
from gross income under section 129 (with respect to dependent care assistance
programs) of the Internal Revenue Code for the taxable year.
(d) Earned income limitation.
(1) In general. Except as otherwise
provided in this subsection, the amount of the employment-related expenses
incurred during any taxable year which may be taken into account under
subsection (a) shall not exceed:
(A) In the case of an individual who
is not married at the close of such year, such individual's earned income for
such year, or
(B) In the case of an individual who
is married at the close of such year, the lesser of such individual's earned
income or the earned income of the individual's spouse for such year.
(2) Special rule for spouse who is a
student or incapable of caring for oneself. In the case of a spouse who is a
student or a qualified individual described in subsection (b)(1)(C), for
purposes of paragraph (1), such spouse shall be deemed for each month during
which such spouse is a full-time student at an educational institution, or is
such a qualifying individual, to be gainfully employed and to have earned
income of not less than:
(A) $200 if subsection (c)(1)
applies for the taxable year, or
(B) $400 if subsection (c)(2)
applies for the taxable year.
In the case of any husband and wife, this
paragraph shall apply with respect to only one spouse for any one month.
(e) Special rules. For purposes of this
section:
(1) Maintaining household. An individual
shall be treated as maintaining a household for any period only if over half
the cost of maintaining the household for the period is furnished by the
individual (or, if the individual is married during the period, is furnished by
the individual and the individual's spouse).
(2) Married couples must file joint
return. If the taxpayer is married at the close of the taxable year, the
credit shall be allowed under subsection (a) only if the taxpayer and the
taxpayer's spouse file a joint return for the taxable year.
(3) Marital status. An individual legally
separated from the individual's spouse under a decree of divorce or of separate
maintenance shall not be considered as married.
(4) Certain married individuals living
apart. If:
(A) An individual who is married and
who files a separate return:
(i) Maintains as the individual's
home a household that constitutes for more than one- half of the taxable year
the principal place of abode of a qualifying individual, and
(ii) Furnishes over half of the cost
of maintaining the household during the taxable year, and
(B) During the last six months of
the taxable year the individual's spouse is not a member of the household,
the individual shall not be considered as
married.
(5) Special dependency test in case of
divorced parents, etc. If:
(A) Paragraph (2) or (4) of section
152(e) of the Internal Revenue Code of 1986, as amended, applies to any child
with respect to any calendar year, and
(B) The child is under age thirteen
or is physically or mentally incompetent of caring for the child's self,
in the case of any taxable year beginning
in the calendar year, the child shall be treated as a qualifying individual
described in subsection (b)(1)(A) or (B) (whichever is appropriate) with
respect to the custodial parent (within the meaning of section 152(e)(1) of the
Internal Revenue Code of 1986, as amended), and shall not be treated as a qualifying
individual with respect to the noncustodial parent.
(6) Payments to related individuals. No
credit shall be allowed under subsection (a) for any amount paid by the
taxpayer to an individual:
(A) With respect to whom, for the
taxable year, a deduction under section 151(c) of the Internal Revenue Code of
1986, as amended (relating to deduction for personal exemptions for dependents)
is allowable either to the taxpayer or the taxpayer's spouse, or
(B) Who is a child of the taxpayer
(within the meaning of section 151(c)(3) of the Internal Revenue Code of 1986,
as amended) who has not attained the age of nineteen at the close of the
taxable year.
For purposes of this paragraph, the term
"taxable year" means the taxable year of the taxpayer in which the
service is performed.
(7) Student. The term "student"
means an individual who, during each of five calendar months during the taxable
year, is a full-time student at an educational organization.
(8) Educational organization. The term
"educational organization" means a school operated by the department
of education under chapter 302A, an educational organization described in
section 170(b)(1)(A)(ii) of the Internal Revenue Code of 1986, as amended, or a
university, college, or community college.
(9) Identifying information required with
respect to service provider. No credit shall be allowed under subsection (a)
for any amount paid to any person unless:
(A) The name, address, taxpayer
identification number, and general excise tax license number of the person are
included on the return claiming the credit,
(B) If the person is located outside
the State, the name, address, and taxpayer identification number, if any, of
the person and a statement indicating that the service provider is located outside
the State and that the general excise tax license and, if applicable, the
taxpayer identification numbers are not required, or
(C) If the person is an organization
described in section 501(c)(3) of the Internal Revenue Code and exempt from tax
under section 501(a) of the Internal Revenue Code, the name and address of the
person are included on the return claiming the credit.
In the case of a failure to provide the
information required under the preceding sentence, the preceding sentence shall
not apply if it is shown that the taxpayer exercised due diligence in
attempting to provide the information so required.
(f) Rules. The director of taxation shall
prescribe such rules under chapter 91 as may be necessary to carry out the
purposes of this section."]
SECTION 10. Section 235-55.7, Hawaii Revised Statutes, is repealed.
["§235-55.7 Income tax
credit for low-income household renters. (a) As used in this
section:
(1) "Adjusted gross income" is
defined by section 235-1.
(2) "Qualified exemption"
includes those exemptions permitted under this chapter; provided that a person
for whom exemption is claimed has physically resided in the State for more than
nine months during the taxable year; and provided that multiple exemption shall
not be granted because of deficiencies in vision, hearing, or other disability.
(3) "Rent" means the amount paid
in cash in any taxable year for the occupancy of a dwelling place which is used
by a resident taxpayer or the resident taxpayer's immediate family as the principal
residence in this State. Rent is limited to the amount paid for the occupancy
of the dwelling place only, and is exclusive of charges for utilities, parking
stalls, storage of goods, yard services, furniture, furnishings, and the like.
Rent shall not include any rental claimed as a deduction from gross income or
adjusted gross income for income tax purposes, any ground rental paid for use
of land only, and any rent allowance or subsidies received.
(b) Each resident taxpayer who occupies and
pays rent for real property within the State as the resident taxpayer's
residence or the residence of the resident taxpayer's immediate family which is
not partially or wholly exempted from real property tax, who is not eligible to
be claimed as a dependent for federal or state income taxes by another, and who
files an individual net income tax return for a taxable year, may claim a tax
credit under this section against the resident taxpayer's Hawaii state
individual net income tax.
(c) Each taxpayer with an adjusted gross
income of less than $30,000 who has paid more than $1,000 in rent during the
taxable year for which the credit is claimed may claim a tax credit of $50
multiplied by the number of qualified exemptions to which the taxpayer is
entitled; provided each taxpayer sixty-five years of age or over may claim
double the tax credit; and provided that a resident individual who has no
income or no income taxable under this chapter may also claim the tax credit as
set forth in this section.
(d) If a rental unit is occupied by two or
more individuals, and more than one individual is able to qualify as a
claimant, the claim for credit shall be based upon a pro rata share of the rent
paid.
(e) The tax credits shall be deductible
from the taxpayer's individual net income tax for the tax year in which the
credits are properly claimed; provided that a husband and wife filing separate
returns for a taxable year for which a joint return could have been made by
them shall claim only the tax credits to which they would have been entitled
had a joint return been filed. In the event the allowed tax credits exceed the
amount of the income tax payments due from the taxpayer, the excess of credits
over payments due shall be refunded to the taxpayer; provided that allowed tax
credits properly claimed by an individual who has no income tax liability shall
be paid to the individual; and provided further that no refunds or payments on
account of the tax credits allowed by this section shall be made for amounts
less than $1.
(f) The director of taxation shall prepare
and prescribe the appropriate form or forms to be used herein, may require
proof of the claim for tax credits, and may adopt rules pursuant to chapter 91.
(g) All of the provisions relating to
assessments and refunds under this chapter and under section 231-23(c)(1) shall
apply to the tax credits hereunder.
(h) Claims for tax credits under this
section, including any amended claims thereof, shall be filed on or before the
end of the twelfth month following the taxable year for which the credit may be
claimed."]
SECTION 11. Section 235-110.2, Hawaii Revised Statutes, is repealed.
["§235-110.2 Credit for
school repair and maintenance. (a) There shall be allowed to each
taxpayer licensed under chapter 444, 460J, or 464, who is subject to the tax
imposed by this chapter, and does not owe the State delinquent taxes,
penalties, or interest, a credit for contributions of in-kind services for the
repair and maintenance of public schools provided by the licensed taxpayer in
Hawaii. 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.
(b) The amount of the credit determined
under this section for the taxable year shall be equal to ten per cent of the
value of contributions of in-kind services to the Hawaii school repair and
maintenance fund for that taxable year; provided that the aggregate value of
the contributions of in-kind services claimed by a taxpayer shall not exceed
$40,000.
(c) For purposes of this section:
"Public schools" has the same
meaning as defined in section 302A-101.
"Value of contributions of in-kind
services" means the fair market value of uncompensated services or labor
as determined and certified by the department of accounting and general
services.
(d) The credit allowed under this section
shall be claimed against net income tax liability for the taxable year. A tax
credit under this section which exceeds the taxpayer's income tax liability may
be used as a credit against the taxpayer's income tax liability in subsequent
years until exhausted.
(e) All claims for tax credits under this
section, including any amended claims, shall be filed on or before the end of
the twelfth month following the close of the taxable year for which the credits
may be claimed. Failure to comply with the foregoing provision shall
constitute a waiver of the right to claim the credit.
(f) The department of education shall
maintain records of the names of taxpayers eligible for the credit and the
total value of in-kind services contributed for the repair and maintenance of
public schools for the taxable year. All contributions shall be verified by
the department of education. The department of education shall total all
contributions that the department of education certifies. Upon each
determination, the department of education shall issue a certificate to the
taxpayer certifying:
(1) The amount of the contribution;
(2) That the taxpayer is licensed under
chapter 444, 460J, or 464; and
(3) That the taxpayer has obtained a
current and valid certificate signed by the director of taxation, showing that
the taxpayer does not owe the State any delinquent taxes, penalties, or
interest.
The taxpayer shall file the certificate from
the department of education with the taxpayer's tax return with the department
of taxation. When the total amount of certified contributions reaches
$2,500,000, the department of education shall immediately discontinue
certifying contributions and notify the department of taxation. In no instance
shall the total amount of certified contributions exceed $2,500,000 for each
taxable year.
(g) The State shall provide not more than
$250,000 in tax credits for contributions of in-kind services in Hawaii for the
repair and maintenance of public schools.
(h) The director of taxation shall prepare
any forms that may be necessary to allow a credit to be claimed under this
section. "]
SECTION 12. Section 235-110.3, Hawaii Revised Statutes, is repealed.
["§235-110.3 Ethanol
facility tax credit. (a) Each year during the credit period, there
shall be allowed to each taxpayer subject to the taxes imposed by this chapter,
an ethanol facility tax credit that shall be applied to the taxpayer's net
income tax liability, if any, imposed by this chapter for the taxable year in
which the credit is properly claimed.
For each qualified ethanol production
facility, the annual dollar amount of the ethanol facility tax credit during
the eight-year period shall be equal to thirty per cent of its nameplate
capacity if the nameplate capacity is greater than five hundred thousand but
less than fifteen million gallons. A taxpayer may claim this credit for each
qualifying ethanol facility; provided that:
(1) The claim for this credit by any
taxpayer of a qualifying ethanol production facility shall not exceed one
hundred per cent of the total of all investments made by the taxpayer in the
qualifying ethanol production facility during the credit period;
(2) The qualifying ethanol production
facility operated at a level of production of at least seventy-five per cent of
its nameplate capacity on an annualized basis;
(3) The qualifying ethanol production
facility is in production on or before January 1, 2017; and
(4) No taxpayer that claims the credit
under this section shall claim any other tax credit under this chapter for the
same taxable year.
(b) As used in this section:
"Credit period" means a maximum
period of eight years beginning from the first taxable year in which the
qualifying ethanol production facility begins production even if actual
production is not at seventy-five per cent of nameplate capacity.
"Investment" means a nonrefundable
capital expenditure related to the development and construction of any
qualifying ethanol production facility, including processing equipment, waste
treatment systems, pipelines, and liquid storage tanks at the facility or
remote locations, including expansions or modifications. Capital expenditures
shall be those direct and certain indirect costs determined in accordance with
section 263A of the Internal Revenue Code, relating to uniform capitalization
costs, but shall not include expenses for compensation paid to officers of the
taxpayer, pension and other related costs, rent for land, the costs of
repairing and maintaining the equipment or facilities, training of operating
personnel, utility costs during construction, property taxes, costs relating to
negotiation of commercial agreements not related to development or
construction, or service costs that can be identified specifically with a
service department or function or that directly benefit or are incurred by
reason of a service department or function. For the purposes of determining a capital
expenditure under this section, the provisions of section 263A of the Internal
Revenue Code shall apply as it read on March 1, 2004. For purposes of this
section, investment excludes land costs and includes any investment for which
the taxpayer is at risk, as that term is used in section 465 of the Internal
Revenue Code (with respect to deductions limited to amount at risk).
"Nameplate capacity" means the
qualifying ethanol production facility's production design capacity, in gallons
of motor fuel grade ethanol per year.
"Net income tax liability" means
net income tax liability reduced by all other credits allowed under this
chapter.
"Qualifying ethanol production"
means ethanol produced from renewable, organic feedstocks, or waste materials,
including municipal solid waste. All qualifying production shall be fermented,
distilled, gasified, or produced by physical chemical conversion methods such
as reformation and catalytic conversion and dehydrated at the facility.
"Qualifying ethanol production
facility" or "facility" means a facility located in Hawaii which
produces motor fuel grade ethanol meeting the minimum specifications by the
American Society of Testing and Materials standard D-4806, as amended.
(c) In the case of a taxable year in which
the cumulative claims for the credit by the taxpayer of a qualifying ethanol
production facility exceeds the cumulative investment made in the qualifying
ethanol production facility by the taxpayer, only that portion that does not
exceed the cumulative investment shall be claimed and allowed.
(d) The department of business, economic
development, and tourism shall:
(1) Maintain records of the total amount of
investment made by each taxpayer in a facility;
(2) Verify the amount of the qualifying
investment;
(3) Total all qualifying and cumulative
investments that the department of business, economic development, and tourism
certifies; and
(4) Certify the total amount of the tax
credit for each taxable year and the cumulative amount of the tax credit during
the credit period.
Upon each determination, the department of
business, economic development, and tourism shall issue a certificate to the
taxpayer verifying the qualifying investment 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 of taxation. Notwithstanding the
department of business, economic development, and tourism's certification
authority under this section, the director of taxation may audit and adjust
certification to conform to the facts.
If in any year, the annual amount of
certified credits reaches $12,000,000 in the aggregate, the department of
business, economic development, and tourism shall immediately discontinue
certifying credits and notify the department of taxation. In no instance shall
the total amount of certified credits exceed $12,000,000 per year.
Notwithstanding any other law to the contrary, this information shall be
available for public inspection and dissemination under chapter 92F.
(e) If the credit under this section
exceeds the taxpayer's income tax liability, the excess of credit over
liability shall be refunded to the taxpayer; provided that no refunds or
payments on account of the tax credit allowed by this section shall be made for
amounts less than $1. All claims for a credit under this section must be
properly 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.
(f) If a qualifying ethanol production
facility or an interest therein is acquired by a taxpayer prior to the
expiration of the credit period, the credit allowable under subsection (a) for
any period after such acquisition shall be equal to the credit that would have
been allowable under subsection (a) to the prior taxpayer had the taxpayer not
disposed of the interest. If an interest is disposed of during any year for
which the credit is allowable under subsection (a), the credit shall be
allowable between the parties on the basis of the number of days during the
year the interest was held by each taxpayer. In no case shall the credit
allowed under subsection (a) be allowed after the expiration of the credit
period.
(g) Once the total nameplate capacities of
qualifying ethanol production facilities built within the State reaches or
exceeds a level of forty million gallons per year, credits under this section
shall not be allowed for new ethanol production facilities. If a new
facility's production capacity would cause the statewide ethanol production
capacity to exceed forty million gallons per year, only the ethanol production
capacity that does not exceed the statewide forty million gallon per year level
shall be eligible for the credit.
(h) Prior to construction of any new
qualifying ethanol production facility, the taxpayer shall provide written notice
of the taxpayer's intention to begin construction of a qualifying ethanol
production facility. The information shall be provided to the department of
taxation and the department of business, economic development, and tourism on
forms provided by the department of business, economic development, and
tourism, and shall include information on the taxpayer, facility location,
facility production capacity, anticipated production start date, and the
taxpayer's contact information. Notwithstanding any other law to the contrary,
this information shall be available for public inspection and dissemination
under chapter 92F.
(i) The taxpayer shall provide written
notice to the director of taxation and the director of business, economic
development, and tourism within thirty days following the start of production.
The notice shall include the production start date and expected ethanol fuel
production for the next twenty-four months. Notwithstanding any other law to
the contrary, this information shall be available for public inspection and
dissemination under chapter 92F.
(j) If a qualifying ethanol production
facility fails to achieve an average annual production of at least seventy-five
per cent of its nameplate capacity for two consecutive years, the stated
capacity of that facility may be revised by the director of business, economic
development, and tourism to reflect actual production for the purposes of
determining statewide production capacity under subsection (g) and allowable
credits for that facility under subsection (a). Notwithstanding any other law
to the contrary, this information shall be available for public inspection and
dissemination under chapter 92F.
(k) Each calendar year during the credit
period, the taxpayer shall provide information to the director of business,
economic development, and tourism on the number of gallons of ethanol produced
and sold during the previous calendar year, how much was sold in Hawaii versus
overseas, feedstocks used for ethanol production, the number of employees of
the facility, and the projected number of gallons of ethanol production for the
succeeding year.
(l) In the case of a partnership, S
corporation, estate, or trust, the tax credit allowable is for every qualifying
ethanol production facility. 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).
(m) Following each year in which a credit
under this section has been claimed, the director of business, economic
development, and tourism shall submit a written report to the governor and
legislature regarding the production and sale of ethanol. The report shall
include:
(1) The number, location, and nameplate
capacities of qualifying ethanol production facilities in the State;
(2) The total number of gallons of ethanol
produced and sold during the previous year; and
(3) The projected number of gallons of
ethanol production for the succeeding year.
(n) The director of taxation shall prepare
forms that may be necessary to claim a credit under this section.
Notwithstanding the department of business, economic development, and tourism's
certification authority under this section, the director may audit and adjust
certification to conform to the facts. The director may also require the
taxpayer to furnish information to ascertain the validity of the claim for
credit made under this section and may adopt rules necessary to effectuate the
purposes of this section pursuant to chapter 91."]
SECTION 13. Section 235-110.7, Hawaii Revised Statutes, is repealed.
["§235-110.7 Capital goods
excise tax credit. (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, 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.
(b) If the
capital goods excise tax credit allowed under subsection (a) exceeds the
taxpayer's net income tax liability, the excess of credit over liability shall
be refunded to the taxpayer; provided that no refunds or payment on account of
the tax credit allowed by this section shall be made for amounts less than $1.
All claims
for tax credits under this section, including any amended claims, must be filed
on or before the end of the twelfth month following the close of the taxable
year for which the credits may be claimed. Failure to comply with the
foregoing provision shall constitute a waiver of the right to claim the credit.
(c) Application for the capital goods
excise tax credit shall be upon forms provided by the department of taxation.
(d) Sections 47 (with respect to
dispositions of section 38 property and the recapture percentages) of the
Internal Revenue Code of 1954, as amended, as of December 31, 1984, and 280F as
operative for this chapter (with respect to limitation on investment tax credit
and depreciation for luxury automobiles; limitation where certain property used
for personal purposes) of the Internal Revenue Code of 1954, as amended, shall
be operative for purposes of this section.
(e) As used
in this section, the definition of section 38 property (with respect to
investment in depreciable tangible personal property) as defined by section
48(a)(1)(A), (a)(1)(B), (a)(3), (a)(4), (a)(7), (a)(8), (a)(10)(A), (b), (c),
(f), (l), (m), and (s) of the Internal Revenue Code of 1954, as amended as of
December 31, 1984, is operative for the purposes of this section only.
As used in
this section:
"Cost"
means (1) the actual invoice price of the tangible personal property, or (2)
the basis from which depreciation is taken under section 167 (with respect to
depreciation) or from which a deduction may be taken under section 168 (with
respect to accelerated cost recovery system) of the Internal Revenue Code of
1954, as amended, whichever is less.
"Eligible
depreciable tangible personal property" is section 38 property as defined
by the operative provisions of section 48 and having a depreciable life under
section 167 or for which a deduction may be taken under section 168 of the
federal Internal Revenue Code of 1954, as amended.
"Placed
in service" means the earliest of the following taxable years:
(1) The
taxable year in which, under the:
(A) Taxpayer's
depreciation practice, the period for depreciation; or
(B) Accelerated
cost recovery system, a claim for recovery allowances; with respect to such
property begins; or
(2) The
taxable year in which the property is placed in a condition or state of
readiness and availability for a specifically assigned function.
"Purchase"
means an acquisition of property.
"Tangible
personal property" means tangible personal property which is placed in
service within Hawaii after December 31, 1987, and the purchase or
importation of which resulted in a transaction which was subject to the
imposition and payment of tax at the rate of four per cent under chapter 237 or
238. "Tangible personal property" does not include tangible personal
property which is an integral part of a building or structure or tangible
personal property used in a foreign trade zone, as defined under chapter 212.
"]
SECTION 14. Section 235-110.8, Hawaii Revised Statutes, is repealed.
["§235-110.8 Low-income
housing tax credit. (a) Section 42 (with respect to low-income
housing credit) of the Internal Revenue Code shall be operative for the
purposes of this chapter as provided in this section.
(b) Each taxpayer subject to the tax
imposed by this chapter, who has filed [a] net income tax return for a taxable
year may claim a low-income housing tax credit against the taxpayer's net
income tax liability. The amount of 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 on a timely basis. A
credit under this section may be claimed whether or not the taxpayer claims a
federal low-income housing tax credit pursuant to section 42 of the Internal
Revenue Code.
(c) The low-income housing tax credit shall
be fifty per cent of the applicable percentage of the qualified basis of each
building located in Hawaii. The applicable percentage shall be calculated as
provided in section 42(b) of the Internal Revenue Code.
(d) For the purposes of this section, the
determination of:
(1) Qualified basis and qualified
low-income building shall be made under section 42(c);
(2) Eligible basis shall be made under
section 42(d);
(3) Qualified low-income housing project
shall be made under section 42(g);
(4) Recapture of credit shall be made under
section 42(j), except that the tax for the taxable year shall be increased
under section 42(j)(1) only with respect to credits that were used to reduce
state income taxes;
(5) Application of at-risk rules shall be
made under section 42(k);
of the Internal Revenue Code.
(e) As provided in section 42(e),
rehabilitation expenditures shall be treated as separate new building and their
treatment under this section shall be the same as in section 42(e). The
definitions and special rules relating to credit period in section 42(f) and
the definitions and special rules in section 42(i) shall be operative for the
purposes of this section.
(f) The state housing credit ceiling under
section 42(h) shall be zero for the calendar year immediately following the
expiration of the federal low-income housing tax credit program and for any
calendar year thereafter, except for the carryover of any credit ceiling amount
for certain projects in progress which, at the time of the federal expiration,
meet the requirements of section 42.
(g) The credit allowed under this section
shall be claimed against net income tax liability for the taxable year. For
the purpose of deducting this tax credit, net income tax liability means net
income tax liability reduced by all other credits allowed the taxpayer under
this chapter.
A tax credit under this section which
exceeds the taxpayer's income tax liability may be used as a credit against the
taxpayer's income tax liability in subsequent years until exhausted. All
claims for a tax credit under this section must 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 and timely claim the credit shall
constitute a waiver of the right to claim the credit. A taxpayer may claim a
credit under this section only if the building or project is a qualified
low-income housing building or a qualified low-income housing project under
section 42 of the Internal Revenue Code.
Section 469 (with respect to passive
activity losses and credits limited) of the Internal Revenue Code shall be
applied in claiming the credit under this section.
(h) The director of taxation may adopt any
rules under chapter 91 and forms necessary to carry out this section."]
SECTION 15. Section 235-110.9, Hawaii Revised Statutes, is repealed.
["§235-110.9 High technology
business investment tax credit. (a) There shall be allowed to each
taxpayer subject to the taxes imposed by this chapter a high technology
business investment 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 investment was made and the following four years provided the credit
is properly claimed. The tax credit shall be as follows:
(1) In the year the investment was made,
thirty-five per cent;
(2) In the first year following the year in
which the investment was made, twenty-five per cent;
(3) In the second year following the
investment, twenty per cent;
(4) In the third year following the
investment, ten per cent; and
(5) In the fourth year following the
investment, ten per cent;
of the investment made by the taxpayer in each
qualified high technology business, up to a maximum allowed credit in the year
the investment was made, $700,000; in the first year following the year in
which the investment was made, $500,000; in the second year following the year
in which the investment was made, $400,000; in the third year following the
year in which the investment was made, $200,000; and in the fourth year
following the year in which the investment was made, $200,000.
(b) The credit allowed under this
section shall be claimed against the net income tax liability for the taxable
year. For the purpose of this section, "net income tax liability"
means net income tax liability reduced by all other credits allowed under this
chapter.
(c) If the tax credit under this section
exceeds the taxpayer's income tax liability for any of the five years that the
credit is taken, the excess of the tax credit over liability may be used as a
credit against the taxpayer's income tax liability in subsequent years until
exhausted. Every claim, including amended 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
comply with the foregoing provision shall constitute a waiver of the right to
claim the credit.
(d) If at the close of any taxable year in
the five-year period in subsection (a):
(1) The business no longer qualifies as a
qualified high technology business;
(2) The business or an interest in the
business has been sold by the taxpayer investing in the qualified high
technology business; or
(3) The taxpayer has withdrawn the
taxpayer's investment wholly or partially from the qualified high technology
business;
the credit claimed under this section shall be
recaptured. The recapture shall be equal to ten per cent of the amount of the
total tax credit claimed under this section in the preceding two taxable
years. The amount of the credit recaptured shall apply only to the investment
in the particular qualified high technology business that meets the
requirements of paragraph (1), (2), or (3). The recapture provisions of this
subsection shall not apply to a tax credit claimed for a qualified high
technology business that does not fall within the provisions of paragraph (1),
(2), or (3). The amount of the recaptured tax credit determined under this
subsection shall be added to the taxpayer's tax liability for the taxable year
in which the recapture occurs under this subsection.
(e) Every taxpayer, before March 31 of each
year in which an investment in a qualified high technology business was made in
the previous taxable year, shall submit a written, certified statement to the
director of taxation identifying:
(1) Qualified investments, 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.
(f) 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 investment costs upon which the tax credit is
based;
(2) Verify the nature and amount of the
qualifying investments;
(3) Total all qualifying and cumulative
investments 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 qualifying investment
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 credits 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.
(g) As used in this section:
"Investment tax credit allocation
ratio" means, with respect to a taxpayer that has made an investment in a
qualified high technology business, the ratio of:
(1) The amount of the credit under this
section that is, or is to be, received by or allocated to the taxpayer over the
life of the investment, as a result of the investment; to
(2) The amount of the investment in the
qualified high technology business.
"Qualified high technology
business" means a business, employing or owning capital or property, or
maintaining an office, in this State; provided that:
(1) More than fifty per cent of its total
business activities are qualified research; and provided further that the
business conducts more than seventy-five per cent of its qualified research in
this State; or
(2) More than seventy-five per cent of its
gross income is derived from qualified research; and provided further that this
income is received from:
(A) Products sold from, manufactured
in, or produced in this State; or
(B) Services performed in this
State.
"Qualified research" means the
same as defined in section 235-7.3.
(h) Common law principles, including the
doctrine of economic substance and business purpose, shall apply to any
investment. There exists a presumption that a transaction satisfies the
doctrine of economic substance and business purpose to the extent that the
special allocation of the high technology business tax credit has an investment
tax credit ratio of 1.5 or less of credit for every dollar invested.
Transactions for which an investment tax
credit allocation ratio greater than 1.5 but not more than 2.0 of credit for
every dollar invested and claimed may be reviewed by the department for
applicable doctrines of economic substance and business purpose.
Businesses claiming a tax credit for
transactions with investment tax credit allocation ratios greater than 2.0 of
credit for every dollar invested shall substantiate economic merit and business
purpose consistent with this section.
(i) For investments made on or after May 1,
2009, notwithstanding any other law to the contrary, no allocations, special or
otherwise, of credits under this section may exceed the amount of the
investment made by the taxpayer ultimately claiming this credit; and investment
tax credit allocation ratios greater than 1.0 of credit for every dollar
invested shall not be allowed. In addition, the credit shall be allowed only
in accordance with subsection (a).
(j) For investments made on or after May 1,
2009, this section shall be subject to section 235-109.5.
(k) This section shall not apply to taxable
years beginning after December 31, 2010.
"]
SECTION 16. Section 235-110.46, Hawaii Revised Statutes, is repealed.
["[§235-110.46] Attractions
and educational facilities tax credit; Ko Olina Resort and Marina; Makaha
Resort. (a) There shall be allowed to each qualified taxpayer
subject to the taxes imposed by this chapter or chapter 237, 237D, 238, 239,
241, or 431, a tax credit [that] may be claimed for taxable years beginning after
December 31, 2004, for qualified costs in the development of facilities for
attractions and educational purposes at Ko Olina Resort and Marina and at
Makaha Resort. The tax credit shall be deductible from the taxpayer's net
income tax liability, if any, imposed by this chapter and, at the election of
the taxpayer, from the tax liability imposed by chapters 237, 237D, 238, 239,
241, and 431.
(b) The tax credit earned shall be equal to
the qualified costs incurred from June 1, 2003, through May 31, 2009, up to a
maximum of $75,000,000 of credits in the aggregate for all qualified taxpayers
for all years; provided that notwithstanding the amount of tax credits earned
in any year, a maximum of $7,500,000 of tax credits in the aggregate for all
qualified taxpayers may be used in any one taxable year. The credits over
$7,500,000 shall be used as provided in subsection (d). In the case of a
partnership, limited liability company, S corporation, estate, trust, or
association of apartment owners, the tax credit allowable is for qualified
costs incurred by the entity. The costs upon which the tax credit is computed
shall be determined at the entity level.
(c) To qualify for the tax credit, a
taxpayer shall:
(1) Have expended qualified costs on and be
developing a world-class aquarium and marine science and mammal research
facility at Ko Olina Resort and Marina; and
(2) Dedicate one-half of the net operating
income of the world-class aquarium to the State, beginning on the first day of
the seventeenth year following the year in which the attractions and
educational facilities credit was first taken; or
(3) Acquire or own the Makaha Resort, and
lease or sell a portion of the Makaha Resort for use as training and
educational facilities for a period of not less than six years to a taxpayer
meeting the requirements of subsection (c)(1).
(d) If the tax credit under this section
exceeds $7,500,000 in the aggregate for all qualified taxpayers for any taxable
year or exceeds the taxpayer's tax liability under this chapter or chapters
237, 237D, 238, 239, 241, and 431 for any year for which the credit is taken,
the excess of the tax credit may be used as a credit against the taxpayer's tax
liability for the taxes set forth in this section in subsequent years until exhausted;
provided that the taxpayer may continue to claim the credit provided in this
section if the qualified costs are incurred before June 1, 2009, subject to the
monetary ceilings in subsection (b).
(e) Every claim, including amended 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 comply with the foregoing provision shall constitute a
waiver of the right to claim the credit.
(f) If, at any time during the six-year
period in which tax credits are earned under this section, the costs incurred
no longer meet the definition of qualified costs, the credits claimed under
this section shall be recaptured. The recapture shall be equal to one hundred
per cent of the total tax credits claimed under this section for the preceding
taxable year; provided that the amount of the credits recaptured shall apply
only to those costs that no longer meet the definition of qualified costs. The
amount of the recaptured tax credits determined under this subsection shall be
added to the taxpayer's tax liability for the taxable year in which the
recapture occurs under this subsection.
(g) If any credit is claimed under this
section, then no taxpayer shall claim a credit under any chapter identified in
this section for the same qualified costs for which a credit is claimed under
this section.
(h) 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 claims for credits made under this section and may adopt rules
necessary to effectuate the purposes of this section pursuant to chapter 91.
Every qualified taxpayer, no later than
March 31 of each year in which qualified costs were expended in the previous
taxable year, shall submit a written, certified statement to the director of
business, economic development, and tourism, in the form specified by the
director of business, economic development, and tourism, identifying:
(1) Qualified costs, if any, expended in
the previous taxable year;
(2) The amount of tax credits claimed
pursuant to this section, if any, in the previous taxable year; and
(3) The tax liability under this chapter
and chapters 237, 237D, 238, 239, 241, and 431 against which the tax credits
are claimed.
Any other law to the contrary notwithstanding, a
statement submitted under this subsection shall be a public document.
(i) The department of business, economic
development, and tourism shall maintain records of the names of taxpayers
eligible for the credits and the total amount of qualified costs incurred from
June 1, 2003, through May 31, 2009. The department of business, economic
development, and tourism shall verify all qualified costs and, upon each
determination, shall issue a certificate to the taxpayer certifying:
(1) The amount of the qualified costs; and
(2) The amount of tax credit that the
taxpayer is allowed to use for the taxable year.
The department of business, economic
development, and tourism shall certify no more than $7,500,000 in credits in
the aggregate for all taxpayers for each taxable year; provided that the
department may verify qualified costs of no more than $75,000,000 from June 1,
2003, through May 31, 2009. The taxpayer shall file the certificate with the
taxpayer's return with the department of taxation.
(j) As used in this section:
"Ko Olina Resort and Marina" means
the six hundred forty-two acres reclassified to urban district by Decision and
Order entered on September 12, 1985, in Docket A83-562, by the land use
commission.
"Makaha Resort" means the three
hundred thirty-two acre property identified as tax map keys (1) 8-04-002 parcels
51, 52, 53, 54, 55, and 67 and (1) 8-04-029-142.
"Qualified costs" means any costs
for plans, design, and construction, costs for equipment that is permanently
affixed to a building or structure, and acquisition of facilities for
educational purposes, up to a total of $75,000,000 in the aggregate, incurred
after May 31, 2003, and before June 1, 2009, at either or both of:
(1) Ko Olina Resort and Marina for the
development of facilities for attractions and educational purposes, and for
infrastructure within the Ko Olina Resort and Marina that is directly related
to those facilities, including a world-class aquarium, marine science and
mammal research facilities, international sports training complex, a travel
industry management intern campus, infrastructure for the transfer of ocean
waters to the aquarium or marine mammal facilities, or both, seawater air
conditioning, and other educational facilities developed or operated in
cooperation with the University of Hawaii or other educational institutions; or
(2) Makaha Resort for the development of a
training and educational facility within a working resort and hotel;
provided that "qualified costs" shall
not include land acquisition costs.
"Qualified taxpayer" means a
person who fulfills the requirements of subsection (c). "]
SECTION 17. Section 235-110.93, Hawaii Revised Statutes, is repealed.
["[§235-110.93] Important
agricultural land qualified agricultural cost tax credit. (a)
There shall be allowed to each taxpayer an important agricultural land
qualified agricultural cost tax credit that may be claimed in taxable years
beginning after the taxable year during which the tax credit under section
235-110.46 is repealed, exhausted, or expired. 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. The tax credit
amount shall be determined as follows:
(1) In the first year in which the credit
is claimed, twenty-five per cent of the lesser of the following:
(A) The qualified agricultural costs
incurred by the taxpayer after July 1, 2008; or
(B) $625,000;
(2) In the second year in which the credit
is claimed, fifteen per cent of the lesser of the following:
(A) The qualified agricultural costs
incurred by the taxpayer after July 1, 2008; or
(B) $250,000; and
(3) In the third year in which the credit
is claimed, ten per cent of the lesser of the following:
(A) The qualified agricultural costs
incurred by the taxpayer after July 1, 2008; or
(B) $125,000.
The taxpayer may incur qualified agricultural
costs during a taxable year in anticipation of claiming the credit in future
taxable years during which the credit is available. The taxpayer may claim the
credit in any taxable year after the taxable year during which the taxpayer
incurred the qualified agricultural costs upon which the credit is claimed.
The taxpayer also may claim the credit in consecutive or inconsecutive taxable
years until exhausted.
(b) No other credit may be claimed under
this chapter for qualified agricultural costs for which a credit is claimed
under this section for the taxable year.
(c) The amount of the qualified
agricultural costs eligible to be claimed under this section shall be reduced
by the amount of funds received by the taxpayer during the taxable year from
the irrigation repair and maintenance special fund under section 167-24.
(d) The cost upon which the tax credit is
computed shall be determined at the entity level. In the case of a partnership,
S corporation, estate, trust, or other pass through entity, distribution and
share of the credit shall be determined pursuant to section 235-110.7(a).
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
qualified agricultural cost for which a deduction was taken.
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. No
deduction shall be allowed for that portion of otherwise deductible qualified
agricultural costs on which a credit is claimed under this section.
(e) If the credit under this section
exceeds the taxpayer's net income tax liability for the taxable year, the
excess of the credit over liability shall be refunded to the taxpayer; provided
that no refunds or payments on account of the credits allowed by this section
shall be made for amounts less than $1.
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 credit is
claimed. Failure to comply with the foregoing provision shall constitute a
waiver of the right to claim the credit.
(f) The director of taxation:
(1) Shall prepare any forms that may be
necessary to claim a credit under this section;
(2) May require the taxpayer to furnish information
to ascertain the validity of the claim for credit made under this section; and
(3) May adopt rules pursuant to chapter 91
to effectuate this section.
(g) The department of agriculture shall:
(1) Maintain records of the total amount of
qualified agricultural costs for each taxpayer claiming a credit;
(2) Verify the amount of the qualified
agricultural costs claimed;
(3) Total all qualified agricultural costs
claimed; and
(4) Certify
the total amount of the tax credit for each taxable year.
Upon each determination, the department of
agriculture shall issue a certificate to the taxpayer verifying the qualifying
agricultural costs and the credit amount certified for each taxable year. For
a taxable year, the department of agriculture may certify a credit for a
taxpayer who could have claimed the credit in a previous taxable year, but
chose not to because the maximum annual credit amount under subsection (h) was
reached in that taxable year.
The taxpayer shall file the certificate with
the taxpayer's tax return with the department of taxation. Notwithstanding the
department of agriculture's certification authority under this section, the
director of taxation may audit and adjust certification to conform to the
facts.
Notwithstanding
any other law to the contrary, the information required by this subsection
shall be available for public inspection and dissemination under chapter 92F.
(h) If in
any taxable year the annual amount of certified credits reaches $7,500,000 in
the aggregate, the department of agriculture shall immediately discontinue
certifying credits and notify the department of taxation. In no instance shall
the department of agriculture certify a total amount of credits exceeding
$7,500,000 per taxable year. To comply with this restriction, the department
of agriculture shall certify credits on a first come, first served basis.
The
department of taxation shall not allow the aggregate amount of credits claimed
to exceed that amount per taxable year.
(i) The department of agriculture, in
consultation with the department of taxation, shall annually determine the
information necessary to provide a quantitative and qualitative assessment of
the outcomes of the tax credit.
Every taxpayer, no later than the last day
of the taxable year following the close of the taxpayer's taxable year in which
the credit is claimed, shall submit a certified written statement to the
department of agriculture. Failure to provide the information shall result in
ineligibility and a recapture of any credit already claimed for that taxable
year. The amount of the recaptured tax credit shall be added to the taxpayer's
tax liability for the taxable year in which the recapture occurs.
Notwithstanding any law to the contrary, a
statement submitted under this subsection shall be a public document.
(j) The department of agriculture, in
consultation with the department of taxation, shall annually submit a report
evaluating the effectiveness of the tax credit. The report shall include but
not be limited to findings and recommendations to improve the effectiveness of
the tax credit to further encourage the development of agricultural businesses.
(k) As used in this section:
"Agricultural business" means any
person with a commercial agricultural, silvicultural, or aquacultural facility
or operation, including:
(1) The care and production of livestock
and livestock products, poultry and poultry products, apiary products, and
plant and animal production for nonfood uses;
(2) The planting, cultivating, harvesting,
and processing of crops; and
(3) The farming or ranching of any plant or
animal species in a controlled salt, brackish, or freshwater environment;
provided that the principal place of the
agricultural business is maintained in the State and more than fifty per cent
of the land the agricultural business owns or leases, excluding land classified
as conservation land, is important agricultural land.
"Important agricultural lands"
means lands identified and designated as important agricultural lands pursuant
to part III of chapter 205.
"Net income tax liability" means
income tax liability reduced by all other credits allowed under this chapter.
"Qualified agricultural costs"
means expenditures for:
(1) The plans, design, engineering,
construction, renovation, repair, maintenance, and equipment for:
(A) Roads or utilities, primarily
for agricultural purposes, where the majority of the lands serviced by the
roads or utilities, excluding lands classified as conservation lands, are
important agricultural lands;
(B) Agricultural processing
facilities in the State, primarily for agricultural purposes, where the
majority of the crops or livestock processed, harvested, treated, washed,
handled, or packaged are from agricultural businesses;
(C) Water wells, reservoirs, dams,
water storage facilities, water pipelines, ditches, or irrigation systems in
the State, primarily for agricultural purposes, providing water for lands, the
majority of which, excluding lands classified as conservation lands, are
important agricultural lands; and
(D) Agricultural housing in the
State, exclusively for agricultural purposes; provided that:
(i) The housing units are occupied
solely by farmers or employees for agricultural businesses and their immediate
family members;
(ii) The housing units are owned by
the agricultural business;
(iii) The housing units are in the
general vicinity, as determined by the department of agriculture, of
agricultural lands owned or leased by the agricultural business; and
(iv) The housing units conform to any
other conditions that may be required by the department of agriculture;
(2) Feasibility studies, regulatory
processing, and legal and accounting services related to the items under
paragraph (1);
(3) Equipment, primarily for agricultural
purposes, used to cultivate, grow, harvest, or process agricultural products by
an agricultural business; and
(4) Regulatory processing, studies, and
legal and other consultant services related to obtaining or retaining
sufficient water for agricultural activities and retaining the right to farm on
lands identified as important agricultural lands.
(l) The department of agriculture shall
cease certifying credits pursuant to this section after the fourth taxable year
following the taxable year during which the credits are first claimed; provided
that a taxpayer with accumulated, but unclaimed, certified credits may continue
claiming the credits in subsequent taxable years until exhausted.
[(m)] The department of taxation, in
consultation with the department of agriculture, shall submit to the
legislature an annual report, no later than twenty days prior to the convening
of each regular session, beginning with the regular session of 2010, regarding
the quantitative and qualitative assessment of the impact of the important
agricultural land qualified agricultural cost tax credit."]
SECTION 18. Section 235-129, Hawaii Revised Statutes, is repealed.
["§235-129 Tax credits.
(a) For purposes of section 235‑55, each resident shareholder shall be
considered to have paid a tax imposed on the shareholder in an amount equal to
the shareholder's pro rata share of any net income tax paid by the S
corporation to a state that does not measure the income of S corporation
shareholders by the income of the S corporation. For purposes of the preceding
sentence, the term "net income tax" means any tax imposed on or
measured by a corporation's net income.
(b) Each shareholder of an S corporation
shall be allowed a credit against the tax imposed by section 235-51 in an
amount equal to the shareholder's pro rata share of the tax credit earned by
the S corporation in this State."]
PART II. INCOME TAX EXEMPTIONS
SECTION 19. Section 88-91, Hawaii Revised Statutes, is repealed.
["§88-91 Exemption from
taxation and execution. The right of a person to a pension, an
annuity or a retirement allowance, to the return of contributions, the pension,
annuity or retirement allowance itself, any optional benefit or death benefit,
any other right accrued or accruing to any person under this part and the
moneys in the various funds created under this part are exempted from any tax
of the State and, except as in section 88-92 provided, shall not be subject to
execution, garnishment or any other process and shall be unassignable except as
in this part specifically provided."]
SECTION 20. Section 235-4.5, Hawaii Revised Statutes, is repealed.
["§235-4.5 Taxation of
trusts, beneficiaries; credit. (a) There shall be excluded from
gross income any intangible income, such as dividends and interest, earned by a
trust sited in this State to the extent that, during the taxable year of the
trust, the beneficial interest in the trust shall be held by a beneficiary or
beneficiaries residing outside this State. This exclusion shall not apply to
income received from real property held in a land trust formed under chapter
558.
(b) If a trust sited in this State owns one
hundred per cent of the stock of a foreign corporation which does not engage in
an active trade or business but acts solely as a holding company receiving
intangible income, such as dividends and interest, the intangible income of the
foreign corporation shall be excluded from gross income for Hawaii income tax
purposes but only to the extent that the income of the trust beneficiaries is
excluded from taxation under subsection (a). As used in this section, foreign
corporation means a corporation not created or organized in the United States
or under the laws of the United States, Hawaii, or any other state.
(c) Any resident beneficiary of a trust
with a situs in another state may claim a credit for income taxes paid by the
trust to the other state on any income received which is attributable to assets
other than intangibles."]
SECTION 21. Section 235-7, Hawaii Revised Statutes, is repealed.
["§235-7 Other provisions as
to gross income, adjusted gross income, and taxable income. (a)
There shall be excluded from gross income, adjusted gross income, and taxable
income:
(1) Income not subject to taxation by the
State under the Constitution and laws of the United States;
(2) Rights, benefits, and other income
exempted from taxation by section 88-91, having to do with the state retirement
system, and the rights, benefits, and other income, comparable to the rights,
benefits, and other income exempted by section 88-91, under any other public
retirement system;
(3) Any compensation received in the form
of a pension for past services;
(4) Compensation paid to a patient affected
with Hansen's disease employed by the State or the United States in any
hospital, settlement, or place for the treatment of Hansen's disease;
(5) Except as otherwise expressly provided,
payments made by the United States or this State, under an act of Congress or a
law of this State, which by express provision or administrative regulation or
interpretation are exempt from both the normal and surtaxes of the United
States, even though not so exempted by the Internal Revenue Code itself;
(6) Any income expressly exempted or
excluded from the measure of the tax imposed by this chapter by any other law
of the State, it being the intent of this chapter not to repeal or supersede
any express exemption or exclusion;
(7) Income received by each member of the
reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard
of the United States of America, and the Hawaii national guard as compensation
for performance of duty, equivalent to pay received for forty-eight drills
(equivalent of twelve weekends) and fifteen days of annual duty, at an:
(A) E-1 pay grade after eight years
of service; provided that this subparagraph shall apply to taxable years
beginning after December 31, 2004;
(B) E-2 pay grade after eight years
of service; provided that this subparagraph shall apply to taxable years beginning
after December 31, 2005;
(C) E-3 pay grade after eight years
of service; provided that this subparagraph shall apply to taxable years
beginning after December 31, 2006;
(D) E-4 pay grade after eight years
of service; provided that this subparagraph shall apply to taxable years
beginning after December 31, 2007; and
(E) E-5 pay grade after eight years
of service; provided that this subparagraph shall apply to taxable years
beginning after December 31, 2008;
(8) Income derived from the operation of
ships or aircraft if the income is exempt under the Internal Revenue Code
pursuant to the provisions of an income tax treaty or agreement entered into by
and between the United States and a foreign country; provided that the tax laws
of the local governments of that country reciprocally exempt from the
application of all of their net income taxes, the income derived from the
operation of ships or aircraft that are documented or registered under the laws
of the United States;
(9) The value of legal services provided by
a prepaid legal service plan to a taxpayer, the taxpayer's spouse, and the
taxpayer's dependents;
(10) Amounts paid, directly or indirectly,
by a prepaid legal service plan to a taxpayer as payment or reimbursement for
the provision of legal services to the taxpayer, the taxpayer's spouse, and the
taxpayer's dependents;
(11) Contributions by an employer to a
prepaid legal service plan for compensation (through insurance or otherwise) to
the employer's employees for the costs of legal services incurred by the
employer's employees, their spouses, and their dependents;
(12) Amounts received in the form of a
monthly surcharge by a utility acting on behalf of an affected utility under
section 269-16.3 shall not be gross income, adjusted gross income, or taxable
income for the acting utility under this chapter. Any amounts retained by the
acting utility for collection or other costs shall not be included in this
exemption; and
(13) One hundred per cent of the gain
realized by a fee simple owner from the sale of a leased fee interest in units
within a condominium project, cooperative project, or planned unit development
to the association of owners under chapter 514A or 514B, or the residential
cooperative corporation of the leasehold units.
For purposes of this paragraph:
"Fee simple owner" shall have
the same meaning as provided under section 516-1; provided that it shall
include legal and equitable owners;
"Legal and equitable owner", and
"leased fee interest" shall have the same meanings as provided under
section 516-1; and
"Condominium project" and
"cooperative project" shall have the same meanings as provided under
section 514C-1.
(b) There shall be included in gross
income, adjusted gross income, and taxable income:
(1) Unless excluded by this chapter
relating to the uniformed services of the United States, cost-of-living
allowances and other payments exempted by section 912 of the Internal Revenue
Code, but section 119 of the Internal Revenue Code nevertheless shall apply; and
(2) Unless expressly exempted or excluded
as provided by subsection (a)(6), interest on the obligations of a State or a
political subdivision thereof.
(c) The deductions of or based on dividends
paid or received, allowed to a corporation under chapter 1, subchapter B, Part
VIII of the Internal Revenue Code, shall not be allowed. In lieu thereof there
shall be allowed as a deduction the entire amount of dividends received by any
corporation upon the shares of stock of a national banking association, qualifying
dividends, as defined in section 243(b) of the Internal Revenue Code, received
by members of an affiliated group, or dividends received by a small business
investment company operating under the Small Business Investment Act of 1958
(Public Law 85-699) upon shares of stock qualifying under paragraph (3),
seventy per cent of the amount received by any corporation as dividends:
(1) Upon the shares of stock of another
corporation, if at the date of payment of the dividend at least ninety- five
per cent of the other corporation's capital stock is owned by one or more
corporations doing business in this State and if the other corporation is
subjected to an income tax in another jurisdiction (but subjection to federal
tax does not constitute subjection to income tax in another jurisdiction); and
(2) Upon the shares of stock of a bank or
insurance company organized and doing business under the laws of the State;
(3) Upon the shares of stock of another
corporation, if at least fifteen per cent of the latter corporation's business,
for the taxable year of the latter corporation preceding the payment of the
dividend, has been attributed to this State.
However, except for national bank dividends, the
deductions under this subsection are not allowed when they would not have been
allowed under section 243 of the Internal Revenue Code, as amended by Public
Law 85-866, by reason of subsections (b) and (c) of section 246 of the Internal
Revenue Code. For the purposes of this subsection fifteen per cent of a corporation's
business shall be deemed to have been attributed to this State if fifteen per
cent or more of the entire gross income of the corporation as defined in this
chapter (which for the purposes of this subsection shall be computed without
regard to source in the State and shall include income not taxable by reason of
the fact that it is from property not owned in the State or from a trade or
business not carried on in the State in whole or in part), under section 235-5
and the other provisions of this chapter, shall have been attributed to the
State and subjected to assessment of the taxable income therefrom (including
the determination of the resulting net loss, if any).
(d) (1) For taxable years ending before
January 1, 1967, the net operating loss deductions allowed as carrybacks and
carryovers by the Internal Revenue Code shall not be allowed. In lieu thereof
the net operating loss deduction shall consist of the excess of the deductions
allowed by this chapter over the gross income, computed with the modifications
specified in paragraphs (1) to (4) of section 172(d) of the Internal Revenue
Code, and with the further modification stated in paragraph (3) hereof; and
shall be allowed as a deduction in computing the taxable income of the taxpayer
for the succeeding taxable year;
(2) (A) With respect to net
operating loss deductions resulting from net operating losses for taxable years
ending after December 31, 1966, the net operating loss deduction provisions of
the Internal Revenue Code shall apply; provided that there shall be no net
operating loss deduction carried back to any taxable year ending prior to
January 1, 1967;
(B) In the case of a taxable year
beginning in 1966 and ending in 1967, the entire amount of all net operating
loss deductions carried back to the taxable year shall be limited to that
portion of taxable income for such taxable year which the number of days in
1967 bears to the total days in the taxable year ending in 1967; and
(C) The computation of any net
operating loss deduction for a taxable year covered by this subsection shall
require the further modifications stated in paragraphs (3), (4), and (5) of
this subsection;
(3) In computing the net operating loss
deduction allowed by this subsection, there shall be included in gross income
the amount of interest which is excluded from gross income by subsection (a),
decreased by the amount of interest paid or accrued which is disallowed as a
deduction by subsection (e). In determining the amount of the net operating
loss deduction under this subsection of any corporation, there shall be
disregarded the net operating loss of such corporation for any taxable year for
which the corporation is an electing small business corporation;
(4) No net operating loss carryback or
carryover shall be allowed by this chapter if not allowed under section 172 of
the Internal Revenue Code;
(5) The election to relinquish the entire
carryback period with respect to a net operating loss allowed under section
172(b)(3)(C) of the Internal Revenue Code shall be operative for the purposes
of this chapter; provided that no taxpayer shall make such an election as to a
net operating loss of a business where such net operating loss occurred in the
taxpayer's business prior to the taxpayer entering business in this State; and
(6) The five-year carryback period for net
operating losses for any taxable year ending during 2001 and 2002 in section
172(b)(1)(H) of the Internal Revenue Code as
it read on December 31, 2008, shall not be operative for purposes of this chapter;
and
(7) The
election for the carryback for 2008 or 2009 net operating losses of small
businesses as provided in section 172(b)(1)(H) of the Internal Revenue Code as
it read on December 31, 2009, shall not be operative for purposes of this
chapter.
(e) There shall be disallowed as a
deduction the amount of interest paid or accrued within the taxable year on
indebtedness incurred or continued, (1) to purchase or carry bonds the interest
upon which is excluded from gross income by subsection (a); or (2) to purchase
or carry property owned without the State, or to carry on trade or business
without the State, if the taxpayer is a person taxable only upon income from
sources in the State.
(f) Losses of property as the result of
tidal wave, hurricane, earthquake, or volcanic eruption, or as a result of
flood waters overflowing the banks or walls of a river or stream, or from any
other natural disaster, to the extent of the amount deductible, under this
chapter, not compensated for by insurance or otherwise, may be deducted in the
taxable year in which sustained, or at the option of the taxpayer may be
deducted in equal installments over a period of five years, the first such year
to be the calendar year or fiscal year of the taxpayer in which such loss occurred."]
SECTION 22. Section 235-7.3, Hawaii Revised Statutes, is repealed.
["§235-7.3 Royalties derived
from patents, copyrights, or trade secrets excluded from gross income.
(a) In addition to the exclusions in section 235-7, there shall be excluded
from gross income, adjusted gross income, and taxable income, amounts received
by an individual or a qualified high technology business as royalties and other
income derived from any patents, copyrights, and trade secrets:
(1) Owned by the individual or qualified
high technology business; and
(2) Developed and arising out of a
qualified high technology business.
(b) With respect to performing arts
products, this exclusion shall extend to:
(1) The authors of performing arts
products, or any parts thereof, without regard to the application of the
work-for-hire doctrine under United States copyright law;
(2) The authors of performing arts
products, or any parts thereof, under the work-for-hire doctrine under United
States copyright law; and
(3) The assignors, licensors, and licensees
of any copyright rights in performing arts products, or any parts thereof.
(c) For the purposes of this section:
"Performing arts products" means:
(1) Audio files, video files, audiovideo
files, computer animation, and other entertainment products perceived by or
through the operation of a computer; and
(2) Commercial television and film products
for sale or license, and reuse or residual fee payments from these products.
"Qualified high technology
business" means a business that conducts more than fifty per cent of its
activities in qualified research.
"Qualified research" means:
(1) The same as in section 41(d) of the
Internal Revenue Code;
(2) The development and design of computer
software for ultimate commercial sale, lease, license or to be otherwise
marketed, for economic consideration. With respect to the software's
development and design, the business shall have substantial control and retain
substantial rights to the resulting intellectual property;
(3) Biotechnology;
(4) Performing arts products;
(5) Sensor and optic technologies;
(6) Ocean sciences;
(7) Astronomy; or
(8) Nonfossil fuel energy-related
technology."]
SECTION 23. Section 235-9, Hawaii Revised Statutes, is repealed.
["§235-9 Exemptions;
generally. Except as provided in sections 235-61 to 235-67 relating
to withholding and collection of tax at source, and section 235-2.4 relating to
"unrelated business taxable income", the following persons and
organizations shall not be taxable under this chapter: banks, building and
loan associations, financial services loan companies, financial corporations,
small business investment companies, trust companies, mortgage loan companies,
financial holding companies, subsidiaries of financial holding companies as
defined in chapter 241, and development companies taxable under chapter 241;
insurance companies, agricultural cooperative associations, and fish marketing
associations exclusively taxable under other laws; and persons engaged in the
business of motion picture and television film production as defined by the
director of taxation."]
SECTION 24. Section 235-9.5, Hawaii Revised Statutes, is repealed.
["§235-9.5 Stock options
from qualified high technology businesses excluded from taxation.
(a) Notwithstanding any law to the contrary, all income earned and proceeds
derived from stock options or stock, including stock issued through the
exercise of stock options or warrants, from a qualified high technology
business or from a holding company of a qualified high technology business by
an employee, officer, or director of the qualified high technology business, or
investor who qualifies for the credit under section 235-110.9, that would
otherwise be taxed as ordinary income or as capital gains to those persons
shall be excluded from taxation under this chapter.
Similar provisions shall apply to options to
acquire equity interests and to equity interests themselves with regard to
entities other than corporations.
(b) For the purposes of this section:
"Holding company of a qualified high
technology business" means any business entity that possesses:
(1) At least eighty per cent of the total
voting power of the stock or other interest; and
(2) At least eighty per cent of the total
value of the stock or other interest;
in the qualified high technology business.
"Income earned and proceeds derived
from stock options or stock" includes income from:
(1) Dividends from stock or stock received
through the exercise of stock options or warrants;
(2) The receipt or the exercise of stock
options or warrants; or
(3) The sale of stock options or stock,
including stock issued through the exercise of stock options or warrants.
"Qualified high technology
business" means the same as defined in section 235-7.3."]
SECTION 25. Section 235-18, Hawaii Revised Statutes, is repealed.
["[§235-18] Deposit beverage
container deposit exemption. This chapter shall not apply to amounts
received as a deposit beverage container deposit collected under part VIII of
chapter 342G."]
SECTION 26. Section 235-54, Hawaii Revised Statutes, is repealed.
["§235-54 Exemptions.
(a) In computing the taxable income of any individual, there shall be
deducted, in lieu of the personal exemptions allowed by the Internal Revenue
Code of 1986, as amended, and except as provided in subsection (c), personal
exemptions computed as follows: Ascertain the number of exemptions which the
individual can lawfully claim under the Internal Revenue Code, add an
additional exemption for the taxpayer or the taxpayer's spouse who is
sixty-five years of age or older within the taxable year, and multiply that
number by $1,144, for taxable years beginning after December 31, 1984. A
nonresident shall prorate the personal exemptions on account of income from
sources outside the State as provided in section 235-5. In the case of an
individual with respect to whom an exemption under this section is allowable to
another taxpayer for a taxable year beginning in the calendar year in which the
individual's taxable year begins, the personal exemption amount applicable to
such individual under this subsection for such individual's taxable year shall
be zero.
(b) In computing the taxable income of an
estate or trust there shall be allowed, in lieu of the deductions allowed under
subsection (a), the following:
(1) An estate shall be allowed a deduction
of $400.
(2) A trust which, under its governing
instrument, is required to distribute all of its income currently shall be
allowed a deduction of $200.
(3) All other trusts shall be allowed a
deduction of $80.
(c) The phaseout under section 151(d)(3) of
the Internal Revenue Code of 1986, as amended, shall apply to this section;
provided that the threshold income amounts under section 151(d)(3)(C) of the
Internal Revenue Code of 1986, as amended, shall be reduced by twenty-five per
cent for the purposes of this subsection; provided further that the threshold
income amounts under section 151(d)(3)(C) of the Internal Revenue Code of 1986,
as amended, used to determine the twenty-five per cent reduction under this
subsection shall be maintained at the amounts in place on July 1, 2008.
(d) A blind person, a deaf person, and any
person totally disabled, in lieu of the personal exemptions allowed by the
Internal Revenue Code, shall be allowed, and there shall be deducted in
computing the taxable income of a blind person, a deaf person, or a totally
disabled person, instead of the exemptions provided by subsection (a), the
amount of $7,000."]
SECTION 27. Section 421-23, Hawaii Revised Statutes, is repealed.
["§421-23 Taxation.
To obtain the exemptions from taxation granted by this section or any other
law, the association annually shall file with the director of taxation a copy
of its report made under section 421-22, and in addition thereto, within ninety
days after the close of its fiscal year, shall file with the tax assessor of
each district in which there are persons doing business to whom it has paid,
during the preceding fiscal year, any proceeds of goods marketed, a report
showing the name of each person to whom the proceeds were paid, the total
proceeds of sales for which such person is taxable under chapter 237 for the
fiscal year, and the rate or rates of such tax applicable thereto or to the
several amounts thereof, as the case may be."]
PART III. GENERAL EXCISE TAX EXEMPTIONS
SECTION 28. Section 346-369, Hawaii Revised Statutes, is amended to read as follows:
"[[]§346-369[]] Exemptions.
(a) [Any compensation received by a provider agency for services rendered
to homeless families or individuals, or in operating or managing a homeless
facility authorized by this part, is exempt from taxation under chapter 237.
(b)] Any county mayor may exempt, by
executive order, donors and provider agencies from real property taxes, water
and sewer development fees, rates collected for water supplied to consumers and
for use of sewers, and any other county taxes, charges, or fees; provided that
any county may enact ordinances to regulate the exemptions granted by this
subsection.
[(c)] (b) Any provider agency
operating or managing a homeless facility or any other program for the homeless
authorized by this part is exempt, for purposes of those facilities or
programs, from any requirements contained in part VIII of chapter 346 and
chapters 467 and 521."
SECTION 29. Section 373K-2, Hawaii Revised Statutes, is amended to read as follows:
"[[]§373K-2[]]
Professional employment organization; employee rights[; payroll cost
exemption]. (a) Where any client company uses the services of
assigned employees and co-employs assigned employees with a professional
employment organization, the client company and the professional employment
organization, with respect to the assigned employees, shall not be exempt from
the requirements of any federal, state, or county law, including labor or
employment laws, collective bargaining rights, anti-discrimination provisions,
or other laws with respect to the protection and rights of employees, including
chapters 377 and 378, that would apply to the assigned employees if the
assigned employees were employees of the client company alone, and were not co-employees
of the professional employment organization.
These employee rights shall not be abrogated by any contract or agreement between the client company and the professional employment organization, or the professional employment organization and the assigned employee, which contains terms or conditions that could not be lawfully contained in a contract or agreement directly between the client company and the assigned employee in which no professional employment organization is involved. Notwithstanding any statute, local ordinance, executive order, rule, or regulation to the contrary, where the laws, rights, and protections referred to in this section define or require a determination of the "employer", the employer shall be deemed to be the client company and not the professional employment organization. The department of labor and industrial relations shall notify the department of taxation in writing of any violation of this subsection.
(b) The client company shall be deemed to have satisfied its obligations with respect to any assigned employee under any applicable law, including, without limitation, workers' compensation laws including chapter 386, employee insurance coverage laws including chapters 383, 385, 392, and 393, and tax withholding and reporting laws, if and to the extent that those obligations are satisfied by the professional employment organization acting in its capacity as co-employer of such assigned employee.
[(c) Amounts received by a
professional employment organization from a client company in amounts equal to
and that are disbursed by the professional employment organization for employee
wages, salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick leave, health benefits, and similar employment
benefits with respect to assigned employees at a client company shall not be
subject to the general excise tax as provided by section 237-24.75.
(d) The general excise tax exemption under
section 237‑24.75 shall not apply to the professional employment
organization if:
(1) By or through any contract between the
client company and any professional employment organization, or otherwise,
employees are excluded from any employee rights or employee benefits required
by law to be provided to employees of the client company by the client company;
or
(2) The professional employment
organization fails to pay any tax withholding for assigned employees or any
federal or state taxes for which the professional employment organization is
responsible.]"
SECTION 30. Section 237-16.8, Hawaii Revised Statutes, is repealed.
["[§237-16.8] Exemption of
certain convention, conference, and trade show fees. In addition to
any other applicable exemption provided under this chapter, there shall be
exempted from the measure of taxes imposed by this chapter all of the value or
gross income derived by a fraternal benefit, religious, charitable, scientific,
educational, or other nonprofit organization under section 501(c) of the
Internal Revenue Code of 1986, as amended, from fees for convention,
conference, or trade show exhibit or display spaces; provided that the gross
proceeds of sales by a vendor through the use of exhibit or display space at a
conference, convention, or trade show shall be subject to the imposition of the
general excise tax under section 237-13."]
SECTION 31. Section 237-23, Hawaii Revised Statutes, is repealed.
["§237-23 Exemptions,
persons exempt, applications for exemption. (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, prepaid legal services, 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 prepaid legal services 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 prepaid
legal service plan, and from which no profit inures to the benefit of any
private stockholder or individual;
(6) Hospitals, infirmaries, and sanitaria;
(7) 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,
"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;
(8) Persons affected with Hansen's disease
and kokuas, with respect to business within the county of Kalawao;
(9) Corporations, 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; and
(10) Nonprofit shippers associations
operating under part 296 of the Civil Aeronautics Board Economic Regulations.
(b) The exemptions enumerated in subsection
(a)(3) to (6) shall apply only:
(1) To those persons who shall have
registered with the department of taxation by filing a written application for
registration in such form as the department shall prescribe, shall have paid
the registration fee of $20, and shall have had the exemption allowed by the
department or by a court or tribunal of competent jurisdiction upon appeal from
any assessment resulting from disallowance of the exemption by the department;
(2) To activities from which no profit
inures to the benefit of any private stockholder or individual, except for
death or other benefits to the members of fraternal societies; and
(3) To the fraternal, religious,
charitable, scientific, educational, communal, or social welfare activities of
such persons, or to the activities of such hospitals, infirmaries, and
sanitaria as such, and not to any activity the primary purpose of which is to
produce income even though the income is to be used for or in furtherance of
the exempt activities of such persons.
(c) To obtain allowance of an exemption:
(1) A person under subsection (a)(3) to (6),
who has received or applied for recognition of tax exempt status under section
501(c)(3), (4), (6), or (8) of the Internal Revenue Code of 1986, as amended,
or who is a subordinate person of a person who has received a group exemption
letter under section 501(c)(3), (4), (6), or (8) of the Internal Revenue Code
of 1986, as amended, shall register with the department by filing a statement
attaching a copy of the exemption or application for recognition of exempt
status and any particular facts that the department may require; and
(2) All other persons under subsection
(a)(3) to (6) shall file an application for exemption in the form of an
affidavit or affidavits setting forth in general all facts affecting the right
to the exemption and such particular facts as the department may require, to
which shall be attached such records, papers, and other information as the
department may prescribe.
(d) For all persons, the statement
registering the person with the department or application for exemption shall be
filed on or before March 31 of the first year of registration or within three
months after the commencement of business. In the event of allowance of the
exemption, no further statement or application therefor need be filed unless
there is a material change in the facts. In the event of disallowance of the
exemption, a license may be obtained upon payment of the required fee as
provided by section 237-9, less the $20 already paid under this section, which
shall be credited thereon. In the event the registrant has a license under
this chapter, no further fee shall be required for registration under this
section.
(e) The department for good cause may
extend the time for registration or the time for filing an application for
exemption."]
SECTION 32. Section 237-23.5, Hawaii Revised Statutes, is repealed.
["§237-23.5 Related
entities; common paymaster; certain exempt transactions. (a) This chapter
shall not apply to amounts received, charged, or attributable to services
furnished by one related entity to another related entity or to imputed or
stated interest attributable to loans, advances, or use of capital between
related entities.
As used in this subsection:
"Related entities" means:
(1) An affiliated group of corporations
within the meaning of section 1504 (with respect to affiliated group defined)
of the federal Internal Revenue Code of 1986, as amended;
(2) A controlled group of corporations
within the meaning of section 1563 (with respect to definitions and special
rules) of the federal Internal Revenue Code of 1986, as amended;
(3) Those entities connected through
ownership of at least eighty per cent of the total value and at least eighty
per cent of the total voting power of each such entity (or combination
thereof), including partnerships, associations, trusts, S corporations,
nonprofit corporations, limited liability partnerships, or limited liability
companies; and
(4) Any group or combination of the
entities described in paragraph (3) constituting a unitary business for income
tax purposes;
whether or not the entity is located within or
without the State or licensed under this chapter.
"Services" means legal and
accounting services, the use of computer software and hardware, information
technology services, database management, and those managerial and
administrative services performed by an employee, officer, partner, trustee,
sole proprietor, member, or manager in the person's capacity as an employee,
officer, partner, trustee, sole proprietor, member, or manager of one of the
related entities and shall include overhead costs attributable to those
services.
(b) This chapter shall not apply to amounts
received by common paymasters which are disbursed as remuneration to employees
of two or more related corporations where the common paymaster is making such
remunerations on behalf of such corporations. Such amounts received or
disbursed by the common paymaster shall include payments of payroll taxes and
employee benefits which the common paymaster is making on behalf of related
corporations and which payments are related to the employees being
remunerated. The definitions of related corporations, common paymaster,
multiple common paymasters, and concurrent employment contained in 26 Code of
Federal Regulations, section 31.3121(s)-1(b) are incorporated and made a part
of this subsection.
To the extent not covered by subsection (a),
the exemption allowed by this subsection shall not apply to the cost of
services, or reimbursements of such cost by one corporation to another
corporation, of an employee disbursing the amounts exempted under this
subsection. Each related corporation using a common paymaster or multiple
common paymaster shall keep separate payroll records and other documentation
required to prove the existence of concurrent employment. Such records and
documents shall be available for inspection by the director of taxation during
normal business hours."]
SECTION 33. Section 237-24, Hawaii Revised Statutes, is repealed.
["§237-24 Amounts not
taxable. This chapter shall not apply to the following amounts:
(1) Amounts received under life insurance
policies and contracts paid by reason of the death of the insured;
(2) Amounts received (other than amounts
paid by reason of death of the insured) under life insurance, endowment, or
annuity contracts, either during the term or at maturity or upon surrender of
the contract;
(3) Amounts received under any accident
insurance or health insurance policy or contract or under workers' compensation
acts or employers' liability acts, as compensation for personal injuries,
death, or sickness, including also the amount of any damages or other
compensation received, whether as a result of action or by private agreement
between the parties on account of the personal injuries, death, or sickness;
(4) The value of all property of every kind
and sort acquired by gift, bequest, or devise, and the value of all property
acquired by descent or inheritance;
(5) Amounts received by any person as
compensatory damages for any tort injury to the person, or to the person's
character reputation, or received as compensatory damages for any tort injury
to or destruction of property, whether as the result of action or by private
agreement between the parties (provided that amounts received as punitive damages
for tort injury or breach of contract injury shall be included in gross
income);
(6) Amounts received as salaries or wages
for services rendered by an employee to an employer;
(7) Amounts received as alimony and other
similar payments and settlements;
(8) Amounts collected by distributors as
fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts
collected by such distributors as a fuel tax imposed by any Act of the Congress
of the United States;
(9) Taxes on liquor imposed by chapter 244D
on dealers holding permits under that chapter;
(10) The amounts of taxes on cigarettes and
tobacco products imposed by chapter 245 on wholesalers or dealers holding
licenses under that chapter and selling the products at wholesale;
(11) Federal excise taxes imposed on
articles sold at retail and collected from the purchasers thereof and paid to
the federal government by the retailer;
(12) The amounts of federal taxes under
chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on
sugar manufactured in the State, paid by the manufacturer to the federal
government;
(13) An amount up to, but not in excess of,
$2,000 a year of gross income received by any blind, deaf, or totally disabled
person engaging, or continuing, in any business, trade, activity, occupation,
or calling within the State; a corporation all of whose outstanding shares are
owned by an individual or individuals who are blind, deaf, or totally disabled;
a general, limited, or limited liability partnership, all of whose partners are
blind, deaf, or totally disabled; or a limited liability company, all of whose
members are blind, deaf, or totally disabled;
(14) Amounts received by a producer of
sugarcane from the manufacturer to whom the producer sells the sugarcane, where:
(A) The producer is an independent
cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of
1948 (61 Stat. 922, Chapter 519) as the Act may be amended or supplemented;
(B) The value or gross proceeds of
the sale of the sugar, and other products manufactured from the sugarcane, are
included in the measure of the tax levied on the manufacturer under section
237-13(1) or (2);
(C) The producer's gross proceeds of
sales are dependent upon the actual value of the products manufactured
therefrom or the average value of all similar products manufactured by the
manufacturer; and
(D) The producer's gross proceeds of
sales are reduced by reason of the tax on the value or sale of the manufactured
products;
(15) Money paid by the State or eleemosynary
child-placing organizations to foster parents for their care of children in
foster homes;
(16) Amounts received by a cooperative
housing corporation from its shareholders in reimbursement of funds paid by the
corporation for lease rental, real property taxes, and other expenses of
operating and maintaining the cooperative land and improvements; provided that
the cooperative corporation is a corporation:
(A) Having one and only one class of
stock outstanding;
(B) Each of the stockholders of
which is entitled solely by reason of the stockholder's ownership of stock in
the corporation, to occupy for dwelling purposes a house, or an apartment in a
building owned or leased by the corporation; and
(C) No stockholder of which is
entitled (either conditionally or unconditionally) to receive any distribution
not out of earnings and profits of the corporation except in a complete or
partial liquidation of the corporation; and
(17) Amounts received by a
managed care support contractor of the TRICARE program that is established
under Title 10 United States Code chapter 55, as amended, for the actual cost
or advancement to third party health care providers pursuant to a contract with
the United States."]
SECTION 34. Section 237-24.3, Hawaii Revised Statutes, is repealed.
["§237-24.3 Additional
amounts not taxable. In addition to the amounts not taxable under section
237-24, this chapter shall not apply to:
(1) Amounts
received from the loading, transportation, and unloading of agricultural commodities
shipped for a producer or produce dealer on one island of this State to a
person, firm, or organization on another island of this State. The terms
"agricultural commodity", "producer", and "produce
dealer" shall be defined in the same manner as they are defined in section
147-1; provided that agricultural commodities need not have been produced in
the State;
(2) Amounts
received from sales of:
(A) Intoxicating
liquor as the term "liquor" is defined in chapter 244D;
(B) Cigarettes
and tobacco products as defined in chapter 245; and
(C) Agricultural,
meat, or fish products;
to any person or common carrier in interstate
or foreign commerce, or both, whether ocean-going or air, for consumption
out-of-state on the shipper's vessels or airplanes;
(3) Amounts
received by the manager, submanager, or board of directors of:
(A) An
association of owners of a condominium property regime established in
accordance with chapter 514A or 514B; or
(B) A
nonprofit homeowners or community association incorporated in accordance with
chapter 414D or any predecessor thereto and existing pursuant to covenants
running with the land,
in
reimbursement of sums paid for common expenses;
(4) Amounts
received or accrued from:
(A) The
loading or unloading of cargo from ships, barges, vessels, or aircraft, whether
or not the ships, barges, vessels, or aircraft travel between the State and
other states or countries or between the islands of the State;
(B) Tugboat
services including pilotage fees performed within the State, and the towage of
ships, barges, or vessels in and out of state harbors, or from one pier to
another; and
(C) The
transportation of pilots or governmental officials to ships, barges, or vessels
offshore; rigging gear; checking freight and similar services; standby charges;
and use of moorings and running mooring lines;
(5) Amounts
received by an employee benefit plan by way of contributions, dividends,
interest, and other income; and amounts received by a nonprofit organization or
office, as payments for costs and expenses incurred for the administration of
an employee benefit plan; provided that this exemption shall not apply to any
gross rental income or gross rental proceeds received after June 30, 1994, as
income from investments in real property in this State; and provided further
that gross rental income or gross rental proceeds from investments in real
property received by an employee benefit plan after June 30, 1994, under
written contracts executed prior to July 1, 1994, shall not be taxed until the
contracts are renegotiated, renewed, or extended, or until after December 31,
1998, whichever is earlier. For the purposes of this paragraph, "employee
benefit plan" means any plan as defined in section 1002(3) of title 29 of
the United States Code, as amended;
(6) Amounts
received for purchases made with United States Department of Agriculture food
coupons under the federal food stamp program, and amounts received for
purchases made with United States Department of Agriculture food vouchers under
the Special Supplemental Foods Program for Women, Infants and Children;
(7) Amounts
received by a hospital, infirmary, medical clinic, health care facility,
pharmacy, or a practitioner licensed to administer the drug to an individual
for selling prescription drugs or prosthetic devices to an individual; provided
that this paragraph shall not apply to any amounts received for services
provided in selling prescription drugs or prosthetic devices. As used in this
paragraph:
"Prescription
drugs" are those drugs defined under section 328-1 and dispensed by
filling or refilling a written or oral prescription by a practitioner licensed
under law to administer the drug and sold by a licensed pharmacist under
section 328-16 or practitioners licensed to administer drugs; and
"Prosthetic
device" means any artificial device or appliance, instrument, apparatus,
or contrivance, including their components, parts, accessories, and
replacements thereof, used to replace a missing or surgically removed part of
the human body, which is prescribed by a licensed practitioner of medicine,
osteopathy, or podiatry and which is sold by the practitioner or which is
dispensed and sold by a dealer of prosthetic devices; provided that
"prosthetic device" shall not mean any auditory, ophthalmic, dental,
or ocular device or appliance, instrument, apparatus, or contrivance;
(8) Taxes on
transient accommodations imposed by chapter 237D and passed on and collected by
operators holding certificates of registration under that chapter;
(9) Amounts
received as dues by an unincorporated merchants association from its membership
for advertising media, promotional, and advertising costs for the promotion of
the association for the benefit of its members as a whole and not for the
benefit of an individual member or group of members less than the entire
membership;
(10) Amounts
received by a labor organization for real property leased to:
(A) A
labor organization; or
(B) A
trust fund established by a labor organization for the benefit of its members,
families, and dependents for medical or hospital care, pensions on retirement
or death of employees, apprenticeship and training, and other membership
service programs.
As used in this
paragraph, "labor organization" means a labor organization exempt
from federal income tax under section 501(c)(5) of the Internal Revenue Code,
as amended;
(11) Amounts
received from foreign diplomats and consular officials who are holding cards
issued or authorized by the United States Department of State granting them an
exemption from state taxes; and
(12) Amounts received as rent for the rental
or leasing of aircraft or aircraft engines used by the lessees or renters for
interstate air transportation of passengers and goods. For purposes of this
paragraph, payments made pursuant to a lease shall be considered rent
regardless of whether the lease is an operating lease or a financing lease.
The definition of "interstate air transportation" is the same as in
49 U.S.C. 40102."]
SECTION 35. Section 237-24.5, Hawaii Revised Statutes, is repealed.
["§237-24.5 Additional
exemptions. (a) In addition to the amounts exempt under section
237-24, this chapter shall not apply to amounts received by:
(1) An exchange from:
(A) Transaction fees charged
exchange members by the exchange for:
(i) The sale or purchase of
securities or products, or both, bought or sold on an exchange by exchange
members for their own account or an account for which they have responsibility
as an agent, broker, or fiduciary;
(ii) Order book executions made for
purposes of effecting transactions; and
(iii) Trade processing performed by an
exchange in matching trades, keypunching, record keeping, post cashiering, and
notarization;
(B) Membership dues, fees, charges,
assessments, and fines from individuals or firms, including charges for firm
symbols (member identification), application processing, registration,
initiation, membership transfers, floor or post privileges, transaction time
extensions, expediting transactions, crossover trades (trading out of assigned
functions) and rule infractions;
(C) Service fees charged to members
including fees for communications, badges, forms, documents, and reports;
(D) Listing fees and listing
maintenance fees charged to companies that wish to be listed and have their
securities or products traded on the exchange; and
(E) Participation in the
communication network consortium operated collectively by United States
exchanges or other markets recognized by the Securities and Exchange Commission,
the Commodities Futures Trading Commission, or similar regulatory authorities
outside the United States that provides last sale and quote securities
information to subscribers or that connects such markets or exchanges for
purposes of data transmission;
(2) Exchange members by reason of executing
a securities or product transaction on an exchange; provided that this
exemption shall apply only to amounts received by exchange members from brokers
or dealers registered with the Securities and Exchange Commission, from futures
commission merchants, brokers, or associates registered with the Commodities
Futures Trading Commission, or from similar individuals or firms registered
with similar regulatory authorities outside the United States; and
(3) Exchange members as proceeds from the
sale of their exchange memberships.
(b) As used in this section:
"Exchange" means an exchange or
board of trade as defined in 15 United States Code section 78c(a)(1) or in 7
United States Code section 7, respectively, which is subject to regulation by
the Securities and Exchange Commission or the Commodities Futures Trading
Commission or an organization subject to similar regulation under the laws of a
jurisdiction outside the United States.
"Exchange member" means an individual
or firm that is qualified by an exchange as a member and pays membership dues
to an exchange in order to trade securities or products on an exchange.
"Securities" means securities as
defined in 15 United States Code section 78c and "products" means
contracts of sale of commodities for future delivery, futures contracts,
options, calls, puts, and similar rights as defined in 7 United States Code
section 2, which securities or products are permitted to be traded on an
exchange."]
SECTION 36. Section 237-24.7, Hawaii Revised Statutes, is repealed.
["§237-24.7 Additional amounts not taxable. In addition to the amounts not taxable under section
237-24, this chapter shall not apply to:
(1) Amounts
received by the operator of a hotel from the owner of the hotel or from a time
share association, and amounts received by the suboperator of a hotel from the
owner of the hotel, from a time share association, or from the operator of the
hotel, in amounts equal to and which are disbursed by the operator or suboperator
for employee wages, salaries, payroll taxes, insurance premiums, and benefits,
including retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee"
means employees directly engaged in the day-to-day operation of the hotel and
employed by the operator or suboperator.
"Hotel"
means an operation as defined in section 445-90 or a time share plan as defined
in section 514E-1.
"Operator"
means any person who, pursuant to a written contract with the owner of a hotel
or time share association, operates or manages the hotel for the owner or time
share association.
"Owner"
means the fee owner or lessee under a recorded lease of a hotel.
"Suboperator"
means any person who, pursuant to a written contract with the operator,
operates or manages the hotel as a subcontractor of the operator.
"Time
share association" means an "association" as that term is
defined in section 514E-1;
(2) Amounts
received by the operator of a county transportation system operated under an
operating contract with a political subdivision, where the political
subdivision is the owner of the county transportation system. As used in this
paragraph:
"County
transportation system" means a mass transit system of motorized buses
providing regularly scheduled transportation within a county.
"Operating
contract" or "contract" means a contract to operate and manage a
political subdivision's county transportation system, which provides that:
(A) The
political subdivision shall exercise substantial control over all aspects of
the operator's operation;
(B) The
political subdivision controls the development of transit policy, service
planning, routes, and fares; and
(C) The
operator develops in advance a draft budget in the same format as prescribed
for agencies of the political subdivision. The budget must be subject to the
same constraints and controls regarding the lawful expenditure of public funds
as any public sector agency, and deviations from the budget must be subject to
approval by the appropriate political subdivision officials involved in the
budgetary process.
"Operator"
means any person who, pursuant to an operating contract with a political
subdivision, operates or manages a county transportation system.
"Owner"
means a political subdivision that owns or is the lessee of all the properties
and facilities of the county transportation system (including buses, real
estate, parking garages, fuel pumps, maintenance equipment, office supplies,
etc.), and that owns all revenues derived therefrom;
(3) Surcharge
taxes on rental motor vehicles imposed by chapter 251 and passed on and
collected by persons holding certificates of registration under that chapter;
(4) Amounts
received by the operator of orchard properties from the owner of the orchard
property in amounts equal to and which are disbursed by the operator for
employee wages, salaries, payroll taxes, insurance premiums, and benefits,
including retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee"
means an employee directly engaged in the day-to-day operations of the orchard
properties and employed by the operator.
"Operator"
means a producer who, pursuant to a written contract with the owner of the
orchard property, operates or manages the orchard property for the owner where
the property contains an area sufficient to make the undertaking economically
feasible.
"Orchard
property" means any real property that is used to raise trees with a
production life cycle of fifteen years or more producing fruits or nuts having
a normal period of development from the initial planting to the first
commercially saleable harvest of not less than three years.
"Owner"
means a fee owner or lessee under a recorded lease of orchard property;
(5) Taxes on
nursing facility income imposed by chapter 346E and passed on and collected by
operators of nursing facilities;
(6) Amounts
received under property and casualty insurance policies for damage or loss of
inventory used in the conduct of a trade or business located within the State
or a portion thereof that is declared a natural disaster area by the governor
pursuant to section 209-2;
(7) Amounts
received as compensation by community organizations, school booster clubs, and
nonprofit organizations under a contract with the chief election officer for
the provision and compensation of precinct officials and other election-related
personnel, services, and activities, pursuant to section 11-5;
(8) Interest
received by a person domiciled outside the State from a trust company (as
defined in section 412:8-101) acting as payment agent or trustee on behalf of
the issuer or payees of an interest bearing instrument or obligation, if the
interest would not have been subject to tax under this chapter if paid directly
to the person domiciled outside the State without the use of a paying agent or
trustee; provided that if the interest would otherwise be taxable under this
chapter if paid directly to the person domiciled outside the State, it shall
not be exempt solely because of the use of a Hawaii trust company as a paying
agent or trustee;
(9) Amounts
received by a management company from related entities engaged in the business
of selling interstate or foreign common carrier telecommunications services in
amounts equal to and which are disbursed by the management company for employee
wages, salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee"
means employees directly engaged in the day-to-day operation of related
entities engaged in the business of selling interstate or foreign common
carrier telecommunications services and employed by the management company.
"Management
company" means any person who, pursuant to a written contract with a
related entity engaged in the business of selling interstate or foreign common
carrier telecommunications services, provides managerial or operational
services to that entity.
"Related
entities" means:
(A) An
affiliated group of corporations within the meaning of section 1504 (with
respect to affiliated group defined) of the federal Internal Revenue Code of
1986, as amended;
(B) A
controlled group of corporations within the meaning of section 1563 (with respect
to definitions and special rules) of the federal Internal Revenue Code of 1986,
as amended;
(C) Those
entities connected through ownership of at least eighty per cent of the total
value and at least eighty per cent of the total voting power of each such
entity (or combination thereof), including partnerships, associations, trusts,
S corporations, nonprofit corporations, limited liability partnerships, or
limited liability companies; and
(D) Any
group or combination of the entities described in paragraph (C) constituting a
unitary business for income tax purposes;
whether or
not the entity is located within or without the State or licensed under this
chapter; and
(10) Amounts
received as grants under section 206M-15."]
SECTION 37. Section 237-24.75, Hawaii Revised Statutes, is repealed.
["§237-24.75 Additional
exemptions. In addition to the amounts exempt under section 237-24,
this chapter shall not apply to:
(1) Amounts received as a beverage
container deposit collected under chapter 342G, part VIII;
(2) Amounts received by the operator of the
Hawaii convention center for reimbursement of costs or advances made pursuant
to a contract with the Hawaii tourism authority under section 201B‑7[;
and]
[(3) Amounts received] by a professional employment
organization from a client company equal to amounts that are disbursed by the
professional employment organization for employee wages, salaries, payroll
taxes, insurance premiums, and benefits, including retirement, vacation, sick
leave, health benefits, and similar employment benefits with respect to
assigned employees at a client company; provided that this exemption shall not
apply to a professional employment organization upon failure of the
professional employment organization to collect, account for, and pay over any
income tax withholding for assigned employees or any federal or state taxes for
which the professional employment organization is responsible. As used in this
paragraph, "professional employment organization", "client
company", and "assigned employee" shall have the meanings
provided in section 373K-1."]
SECTION 38. Section 237-24.8, Hawaii Revised Statutes, is repealed.
["§237-24.8 Amounts not
taxable for financial institutions. (a) In addition to the amounts
not taxable under section 237-24, this chapter shall not apply to amounts
received by:
(1) Financial institutions from:
(A) Interest, discount, points,
commitment fees, loan fees, loan origination charges, and finance charges which
are part of the computed annual percentage rate of interest and which are
contracted and received for the use of money;
(B) Leasing of personal property;
(C) Fees or charges relating to the
administration of deposits;
(D) Gains resulting from changes in
foreign currency exchange rates but not including commissions or compensation
derived from the purchase or sale of foreign currency or numismatic currency
whether legal tender or not;
(E) The servicing and sale of loans
contracted for and received by the financial institution; and
(F) Interest received from the
investment of deposits received by the financial institution from financial or
debt instruments;
(2) Trust companies or trust departments of
financial institutions from:
(A) Trust agreements and retirement
plans where the trust companies or trust departments are acting as fiduciaries;
(B) Custodial agreements; and
(C) Activities relating to the
general servicing of fiduciary/custodial accounts held by the trust companies
or trust departments; and
(3) Financial corporations acting as
interbank brokers as defined by chapter 241 from brokerage services.
(b) As used in this section:
"Activities relating to the general
servicing of fiduciary or custodial accounts" means those activities
performed by trust companies which are directly or indirectly performed within
the fiduciary or custodial relationship between the trust company or trust
department of a financial institution and its client and which are not offered
to any person outside of the fiduciary or custodial relationship.
"Annual percentage rate" and
"finance charge" have the same meaning as defined in the federal
Truth in Lending Act (15 United States Code sections 1605(a) to (c) and 1606).
"Deposit" means:
(1) Money or its equivalent received or
held by a financial institution in the usual course of business and for which
it has given or is obligated to give credit to:
(A) A commercial (including public
deposits), checking, savings, time, or thrift account;
(B) A check or draft drawn against a
deposit account and certified by the financial institution;
(C) A letter of credit; or
(D) A traveler's check, on which the
financial institution is primarily liable;
(2) Trust funds received or held by a
financial institution, whether held in the trust department or held or
deposited in any other department of the financial institution;
(3) Money received or held by a financial
institution, or the credit given for money or its equivalent received or held
by a financial institution in the usual course of business for a special or
specific purpose, regardless of the legal relationship thereby established,
including, without being limited to, escrow funds, funds held as security for
an obligation due the financial institution or others (including funds held as
dealers' reserves) or for securities loaned by the financial institution, funds
deposited by a debtor to meet maturing obligations, funds deposited as advance
payment on subscriptions to United States government securities, funds held for
distribution or purchase of securities, funds held to meet the financial
institution's acceptances or letters of credit, and withheld taxes;
(4) Outstanding drafts, cashier's checks,
money orders, or other officer's checks issued in the usual course of business
for any purpose; or
(5) Money or its equivalent held as a
credit balance by a financial institution on behalf of its customer if the
financial institution is engaged in soliciting and holding the balances in the
regular course of its business.
"Financial institution" means
banks, building and loan associations, development companies, financial
corporations, financial services loan companies, small business investment
companies, financial holding companies, mortgage loan originator companies as
defined in chapter 454F, and trust companies all as defined in chapter 241.
"Leasing of personal property"
occurs if:
(1) The lease is to serve as the functional
equivalent of an extension of credit to the lessee of the property;
(2) The property to be leased is acquired
specifically for the leasing transaction under consideration, or was acquired
specifically for an earlier leasing transaction;
(3) The lease is on a nonoperating basis
where the financial institution may not, directly or indirectly:
(A) Provide for the maintenance,
repair, replacement, or servicing of the leased property during the lease term;
(B) Purchase parts and accessories
in bulk or for an individual property after the lessee has taken delivery of
the property; or
(C) Purchase insurance for the
lessee;
(4) At the inception of the lease the
effect of the transaction will yield a return that will compensate the lessor
financial institution for not less than the lessor's full investment in the
property plus the estimated total cost of financing the property over the term
of the lease, from:
(A) Rentals;
(B) Estimated tax benefits,
including capital goods excise tax credit, net economic gain from tax deferral
from accelerated depreciation, and other tax benefits with a substantially
similar effect; and
(C) The estimated residual value of
the property at the expiration of the initial term of the lease;
(5) The maximum lease term during which the
lessor financial institution shall recover the lessor's full investment in the
property, plus the estimated total cost of financing the property, shall be
forty years; and
(6) At the expiration of the lease,
including any renewals or extensions with the same lessee, all interest in the
property shall be either liquidated or leased again on a nonoperating basis as
soon as practicable but in no event later than two years from the expiration of
the lease; provided that in no case shall the lessor retain any interest in the
property beyond fifty years after the lessor's acquisition of the property."]
SECTION 39. Section 237-24.9, Hawaii Revised Statutes, is repealed.
["§237-24.9 Aircraft service
and maintenance facility. (a) This chapter shall not apply to
amounts received from the servicing and maintenance of aircraft or from the
construction of an aircraft service and maintenance facility in the State.
(b) As used in this section:
"Aircraft" means any craft or
artificial contrivance of whatever description engaged in intrastate,
interstate, or international scheduled commercial use as defined in chapter
263, that operates with two or more jet engines.
"Aircraft service and maintenance"
means all scheduled and unscheduled tasks performed within an aircraft service
and maintenance facility for the inspection, modification, maintenance, and
repair of aircraft and related components including engines, hydraulic and
electrical systems, and all other components which are an integral part of an
aircraft.
"Aircraft service and maintenance
facility" means a facility for aircraft service and maintenance that is
not less than thirty thousand square feet in area, and which may include
ancillary space which is integral to the facility, such as parts and inventory
warehouse space, tool rooms, and related administrative and employee space.
"Construction of an aircraft service
and maintenance facility" means all design, engineering, labor, and
material costs associated with the construction of facilities the principle
purpose of which is the provision of facilities for aircraft service and
maintenance.
"Maintenance" means the upkeep of
aircraft engines, hydraulic and electrical systems, and all other components
which are an integral part of an aircraft, but does not include refueling,
janitorial services or cleaning, restocking of aircraft and passenger supplies,
or loading or unloading of cargo and passenger baggage."]
SECTION 40. Section 237-25, Hawaii Revised Statutes, is repealed.
["§237-25 Exemptions of
sales and gross proceeds of sales to federal government, and credit unions.
(a) Any provision of law to the contrary notwithstanding, there shall be
exempted from, and excluded from the measures of, the tax imposed by chapter
237 all sales, and the gross proceeds of all sales, of:
(1) Intoxicating liquor, as defined in
chapter 281, hereafter sold by any person licensed under chapter 281 to the
United States (including any agency or instrumentality of the United States
that is wholly owned or otherwise so constituted as to be immune from the levy
of a tax under chapter 238 or 244D but not including national banks), or to any
organization to which that sale is permitted by the proviso of "Class
3" of section 281-31, located on any Army, Navy, or Air Force reservation,
but the person making the sale shall nevertheless, within the meaning of
chapters 237, 244D, and 281 be deemed to be a licensed seller;
(2) Tobacco products and cigarettes, as
defined in chapter 245, sold by any person licensed under the chapter to the
United States (including any agency or instrumentality thereof that is wholly
owned or otherwise so constituted as to be immune from the levy of a tax under
chapter 238 or 245 but not including national banks), but the person making the
sale shall nevertheless, within the meaning of chapters 237 and 245, be deemed
to be a licensed seller;
(3) Other tangible personal property sold
by any person licensed under this chapter to the United States (including any
agency, instrumentality, or federal credit union thereof but not including
national banks), and to any state-chartered credit union, but the person making
such sale shall nevertheless, within the meaning of this chapter, be deemed a
licensed seller; and
(4) When the amount of property sold by a
licensee turns upon the amount of the property sold through a vending machine
or similar device to the customer using the device, there shall not be deemed
to have occurred any sale covered by an exemption under paragraph (1), (2), or
(3).
(b) Nothing in this section shall be deemed
to exempt any sales to or by a federal cost-plus contractor, as defined in
chapter 237, or the gross proceeds thereof; with respect to all such activities
and transactions, taxes shall be levied, returned, computed, and assessed the
same as if this section had not been enacted, and in the case of an election
made under sections 237-13(2)(F) and 237-13(3)(C)(ii), the tax shall be
computed the same as upon a sale to the state government.
(c) Nothing in this section shall be deemed
to exempt any person engaging or continuing in a service business or calling
from any part of the tax imposed upon the person for such activity, and the
person shall not be entitled to deduct any amount for tangible personal
property furnished in conjunction therewith even though the person separately
bills or otherwise shows the amount of the gross income of the business derived
from the furnishing of the property.
(d) The exemption granted by this section
shall apply to the seller of products sold in the State as provided in
subsection (a) in respect of the privilege of manufacturing or producing, as
well as the privilege of selling, and the value or gross proceeds of sales of
the products so sold shall be excluded from the measure of the tax imposed by
chapter 237 upon the seller as a manufacturer or producer."]
SECTION 41. Section 237-26, Hawaii Revised Statutes, is repealed.
["§237-26 Exemption of
certain scientific contracts with the United States. (a) Any
provision of law to the contrary notwithstanding, there shall be exempted from
the measure of the taxes imposed by chapter 237, all of the gross proceeds
derived by a contractor or subcontractor arising from the performance of any
scientific work as defined in subsection (b), under a contract or subcontract
entered into with the United States (including any agency or instrumentality
thereof but not including national banks), and all of the gross proceeds
derived from the sale of tangible personal property by a seller of such
tangible personal property to such contractor or subcontractor; provided the
exemption herein shall apply only to such tangible personal property which is
to be affixed to, or to become a physical, integral part of the scientific
facility, or which is to be entirely consumed during the performance of the
service required by the contract or subcontract.
(b) For purposes of this section,
"scientific work" is work involving primarily the research and
development for, or the design, manufacture, instrumentation, installation,
maintenance, or operation of aerospace, agricultural, astronomical, biomedical,
electronic, geophysical, oceanographic, test range, or other scientific
facilities. Maintenance or operation, for purposes of this section, shall
include housekeeping functions in providing certain nonscientific logistic and
support services."]
SECTION 42. Section 237-27, Hawaii Revised Statutes, is repealed.
["§237-27 Exemption of
certain petroleum refiners. (a) As used in this section:
(1) "Petroleum products" means
petroleum, any distillate, fraction, or derivative of petroleum, natural gas or
its components, gas manufactured from a petroleum product, and any product
derived from the gas or from the manufacture thereof, such as benzene, xylene,
toluene, acetylene, tars, components of tars, and ammonia.
(2) "Refiner" means any person
who, in the State, engages in the business of refining petroleum products and
is taxable under this chapter, upon the value or gross proceeds of sales of the
petroleum products resultant from the business. A person who is engaged in
business as a refiner and also in other business shall be deemed a refiner only
in respect of the business that produces the products included in the measure
of the tax imposed by this chapter.
(3) "Refining" means:
(A) Any process performed by a
refiner that includes a change in the character or properties of a petroleum
product through the application of heat, or
(B) The compounding by a refiner of
a petroleum product with a product that has been refined by the refiner by the
process stated in clause (A).
(b) There shall be excluded from the
measure of the tax on a refiner such part of the petroleum products resultant
from the refiner's business as is to be further refined by another refiner, to
the extent that the petroleum products resultant from such further refining
will be (or but for this subsection would be) included in the measure of the
tax on such other refiner, and where petroleum products are to be used partly
for such refining and partly for other purposes, the proportion used for each
purpose shall be determined upon the basis of weight or BTU content."]
SECTION 43. Section 237-27.5, Hawaii Revised Statutes, is repealed.
["§237-27.5 Air pollution
control facility. (a) As used in this section, "air pollution
control facility" shall mean a new identifiable treatment facility,
equipment, device, or the like, which is used to abate or control atmospheric
pollution or contamination by removing, reducing, or rendering less noxious air
contaminants emitted into the atmosphere from a point immediately preceding the
point of such removal, reduction, or rendering to the point of discharge of
air, meeting emission standards as established by the department of health,
excluding air conditioner, fan, or other similar facility for the comfort of
persons at a place of business.
(b) Any provision of law to the contrary
notwithstanding, and upon receipt of the certification required by subsection
(c), there shall be exempted from, and excluded from the measure of, the taxes
imposed by this chapter, all of the gross proceeds arising from, and all of the
amount of tangible personal property furnished in conjunction with, the
construction, reconstruction, erection, operation, use, or maintenance of an
air pollution control facility.
(c) Application for the exemption provided
by this section shall first be made with the director of health who, if
satisfied that the facility meets the pollution emission criteria established
by the department of health, shall certify to that fact. A new certificate
shall be obtained from the director of health and filed with the director of
taxation every five years certifying that the pollution control facility
complies with the pollutant emission criteria established by the department of
health."]
SECTION 44. Section 237-27.6, Hawaii Revised Statutes, is repealed.
["§237-27.6 Solid waste
processing, disposal, and electric generating facility; certain amounts exempt.
(a) Any provision of the law to the contrary notwithstanding, there shall be
exempted from, and excluded from the measure of, the taxes imposed by this
chapter all of the amounts enumerated in subsection (b) arising from a
transaction involving a sale and leaseback of a solid waste processing,
disposal, and electric generating facility entered into by a political
subdivision of the State under section 46-19.1 where the facility is owned or
under construction by the subdivision before May 10, 1988.
(b) Amounts are exempted or excluded from
taxation under this chapter only to the extent that they:
(1) Are received by an operator of a
facility under an operating contract with a political subdivision, where the:
(A) Operator, or its successor,
entered into an operating contract prior to May 10, 1988;
(B) Operator enters into a lease of
the facility from the owner at a time that coincides with the time the owner and
the political subdivision entering into a sale and leaseback transaction; and
(C) Amounts are used by the operator
to make rental payments to the owner;
(2) Are received as rental payments by the
owner of the facility from the operator of the facility;
(3) Do not exceed the payments made by the
owner of the facility under the sale and leaseback transaction to the political
subdivision; and
(4) In no case exceed debt service costs
incurred by the political subdivision for the construction of the facility.
(c) For the purposes of this section:
"Debt service costs" means
payments of principal and interest on general obligation bonds issued at any
time by a political subdivision for the construction of the facility.
"Sale and leaseback" means a transaction
in which a facility is sold by a political subdivision to a private entity for
cash, under an installment sale, a financing lease, or similar arrangement, or
any combination thereof, where the political subdivision has the right to
repurchase the facility at a later date, and where the facility is leased to an
operator of the facility.
"Solid waste processing, disposal, and
electric generating facility" or "facility" means a facility for
the processing and disposal of solid waste or the generation of electric
energy, or both, the construction of which has been financed pursuant to
section 47-4 and constitutes an undertaking as defined in section 49-1.
"Operator" means a private entity
who enters into an agreement or other arrangement with the owner of a solid
waste processing, disposal, and electric generating facility for the purpose of
operating such facility for a political subdivision of the State.
"Owner" means any person who
purchases a solid waste processing, disposal, and electric generating facility
under section 46-19.1. "]
SECTION 45. Section 237-28.1, Hawaii Revised Statutes, is repealed.
["[§237-28.1] Exemption of
certain shipbuilding and ship repair business. There shall be
exempted from, and excluded from the measure of, the taxes imposed by this
chapter all of the gross proceeds arising from shipbuilding and ship repairs
rendered to surface vessels federally owned or engaged in interstate or
international trade."]
SECTION 46. Section 237-29, Hawaii Revised Statutes, is repealed.
["§237-29 Exemptions for
certified or approved housing projects. (a) All gross income
received by any qualified person or firm for the planning, design, financing,
construction, sale, or lease in the State of a housing project that has been
certified or approved under section 201H-36 shall be exempt from general excise
taxes.
(b) All gross income received by a
nonprofit or a limited distribution mortgagor for a low- and moderate-income
housing project certified or approved under section 201H-36 shall be exempt
from general excise taxes.
(c) The director of taxation and the Hawaii
housing finance and development corporation shall adopt rules pursuant to
chapter 91 for the purpose of this section, including any time limitation for
the exemptions."]
SECTION 47. Section 237-29.5, Hawaii Revised Statutes, is repealed.
["§237-29.5 Exemption for
sales of tangible personal property shipped out of the State. (a)
There shall be exempted from, and excluded from the measure of, the taxes
imposed by this chapter all of the value or gross proceeds arising from the
manufacture, production, or sale of tangible personal property:
(1) Shipped by the manufacturer, producer,
or seller to a point outside the State where the property is resold or
otherwise consumed or used outside the State; or
(2) The sale of which is exempt under
section 237-24.3(2).
(b) For the purposes of this section, the
manufacturer, producer, or seller shall take from the purchaser, a certificate,
in such form as the department shall prescribe, certifying that the tangible
personal property purchased is to be resold or otherwise consumed or used
outside the State. Any purchaser who shall furnish such a certificate shall be
obligated to pay to the seller, upon demand, if the property purchased is not
resold or otherwise consumed or used outside the State, the amount of the
additional tax which by reason thereof is imposed upon the seller."]
SECTION 48. Section 237-29.53, Hawaii Revised Statutes, is repealed.
["§237-29.53 Exemption for
contracting or services exported out of State. (a) There shall be
exempted from, and excluded from the measure of, taxes imposed by this chapter,
all of the value or gross income derived from contracting (as defined under
section 237-6) or services performed by a person engaged in a service business
or calling in the State for use outside the State where:
(1) The contracting or services are for
resale, consumption, or use outside the State; and
(2) The value or gross income derived from
the contracting or services performed would otherwise be subject to the tax
imposed under this chapter on contracting or services at the highest rate.
For the purposes of this subsection, the seller
or person rendering the contracting or services exported and resold, consumed,
or used outside the State shall take from the customer, a certificate or an
equivalent, in a form the department prescribes, certifying that the
contracting or service purchased is to be otherwise resold, consumed, or used
outside the State. Any customer who furnishes this certificate or an
equivalent shall be obligated to pay the seller or person rendering the
contracting or services, upon demand, if the contracting or service purchased
is not resold or otherwise consumed or used outside the State, the amount of
the additional tax which by reason thereof is imposed upon the seller or person
rendering the contracting or service.
(b) There shall be exempted from, and
excluded from the measure of, taxes imposed by this chapter, all of the value
or gross income derived from contracting (as defined in section 237-6) or
services performed by a person engaged in a service business or calling in the
State for a purchaser who resells all of the contracting or services for
resale, consumption, or use outside the State pursuant to subsection (a). For
the purposes of this subsection, the seller or person rendering the contracting
or services for a purchaser who resells the contracting or services for resale,
consumption, or use outside the State shall take from the purchaser, a
certificate or an equivalent, in a form that the department prescribes,
certifying that the contracting or services purchased is to be for resale,
consumption, or use outside the State pursuant to subsection (a). Any
purchaser who furnishes this certificate or an equivalent shall be obligated to
pay the seller or person rendering the contracting or services, upon demand, if
the contracting or services purchased is not resold in its entirety to a
customer of the purchaser who has complied with subsection (a), the amount of
the additional tax which by reason thereof is imposed upon the seller or the
person rendering the contracting or service."]
SECTION 49. Section 237-29.55, Hawaii Revised Statutes, is repealed.
["[§237-29.55] Exemption
for sale of tangible personal property for resale at wholesale. (a) There
shall be exempted from, and excluded from the measure of, the taxes imposed by
this chapter all of the gross proceeds or gross income arising from the sale of
tangible personal property imported to Hawaii from a foreign or domestic source
to a licensed taxpayer for subsequent resale for the purpose of wholesale as
defined under section 237-4.
(b) The department, by rule, may provide
that a seller may take from the purchaser of imported tangible personal
property, a certificate, in a form that the department shall prescribe,
certifying that the purchaser of the imported tangible personal property shall
resell the imported tangible personal property at wholesale as defined under
section 237-4. Any purchaser who furnishes a certificate shall be obligated to
pay to the seller, upon demand, if the sale in fact is not a sale for the
purpose of resale at wholesale, the amount of the additional tax which by
reason thereof is imposed upon the seller. The absence of a certificate,
unless the sales of the business are exclusively a sale for the purpose of
resale at wholesale, in itself, shall give rise to the presumption that the
sale is not a sale for the purpose of resale at wholesale."]
SECTION 50. Section 237-29.7, Hawaii Revised Statutes, is repealed.
["[§237-29.7] Exemption of
insurance companies. This chapter shall not apply to the gross
income or gross proceeds of insurance companies authorized to do business under
chapter 431; except this exemption shall not apply to any gross income or gross
proceeds received after December 31, 1991, as rents from investments in real
property in this State; provided that gross income or gross proceeds from
investments in real property received by insurance companies after December 31,
1991, under written contracts entered into before January 1, 1992, that do not
provide for the passing on of taxes or tax increases shall not be taxed until
the contracts are renegotiated, renewed, or extended."]
SECTION 51. Section 237-29.8, Hawaii Revised Statutes, is repealed.
["[§237-29.8] Call centers;
exemption; engaging in business; definitions. (a) This chapter
shall not apply to amounts received from a person operating a call center by a
person engaged in business as a telecommunications common carrier for
interstate or foreign telecommunications services, including toll-free
telecommunications, telecommunications capabilities for electronic mail, voice,
and data telecommunications, computerized telephone support, facsimile, wide
area telecommunications services, or computer-to-computer communication.
(b) The establishment of a call center in
this State by any person shall not be used by itself by the State to find that
any other part of the person's business is engaged in business in this State
for the purposes of this chapter. Gross income or gross proceeds received by a
call center for customer service and support shall be exempt from the measure
of taxes imposed by this chapter.
(c) The department, by rule, may provide
that the person providing the telecommunications service may take from the
person operating a call center a certificate, in a form that the department
shall prescribe, certifying that the amounts received for telecommunications
services are for operating a call center. If the certificate is required by
rule of the department, the absence of the certificate in itself shall give
rise to the presumption that the amounts received from the sale of
telecommunications services are not for operating a call center.
(d) As used in this section:
"Call center" means a physical or
electronic operation that focuses on providing customer service and support for
computer hardware and software companies, manufacturing companies, software
service organizations, and telecommunications support services, within an
organization in which a managed group of individuals spend most of their time
engaging in business by telephone, usually working in a computer-automated
environment; provided that the operation shall not include telemarketing or
sales.
"Customer service and support"
means product support, technical assistance, sales support, phone or
computer-based configuration assistance, software upgrade help lines, and
traditional help desk services.
"Telecommunications common
carrier" means any person that owns, operates, manages, or controls any
facility used to furnish telecommunications services for profit to the public,
or to classes of users as to be effectively available to the public, engaged in
the provision of services, such as voice, data, image, graphics, and video
services, that make use of all or part of their transmission facilities,
switches, broadcast equipment, signalling, or control devices.
"Telecommunications service" or
"telecommunications" means the offering of transmission between or
among points specified by a user, of information of the user's choosing,
including voice, data, image, graphics, and video without change in the form or
content of the information, as sent and received, by means of electromagnetic
transmission, or other similarly capable means of transmission, with or without
benefit of any closed transmission medium.
(e) This section shall not apply to gross
proceeds or gross income received after June 30, 2010."]
PART IV.
SECTION 52. Statutory material to be repealed is bracketed and stricken.
SECTION 53. This Act, upon its approval, shall take effect for taxable years beginning after December 31, 2011.
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Report Title:
Income Tax; General Excise Tax; Credits; Exemptions
Description:
Repeals income, general excise, and other certain tax credits and exclusions, with certain exemptions.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
