Creates an income tax credit to repay student loans for students who practice in medically or dentally underserved areas in the State and who derive 20% or more of total income from medicaid, QUEST, or SCHIP reimbursement. (SD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that there is a serious crisis in the provision of medical and dental services in the medically and dentally underserved areas of the State, particularly in the rural areas. The legislature further finds that incentives need to be extended to medical and dental students to practice after graduation in those areas. The legislature further finds that some medical and dental students finance their education with substantial student loans, oftentimes amounting to $90,000. The legislature further finds that an ideal incentive for these students to practice in the medically and dentally underserved areas is for student loans to be repaid from income tax credits allowed to the loan recipient, on the condition that the doctor or dentist practices in those areas and serves a certain percentage of underserved patients.

The purpose of this Act is to establish an income tax credit to be applied to the repayment of loans to attend medical school or dental school granted to a physician or dentist who practices after training in medically or dentally underserved areas of the State and who derives a specified percentage of total income from medicaid, QUEST, or SCHIP reimbursement.

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

"§235-   Tax credit to repay student loans for physicians and dentists practicing in underserved areas. (a) Any taxpayer licensed to practice medicine under chapter 453 and any taxpayer licensed to practice dentistry under section 448 who files an individual income tax return for a taxable year may claim an income tax credit under this section against the Hawaii state individual net income tax, if the taxpayer has received a student loan to attend medical school or dental school and is obligated to repay the loan after graduation.

(b) The director of taxation shall cause all tax credits under this section to be remitted in the name of the taxpayer to the lender.

(c) The tax credit shall be in the amount of the taxpayer's actual loan repayment, not to exceed $20,000 per taxable year in which the credit is claimed, up to a maximum amount of $100,000 amortized in equal amounts over five years; provided that:

(d) If the tax credit claimed by the taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be remitted in the name of the physician taxpayer or dental taxpayer to the lender; provided that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.

(e) The director of taxation shall prepare such forms as may be necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91.

(f) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credit under this section.

(g) Claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval, and shall apply to taxable years beginning after December 31, 2004.