REPORT TITLE:
Taxation


DESCRIPTION:
Exempts certain activities of call centers from the general
excise tax and the public service company tax.  Specifies the
terms, conditions, and amount of qualified improvement tax
credits, allowed for qualified improvement costs for property
designated primarily for resort/commercial or hotel use by the
counties, property on which the primary purpose is for hotel or
resort use, or residential property situated in those areas, and
including condominiums and time share facilities.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TAXATION.



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

 1                              PART I
 
 2      SECTION 1.  Chapter 237, Hawaii Revised Statutes, is amended
 
 3 by adding a new section to be appropriately designated and to
 
 4 read as follows:
 
 5      "§237-      Call centers; exemption; engaging in business;
 
 6 definitions.  (a)  This chapter shall not apply to amounts
 
 7 received from a person operating a call center by a person
 
 8 engaged in business as a telecommunications common carrier for
 
 9 interstate or foreign telecommunications services, including
 
10 toll-free telecommunications, telecommunications capabilities for
 
11 electronic mail, voice, and data telecommunications, computerized
 
12 telephone support, facsimile, wide area telecommunications
 
13 services, or 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
 

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

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

 


 

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

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

 
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 1 including infrastructure costs,]:
 
 2      (1)  On property designated primarily for hotel or
 
 3           resort/commercial use including time share use by the
 
 4           applicable county zoning ordinances or general plan;
 
 5      (2)  On residential property within an area designated for
 
 6           hotel, resort, or time share use by the applicable
 
 7           county zoning ordinances or general plan; or
 
 8      (3)  On property not so designated, but the primary purpose
 
 9           of which is for hotel or resort use including time
 
10           share use;
 
11 but shall not include the costs for which another tax credit was
 
12 claimed for the taxable year.
 
13      ["Qualified resort facility" means any building or
 
14 improvement located or to be located:
 
15      (1)  On property designated primarily for resort or hotel
 
16           use by the applicable county zoning ordinances or
 
17           general plan; or
 
18      (2)  On property not so designated, but the primary purpose
 
19           of which is for commercial or recreational use to
 
20           support or service a hotel or resort use, such as a
 
21           golf course, golf course clubhouse, or retail center.]
 
22      "Taxpayer" means a taxpayer under chapter 235, and includes:
 
23      (1)  An association of apartment owners; or
 

 
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 1      (2)  A time share owners association."
 
 2      SECTION 4.  Section 235D-2, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "[[]§235D-2[]]  Qualified improvement tax credit.(a)
 
 5 There shall be allowed to each taxpayer subject to the taxes
 
 6 imposed by chapters 235, 237, [237D,] and 239, a qualified
 
 7 improvement tax credit, which shall be available to reduce the
 
 8 taxpayer's net income tax liability, general excise tax,
 
 9 [transient accommodations tax,] or public service company tax
 
10 imposed by these chapters.
 
11      (b)  [The total amount of the qualified improvement tax
 
12 credit shall be determined by applying the applicable credit
 
13 percentage to the qualified improvement costs paid by the
 
14 taxpayer in the taxable year.]  For qualified improvement costs
 
15 [to a qualified resort facility totalling $1,000,000 or more over
 
16 a three-year period, the applicable credit percentage shall be
 
17           per cent.  For qualified improvement costs to a
 
18 qualified general facility totalling $1,000,000 or more over a
 
19 three-year period, the applicable credit percentage shall be
 
20       per cent.] totaling over a three-year period:
 
21      (1)  Less than $1,000,000, the applicable credit percentage
 
22           shall be four per cent;
 
23      (2)  $1,000,000 and over, but not over $5,000,000, the
 

 
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 1           applicable credit percentage shall be ten per cent;
 
 2      (3)  Over $5,000,000, but not over $10,000,000, the
 
 3           applicable credit percentage shall be fifteen per cent;
 
 4      (4)  Over $10,000,000, the applicable credit percentage
 
 5           shall be fifteen per cent; provided that the taxpayer:
 
 6           (A)  Pays all employees the prevailing wages under
 
 7                chapter 104 if the taxpayer is the general
 
 8                contractor on the project; or
 
 9           (B)  Provides, in any contract let in connection with
 
10                the project, stipulations requiring the contractor
 
11                and any subcontractor to pay the prevailing wages
 
12                under chapter 104 for the employees working on the
 
13                project; or
 
14      (5)  Over $30,000,000, the applicable credit percentage
 
15           shall be twenty per cent, notwithstanding paragraph
 
16           (4); provided that the conditions of paragraph (4)(A)
 
17           and (B) and subsection (c) are met.
 
18      To qualify for a tax credit of fifteen per cent or more
 
19 under this section, any taxpayer who purchases an operating hotel
 
20 and closes the hotel for renovation shall retain nonsupervisory,
 
21 nontipped employees on the payroll for at least six months
 
22 following the closure of the hotel.
 
23      To qualify for any tax credit, the taxpayer shall be in
 

 
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 1 compliance with all applicable federal, state, and county
 
 2 statutes, rules, and regulations.
 
 3      The department of taxation may request the assistance of the
 
 4 department of labor and industrial relations in administering the
 
 5 provisions of this subsection regarding prevailing wages and
 
 6 nonsupervisory, nontipped employees.  If necessary, the
 
 7 department of taxation may request documentation from the
 
 8 taxpayer to assist in administering this subsection.
 
 9      Even if a taxpayer chooses not to or cannot qualify under
 
10 this subsection and subsection (c) for the twenty per cent tax
 
11 credit, the taxpayer may claim a credit under paragraph (4).
 
12      (c)  The twenty per cent tax credit provided in subsection
 
13 (b)(4) shall not be allowed unless:
 
14      (1)  The department of business, economic development, and
 
15           tourism certifies that without the twenty per cent tax
 
16           credit it is not economically feasible for the project
 
17           to provide an internal rate of return that will attract
 
18           investment capital to the State for the project; and
 
19      (2)  The department of taxation certifies that the project
 
20           will contribute positive tax dollars to the state
 
21           treasury within a five-year period and that the tax
 
22           credits can be phased in to prevent any negative tax
 
23           impacts on the state treasury.
 

 
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 1      [(c)  The] (d)  Each tax credit allowed under this chapter
 
 2 may be taken over a period not to exceed [ten] seven consecutive
 
 3 taxable years.  The taxpayer shall elect the period and annual
 
 4 allocation of [the] each tax credit in the initial year for which
 
 5 the credit is claimed[.], subject to subsection (i).
 
 6      [(d)] (e)  In the case of a partnership, S corporation,
 
 7 estate, or trust, the allowable tax credit is for qualified
 
 8 improvement costs incurred by the entity for the taxable year.
 
 9 The costs upon which the tax credit is computed shall be
 
10 determined at the entity level.  Distribution and share of the
 
11 tax credit shall be determined by [rules adopted pursuant to
 
12 section 235D-4.] procedures developed by the director of
 
13 taxation.
 
14      [(e)] (f)  If a deduction is taken under section 179 (with
 
15 respect to election to expense depreciable business assets) of
 
16 the Internal Revenue Code of 1986, as amended, no tax credit
 
17 shall be allowed for that portion of the qualified improvement
 
18 costs for which the deduction is taken.
 
19      [(f)] (g)  The basis of eligible property for depreciation
 
20 or accelerated cost recovery system purposes for state income
 
21 taxes shall be reduced by the amount of credit allowed and
 
22 claimed under this chapter.  In the alternative, the taxpayer
 
23 shall treat the amount of the credit allowable and claimed as a
 

 
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 1 taxable income item for the taxable year in which it is properly
 
 2 recognized under the method of accounting used to compute taxable
 
 3 income.
 
 4      [(g)] (h)  [The] Each tax credit allowed under this chapter
 
 5 shall be claimed against any or all net income tax liability,
 
 6 general excise tax, [transient accommodations tax,] or public
 
 7 service company tax for the taxable [years over] year in which
 
 8 the credit is claimed.
 
 9      (i)  The director of taxation may develop a plan for each
 
10 taxpayer that allows the tax credits claimed by the taxpayer
 
11 under this section over a seven-year period in such a manner that
 
12 when the project generates high tax revenues, the amount of the
 
13 credit allowed may be higher; or if the generated tax revenues
 
14 are lower, then the credit allowed may be lower.  In each case
 
15 the taxpayer shall be allowed to claim the total tax credit
 
16 determined under subsection (b) over the seven-year period.
 
17      The director may implement the tax credits by prescribing
 
18 tax forms and instructions that require tax reporting and payment
 
19 by deduction, exemption, or any other method to determine tax
 
20 liability with due regard to the tax credits.
 
21      (j)  No taxpayer that claims a credit under this chapter
 
22 shall claim a hotel construction and remodeling tax credit under
 
23 any provision of chapter 235."
 

 
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 1      SECTION 5.  Section 235D-3, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]§235D-3[]]  No refund; failure to file.  If the amount
 
 4 of the tax credit claimed [in any year] exceeds the total of the
 
 5 taxpayer's net income tax liability, general excise tax,
 
 6 [transient accommodations tax,] or public service company tax
 
 7 payable for [that] the taxable year, the excess of credit over
 
 8 liability shall not be refunded to the taxpayer.  All claims for
 
 9 a tax credit under this chapter shall be filed on or before the
 
10 end of the twelfth month following the close of the [initial]
 
11 taxable year for which the credit [may be] is claimed.  Failure
 
12 to [comply with] meet the filing requirements of this section
 
13 shall constitute a waiver of the right to claim the credit."
 
14      SECTION 6.  Section 235D-4, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "[[]§235D-4[]]  Forms; rules.  The director of taxation
 
17 shall prepare forms and procedures as may be necessary to claim a
 
18 tax credit under this chapter.  The director of taxation may also
 
19 require the taxpayer to furnish information to ascertain the
 
20 validity of a claim for a tax credit made under this chapter [and
 
21 may adopt rules necessary to effectuate the purposes of this
 
22 chapter pursuant to chapter 91]."
 
23      SECTION 7.  Statutory material to be repealed is bracketed.
 

 
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 1 New statutory material is underscored.
 
 2      SECTION 8.  This Act shall take effect upon its approval;
 
 3 provided that:
 
 4      (1)  Section 1 of Part I shall apply to gross income or
 
 5           gross proceeds received after June 30, 2000;
 
 6      (2)  Section 2 of Part I shall apply to the entire gross
 
 7           income received by a public service company for the
 
 8           fiscal year preceding July 1, 2001; provided that in
 
 9           the case of a public service company operating on a
 
10           calendar year basis, section 2 of Part I shall apply to
 
11           the entire gross income received for the calendar year
 
12           in which July 1, 2000, occurs and for calendar years
 
13           thereafter;
 
14      (3)  Section 235D-2, Hawaii Revised Statutes, as amended by
 
15           section 4 of Part II of this Act shall apply
 
16           retroactive to January 1, 1999;
 
17      (4)  Part II shall be repealed on January 1, 2006.