REPORT TITLE:
Tax Credits; Felons


DESCRIPTION:
Tax credits for employers hiring recently released persons who
have been incarcerated for conviction of felonies.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1222       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "§235-    Credit for employment of parolees.  (a)  There
 
 5 shall be allowed to each taxpayer subject to the tax imposed by
 
 6 this chapter, a credit for employment of a qualified parolee.
 
 7 The credit shall be deductible from the taxpayer's net income tax
 
 8 liability, if any, imposed by this chapter for the taxable year
 
 9 in which the credit is properly claimed.
 
10      (b)  The amount of the credit determined under this section
 
11 for the taxable year shall be equal to twenty per cent of the
 
12 qualified first-year wages for that year.  The amount of the
 
13 qualified first-year wages that may be taken into account with
 
14 respect to any person shall not exceed $6,000.
 
15      (c)  For purposes of this section:
 
16      "Hiring date" means the day a qualified parolee is employed
 
17 by the employer.
 
18      "Qualified first-year wages" means, with respect to a
 
19 qualified parolee, qualified wages attributable to service
 

 
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 1 rendered during the first twelve months from the hiring date.
 
 2      "Qualified parolee" means a person incarcerated for any
 
 3 felony conviction who was released from incarceration within the
 
 4 twelve months preceding the hiring date.
 
 5      "Qualified wages" means the wages paid or owed by the
 
 6 employer during the taxable year to a qualified parolee and more
 
 7 than one-half of the wages paid or owed to a qualified parolee is
 
 8 for services performed in a trade or business of the employer.
 
 9      "Wages" has the meaning given to terms by section 3306(b) of
 
10 the Internal Revenue Code (determined without regard to any
 
11 dollar limitation contained in the Internal Revenue Code
 
12 section).  "Wages" shall not include:
 
13      (1)  Amounts paid or owed by an employer for any period to a
 
14           qualified parolee for whom the employer receives state
 
15           or federally funded payments for on-the-job training of
 
16           the qualified parolee for the period; and
 
17      (2)  If the principal place of employment is at a plant or
 
18           facility, and there is a strike or lockout involving a
 
19           qualified parolee at the plant or facility, amounts
 
20           paid or owed by the employer to the qualified parolee
 
21           for services which are the same as, or substantially
 
22           similar to, those services performed by employees
 
23           participating in, or affected by, the strike or lockout
 

 
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 1           during the period of strike or lockout.
 
 2      (d)  The following wages paid to a qualified parolee are
 
 3 ineligible to be claimed by the employer for this credit:
 
 4      (1)  No wages shall be taken into account under this section
 
 5           with respect to a qualified parolee who:
 
 6           (A)  Bears any of the relationships described in
 
 7                section 152(a)(1) to (8) of the Internal Revenue
 
 8                Code to the taxpayer, or, if the taxpayer is a
 
 9                corporation, to an individual who owns, directly
 
10                or indirectly, more than fifty per cent in value
 
11                of the outstanding stock of the corporation
 
12                (determined with the application of section 267(c)
 
13                of the Internal Revenue Code);
 
14           (B)  If the taxpayer is an estate or trust, is a
 
15                grantor, beneficiary, or fiduciary of the estate
 
16                or trust, or is an individual who bears any of the
 
17                relationships described in section 152(a)(1) to
 
18                (8) of the Internal Revenue Code to a grantor,
 
19                beneficiary, or fiduciary of the estate or trust;
 
20                or
 
21           (C)  Is a dependent (described in section 152(a)(9) of
 
22                the Internal Revenue Code) of the taxpayer, or, if
 
23                the taxpayer is a corporation, of an individual
 

 
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                                     H.B. NO.1222       
                                                        
                                                        

 
 1                described in subparagraph (A), or, if the taxpayer
 
 2                is an estate or trust, of a grantor, beneficiary,
 
 3                or fiduciary of the estate or trust.
 
 4      (2)  No wages shall be taken into account under this section
 
 5           with respect to a qualified parolee unless the
 
 6           qualified parolee either:
 
 7           (A)  Is employed by the employer at least ninety days;
 
 8                or
 
 9           (B)  Has completed at least one hundred-twenty hours of
 
10                services performed for the employer.
 
11      (e)  An employer claiming tax credits under this section
 
12 shall obtain written certification from the Hawaii paroling
 
13 authority that the qualified parolee was released, in fact, from
 
14 incarceration within the twelve months immediately preceding
 
15 employment by the employer.
 
16      (f)  In the case of a successor employer referred to in
 
17 section 3306(b)(1) of the Internal Revenue Code, the
 
18 determination of the amount of the tax credit allowable under
 
19 this section with respect to wages paid by the successor employer
 
20 shall be made in the same manner as if the wages were paid by the
 
21 predecessor employer referred to in the section.
 
22      (g)  No credit shall be determined under this section with
 
23 respect to wages paid by an employer to a qualified parolee for
 

 
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                                     H.B. NO.1222       
                                                        
                                                        

 
 1 services performed by the qualified parolee for another person
 
 2 unless the amount reasonably expected to be received by the
 
 3 employer for the services from the other person exceeds the wages
 
 4 paid by the employer to the qualified parolee for those services.
 
 5      (h)  The credit allowed under this section shall be claimed
 
 6 against net income tax liability for the taxable year.  A tax
 
 7 credit under this section that exceeds the taxpayer's income tax
 
 8 liability may be used as a credit against the taxpayer's income
 
 9 tax liability in subsequent years until exhausted.
 
10      (i)  All claims for tax credits under this section,
 
11 including any amended claims, shall be filed on or before the end
 
12 of the twelfth month following the close of the taxable year for
 
13 which the credits may be claimed.  Failure to comply with the
 
14 foregoing provision shall constitute a waiver of the right to
 
15 claim the credit.
 
16      (j)  No deduction shall be allowed for that portion of the
 
17 wages or salaries paid or incurred for the taxable year that is
 
18 equal to the amount of the credit determined under this section.
 
19      (k)  The director of taxation may adopt any rules under
 
20 chapter 91 and forms necessary to carry out this section."
 
21      SECTION 2.  Chapter 353, Hawaii Revised Statutes, is amended
 
22 by adding a new section to Part II to be appropriately designated
 
23 and to read as follows:
 

 
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 1      "§353-    Certification of parole for employment tax credit.
 
 2 The Hawaii paroling authority shall provide, upon request by an
 
 3 employer pursuant to section 235-  (e), a written certification
 
 4 of the parole status of the person for whom the employer submits
 
 5 the request."
 
 6      SECTION 3.  New statutory material is underscored.
 
 7      SECTION 4.  This Act shall take effect upon approval;
 
 8 provided that section 1 shall apply to taxable years beginning
 
 9 after December 31, 1998.
 
10 
 
11                           INTRODUCED BY:  _______________________