SB2561 SD1

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Historic preservation income tax credit. (a) Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit, which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the tax credit is properly claimed. For each rehabilitation plan accepted by qualified staff of the state historic preservation division qualified staff, the amount of tax credit shall be:

(1) Twenty-five per cent of the projected qualified rehabilitation expenditures; or

(2) Thirty per cent of the projected qualified expenditures for rehabilitation plans if:

(A) At least twenty per cent of the units are rental units and qualify as affordable housing; or

(B) At least ten per cent of the units are individual homeownership units and qualify as affordable housing.

(b) The tax credit allowed under this section shall be available in the tax year in which the substantially rehabilitated historic structure is placed in service. In the case of projects completed in phases, the tax credit shall be prorated to the substantially rehabilitated identifiable portion of the building placed in service.

(c) In the case of a partnership, S corporation, estate, trust, or any developer of a rehabilitated historic structure, the tax credit allowable shall be as provided under subsection (b) for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level and the distribution and share of the tax credit shall be determined pursuant to section 235-110.7(a).

(d) If the tax credit under this section exceeds the taxpayer's income liability, the excess of credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amount less than $1. All claims, including any amended claims, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(e) To qualify for this tax credit, qualified staff of the state historic preservation division shall develop standards and criteria for the approval of rehabilitation of certified historic structures for which the credit is sought. These standards and criteria shall take into account whether the rehabilitation of a certified historic structure will preserve the historic character of the building.

(f) Following the completion of rehabilitation of a certified historic structure, the owner shall notify the state historic preservation division that the rehabilitation has been completed. The owner shall provide the state historic preservation division with documentation of the costs incurred in rehabilitating the historic structure and shall submit certification of the costs incurred in rehabilitating the historic structure. Qualified staff of the state historic preservation division shall review the rehabilitation and verify its compliance with the rehabilitation plan.

(g) The director of taxation shall prepare forms as may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(h) The aggregate amount of tax credits claimed for qualified rehabilitation projects shall not exceed $ per year and the review board shall be required to monitor, and inform the department of taxation, of the annual projected credit amount.

(i) The state historic preservation division, in consultation with the department of taxation, shall determine the types of information that are necessary on an annual basis to enable a quantitative and qualitative assessment of the outcomes of the tax credit to be determined. Every taxpayer, no later than the last day of the taxable year following the close of the taxpayer's taxable year in which qualified costs were expended, shall submit a written, certified statement to the review board.

Any taxpayer failing to submit information to the state historic preservation division in the manner prescribed by the state historic preservation division prior to the last day of the taxable year following the close of the taxpayer's taxable year in which qualified costs were expended shall not be eligible to receive the tax credit, and any credit already claimed for that taxable year shall be recaptured in total. The amount of the recaptured tax credit shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs.

Notwithstanding any law to the contrary, a statement submitted under this subsection shall be a public document.

(j) Recapture of a previously claimed credit shall be required by the taxpayer who received the credit if any of the following occur:

(1) The projected qualified expenditures do not materialize;

(2) If the qualified rehabilitation plans do not proceed in a timely manner and in accordance with the approved plans;

(3) In the case of the thirty per cent credit, less than twenty per cent of the units are rental units that qualify as affordable housing; or

(4) If less than ten per cent of the units are individual homeownership units that qualifying as affordable housing.

(k) On an annual basis, the state historic preservation division, in consultation with the department of taxation, shall submit a report evaluating the effectiveness of the tax credit. The report shall include but not be limited to findings and recommendations to improve the effectiveness of the tax credit to further encourage the rehabilitation of historic properties.

For the purposes of this section:

"Certified historic structure" means any structure that is:

(1) Listed individually in the Hawaii register of historic places or the national register of historic places; or

(2) Located in a registered historic district and certified by the state historic preservation division as contributing to the historic significance of the district.

"Qualified rehabilitation expenditures" means any costs incurred for the physical construction involved in the rehabilitation of a historic structure for mixed residential and nonresidential uses where at least thirty per cent of the total square footage of the rehabilitation is placed into service for residential use, excluding:

(1) The owner's personal labor;

(2) The cost of a new addition, except as required to comply with the applicable county building code or fire safety code; and

(3) Any non-construction cost such as architectural fees, legal fees, and financing fees.

"Qualified staff of the state historic preservation division" means a staff member who meets the National Park Service Secretary of Interior standards for architectural historian or historic architect.

"Rehabilitation plan" means any construction plans and specifications for the proposed rehabilitation of a historic structure in sufficient detail for evaluation by compliance with the standards and criteria developed by the state historic preservation division.

"Substantial rehabilitation" means the qualified rehabilitation expenditures of a historic structure that exceed twenty-five per cent of the assessed value of the structure."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2007.

THE SENATE	S.B. NO.	2561
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 1
STATE OF HAWAII