SB3035 HD1

SECTION 1. The legislature finds that to keep our community vibrant and our 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 our future 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 resulting from research and development contributes greatly to economic growth and is often 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 our State's economy and create a wide range of high-skilled, high-paying jobs for our young people, which may allow them to 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 investment 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 investment tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter an ocean sciences research investment 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 per cent of the at-risk investment made into the qualified entity for research and development in the field of ocean sciences; provided that:

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

(2) In no event shall a qualified entity 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:

(1) Shall prepare any forms that may be necessary to claim a credit under this section;

(2) May require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section; and

(3) 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) 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.

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

(h) For the purposes of this section:

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

"Qualified entity" means a small business licensed in the State and employing or owning capital or property, or maintaining an office, in the State and having the principal purpose of actively and continuously conducting research and development in the field of ocean sciences, as defined by the North American Industry Classification System code 541715.

"Small business" means a business that employs fifty or fewer employees and has revenues of less than $5,000,000 per year."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2051, and shall apply to taxable years beginning after December 31, 2020.

THE SENATE	S.B. NO.	3035
THIRTIETH LEGISLATURE, 2020		S.D. 2
STATE OF HAWAII		H.D. 1