HB1732

SECTION 1. The legislature finds that the population of the state is on a steady decline. In 2023, Hawaii was one of just seven states to experience a decrease in population and marked the eighth consecutive year of population loss. This decline includes on average 15,000 Native Hawaiians each year leaving the state for the mainland, which now has a larger population of Native Hawaiians than Hawaii itself.

The legislature also finds that Hawaii suffers from workforce shortages in many fields and experiences challenges in attracting top-tier talent. Increased strategic measures are necessary to encourage businesses to consider individuals who have relocated away from the state. Accordingly, the purpose of this Act is to establish tax incentives for employers to hire individuals who have previously resided in the Hawaii and wish to return.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Kamaaina come home income tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed under this chapter, a kamaaina come home income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The kamaaina come home income tax credit shall be equal to:

(1) $ for each eligible employee hired by the taxpayer in the first year or partial year of employment; provided that an employee hired in the last ninety days of a taxable year shall be excluded for that taxable year and shall be considered an eligible employee in the following taxable year;

(2) $ for each eligible employee employed by the taxpayer for the full taxable year in the second year of continuous employment; and

(3) $ for each eligible employee employed by the taxpayer for the full taxable year in the third year of continuous employment.

(c) Every taxpayer, before March 31 of each year in which the taxpayer employed an eligible employee in the previous taxable year, shall submit a written, certified statement to the department of business, economic development, and tourism identifying:

(1) The number of eligible employees of the taxpayer employed by the taxpayer in the previous taxable year; and

(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

(d) The department of business, economic development, and tourism shall:

(1) Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total number of eligible employees upon which the tax credit is based;

(2) Verify the number of eligible employees employed by the taxpayer and the wage rate of each employee;

(3) Total all hours worked and wages paid to eligible employees employed by the taxpayer; 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 number of eligible employees employed by the taxpayer, 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.

(e) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and

(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.

(f) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for the tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(g) As used in this section, "eligible employee" means a state resident who:

(1) Has been living, working, or studying in the continental United States for not less than three years; and

(2) Agrees to return to the State for purposes of employment by the taxpayer.

"Eligible employee" does not include a person who was previously employed in the State by the taxpayer, whose position was subsequently terminated or eliminated, and who was later rehired by the taxpayer."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2024.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1732
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII