HB2716 HD1

SECTION 1. The legislature finds that to keep Hawaii's community vibrant and the economy expanding, Hawaii needs to focus on innovation sectors that will bring new dollars and high-demand jobs to Hawaii's economy. As an island state, research and development in ocean sciences is an intrinsic and essential part of sustainability. Supporting and encouraging more research and development in ocean and marine sciences will foster and fuel innovative ideas and promote entrepreneurship that will better position Hawaii for future economic growth and expansion. Innovation as a result of research and development contributes greatly to economic growth. It is oftentimes the catalyst for change, job creation, and a higher standard of living. Expanding Hawaii's research and development industry in ocean sciences will bring in new dollars to the State's economy and create a wide range of high-skilled, high-paying jobs for young people so they may continue to live and work in Hawaii. Research and development in ocean sciences may be vital to Hawaii's future economic growth.

The purpose of this Act is to establish an ocean sciences research income tax credit to foster research and development to expand and diversify Hawaii's economy.

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

"§235‑ Ocean sciences research; tax credit. (a) There shall be allowed to each small business subject to the taxes imposed by this chapter an ocean sciences research tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter.

(b) The amount of the tax credit shall be equal to the actual cost paid with an investment made into the qualified entity for research and development in the field of ocean sciences; provided that:

(1) A qualified entity may form a special purpose entity for the purposes of raising investor capital and claiming the credit on behalf of the qualified entity;

(2) The qualified entity, together with all of its special purpose entities, including all partners and members of the qualified entity and its special purpose entities, shall not claim any credit in any one taxable year that exceeds $ ; provided that if the total amount of credits applied for in any particular year exceeds the aggregate amount of credits allowed for such year under this section the excess shall be treated as having been applied for in the subsequent year and shall be claimed in such year; provided further that no excess shall be allowed to be claimed after December 31, 2025; and

(3) In no event shall a qualified entity or any of its special purposes entities, or any other taxpayer claim a credit under this section after December 31, 2025.

(c) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted. All claims, including amended claims, for a tax credit 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) The director of taxation shall prepare any forms that 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. The director of taxation may adopt rules pursuant to chapter 91 to effectuate the purposes of this section.

(e) Any taxpayer claiming a tax credit under this section, within ninety days of the end of the calendar year in which the credit is properly claimable, shall submit the following information to the department of taxation:

(1) The amount of the eligible costs for which the tax credit may be claimed; and

(2) The qualified entity that incurred the costs.

Failure to timely submit the information shall be subject to a penalty of $5,000 per month or a fraction thereof, not to exceed $25,000.

(f) This section shall not apply to taxable years beginning after December 31, 2025.

(g) No other credit under this chapter shall be claimed for expenses or costs paid with an investment made into a qualified entity for which the credit was claimed under this section.

(h) For the purposes of this section:

"Net income tax liability" means income tax liability reduced by all other credits allowed under this section.

"Qualified entity" means an entity with the principal purpose of research and development in the field of ocean sciences as defined by the National American Industry Classification System code 541715.

"Small business" means a business with:

(1) Fewer than one hundred employees; and

(2) An office located in the State."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after January 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	2716
THIRTIETH LEGISLATURE, 2020		H.D. 1
STATE OF HAWAII