HB399

SECTION 1. The legislature finds that local students will have a better chance at surviving and thriving in Hawaii if they possess high-quality work-based learning experience before they graduate from high school. Although partnership programs between schools and employers have been expanding over the past decade, the legislature finds that equitable access to a diverse range of industries will require significantly greater participation by employers in these programs.

In order to significantly increase these offerings for students, the legislature further finds that additional financial resources for employers would incentivize companies to offer work-based learning opportunities and help them add capacity to host students. Without these resources, it will continue to be difficult for many employers, especially small- to medium-sized employers, to justify offering these experiences.

Accordingly, the purpose of this Act is to establish a tax credit for employers that provide work-based learning programs for qualified interns.

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

"§235- Work-based learning programs; qualified interns; income tax credit. (a) Notwithstanding any law to the contrary, there shall be allowed to each individual or corporate taxpayer subject to the tax imposed by this chapter, an 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 for taxable years beginning after January 1, 2024, but before January 1, 2025. A taxpayer shall be allowed a nonrefundable tax credit against the tax imposed pursuant to this chapter in an amount equal to fifty hours of the value of the salaries, wages, or other remuneration for services paid to a qualified intern.

(b) The credit allowed shall not be permitted for more than 5,250 qualified interns per calendar year.

(c) No credit shall be allowed for a qualified intern who was employed by the taxpayer during the six months immediately preceding the commencement of employment as a qualified intern.

(d) A credit claimed shall not be allowed unless the taxpayer submits an application and receives an initial approval from the department and complies with all filing requirements.

The application shall include:

(1) A description of the daily tasks to be performed by the qualified intern;

(2) Expected learning outcomes by the end of the internship period; and

(3) Other questions or prompts that qualify the internship position as part of a work-based learning program that has been approved by the department of education or University of Hawaii, as applicable.

Failure to meet the qualifications of a bona fide work-based learning program shall result in denial of the application.

(e) A taxpayer shall file an application with the department for an initial approval of a credit allowed for each qualified intern for which the taxpayer claims a credit. In the application, the taxpayer shall certify that:

(1) The taxpayer would not have employed the qualified intern but for the credit allowed; and

(2) The taxpayer expects that the number of hours worked by qualified interns shall increase in the taxable year for which the application is submitted compared to the immediately preceding taxable year.

(f) The department shall reject an application for initial approval if that approval would exceed the limitations set forth in this section. Complete applications shall be applied against the limitations specified in subsection (b) in the order in which the complete applications are received.

The department shall issue an initial approval or rejection within ninety days of receipt of an application. If the department fails to issue an initial approval or rejection within ninety days of receipt of an application, the application shall be deemed to have received initial approval, notwithstanding the limitations specified in subsection (b).

(g) The commencement of the employment of a qualified intern prior to the receipt of an initial approval shall not preclude allowance of the credit claimed.

(h) A taxpayer who has received an initial approval shall file with the taxpayer's return an application for the credit allowed. In the application, the taxpayer shall certify that:

(1) The qualified intern was employed and supervised in Hawaii in a position that provides training and experience to the individual in the individual's chosen field of study; and

(2) The qualified intern was paid a wage of no less than $12.00 per hour for a term of employment that includes at least one hundred fifty hours, with no more than fifteen hours per week during the school year and no more than forty hours per week during winter and summer holiday breaks.

(i) The department may require a taxpayer who claims the credit to provide documentation that the work-based learning program has been approved by the department of education or University of Hawaii, as applicable.

(j) The order of priority of the application of the credit allowed under this section and any other credits allowed by law shall be as prescribed by the department. The amount of the credit applied under this section against the tax imposed for a taxable year, together with any other credits allowed against the tax imposed, shall not exceed fifty per cent of the tax liability otherwise due and shall not reduce the tax liability to an amount less than the statutory minimum. An unused credit resulting from the limitations of this section may be carried forward, if necessary, for use in the seven taxable years following the taxable year for which the credit is allowed.

(k) All claims, 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.

(l) The department may adopt any necessary rules to administer this section.

(m) As used in this section:

"Department" means the department of taxation.

"Qualified intern" means an individual who is:

(1) Enrolled in a department of education school, public charter school, or at a campus within the University of Hawaii system;

(2) Employed and supervised in Hawaii in a position that provides training and experience to the individual in their chosen field of study; and

(3) Paid a wage of no less than $12.00 per hour for a term of employment that includes at least one hundred fifty hours, with no more than fifteen hours per week during the school year and no more than forty hours per week during winter and summer holiday breaks."

SECTION 3. At least twenty days before the convening of the regular sessions of 2025 and 2026, the department of taxation shall submit a report to the governor and legislature that includes:

(1) The total value of tax credits allowed for each tax year;

(2) The total number of qualified interns for which a tax credit was allowed for each tax year; and

(3) Information on the division's experience in administering the tax credits, including but not limited to a description of increased workload associated with the tax credit, and an analysis as to the effectiveness of the credits as an incentive for encouraging the employment of qualified interns.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2023.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	399
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII