HB2085.DOC

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

"§235- Location efficiency tax credit. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed by this chapter a location efficiency 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) To qualify for a tax credit under this section, the taxpayer shall submit a location efficiency report to the corporation. The corporation may grant a tax credit to the taxpayer if, in the corporation's discretion, the taxpayer's location efficiency report demonstrates that the taxpayer seeks a tax credit for a project to be located in an area that satisfies this section's standards for affordable workforce housing or accessible and affordable mass transit.

(c) The amount of the tax credit shall be equal to ten per cent of the amount of taxes withheld by the qualified taxpayer, pursuant to section 235-61, from the wages of new employees. If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for the tax credit under this section, including amended claims, 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 this subsection shall constitute a waiver of the right to claim the credit.

(d) A taxpayer claiming a tax credit under this section shall annually submit a written sworn statement to the corporation, identifying:

(1) The number of new employees employed by the taxpayer for the project; and

(2) The amount of taxes withheld by the taxpayer in connection with the new employees, pursuant to section 235-61.

(e) The corporation shall:

(1) Maintain records of the names of the qualified taxpayers claiming the tax credit under subsection (a);

(2) Obtain and total the aggregate amounts of all taxes withheld on wages of new employees per project per taxable year;

(3) Provide a letter to the director of taxation specifying the amount of the tax credit per qualified taxpayer for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed; and

(4) Submit to the legislature no later than twenty days prior to the convening of each regular session a report on the tax credit allowed under this section, detailing the withheld taxes that form the basis of the tax credit claims, itemized by qualified taxpayer, in a redacted format to preserve the confidentiality of the taxpayers claiming the credit; provided that the report shall also include the corporation's activities, findings, and recommendations for proposed legislation.

Upon each determination required under this subsection, the corporation shall issue a letter to the qualified taxpayer, specifying the tax credit amount qualified for in each taxable year a tax credit is claimed. The qualified taxpayer shall file the letter with the taxpayer's tax return to the department of taxation. Notwithstanding the authority of the corporation under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.

(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) As used in this section:

"Accessible and affordable mass transit" means access to transit stops with regular and frequent service within one mile from the project site and pedestrian access to transit stops.

"Affordable workforce housing" means owner-occupied or rental housing that costs, based on current census data for the municipality where the project is located, no more than thirty-five per cent of the median salary of employees at the project site, exclusive of the highest ten per cent of the site's salaries.

"Corporation" means the Hawaii housing finance and development corporation.

"Location efficiency" means a project that maximizes the use of existing investments in infrastructure, avoids or minimizes additional government expenditures for new infrastructure, and has nearby affordable workforce housing or accessible and affordable mass transit, or some combination of both.

"New employee" means a full-time employee first employed by a taxpayer in a location efficient project. The term "new employee" does not include an employee of the taxpayer who performs a job that was previously performed by another employee, if that job existed for at least six months before hiring the employee, or a child, grandchild, parent, or spouse, other than a spouse who is legally separated from any person who has a direct or an indirect ownership interest of at least five per cent in the profits, capital, or value of the taxpayer.

"Qualified taxpayer" means a person who fulfills the requirements of subsection (b)."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval, and:

(1) Apply to taxable years beginning after December 31, 2013; and

(2) Be repealed on January 1, 2018.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2085
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII