REPORT TITLE:
Taxation; Aircraft Leases


DESCRIPTION:
Gives taxpayers an aircraft operating lease investment income
tax credit that is deductible from the net income tax liability
of a lessee of an aircraft under an operating lease.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2706
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      SECTION 1.  The legislature finds that the geographical
 
 2 nature of Hawaii is unique in that it is composed of separate and
 
 3 distinct islands, and therefore travel among these islands is
 
 4 dependent solely on the availability of commercial modes of
 
 5 transportation, primarily air travel.
 
 6      The legislature further finds that the interisland
 
 7 transportation needs of Hawaii's residents, as well as those
 
 8 tourists who wish to experience the beauty of each island, are
 
 9 currently served by commercial air carriers that provide
 
10 frequent, affordable, and necessary means of intrastate
 
11 transportation to our residents and tourists alike, thus
 
12 differentiating these air carriers by the necessary service they
 
13 provide.
 
14      The legislature finds that Hawaii is currently served by two
 
15 major interisland air carriers that have made and will continue
 
16 to make capital investments to assure that our residents continue
 
17 to be best served in their interisland transportation needs.  In
 
18 addition, the service provided by these two interisland carriers
 
19 also provides a necessary service to Hawaii's tourists and
 
20 supports the tourism market on each major island.
 

 
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 1      Finally, the legislature finds that the use of stage 3
 
 2 aircraft, that operate with reduced noise levels, is desirable
 
 3 and should be encouraged by an operating lease investment income
 
 4 tax credit.
 
 5      The purpose of this Act is to give taxpayers an aircraft
 
 6 operating lease investment income tax credit that is deductible
 
 7 from the net income tax liability of a lessee of a stage 3
 
 8 aircraft under an operating lease.
 
 9      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
 
10 by adding a new section to be appropriately designated and to
 
11 read as follows:
 
12      "§235-    Aircraft operating lease investment tax credit.
 
13 (a)  There shall be allowed to each lessee of an aircraft under
 
14 an operating lease who is subject to the tax imposed by this
 
15 chapter, an aircraft operating lease investment tax credit which
 
16 shall be deductible from the lessee's net income tax liability,
 
17 if any, imposed by this chapter for the taxable year in which the
 
18 credit is properly claimed.
 
19      (b)  The credit shall be an amount equal to two per cent of
 
20 the lease rent paid by the lessee to a lessor for an aircraft
 
21 under an operating lease during the taxable year.
 
22      (c)  If the aircraft operating lease investment tax credit
 
23 allowed under subsection (a) exceeds the lessee's net income tax
 

 
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 1 liability, the excess of credit over liability shall be refunded
 
 2 to the lessee; provided that no refunds or payment on account of
 
 3 the tax credit allowed by this section shall be made for amounts
 
 4 less than $1.
 
 5      (d)  All claims for tax credits under this section,
 
 6 including any amended claims, shall be filed on or before the end
 
 7 of the twelfth month following the close of the taxable year for
 
 8 which the credits may be claimed.  Failure to comply with the
 
 9 foregoing provision shall constitute a waiver of the right to
 
10 claim the credit.
 
11      (e)  Application for the aircraft operating lease investment
 
12 tax credit shall be upon forms provided by the department of
 
13 taxation.
 
14      (f)  As used in this section:
 
15      "Aircraft" means any craft or artificial contrivance used
 
16 for navigation through the air, all related components, including
 
17 without limitation, engines, hydraulic and electrical systems,
 
18 and all other components which are or are designed to be an
 
19 integral part of an aircraft, that are:
 
20      (1)  Leased to a lessee under an operating lease entered
 
21           into before or after the effective date of this
 
22           section;
 
23      (2)  Used by the lessee for commercial transportation for
 

 
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 1           compensation or hire of passengers or goods or other
 
 2           tangible personal property between points in this
 
 3           State; and
 
 4      (3)  Stage 3 compliant.
 
 5      "Operating lease" means a lease for an aircraft:
 
 6      (1)  The lease rent from which is subject to the general
 
 7           excise tax under chapter 237 at the rate of four per
 
 8           cent; and
 
 9      (2)  That is not a financing, capital, or other lease which
 
10           would allow the lessee to claim a capital goods excise
 
11           tax credit under section 235-110.7.
 
12      "Stage 3 compliant" means that the aircraft is a stage 3
 
13 aircraft as defined in section 36.1(f)(6) of title 14, Code of
 
14 Federal Regulations under the Airport Noise and Capacity Act of
 
15 1990 (49 U.S.C. 47521 to 47533), Appendix C to part 36 of title
 
16 14, Code of Federal Regulations, and Federal Aviation
 
17 Administration Advisory Circular 36-3G, Estimated Airplane Noise
 
18 Levels in A-Weighted Decibels, or any successor documents thereto
 
19 that may be in effect, at the inception of the operating lease."
 
20      SECTION 3.  New statutory material is underscored.
 
21      SECTION 4.  This Act, upon its approval, shall apply to
 
22 taxable years beginning after December 31, 1999, and shall apply
 

 
 
 
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 1 to lease rent paid under an operating lease subject to section
 
 2 235-     , Hawaii Revised Statutes, after June 30, 2000.