REPORT TITLE:
Taxation


DESCRIPTION:
Exempts certain activities of call centers from the general
excise tax and the public service company tax.  Specifies the
terms and conditions, and amount of qualified improvement tax
credits, allowed for qualified improvement costs for property
designated primarily for resort or hotel use by the counties, or
property in which the primary purpose is for hotel or resort use
or commercial or recreational use to support or service a hotel
or resort use.  Disallows TAT credits from qualified improvement
costs.  Requires the director of taxation to develop procedures
for the distribution and share of the tax credits.  Authorizes
the director of taxation to develop for each qualified taxpayer,
a plan that phases in over a ten-year period, the qualified
improvment tax credits claimed by the taxpayer.  (SB2409 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2409
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 1
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 237, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "§237-    Call centers; exemption; engaging in business;
 
 5 definitions.  (a)  In addition to the amounts not taxable under
 
 6 section 237-24, this chapter shall not apply to amounts received
 
 7 from a person operating a call center by a person engaged in
 
 8 business as a telecommunications common carrier for interstate or
 
 9 foreign telecommunications services, including toll-free
 
10 telecommunications, telecommunication capabilities for electronic
 
11 mail, voice, and data telecommunication, computerized telephone
 
12 support, facsimile, wide area telecommunication services, or
 
13 computer-to-computer communication.
 
14      (b)  The establishment of a call center in this State by any
 
15 person shall not be used by itself by the State to find that any
 
16 other part of the person's business is engaged in business in
 
17 this State for the purposes of this chapter.  Gross income or
 
18 gross proceeds received by a call center for customer service and
 
19 support shall be exempt from the measure of taxes imposed by this
 
20 chapter.
 

 
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 1      (c)  The department, by rule, may provide that the person
 
 2 providing the telecommunications service may take from the person
 
 3 operating a call center a certificate, in a form that the
 
 4 department shall prescribe, certifying that the amounts received
 
 5 for telecommunications services are for operating a call center.
 
 6 If the certificate is required by rule of the department, the
 
 7 absence of the certificate in itself shall give rise to the
 
 8 presumption that the amounts received from the sale of
 
 9 telecommunications services are not for operating a call center.
 
10      (d)  As used in this section:
 
11      "Call center" means a physical or electronic operation that
 
12 focuses on providing customer service and support for computer
 
13 hardware and software companies, manufacturing companies,
 
14 software service organizations, and telecommunications support
 
15 services, within an organization in which a managed group of
 
16 individuals spend most of their time engaging in business by
 
17 telephone, usually working in a computer-automated environment;
 
18 provided that the operation shall not include telemarketing or
 
19 sales.
 
20      "Customer service and support" means product support,
 
21 technical assistance, sales support, phone or computer-based
 
22 configuration assistance, software upgrade help lines, and
 
23 traditional help desk services.
 

 
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 1      "Telecommunications common carrier" means any person that
 
 2 owns, operates, manages, or controls any facility used to furnish
 
 3 telecommunications services for profit to the public, or to
 
 4 classes of users as to be effectively available to the public,
 
 5 engaged in the provision of services, such as voice, data, image,
 
 6 graphics, and video services, that make use of all or part of
 
 7 their transmission facilities, switches, broadcast equipment,
 
 8 signalling, or control devices.
 
 9      "Telecommunications service" or "telecommunications" means
 
10 the offering of transmission between or among points specified by
 
11 a user, of information of the user's choosing, including voice,
 
12 data, image, graphics, and video without change in the form or
 
13 content of the information, as sent and received, by means of
 
14 electromagnetic transmission, or other similarly capable means of
 
15 transmission, with or without benefit of any closed transmission
 
16 medium.
 
17      (e)  This section shall not apply to gross proceeds or gross
 
18 income received after June 30, 2010."
 
19      SECTION 2.  Chapter 239, Hawaii Revised Statutes, is amended
 
20 by adding a new section to be appropriately designated and to
 
21 read as follows:
 
22      "§239-    Call centers; exemption; engaging in business;
 
23 definitions.  (a)  This chapter shall not apply to amounts
 

 
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 1 received from a person operating a call center by a person
 
 2 engaged in business as a telecommunications common carrier for
 
 3 interstate or foreign telecommunications services, including
 
 4 toll-free telecommunications, telecommunication capabilities for
 
 5 electronic mail, voice and data telecommunication, computerized
 
 6 telephone support, facsimile, wide area telecommunication
 
 7 services, or computer to computer communication.
 
 8      (b)  The department, by rule, may provide that the person
 
 9 providing the telecommunications service may take from the person
 
10 operating a call center a certificate, in a form that the
 
11 department shall prescribe, certifying that the amounts received
 
12 for telecommunications services are for operating a call center.
 
13 If the certificate is required by rule of the department, the
 
14 absence of the certificate in itself shall give rise to the
 
15 presumption that the amounts received from the sale of
 
16 telecommunications services are not for operating a call center.
 
17      (c)  As used in this section:
 
18      "Call center" means a physical or electronic operation that
 
19 focuses on providing customer service and support for computer
 
20 hardware and software companies, manufacturing companies,
 
21 software service organizations, and telecommunications support
 
22 services, within an organization in which a managed group of
 
23 individuals spend most of their time engaging in business by
 

 
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 1 telephone, usually working in a computer-automated environment;
 
 2 provided that the operation shall not include telemarketing or
 
 3 sales.
 
 4      "Customer service and support" means product support,
 
 5 technical assistance, sales support, phone or computer-based
 
 6 configuration assistance, software upgrade help lines, and
 
 7 traditional help desk services.
 
 8      (d)  This section shall not apply to income received after
 
 9 June 30, 2010."
 
10      SECTION 3.  Section 235D-1, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "[[]§235D-1[]]  Definitions.  Whenever used in this chapter,
 
13 unless the context otherwise requires:
 
14      "Net income tax liability" means income tax liability
 
15 reduced by all other allowed credits, as determined under chapter
 
16 235.
 
17      ["Qualified general facility" means any building or
 
18 improvement that is not a qualified resort facility.]
 
19      "Qualified improvement costs" means any capitalized costs
 
20 for construction and equipment of a permanent nature [related to
 
21 a qualified resort facility or a qualified general facility,
 
22 including infrastructure costs,]:
 

 
 
 
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 1      (1)  On property designated primarily for hotel or resort
 
 2           use by the applicable county zoning ordinances or
 
 3           general plan; or
 
 4      (2)  On property not so designated, but the primary purpose
 
 5           of which is for:
 
 6           (A)  Hotel or resort use; or
 
 7           (B)  Commercial or recreational use to support or
 
 8                service a hotel or resort use;
 
 9 but shall not include the costs for which another tax credit was
 
10 claimed for the taxable year.
 
11      ["Qualified resort facility" means any building or
 
12 improvement located or to be located:
 
13      (1)  On property designated primarily for resort or hotel
 
14           use by the applicable county zoning ordinances or
 
15           general plan; or
 
16      (2)  On property not so designated, but the primary purpose
 
17           of which is for commercial or recreational use to
 
18           support or service a hotel or resort use, such as a
 
19           golf course, golf course clubhouse, or retail center.]"
 
20      SECTION 4.  Section 235D-2, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "[[]§235D-2[]]  Qualified improvement tax credit.(a)
 
23 There shall be allowed to each taxpayer subject to the taxes
 

 
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 1 imposed by chapters 235, 237, [237D,] and 239, a qualified
 
 2 improvement tax credit, which shall be available to reduce the
 
 3 taxpayer's net income tax liability, general excise tax,
 
 4 [transient accommodations tax,] or public service company tax
 
 5 imposed by these chapters.
 
 6      (b)  [The total amount of the qualified improvement tax
 
 7 credit shall be determined by applying the applicable credit
 
 8 percentage to the qualified improvement costs paid by the
 
 9 taxpayer in the taxable year.]  For qualified improvement costs
 
10 [to a qualified resort facility totalling $1,000,000 or more over
 
11 a three-year period, the applicable credit percentage shall be
 
12           per cent.  For qualified improvement costs to a
 
13 qualified general facility totalling $1,000,000 or more over a
 
14 three-year period, the applicable credit percentage shall be
 
15           per cent.] totalling over a three-year period:
 
16      (1)  $1,000,000 and over, but not over $5,000,000, the
 
17           applicable credit percentage shall be ten per cent;
 
18      (2)  Over $5,000,000, but not over $10,000,000, the
 
19           applicable credit percentage shall be fifteen per cent;
 
20           and
 
21      (3)  Over $10,000,000, the applicable credit percentage
 
22           shall be twenty per cent; provided that the taxpayer
 
23           shall:
 

 
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 1           (A)  Pay all employees the prevailing wages if the
 
 2                taxpayer is the general contractor on the project;
 
 3                or
 
 4           (B)  Provide, in any contract let in connection with
 
 5                the project, stipulations requiring that the
 
 6                contractor and any subcontractor pay the
 
 7                prevailing wages for the employees working on the
 
 8                project.
 
 9      To qualify for a credit of fifteen per cent or more under
 
10 this section, any taxpayer who purchases an operating hotel and
 
11 closes the hotel for renovation shall retain nonsupervisory,
 
12 nontipped employees on the payroll for at least six months
 
13 following the closure of the hotel.
 
14      (c)  [The] Each tax credit allowed under this chapter may be
 
15 taken over a period not to exceed ten consecutive taxable years.
 
16 The taxpayer shall elect the period and annual allocation of
 
17 [the] each tax credit in the initial year for which the credit is
 
18 claimed.
 
19      (d)  In the case of a partnership, S corporation, estate, or
 
20 trust, the allowable tax credit is for qualified improvement
 
21 costs incurred by the entity for the taxable year.  The costs
 
22 upon which the tax credit is computed shall be determined at the
 
23 entity level.  Distribution and share of the tax credit shall be
 

 
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 1 determined by [rules adopted pursuant to section 235D-4.]
 
 2 procedures developed by the director of taxation.
 
 3      (e)  If a deduction is taken under section 179 (with respect
 
 4 to election to expense depreciable business assets) of the
 
 5 Internal Revenue Code of 1986, as amended, no tax credit shall be
 
 6 allowed for that portion of the qualified improvement costs for
 
 7 which the deduction is taken.
 
 8      (f)  The basis of eligible property for depreciation or
 
 9 accelerated cost recovery system purposes for state income taxes
 
10 shall be reduced by the amount of credit allowed and claimed
 
11 under this chapter.
 
12      (g)  [The] Each tax credit allowed under this chapter shall
 
13 be claimed against any or all net income tax liability, general
 
14 excise tax, [transient accommodations tax,] or public service
 
15 company tax for the taxable [years over] year in which the credit
 
16 is claimed.
 
17      (h)  The director of taxation may develop for each qualified
 
18 taxpayer, a plan that phases in over a ten-year period, the
 
19 credits claimed by the taxpayer under this section."
 
20      SECTION 5.  Section 235D-3, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "[[]§235D-3[]]  No refund; failure to file.  If the amount
 
23 of the tax credit claimed [in any year] exceeds the total of the
 

 
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 1 taxpayer's net income tax liability, general excise tax,
 
 2 [transient accommodations tax,] or public service company tax
 
 3 payable for [that] the taxable year, the excess of credit over
 
 4 liability shall not be refunded to the taxpayer.  All claims for
 
 5 a tax credit under this chapter shall be filed on or before the
 
 6 end of the twelfth month following the close of the [initial]
 
 7 taxable year for which the credit [may be] is claimed.  Failure
 
 8 to [comply with] meet the filing requirements of this section
 
 9 shall constitute a waiver of the right to claim the credit."
 
10      SECTION 6.  Section 235D-4, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "[[]§235D-4[]]  Forms; rules.  The director of taxation
 
13 shall prepare forms and procedures as may be necessary to claim a
 
14 tax credit under this chapter.  The director of taxation may also
 
15 require the taxpayer to furnish information to ascertain the
 
16 validity of a claim for a tax credit made under this chapter [and
 
17 may adopt rules necessary to effectuate the purposes of this
 
18 chapter pursuant to chapter 91]."
 
19      SECTION 7.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 8.  This Act shall take effect on July 1, 2000;
 
22 provided that:
 

 
 
 
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 1      (1)  Section 1 shall apply to gross income or gross proceeds
 
 2           received after June 30, 2000; and
 
 3      (2)  Section 2 shall apply to the entire gross income
 
 4           received by a public service company for the fiscal
 
 5           year preceding July 1, 2001.
 
 6      In the case of a public service company operating on a
 
 7 calendar year, this Act shall apply to the entire gross income
 
 8 received for the calendar year in which July 1, 2001, occurs and
 
 9 for fiscal years thereafter.