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. (SD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that the geographical nature of Hawaii is unique in that it is composed of separate and distinct islands, and therefore travel among these islands is dependent solely on the availability of commercial modes of transportation, primarily air travel.

The legislature further finds that the interisland transportation needs of Hawaii's residents, as well as those tourists who wish to experience the beauty of each island, are currently served by commercial air carriers that provide frequent, affordable, and necessary means of intrastate transportation to our residents and tourists alike, thus differentiating these air carriers by the necessary service they provide.

The legislature finds that Hawaii is currently served by two major interisland air carriers that have made and will continue to make capital investments to assure that our residents continue to be best served in their interisland transportation needs. In addition, the service provided by these two interisland carriers also provides a necessary service to Hawaii's tourists and supports the tourism market on each major island.

Finally, the legislature finds that the use of stage 3 aircraft, that operate with reduced noise levels, is desirable and should be encouraged by an operating lease investment income tax credit.

The purpose of this Act is to give taxpayers an aircraft operating lease investment income tax credit that is deductible from the net income tax liability of a lessee of a stage 3 aircraft under an operating lease.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Aircraft operating lease investment tax credit. (a) There shall be allowed to each lessee of an aircraft under an operating lease, who is subject to the tax imposed by this chapter, an aircraft operating lease investment tax credit which shall be deductible from the lessee's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The credit shall be an amount equal to       per cent of the lease rent paid by the lessee to a lessor for an aircraft under an operating lease during the taxable year.

(c) If the aircraft operating lease investment tax credit allowed under subsection (a) exceeds the lessee's net income tax liability, the excess of credit over liability shall be refunded to the lessee; provided that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

(d) All claims for tax credits under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(e) Application for the aircraft operating lease investment tax credit shall be upon forms provided by the department of taxation.

(f) As used in this section:

"Aircraft" means any craft or artificial contrivance used for navigation through the air, all related components, including without limitation, engines, hydraulic and electrical systems, and all other components which are or are designed to be an integral part of an aircraft, that are:

"Operating lease" means a lease for an aircraft:

"Stage 3 compliant" means that the aircraft is a stage 3 aircraft as defined in section 36.1(f)(6) of title 14, Code of Federal Regulations under the Airport Noise and Capacity Act of 1990 (49 U.S.C. 47521 to 47533), Appendix C to part 36 of title 14, Code of Federal Regulations, and Federal Aviation Administration Advisory Circular 36-3G, Estimated Airplane Noise Levels in A-Weighted Decibels, or any successor documents thereto that may be in effect, at the inception of the operating lease."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2000, and shall apply to lease rent paid under an operating lease subject to section 235-   , Hawaii Revised Statutes, after June 30, 2001.