Haw. Code R. § 15-6-12
Example 1:
ABC Corporation is located in an area designated as an enterprise zone. ABC submits an application to the department. The department determines that ABC is eligible to participate in the program commencing on December 27. Under section 15-6-10, ABC's seven-year cycle will commence on January 1. ABC claims the general excise tax exemption from January 1 for income from trade or business in the zone. ABC, however, pays the general excise tax for income from business activity without the zone. ABC's total income at the end of the taxable year is $100,000. ABC pays $500 in unemployment insurance premiums during the taxable year. ABC's net profit before taxes is $10,000. ABC determines that seventy per cent of its income was attributable to the conduct of a trade or business in an eligible business activity in the zone. During the taxable year, ABC properly claimed the general excise exemption for $70,000 of its income. ABC is also eligible for a tax credit against the $440 in taxes ABC owes the State, calculated as follows:
Example 2:
Assume the same facts as in Example 1, except that ABC is a sole proprietorship owned by individual X who files a joint return with Y; Y has a salary of $20,000; X and Y jointly receive dividends and interest of $2,000; and X and Y claim personal exemptions of $2,080 and itemized deductions of $9,920. X and Y's adjusted gross income is $32,000, which is calculated by adding the $10,000 profit of ABC, Y's salary of $20,000, and $2,000 in dividends and interest. After subtracting the itemized deductions and personal exemptions, their taxable income is $20,000. By applying the apportionment factor of 70 per cent to the $10,000 of income earned by X through ABC, $7,000 of ABC's net profit is apportioned to trade or business in an eligible business activity in the zone. X and Y are subject to a tax of $2,000, which is calculated by multiplying X and Y's taxable income of $20,000 by a tax rate of 10 per cent, before the application of the enterprise zone credit. The tax of $2,000 is multiplied by 21.875 per cent ($7,000 divided by $32,000). This amount is $437.50, which is then multiplied by 80 per cent to arrive at $350, the enterprise zone income tax credit which X and Y may claim on their joint return. X and Y may also claim a credit of $400, which is 80 per cent of the $500 in unemployment insurance premiums paid.
Thus, X and Y's credits from the program total $750 against a tax liability of $2,000. If no other credits are taken by X and Y, they will owe a balance of $1,250 to the State.
Example 3:
ABC Corporation, which is engaged in business within the State but located outside an area designated as an enterprise zone, opens XYZ, an establishment, in an area designated as an enterprise zone. XYZ is a subsidiary of ABC. The department determines that XYZ is eligible to participate in the program commencing on December 27. Under section 15-6-2, XYZ's seven-year cycle commences on January 1. XYZ may claim the general excise tax exemption from January 1 for receipts that XYZ receives for trade or business in an eligible business activity in the zone. XYZ pays $2,000 in unemployment insurance premiums during the year for all employees employed in the enterprise zone. ABC's total receipts during the taxable year are $100,000, including XYZ's receipts of $10,000. $5,000 of XYZ's receipts are derived from trade or business in an eligible business activity in the zone. Accordingly, the requirement in section 209E-9(a)(2), HRS, that at least 50 per cent of the establishment's receipts, rather than the business' receipts, be attributable to the active conduct of a trade or business in an eligible business activity, is satisfied. ABC's net profit before taxes is $10,000. During the taxable year, ABC incorrectly claimed the general excise tax exemption on all of XYZ's receipts. At the end of the year when XYZ is certified to receive tax benefits, ABC must file the annual general excise tax return and pay the taxes and interest on the $5,000 that was erroneously exempted from the general excise tax. ABC is entitled to a tax credit of $17.60 against the $440 in taxes owed the State, calculated as follows:
Example 4:
ABC Corporation is located in an area designated as an enterprise zone. ABC is engaged in the conduct of a trade or business in an eligible business activity for several years before ABC submits an application to the department. Under section 15-6-2, ABC's seven-year cycle commences on May 1, 1993. ABC may claim the general excise tax exemption from May 1. ABC pays $500 in unemployment insurance premiums during 1993. At the end of 1993, ABC is certified to receive tax benefits. ABC determines that it owes $1,000 in net income taxes to the State under chapter 235, HRS. When ABC files its income tax returns for the taxable year ending December 31, 1993, it is eligible for a tax credit of $533.60, calculated as follows:
Example 5:
Assume the same facts as in Example 4, except that at the end of 1994, year 2 of the cycle, ABC determines that it owes $1,000 in net income taxes. ABC pays $1,000 in unemployment insurance premiums during 1994. ABC is certified to receive tax benefits. When ABC files its income tax returns for the taxable year ending December 31, 1994, ABC is eligible for a tax credit of $266.40, calculated as follows:
Example 6:
ABC Company is engaged in a trade or business in an eligible business activity in an enterprise zone. Due to the difficulty of a particular job, however, ABC subcontracts a portion of the job to XYZ, which is not located in the enterprise zone. XYZ's services are not provided in the zone. ABC will have to apportion the income received from this job which is attributable to the services performed by XYZ and claim tax credits and the general excise tax exemption only for the services delivered in the zone.
Haw. Code R. § 15-6-12