HRS § 235-110.9 — High technology business investment tax credit


§235-110.9 High technology business
investment tax credit. (a) There shall be allowed to each taxpayer
subject to the taxes imposed by this chapter a high technology business
investment 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 investment was made and the following four years provided the credit is
properly claimed. The tax credit shall be as follows:
(1) In the year the investment was made, thirty-five
per cent;
(2) In the first year following the year in which the
investment was made, twenty-five per cent;
(3) In the second year following the investment,
twenty per cent;
(4) In the third year following the investment, ten
per cent; and
(5) In the fourth year following the investment, ten
per cent;
of the investment made by the taxpayer in each
qualified high technology business, up to a maximum allowed credit in the year
the investment was made, $700,000; in the first year following the year in
which the investment was made, $500,000; in the second year following the year
in which the investment was made, $400,000; in the third year following the
year in which the investment was made, $200,000; and in the fourth year
following the year in which the investment was made, $200,000.
(b) The credit allowed under this section
shall be claimed against the net income tax liability for the taxable year.
For the purpose of this section, "net income tax liability" means net
income tax liability reduced by all other credits allowed under this chapter.
(c) If the tax credit under this section
exceeds the taxpayer's income tax liability for any of the five years that the
credit is taken, the excess of the tax credit over liability may be used as a
credit against the taxpayer's income tax liability in subsequent years until
exhausted. Every claim, 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.
(d) If at the close of any taxable year in the
five-year period in subsection (a):
(1) The business no longer qualifies as a qualified
high technology business;
(2) The business or an interest in the business has
been sold by the taxpayer investing in the qualified high technology business;
or
(3) The taxpayer has withdrawn the taxpayer's
investment wholly or partially from the qualified high technology business;
the credit claimed under this section shall be
recaptured. The recapture shall be equal to ten per cent of the amount of the
total tax credit claimed under this section in the preceding two taxable
years. The amount of the credit recaptured shall apply only to the investment
in the particular qualified high technology business that meets the
requirements of paragraph (1), (2), or (3). The recapture provisions of this
subsection shall not apply to a tax credit claimed for a qualified high
technology business that does not fall within the provisions of paragraph (1),
(2), or (3). The amount of the recaptured tax credit determined under this
subsection shall be added to the taxpayer's tax liability for the taxable year
in which the recapture occurs under this subsection.
(e) Every taxpayer, before March 31 of each
year in which an investment in a qualified high technology business was made in
the previous taxable year, shall submit a written, certified statement to the
director of taxation identifying:
(1) Qualified investments, 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.
(f) The department 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 investment costs upon which the tax credit is based;
(2) Verify the nature and amount of the qualifying
investments;
(3) Total all qualifying and cumulative investments
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 shall issue a certificate to the taxpayer verifying
information submitted to the department, including qualifying investment
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.
The director of taxation may assess and collect
a fee to offset the costs of certifying tax credits 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.
(g) As used in this section:
"Investment tax credit allocation
ratio" means, with respect to a taxpayer that has made an investment in a
qualified high technology business, the ratio of:
(1) The amount of the credit under this section that
is, or is to be, received by or allocated to the taxpayer over the life of the
investment, as a result of the investment; to
(2) The amount of the investment in the qualified
high technology business.
"Qualified high technology business"
means a business, employing or owning capital or property, or maintaining an
office, in this State; provided that:
(1) More than fifty per cent of its total business
activities are qualified research; and provided further that the business
conducts more than seventy-five per cent of its qualified research in this
State; or
(2) More than seventy-five per cent of its gross
income is derived from qualified research; and provided further that this
income is received from:
(A) Products sold from, manufactured in, or
produced in this State; or
(B) Services performed in this State.
"Qualified research" means the same
as defined in section 235-7.3.
(h) Common law principles, including the
doctrine of economic substance and business purpose, shall apply to any
investment. There exists a presumption that a transaction satisfies the
doctrine of economic substance and business purpose to the extent that the
special allocation of the high technology business tax credit has an investment
tax credit ratio of 1.5 or less of credit for every dollar invested.
Transactions for which an investment tax credit
allocation ratio greater than 1.5 but not more than 2.0 of credit for every
dollar invested and claimed may be reviewed by the department for applicable
doctrines of economic substance and business purpose.
Businesses claiming a tax credit for
transactions with investment tax credit allocation ratios greater than 2.0 of
credit for every dollar invested shall substantiate economic merit and business
purpose consistent with this section.
(i) For investments made on or after May 1,
2009, notwithstanding any other law to the contrary, no allocations, special or
otherwise, of credits under this section may exceed the amount of the
investment made by the taxpayer ultimately claiming this credit; and investment
tax credit allocation ratios greater than 1.0 of credit for every dollar
invested shall not be allowed. In addition, the credit shall be allowed only
in accordance with subsection (a).
(j) This section shall not apply to taxable
years beginning after December 31, 2010.