|
HOUSE OF REPRESENTATIVES |
H.B. NO. |
2355 |
|
THIRTY-SECOND LEGISLATURE, 2024 |
|
|
|
STATE OF HAWAII |
|
|
|
|
|
|
|
|
||
|
|
||
A BILL FOR AN ACT
RELATING TO TAX CREDIT FOR RESEARCH ACTIVITIES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
The purpose of this Act is to:
(1) Extend the sunset date of the research activities
income tax credit by three years, to December 31, 2027;
(2) Consolidate
the survey and the certification requirements for the research activities tax credit;
(3) Require
the certification based on the date a complete application is received, subject
to certain conditions; and
(4) Add a cap to ensure that a single company and
its related entities do not claim the entire allotment for the tax credit.
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. In determining the allowable credit,
research expenses funded by any grant, forgivable loan, or other amounts not
included in gross income for purposes of this chapter shall not be qualified
research expenses.
(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. Each taxpayer, together with
all of its related entities, shall not be eligible for any more than $1,000,000
in tax credits provided by this section per calendar year.
(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[:]
at a minimum:
(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[.];
(3) 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);
(4) Revenue and expense data, including a breakdown
of any licensing royalty or other forms of income generated from intellectual property;
(5) 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 qualified high technology business, and payroll
taxes;
(6) The number of filed intellectual property, including
invention disclosures, provisional patents, and patents issued or granted; and
(7) The number of new companies spun out or established
in Hawaii to commercialize the intellectual property owned by the qualified high
technology business.
Failure to meet the requirements of this subsection
shall constitute a waiver of the right to claim the credit.
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 additional information related
to patents.
(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] calendar 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] calendar year. To comply with this restriction, the department
of business, economic development, and tourism shall certify credits on a first-come,
first-served basis[.] based on the date of submission of the written,
certified statement; provided that if the total amount of credits properly claimed
by two or more qualified high technology businesses on the same date would, if each
certified, cause the aggregate amount of certified credits to exceed $5,000,000,
each qualified high technology business that submits a certified statement on that
date shall receive a proportionate share of the remaining credit, calculated by
multiplying the total amount of remaining credit by a fraction, the numerator of
which is the amount of credit properly claimed by the qualified high technology
business and the denominator of which is the sum of all credits properly claimed
by all qualified high technology businesses on that date.
The department
of taxation shall not allow the aggregate amount of credits claimed to exceed [that
amount] $5,000,000 per [taxable] calendar 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)]
(i) 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)]
(j) 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)]
(k) The director of taxation may adopt
any rules under chapter 91 and forms necessary to carry out this section.
[(n)]
(l) This section shall not apply to
taxable years beginning after December 31, [2024.] 2027.
[(o)]
(m) 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[.]
and research expenses funded by grant, forgivable loan, and other amounts not
included in gross income."
SECTION 3. Act 261, Session Laws of Hawaii 2019, is amended
by amending section 5 to read as follows:
"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.] 2027."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION
5. This Act shall take effect upon approval;
provided that section 2 shall apply to taxable years beginning after December
31, 2024.
|
INTRODUCED BY: |
_____________________________ |
|
|
BY REQUEST |
Report Title:
Income Tax Credit; Research Activities
Description:
Extends the sunset date for the research activites income tax credit. Consolidates the survey and certification requirements. Requires the certification based on the date a complete application is received subject to certain conditions. Clarifies qualified research expenses. Adds a cap for an eligible taxpayer and the taxpayer's related entities.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.