SB3167 SD2

PART I

SECTION 1. In 1976, the Hawaii community development authority was established to address long-term planning and redevelopment needs in urban Honolulu, operating with broad powers and state funding alternatives to accomplish what existing planning and zoning laws could not do. At the same time, the Hawaii community development authority was tasked with addressing unmet community development needs that included, among other things, "...insufficient commercial and industrial facilities for rent...".

Under section 206E-31, the Kakaako community development district was tasked with facilitating the development of a mixed-use district in which industrial, commercial, residential, and public uses would be able to coexist compatibly within the same area. The Hawaii community development authority was directed to "...respect and support the present function of Kakaako as a major economic center, providing significant employment in such areas as light industrial, wholesaling, service and commercial activity."

The legislature finds that, within central Kakaako, the key question is the extent to which light industrial and other businesses located in this neighborhood will survive the policies and market forces that are increasing their taxes at double-digit rates. Central Kakaako's nearly one thousand five hundred businesses – largely small businesses – generate revenues of $2,020,000,000 and employ over sixteen thousand residents. Within that context, the one hundred fifty-four light industrial, wholesaling, and other commercial businesses in the Kakaako mauka area employ seven hundred thirty-two people, with annual sales of $56,300,000.

Since late 2006, small businesses in central Kakaako have participated in a city-state planning project. The first phase of the transit-oriented community-based development project has focused on developing possible scenarios for social and economic revitalization. As a result of their surveys, smaller group meetings, and in-depth research, the study team has found that there is an urgent need for both short-term action and a long-term plan.

The purpose of this part is to fulfill the purposes of chapter 206E, Hawaii Revised Statutes, that promoted small business and light industrial development, by establishing a state industrial use tax credit that offsets a portion of the general excise tax imposed on small businesses.

SECTION 2. Chapter 206E, part II, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§206E‑ Industrial use; tax credit. Effective January 1, , any business within the Kakaako community development district that is located on real property designated as an industrial district by the city and county of Honolulu shall be allowed a tax credit that is equal to per cent of the business's general excise tax liability under chapter 237, as provided by section 235‑ ; provided that the real property is in use for light industrial, wholesaling, or service and commercial operations in the tax year in which the tax credit is claimed and retains the industrial district designation in the year following the tax year in which the tax credit is claimed."

SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235‑ Kakaako community development district; industrial use 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 that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The amount of the credit shall be equal to per cent of the taxpayer's general excise tax liability under chapter 237 for any business within the Kakaako community development district that is located on real property designated as an industrial district by the city and county of Honolulu; provided that the real property is in use for light industrial, wholesaling, or service and commercial operations in the tax year in which the tax credit is claimed and retains the industrial district designation in the year following the tax year in which the tax credit is claimed. The maximum allowable credit that can be properly claimed in any taxable year shall not exceed $ .

(c) If the tax credit under this section exceeds the taxpayer's income tax 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 amounts 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.

(d) Recapture of a previously claimed credit shall be required by the taxpayer who received the credit if:

(1) The previously qualified property is no longer designated as I-1, limited industrial district, or I-2 intensive industrial district; or

(2) The previously qualified property is no longer used for industrial or commercial purposes.

(e) In the case of a partnership, S corporation, estate, trust, or any developer of a commercial building, the tax credit allowable under this section shall be for a percentage of the general excise tax liability owing and paid under chapter 237. The cost upon which the tax credit is computed shall be determined at the entity level.

(f) 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.

(g) The tax credit allowed under this section shall be available for taxable years beginning after December 31, , and shall not be available for taxable years beginning after December 31, ."

PART II

SECTION 4. The purpose of this part is to provide the Hawaii community development authority with greater flexibility in implementing improvement district requirements for light industrial neighborhoods in central Kakaako.

SECTION 5. Section 206E-6, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (b) to read:

"(b) Whenever the authority shall determine to undertake, or cause to be undertaken, any public facility as part of the district-wide improvement program, the cost of providing the public facilities [~~shall~~] may be assessed against the real property in the community development district specially benefiting from [~~such~~] the public facilities. The authority shall determine the areas of the community development district [~~which~~] that will benefit from the public facilities to be undertaken and, if less than the entire community development district benefits, the authority may establish assessment areas within the community development district. The authority may issue and sell bonds in [~~such~~] amounts as may be authorized by the legislature to provide funds to finance [~~such~~] public facilities. The authority [~~shall~~] may fix the assessments against real property specially benefited. All assessments made pursuant to this section shall be a statutory lien against each lot or parcel of land assessed from the date of the notice declaring the assessment until paid and [~~such~~] the lien shall have priority over all other liens except the lien of property taxes. As between liens of assessments, the earlier lien shall be superior to the later lien."

2. By amending subsection (d) to read:

"(d) Any other law to the contrary notwithstanding, in assessing real property for public facilities, the authority [~~shall~~] may assess the real property within an assessment area according to the special benefits conferred upon the real property by the public facilities[.] even if the zoning classifications are I-1 or I-2. These methods may include assessment on a frontage basis or according to the area of real property within an assessment area or any other assessment method which assesses the real property according to the special benefit conferred, or any combination thereof. No such assessment levied against real property specially benefited as provided by this chapter shall constitute a tax on real property within the meanings of any constitutional or statutory provisions."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2007, and before January 1, 2010; provided that part I of this Act shall be repealed on January 1, 2010.

THE SENATE	S.B. NO.	3167
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 2
STATE OF HAWAII