REPORT TITLE:
Construction Industry

DESCRIPTION:
Allows an income tax credit for federal subcontractors and
federal general contractors.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2131
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO FEDERAL CONSTRUCTION.



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-   Federal contractor construction tax credit.  (a)
 
 5 There shall be allowed to each federal general contractor and
 
 6 federal subcontractor subject to the tax imposed by this chapter
 
 7 a federal contractor construction tax credit which shall be
 
 8 deductible from the federal subcontractor's or federal general
 
 9 contractor's net income tax liability, if any, imposed by this
 
10 chapter for the taxable year in which the credit is properly
 
11 claimed.
 
12      (b)  For federal subcontractors, the amount of the credit
 
13 shall be equal to the general excise tax imposed under chapter
 
14 237 and paid by the federal subcontractor to the State at the
 
15 four per cent rate for the taxable year.  For federal general
 
16 contractors, the amount of the credit shall be equal to the
 
17 general excise tax imposed under chapter 237 and paid by the
 
18 federal general contractor to the State at the four per cent rate
 
19 on a federal contract up to the first $20,000,000 of gross income
 

 
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 1 or gross proceeds from a federal contract.
 
 2      (c)  In the case of a partnership, S corporation, estate, or
 
 3 trust, the tax credit allowable is based upon the federal general
 
 4 contractor's or federal subcontractor's income included in the
 
 5 general excise tax under chapter 237 levied and paid at the four
 
 6 per cent rate for the taxable year.  The tax credit shall be
 
 7 determined at the entity level.  Distribution and share of credit
 
 8 shall be determined pursuant to section 235-110.7(a).
 
 9      (d)  Each tax credit claimed under this section shall relate
 
10 to a single federal construction contract including any
 
11 extensions of the federal construction contract.
 
12      (e)  As used in this section:
 
13      "Federal construction contract" means a construction
 
14 contract performed in Hawaii and entered into with the United
 
15 States including any agency or instrumentality thereof excluding
 
16 national banks and scientific contracts exempt under section 237-
 
17 26.
 
18      "Federal general contractor" means a general contractor
 
19 licensed under chapter 237 who receives gross income or gross
 
20 proceeds from a federal construction contract entered into by the
 
21 general contractor with the United States as the general
 
22 contractor.
 
23      "Federal subcontractor" means a subcontractor licensed under
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 chapter 237 who receives gross income or gross proceeds from a
 
 2 federal construction contract entered into by the subcontractor
 
 3 with a federal general contractor.
 
 4      (f)  The tax credit allowed under this section shall be
 
 5 claimed against the net income tax liability for the taxable
 
 6 year.  For the purpose of this tax credit, "net income tax
 
 7 liability" means net income tax liability reduced by all other
 
 8 tax credits under this chapter.
 
 9      (g)  If the tax credit under this section exceeds the
 
10 taxpayer's tax liability, the excess of tax credit over liability
 
11 may be carried over and applied in subsequent years until
 
12 exhausted.  All claims for a tax credit under this section must
 
13 be filed on or before the end of the twelfth month following the
 
14 close of the taxable year for which the tax credit may be
 
15 claimed.  Failure to comply with this subsection shall constitute
 
16 a waiver of the tax credit.
 
17      (h)  The director of taxation shall prepare any forms that
 
18 may be necessary to claim a tax credit under this section.  The
 
19 director may also require the taxpayer to furnish information
 
20 necessary to ascertain the validity of a claim for tax credit
 
21 made under this section and may adopt rules necessary to
 
22 effectuate the purposes of this section pursuant to chapter 91."
 
23      SECTION 2.  Section 444-1, Hawaii Revised Statutes, is
 

 
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 1 amended by amending the definition of "contractor" to read as
 
 2 follows:
 
 3      ""Contractor" means any person who by oneself or through
 
 4 others offers to undertake, or holds oneself out as being able to
 
 5 undertake, or does undertake to alter, add to, subtract from,
 
 6 improve, enhance, or beautify any realty or construct, alter,
 
 7 repair, add to, subtract from, improve, move, wreck, or demolish
 
 8 any building, highway, road, railroad, excavation, or other
 
 9 structure, project, development, or improvement, or do any part
 
10 thereof, including the erection of scaffolding or other
 
11 structures or works in connection therewith.
 
12      "Contractor" includes a subcontractor, a specialty
 
13 contractor, and any person, general engineering, general
 
14 building, or specialty contractor who performs any of the
 
15 activities listed in the previous paragraph directly or
 
16 indirectly for the federal government[.], to the extent allowed
 
17 under federal law."
 
18      SECTION 3.  If any provision of this Act, or the application
 
19 thereof to any person or circumstance is held invalid, the
 
20 invalidity does not affect other provisions of applications of
 
21 the Act which can be given effect without the invalid provision
 
22 or application, and to this end the provisions of this Act are
 
23 severable.
 

 
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 1      SECTION 4.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 5.  This Act, upon its approval, shall apply to
 
 4 taxable years beginning after December 31, 2000.