THE SENATE |
S.B. NO. |
1314 |
THIRTIETH LEGISLATURE, 2019 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 1 |
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C.D. 1 |
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A BILL FOR AN ACT
RELATING TO TAX CREDITS.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. Section 235-20.5, Hawaii Revised Statutes, is amended to read as follows:
"§235-20.5 Tax
administration special fund; established.
(a) There is established a tax administration
special fund, into which shall be deposited:
(1) Fees collected under sections 235-20[,] and
235-110.9[, and 235-110.91];
(2) Revenues collected by the special enforcement section
pursuant to section 231-85; provided that in each fiscal year, of the total
revenues collected by the special enforcement section, all revenues in excess
of $2,000,000 shall be deposited into the general fund; and
(3) Fines assessed pursuant to section 237D-4.
(b) The moneys in the fund shall be used for the
following purposes:
(1) Issuing comfort letters, letter rulings, written opinions,
and other guidance to taxpayers;
(2) Issuing
certificates under sections 235-110.9 [and 235-110.91];
(3) Administering
the operations of the special enforcement section;
(4) Funding
support staff positions in the special enforcement section; and
(5) Developing, implementing, and providing taxpayer education programs, including tax publications."
SECTION 2. Section 235-110.91, Hawaii Revised Statutes, is amended to read as follows:
"§235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for increasing research activities) and section 280C(c) (with respect to certain expenses for which the credit for increasing research activities are allowable) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this section; provided that the federal tax provisions in section 41 of the Internal Revenue Code, as that section was enacted on December 31, 2011, irrespective of any subsequent changes to section 41 of the Internal Revenue Code, shall remain in effect for purposes of determining the state income tax credit under this section; provided further that the federal tax provisions in section 41 of the Internal Revenue Code, as enacted on December 31, 2011, irrespective of any subsequent amendments to section 41 of the Internal Revenue Code, shall apply only to expenses incurred for qualified research activities after December 31, 2012.
(b) All references to Internal Revenue Code
sections within sections 41 and 280C(c) of the Internal Revenue Code shall be
operative for purposes of this section[.]; provided that references
to the base amount in section 41 of the Internal Revenue Code shall not apply,
and credit for all qualified research expenses may be taken without regard to
the amount of expenses for previous years.
(c) There shall be allowed to each qualified high technology business subject to the tax imposed by this chapter an income tax credit for qualified research activities equal to the credit for research activities provided by section 41 of the Internal Revenue Code and as modified by this section; provided that, in addition to any other requirements established in this section, in order to qualify for the tax credit established in this section, the qualified high technology business shall also claim a federal tax credit for the same qualified research activities under section 41 of the Internal Revenue Code, as enacted on December 31, 2011, irrespective of any subsequent amendments to section 41 of the Internal Revenue Code. 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.
(d) Every qualified high technology business,
before March 31 of each year in which qualified research and development
activity was conducted in the previous taxable year, shall submit a written,
certified statement to the [director of taxation] department of
business, economic development, and tourism identifying:
(1) Qualified expenditures, if any, expended in the previous taxable year; and
(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.
(e) The department of business, economic development, and tourism shall:
(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified research and development activity costs upon which the tax credit is based;
(2) Verify the nature of the qualifying research activity and the amount of the qualifying costs or expenditures;
(3) Total all qualifying and cumulative costs or expenditures that the department certifies; and
(4) Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.
Upon each
determination made under this subsection, the department of business,
economic development, and tourism shall issue a certificate to the taxpayer
verifying information submitted to the department[,] of business,
economic development, and tourism, including the qualifying costs or
expenditure amounts, the credit amount certified for each taxable year, and the
cumulative amount of the tax credit during the credit period. The taxpayer shall file the certificate with
the taxpayer's tax return with the department[.] 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 facts.
The [director
of taxation] department of business, economic development, and tourism
may assess and collect a fee to offset the costs of certifying tax credit
claims under this section. [All fees
collected under this section shall be deposited into the tax administration
special fund established under section 235-20.5.
(f) As used in this section:
"Qualified
high technology business" shall have the same meaning as in section
235-7.3(c).
"Qualified
research" shall have the same meaning as in section 41(d) of the Internal
Revenue Code.
"Qualified
research expenses" shall have the same meaning as in section 41(b) of the
Internal Revenue Code; provided that it shall not include research expenses
incurred outside of the State.]
(f) If in any taxable year the annual amount of
certified credits reaches $5,000,000 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 department of business, economic development, and
tourism certify a total amount of credits exceeding $5,000,000 per taxable
year. To comply with this restriction,
the department of business, economic development, and tourism 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.
(g) If the tax credit for qualified research activities claimed by a taxpayer exceeds the amount of income tax payment due from the taxpayer, the excess of the tax credit over payments due shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.
(h) All claims for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to properly claim the credit shall constitute a waiver of the right to claim the credit.
(i) A qualified high technology business that
claims the credit under this section shall complete and file with the
department of business, economic development, and tourism, through that
department's website, an annual survey on electronic forms prepared and
prescribed by the department of business, economic development, and
tourism. The annual survey shall be
filed before June 30 of each calendar year following the calendar year in which
the credit may be claimed under this section.
The department of business, economic development, and tourism may adjust
the due date of the annual survey by rules adopted pursuant to chapter 91.
(j) The annual survey under subsection (i) shall include the following information for the time period or periods specified by the department of business, economic development, and tourism:
(1) Identification of the industry sector or sectors in which the qualified high technology business conducts business, as set forth in paragraphs (2) to (8) of the definition of "qualified research" in section 235‑7.3(c);
(2) Total expenditures and the qualified expenditures, if any, expended in the previous taxable year;
(3) Revenue and expense data, including a breakdown of any licensing royalty or other forms of income generated from intellectual property;
(4) Hawaii employment and wage data, including the numbers of full-time and part-time employees retained, new jobs, temporary positions, external services procured by the business, and payroll taxes;
(5) Filed intellectual property, including invention disclosures, provisional patents, and patents issued or granted; and
(6) The number of new companies spun out or established to commercialize the intellectual property owned by the qualified high technology business.
The department of business, economic development, and tourism shall request information in each of these categories sufficient to measure the effectiveness of the tax credit under this section. The department of business, economic development, and tourism may request any additional information necessary to measure the effectiveness of the tax credit, such as information related to patents. In preparing the survey and requesting any additional information, the department of business, economic development, and tourism shall ensure that qualified high technology businesses are not subject to duplicative reporting requirements.
(k) The department of business, economic development, and tourism shall use information collected under this section and through its other reporting requirements to prepare summary descriptive statistics by category. The information shall be reported at the aggregate level to prevent compromising identities of qualified high technology business investors or other confidential information. The department of business, economic development, and tourism shall also identify each qualified high technology business that applies for or is the beneficiary of tax credits claimed under this section. The department of business, economic development, and tourism shall report the information required under this subsection to the legislature by September 1 of each year.
(l) The department of business, economic development, and tourism, in collaboration with the department of taxation, shall use the information collected to study the effectiveness of the tax credit under this section. The department of business, economic development, and tourism shall submit a report to the legislature on the following:
(1) The amount of tax credits claimed and total taxes paid by qualified high technology businesses;
(2) The number of qualified high technology businesses in each industry sector;
(3) The numbers and types of jobs created by qualified high technology businesses;
(4) External services and materials procured by the businesses;
(5) The compensation levels of jobs provided by qualified high technology businesses;
(6) Qualified research activities; and
(7) Any other factors the department of business, economic development, and tourism deems relevant.
The department of business, economic development, and tourism shall submit the report to the legislature by September 1 of each year.
(m) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section.
(n) This section shall not apply to taxable years
beginning after December 31, [2019.] 2024.
(o) As used in this section:
"Qualified
high technology business" shall have the same meaning as in section
235-7.3(c).
"Qualified
research" shall have the same meaning as in section 41(d) of the Internal
Revenue Code.
"Qualified research expenses" shall have the same meaning as in section 41(b) of the Internal Revenue Code; provided that it shall not include research expenses incurred outside of the State."
PART II
SECTION 3. Section 235-110.91, Hawaii Revised Statutes, is repealed.
["§235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for
increasing research activities) and section 280C(c) (with respect to certain
expenses for which the credit for increasing research activities are allowable)
of the Internal Revenue Code shall be operative for the purposes of this
chapter as provided in this section; provided that the federal tax provisions
in section 41 of the Internal Revenue Code, as that section was enacted on December 31,
2011, irrespective of any subsequent changes to section 41 of the Internal
Revenue Code, shall remain in effect for purposes of determining the state
income tax credit under this section; provided further that the federal tax
provisions in section 41 of the Internal Revenue Code, as enacted on December
31, 2011, irrespective of any subsequent amendments to section 41 of the
Internal Revenue Code, shall apply only to expenses incurred for qualified
research activities after December 31, 2012.
(b) All references to Internal Revenue Code
sections within sections 41 and 280C(c) of the Internal Revenue Code shall be
operative for purposes of this section; provided that references to the base
amount in section 41 of the Internal Revenue Code shall not apply, and credit
for all qualified research expenses may be taken without regard to the amount
of expenses for previous years.
(c) There shall be allowed to each qualified high
technology business subject to the tax imposed by this chapter an income tax
credit for qualified research activities equal to the credit for research
activities provided by section 41 of the Internal Revenue Code and as modified
by this section; provided that, in addition to any other requirements
established in this section, in order to qualify for the tax credit established
in this section, the qualified high technology business shall also claim a
federal tax credit for the same qualified research activities under section 41
of the Internal Revenue Code, as enacted on December 31, 2011, irrespective of
any subsequent amendments to section 41 of the Internal Revenue Code. 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.
(d) Every qualified high technology business,
before March 31 of each year in which qualified research and development
activity was conducted in the previous taxable year, shall submit a written,
certified statement to the department of business, economic development, and
tourism identifying:
(1) Qualified expenditures, if any, expended in
the previous taxable year; and
(2) The amount of tax credits claimed pursuant
to this section, if any, in the previous taxable year.
(e) The department of business, economic
development, and tourism shall:
(1) Maintain records of the names and addresses
of the taxpayers claiming the credits under this section and the total amount
of the qualified research and development activity costs upon which the tax
credit is based;
(2) Verify the nature of the qualifying
research activity and the amount of the qualifying costs or expenditures;
(3) Total all qualifying and cumulative costs
or expenditures that the department certifies; and
(4) Certify the amount of the tax credit for
each taxable year and cumulative amount of the tax credit.
Upon
each determination made under this subsection, the department of business,
economic development, and tourism shall issue a certificate to the taxpayer
verifying information submitted to the department of business, economic
development, and tourism, including the qualifying costs or expenditure
amounts, the credit amount certified for each taxable year, and the cumulative
amount of the tax credit during the credit period. The taxpayer shall file the certificate with
the taxpayer's tax return with the department 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 facts.
The
department of business, economic development, and tourism may assess and
collect a fee to offset the costs of certifying tax credit claims under this
section.
(f) If in any taxable year the annual amount of
certified credits reaches $5,000,000 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 department of
business, economic development, and tourism certify a total amount of credits
exceeding $5,000,000 per taxable year.
To comply with this restriction, the department of business, economic
development, and tourism 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.
(g) If the tax credit for qualified research
activities claimed by a taxpayer exceeds the amount of income tax payment due
from the taxpayer, the excess of the tax credit over payments due shall be
refunded to the taxpayer; provided that no refund on account of the tax credit
allowed by this section shall be made for amounts less than $1.
(h) All claims for a tax credit under this
section shall be filed on or before the end of the twelfth month following the
close of the taxable year for which the credit may be claimed. Failure to properly claim the credit shall
constitute a waiver of the right to claim the credit.
(i) A qualified high technology business that
claims the credit under this section shall complete and file with the
department of business, economic development, and tourism, through that
department's website, an annual survey on electronic forms prepared and
prescribed by the department of business, economic development, and
tourism. The annual survey shall be
filed before June 30 of each calendar year following the calendar year in which
the credit may be claimed under this section.
The department of business, economic development, and tourism may adjust
the due date of the annual survey by rules adopted pursuant to chapter 91.
(j) The annual survey under subsection (i) shall
include the following information for the time period or periods specified by
the department of business, economic development, and tourism:
(1) Identification of the industry sector or
sectors in which the qualified high technology business conducts business, as
set forth in paragraphs (2) to (8) of the definition of "qualified
research" in section 235‑7.3(c);
(2) Total expenditures and the qualified
expenditures, if any, expended in the previous taxable year;
(3) Revenue and expense data, including a
breakdown of any licensing royalty or other forms of income generated from
intellectual property;
(4) Hawaii employment and wage data, including
the numbers of full-time and part-time employees retained, new jobs, temporary
positions, external services procured by the business, and payroll taxes;
(5) Filed intellectual property, including
invention disclosures, provisional patents, and patents issued or granted; and
(6) The number of new companies spun out or
established to commercialize the intellectual property owned by the qualified
high technology business.
The department
of business, economic development, and tourism shall request information
in each of these categories sufficient to measure the effectiveness of the tax
credit under this section. The department
of business, economic development, and tourism may request any
additional information necessary to measure the effectiveness of the tax
credit, such as information related to patents.
In preparing the survey and requesting any additional information, the department
of business, economic development, and tourism shall ensure that
qualified high technology businesses are not subject to duplicative reporting
requirements.
(k) The department of
business, economic development, and tourism shall use information
collected under this section and through its other reporting requirements to
prepare summary descriptive statistics by category. The information shall be reported at the
aggregate level to prevent compromising identities of qualified high technology
business investors or other confidential information. The department of
business, economic development, and tourism shall also identify each
qualified high technology business that applies for or is the beneficiary of
tax credits claimed under this section.
The department of business, economic
development, and tourism shall report the information required under
this subsection to the legislature by September 1 of each year.
(l) The department of
business, economic development, and tourism, in collaboration with the
department of taxation, shall use the information collected to study the
effectiveness of the tax credit under this section. The department of
business, economic development, and tourism shall submit a report to the
legislature on the following:
(1) The amount of tax credits claimed and total
taxes paid by qualified high technology businesses;
(2) The number of qualified high technology
businesses in each industry sector;
(3) The numbers and types of jobs created by
qualified high technology businesses;
(4) External services and materials procured by
the businesses;
(5) The compensation levels of jobs provided by
qualified high technology businesses;
(6) Qualified research activities; and
(7) Any other factors the department
of business, economic development, and tourism deems relevant.
The department of business,
economic development, and tourism shall submit the report to the
legislature by September 1 of each year.
(m) The director of taxation may adopt any rules
under chapter 91 and forms necessary to carry out this section.
(n) This section shall not apply to taxable years
beginning after December 31, 2024.
(o) As used in this section:
"Qualified
high technology business" shall have the same meaning as in section
235-7.3(c).
"Qualified
research" shall have the same meaning as in section 41(d) of the Internal
Revenue Code.
"Qualified
research expenses" shall have the same meaning as in section 41(b) of the
Internal Revenue Code; provided that it shall not include research expenses
incurred outside of the State."]
PART III
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect upon its approval; provided that:
(1) Section 2 shall apply to taxable years beginning after December 31, 2019; and
(2) Part II shall take effect on December 31, 2024.
Report Title:
High Technology; Research Activities; Tax Credit; DOTAX; DBEDT
Description:
Amends the research activity tax credit so that references to the base amount in section 41 of the Internal Revenue Code shall not apply, and credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years. Transfers certification duties from the Department of Taxation to the Department of Business, Economic Development, and Tourism, which shall identify to the Legislature taxpayers who apply for the tax credit. Establishes an annual aggregate cap of $5,000,000. Extends the research activity tax credit through 2024. Repeals the research activity tax credit on 12/31/2024. (CD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.