SB708 SD1

THE SENATE	S.B. NO.	708
TWENTY-FOURTH LEGISLATURE, 2007		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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 tax credit. (a) Each taxpayer who files a net income tax return for a taxable year may claim a tax credit under this section. The tax credit shall be deductible from the taxpayer's net income tax return liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the tax credit shall be twenty-five per cent of the excess of qualified expenditures over $10,000 and incurred for the rehabilitation of a historic property.

(b) Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability for up to five subsequent years.

"Historic property" means property located within the State that is:

(1) Individually listed in the National Register of Historic Places;

(2) Located in a historic district listed in the National Register of Historic Places and certified by the United States Secretary of the Interior as contributing to the historic significance of that district;

(3) Individually designated as a historic property by the Hawaii historic places review board; or

(4) Located in a historic district set apart or registered by a county, acknowledged by the Hawaii historic places review board as contributing to the historic significance of the area, and determined by the Hawaii historic places review board as meeting the criteria for inclusion in the National Register.

"Qualified expenditures" mean any properly chargeable amount incurred for the rehabilitation and restoration of the physical elements of a building, including the historic decorative elements, and the upgrading of the structural, mechanical, electrical, and plumbing systems to applicable building codes. Qualified expenditures do not include the taxpayer's personal labor; the cost of purchasing the historic property; any improvements made to the landscaping or other site features, outbuildings, or garages.

(d) The director of taxation shall prepare forms to claim a credit under this section. The director of taxation may require the taxpayer to furnish additional information to ascertain the validity of the claim for credit under this section, which may include photographs of the property and written declarations from persons knowledgeable about the property. The director of taxation, with the assistance of the department of land and natural resources, division of historic preservation, may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(e) If at the close of any taxable year in the five‑year period beginning on the date the historic property is placed in service the taxpayer:

(1) Disposes of the historic property before the end of five full years after the property was placed in service;

(2) Returns leased property, on which a historic property tax credit was claimed, to the lessor before the end of the recapture period; or

(3) Demolishes the rehabilitated historic property within ten years after claiming the historic preservation tax credit;

one hundred per cent of the credit claimed under this section shall be recaptured.

(f) Recapture of the historic tax credit shall not apply to any of the following:

(1) A transfer due to the death of the taxpayer;

(2) A transfer between spouses or incident to divorce; provided that a later disposition by the transferee is subject to recapture to the same extent as if the transferor had disposed of the historic property at the later date; or

(3) A transaction to which section 381(a) of the Internal Revenue Code applies relating to certain acquisitions of the assets of one corporation by another corporation.

(g) The basis of the historic property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of the credit allowable and claimed."

SECTION 2. New statutory material is underscored.

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