SB801 SD1

SECTION 1. The legislature finds that local students will have a better chance at surviving and thriving in Hawaii if they have an opportunity to participate in a high-quality work-based learning experience before they graduate from high school. While partnerships between schools and employers have expanded in the past decade, the legislature also finds that equitable access to a diverse range of industries will require significantly greater employer participation in these programs.

The legislature further finds that, to drastically increase work-based learning experience opportunities for students, offering additional financial resources for employers will both incentivize companies to offer work-based learning opportunities and increase capacity to host student interns. Without crucial assistance to support work-based learning experiences, many employers, especially small to medium-sized companies, may encounter difficulties in hiring and retention of student interns.

Accordingly, the purpose of this Act is to establish a qualified internship tax credit.

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

"§235- Qualified internship tax credit. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, a qualified internship 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 amount of the tax credit shall be equal to fifty hours of the value of salaries, wages, or other renumeration services paid to a qualified intern by the qualified taxpayer, up to a maximum of $ in any taxable year; provided that the qualified intern was not employed by the taxpayer within the six months immediately preceding the commencement of the internship; provided further that this credit shall be provided for not more than 5,250 qualified interns per calendar year; provided further that the qualified internship tax credit, combined with other credits allowed pursuant to this chapter during the taxable year, shall not exceed fifty per cent of the taxpayer's tax liability and shall not reduce the taxpayer's minimum income tax liability.

(c) Any unused credit resulting from the limitations pursuant to subsection (b), the excess credit over liability may be carried forward, if necessary, for use in the seven taxable years following the taxable year for which the credit is claimed.

(d) Unless a taxpayer submits an application to and in a form prescribed by the department of labor and industrial relations, receives an initial approval in accordance with this subsection, and complies with the filing requirements in accordance with subsection (i), the credit claimed pursuant to this section shall not be disbursed. The application shall include:

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

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

(3) Other questions or prompts as necessary to qualify the internship under the department of education or University of Hawaii-approved work-based learning program.

Failure of the taxpayer to fulfill the requirements set forth by the department of education or University of Hawaii to qualify as a work-based learning program shall result in denial of the application.

(e) The taxpayer shall certify to the department of labor and industrial relations that the taxpayer would not have employed the qualified intern but substantially for the credit allowed pursuant to this section, and that the taxpayer expects that the number of hours worked by the qualified intern will increase in the taxable year for which the application is submitted compared to the immediately preceding taxable year.

(f) The taxpayer, upon initial approval of the application pursuant to subsection (d), shall provide a certificate of claim, in the form as prescribed by the department of labor and industrial relations, that certifies that the qualified intern was employed and supervised in the State in a position that:

(1) Provides training and experience to the qualified intern in their chosen field of study; and

(2) The qualified intern was paid a wage of not less than $12.00 per hour for a term of employment that includes at least one hundred fifty hours; provided that the qualified intern works not more than fifteen hours per week during the academic year and not more than forty hours per week during winter, spring, and summer holiday break periods.

(g) The director of taxation:

(1) Shall prepare forms as 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 the tax credit under this section; and

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

(h) 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.

(i) 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 credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(j) As used in this section, "qualified intern" means an individual who is:

(1) Enrolled in a department of education school or public charter school;

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

(3) Paid a wage of not less than $12.00 per hour for a term of employment that includes at least one hundred fifty hours; provided that the qualified intern works not more than fifteen hours per week during the academic year and not more than forty hours per week during the winter, spring, and summer holiday periods."

SECTION 3. (a) The department of labor and industrial relations shall submit a report on the qualified internship tax credit to the legislature no later than January 1, 2025.

(b) The report shall include:

(1) The total number of qualified interns for which a credit was issued for each taxable year;

(2) Information on the department's process in administering the qualified internship tax credit, including but not limited to a description of departmental personnel tasked with processing and certifying the qualified internship tax credit applications;

(3) An analysis and summary on the data points found within the qualified internship tax credit applications submitted under subsection 235- (d), Hawaii Revised Statutes, and certificates of claim under subsection 235- (f), Hawaii Revised Statutes; and

(4) An analysis on the effectiveness of the qualified internship tax credit as an incentive to encourage employment of qualified interns.

SECTION 4. (a) The department of taxation shall submit a report on the qualified internship tax credit to the legislature no later than January 1, 2025.

(b) The report shall include:

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

(2) The total number of taxpayers for which a credit was issued for each taxable year; and

(3) Information on the department's process in administering the qualified internship tax credit, including but not limited to a description of departmental personnel tasked with verifying and issuing the qualified internship tax credit.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the establishment and implementation of the qualified internship tax credit.

The sums appropriated shall be expended by the department of taxation for the purposes of this Act.

SECTION 6. New statutory material is underscored.

SECTION 7. This Act shall take effect on January 1, 2050; provided that this Act shall apply to taxable years beginning after December 31, 2023.

THE SENATE	S.B. NO.	801
THIRTY-SECOND LEGISLATURE, 2023		S.D. 1
STATE OF HAWAII