Haw. Code R. § 15-6-11

Current through November, 2024

Section 15-6-11 - State income tax credits and general excise tax exemption available to a business that has been certified

(a) A business that has been certified is entitled, subject to the apportionment provisions discussed in these rules, to tax credits against any taxes due under chapter 235, HRS to the State according to the following formula:

First year of the seven-year cycle 80 per cent of tax due

Second year of the seven-year cycle 70 per cent of tax due

Third year of the seven-year cycle 60 per cent of tax due

Fourth year of the seven-year cycle 50 per cent of tax due

Fifth year of the seven-year cycle 40 per cent of tax due

Sixth year of the seven-year cycle 30 per cent of tax due

Seventh year of the seven-year cycle 20 per cent of tax due

Eighth, ninth, and tenth years (extended three-year cycle) 20 per cent of tax due for qualified businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products.

The business shall be eligible for a credit against any taxes due the State under chapter 235, HRS when the tax return required is filed with the department of taxation, together with the certification by the department. No unusable tax credit shall carry over or carry back or be refunded.

(b) A business that has been certified is entitled, subject to the apportionment provisions discussed in these rules, to tax credits against any taxes due to the State under chapter 235, HRS in an amount equal to a percentage of unemployment insurance premiums paid on the payroll of all the business' employees employed within enterprise zones located within the same county, according to the following formula:

First year of the seven-year cycle 80 per cent of premiums paid

Second year of the seven-year cycle 70 per cent of premiums paid

Third year of the seven-year cycle 60 per cent of premiums paid

Fourth year of the seven-year cycle 50 per cent of premiums paid

Fifth year of the seven-year cycle 40 per cent of premiums paid

Sixth year of the seven-year cycle 30 per cent of premiums paid

Seventh year of the seven-year cycle 20 per cent of premiums paid

Eighth, ninth, and tenth years (extended three-year cycle) 20 per cent of premiums paid for qualified businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products.

Tax credits provided for in this subsection apply only to the amount of unemployment insurance premiums paid. Those premiums shall be paid by the business and the business shall be eligible for a credit against any taxes due to the State under chapter 235, HRS when the annual tax return required is filed with the department of taxation, together with the certification by the department.

No unusable tax credit may be carried over or carried back to another tax period.

(c) The tax credits allowed under subsections (a) and (b) may be combined by the business. The department of taxation, however, shall not refund any unusable credit. The application of this provision is illustrated in the following example.

Example 1:

ABC Company's application to participate in the enterprise zones program is approved by the department shortly after ABC commences a trade or business in an eligible business activity in a zone. All of ABC's income is derived from trade or business in an eligible business activity within the zone. During the initial year of the seven-year cycle, ABC pays $500 in unemployment insurance premiums for all employees. ABC's seven-year cycle begins on January 1. After the initial year of the seven-year cycle, it is determined that ABC owes $1,000 in net income taxes to the State under chapter 235, HRS. When ABC files its tax returns at the end of the initial year, it is eligible for a tax credit equaling 80 per cent of the income taxes due, or $800. ABC is also eligible for a credit of 80 per cent of unemployment insurance premiums paid, or $400. Thus, ABC's total credits under the program against income taxes are $1,200. As ABC's income tax liability is $1,000, ABC tax credit is limited to $1,000 at the end of the initial year if ABC is certified by the department even though the calculated maximum credit is $1,200. The $200 of unusable credit, however, shall not be refunded to ABC nor shall it be carried over or carried back to another tax period.

(d) A business may claim the exemption from the general excise tax on the gross receipts from all transactions eligible under this chapter from the first of the month following the date the department determines that the business is eligible to participate in the program. The business, however, shall file the tax returns required under chapter 237, HRS. The business shall submit standard periodic tax returns as required under chapter 237, HRS, report the gross income from the business, and [-] claim an exemption from the general excise tax for trade or business in the zone. These returns shall be filed even if no tax is due.

(e) Businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products are eligible to receive enterprise zone benefits for an extended three-year cycle in addition to their seven-year cycle.

Haw. Code R. § 15-6-11

[Eff 11/3/90; am and comp2/28/2015] (Auth: HRS § 209E- 8) (Imp: HRS §§ 209E-10, 209E-11)