Provides an income tax deduction for qualifying costs of automatic fire sprinkler systems installed and placed into service after December 31, 2006.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to establish an income tax deduction for owners of single-family residences and owner-occupants of residential condominium or cooperative housing units for qualifying costs of automatic fire sprinkler systems installed and placed into service after December 31, 2006.

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

"§235-   Automatic fire sprinkler system; income tax credit. (a) There shall be allowed as a deduction from gross income the amount paid during the taxable year by an individual taxpayer or a married couple filing a joint return for qualifying costs to install an automatic sprinkler system in their single-family residence, or by an association of apartment owners of a residential or mixed use condominium or the cooperative housing corporation of a residential cooperative housing portion for that portion of maintenance fees allocable to qualifying costs to install an automatic fire sprinkler system in their residential unit and building, provided that the individual taxpayer or married couple filing a joint return are owner-occupants of the single-family residence or a residential unit in a condominium or cooperative housing project.

(b) The deduction shall be equal to the qualifying costs of the automatic fire sprinkler system; provided that:

(c) For the purposes of this section:

"Automatic fire sprinkler system" means an integrated system of underground and overhead piping designed in accordance with fire protection engineering standards. The portion of the sprinkler system above ground is a network of specially sized or hydraulically designed piping installed in a building, a structure, or area, generally overhead and to which sprinklers are connected in a systematic pattern. The valve controlling each system riser is located in the system riser or its supply piping. Each sprinkler system riser includes a device for activating an alarm when the system is in operation. The device is normally activated by heat from a fire and discharges water over the fire area.

"Qualifying costs" means costs incurred in purchasing or otherwise acquiring and installing an automatic fire sprinkler system, including accessories and installation, for use in any residential unit of a condominium or cooperative housing project built before 1978.

(d) The director of taxation shall:

SECTION 3. The department of taxation shall determine the estimated amount of tax credits that may be claimed and the estimated amount of state tax revenue that may be lost as a result of the tax credit and shall report its findings to the legislature no later than twenty days prior to the convening of the regular session of 2007.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2006.