Bill Text: HI SB2206 | 2022 | Regular Session | Introduced
Bill Title: Relating To Small Business Hiring Tax Credit.
Spectrum: Partisan Bill (Democrat 6-0)
Status: (Introduced - Dead) 2022-01-24 - Referred to LCA, WAM. [SB2206 Detail]
Download: Hawaii-2022-SB2206-Introduced.html
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THE SENATE |
S.B. NO. |
2206 |
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THIRTY-FIRST LEGISLATURE, 2022 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to small business hiring tax credit.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that small businesses play an integral role in Hawaii's economy and its workforce. The legislature also finds that small businesses in Hawaii continue to be adversely affected by the disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic, and that it is essential to provide them with financial relief to continue operating and hiring employees during their economic hardship.
Accordingly, the purpose of this Act is to establish a nonrefundable small business hiring tax credit that may be applied against the net income tax liability of qualified small business employers, in an amount equal to $1,000 for each net increase in the number of qualified employees not to exceed a total of $25,000 for any qualified small business employer; provided that the cumulative amount of tax credits claimed shall not exceed $100,000,000.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Small business hiring tax credit. (a) There shall be allowed to each qualified small
business employer subject to the taxes imposed by this chapter, a small business
hiring tax credit that shall be deductible from the qualified small business employer's
net income tax liability, if any, imposed by this chapter for the taxable year beginning
on or after January 1, 2022, and before January 1, 2023; provided
that the qualified small business employer receives a tentative tax credit
reservation amount from the department pursuant to this section.
(b) The
tax credit allowed under this section shall be in an amount equal to $1,000 for
each net increase in the number of qualified employees employed by the qualified
small business employer calculated pursuant to subsection (c); provided that
the total amount of tax credit allocated under this section shall not exceed $25,000
for any qualified small business employer and a cumulative total of $100,000,000 for the State.
(2) The
lesser of either of the following:
(A) The average number of monthly full-time equivalent qualified
employees employed by the qualified small business employer during the
three-month period beginning on April 1, 2022, and ending on June 30,
2022. The average number of monthly
full-time equivalent qualified employees is determined by adding the total number
of monthly full-time equivalent qualified employees employed by the qualified
small business employer for all three months and dividing the total by three;
or
(B) The average number of monthly full-time equivalent qualified
employees employed by the qualified small business employer during the twelve-month
period beginning on July 1, 2021, and ending on June 30, 2022. The average number of monthly full-time equivalent
qualified employees is determined by adding the total number of monthly
full-time equivalent qualified employees employed by the qualified small
business employer for all twelve months and dividing the total by twelve.
(d) The tax credit allowed under this section
shall be claimed against the qualified small business employer's net income tax
liability for the taxable year beginning
on or after January 1, 2022, and before January 1, 2023; provided that
if the tax credit allocated to a qualified small business employer under
this section exceeds the qualified small business employer's net income tax liability
for the taxable year beginning on or
after January 1, 2022, and before January 1, 2023, the excess of the
tax credit over the net income tax liability may be used as a tax credit against
the qualified small business employer's net income tax liability in the subsequent
four taxable years, until the tax credit is exhausted; provided that any excess
of the tax credit remaining after the qualified small business employer's filing
of its return for the taxable year beginning
on or after January 1, 2026, and before January 1, 2027, shall
be forfeited and shall not be refunded to the qualified small business
employer.
(e) A qualified small business employer who wishes
to receive a tax credit under this section shall apply for a tentative tax credit
reservation amount from the department.
(1) The application for a tentative tax credit reservation
amount under this section shall include:
(A) The
name of the qualified small business employer;
(B) A
valid federal employer identification number of the qualified small business
employer;
(C) A
valid general excise tax license number of the qualified small business
employer;
(D) The
net increase in the number of qualified employees employed by the qualified small
business employer, as calculated pursuant to subsection (c); and
(E) Any
other information and documentation deemed necessary by the department for the purposes
of enforcing this section.
(2) The qualified small business employer shall
submit the application to the department during the period beginning on November
1, 2022, and ending on November 30, 2022, or an earlier date as determined
by the department upon reaching the cumulative total tax credit allocation limit
for the State set forth in subsection (b). Applications received by the department after November 30,
2022, or any other earlier date as determined by the department pursuant to this
paragraph shall not be accepted by the department. The determination of the date and time an application
is received shall be made by the department, which shall not be subject to appeal
or review under any administrative or judicial proceeding.
(f) The department shall administer the allocation
of tentative tax credit reservation amounts as follows:
(1) The department shall allocate tentative tax
credit reservation amounts to qualified small business employers on a
first-come-first-served basis, and for each application received, the total
amount of tax credit available for allocation shall be reduced by an amount
equal to the allocated tentative credit reservation amount;
(2) The tentative tax credit reservation amount
for a qualified small business employer shall be equal to the net increase in the
number of qualified employees employed by the qualified small business employer
calculated pursuant to subsection (c),
as reported on the application, multiplied by $1,000; provided that the total amount of tax credit under this section shall not
exceed the limit set forth in section (b) for any qualified small business
employer;
(3) The department shall, within thirty days of
receiving an application, notify the applicant of the tentative tax credit reservation
amount allocated to the qualified small business employer; provided that the
amount allocated shall not constitute a determination by the department with
respect to any of the requirements of this section or eligibility for the tax
credit authorized by this section; and
(4) The department shall periodically post on its
website the cumulative total of tentative tax credit reservation amounts allocated
pursuant to this section and the remaining tax credit amount available for
allocation.
(g) A tax credit under this section shall be
allowed only for tax credits claimed on timely filed original returns. The determination of the date an original
return is filed shall be made by the department, which shall not be subject to appeal
or review under any administrative or judicial proceeding.
(h) The department may disallow or reduce a
qualified small business employer's tentative tax credit reservation amount if
the qualified small business employer fails to provide information or documentation
requested by the department within fifteen calendar days after the department requests
the information.
(i) A qualified small business employer that
becomes a converted entity subsequent to receiving a tax credit reservation amount
from the department pursuant to subsections (e) and (f) may transfer any unused
tax credit amounts to the converted entity and apply those amounts against the net
income tax liability of the converted entity, as specified under this section.
(j) No interest shall be paid on an amount of tax credited
to a qualified small business employer or converted entity pursuant to this section.
(k) For purposes of this section, all employees
of the trades or businesses that are treated as related under section 267, 318,
or 707 of the Internal Revenue Code of 1986, as amended, shall be treated as
employed by a single qualified small business employer.
(m) Notwithstanding any other law to the contrary,
the department of labor and industrial relations shall, upon request, provide
the department in the form and manner agreed upon by the departments, any and
all information deemed necessary by the department to administer and enforce
this section.
(n) Notwithstanding
any other law to the contrary, the department shall keep a record of the
following:
(1) All qualified small business employers that
have been allocated a tax credit pursuant to this section; and
(2) The amount of tax credit claimed by each qualified
small business employer.
(o) The department may adopt rules necessary to effectuate
the purposes of this section pursuant to chapter 91.
(p) As
used in this section, unless the context clearly requires otherwise:
"Converted entity" means a
qualified small business employer that changed its business form to a different
entity type and continues its operation.
"Monthly
full-time equivalent" means either of the following:
(1) For a qualified employee who is paid hourly
qualified wages, "monthly full-time equivalent" means the total
number of hours the qualified employee was employed by the qualified small business
employer per month, not to exceed one hundred sixty-seven hours per month per
qualified employee, divided by one hundred sixty-seven; or
(2) For a salaried qualified employee, "monthly
full-time equivalent" means the total number of weeks the qualified
employee was employed by the qualified small business employer per month,
divided by 4.33 multiplied by the time base the qualified employee was
employed.
"Net
income tax liability" means net income tax liability reduced by all other
credits allowed under this chapter.
"Qualified
employee" means an employee who is paid qualified wages by a qualified
small business employer. "Qualified
employee" shall not include an employee whose qualified wages are included
in calculating any other credit allowed under this chapter.
"Qualified
small business employer" means a person who:
(1) Is domiciled and authorized to do business
in Hawaii;
(2) Is subject to income taxes imposed by this chapter;
(3) Is independently owned and operated;
(4) As of December 31, 2021, employed a total
of one hundred or fewer qualified employees; and
(5) Meets the following requirements:
(A) Has a decrease of twenty per cent or more
in gross receipts determined by comparing gross receipts for the period
beginning on January 1, 2021, and ending on December 31, 2021, to the
gross receipts for the period beginning on January 1, 2020, and ending on
December 31, 2020; or
(B) If the person is a fiscal year taxpayer,
has a decrease of twenty per cent or more in gross receipts determined by
comparing either of the following:
(i) The gross receipts for fiscal year
2020-2021 to the gross receipts from fiscal year 2019-2020; or
(ii) The average of gross receipts for fiscal year
2020-2021 and fiscal year 2021-2022 to the gross receipts from fiscal year
2019-2020;
(C) If a person that first commences business
after January 1, 2020, but on or before January 1, 2021, has a decrease of twenty
per cent or more in gross receipts in the second quarter of 2021 determined by
comparing gross receipts from January 1, 2021, through March 31, 2021,
multiplied by 1.5, to the gross receipts for the period beginning on April 1,
2021, and ending on June 30, 2021.
"Qualified small business employer"
does not include a person required to be included in a combined return under part
II of this chapter or authorized to be included in a consolidated income tax
report under section 235-92(2).
"Qualified
wages" has the same meaning as "wages" in the Hawaii employment
security law, as defined in section 383-10.
"Tax credit amount" means an
amount equal to the tax credit amount that would otherwise be allowed to a
qualified small business employer pursuant to this section.
"Time
base" means the fraction of the full-time employment that the qualified
employee is employed.
"Weeks
employed" means the total number of calendar days that a qualified
employee was employed by the qualified small business employer during the
month, divided by seven, not to exceed 4.33."
SECTION 3. The department of taxation shall assess if the small business hiring tax credit has achieved the intended purpose of providing the necessary financial relief that would incentivize Hawaii's small businesses to continue hiring employees during the economic hardship caused by the pandemic by using the following performance indicators:
(1) The number of applications received for tentative tax credit reservation;
(2) The net increase in the number of qualified employees represented on applications for tentative tax credit reservation; and
(3) The average credit amount on tax returns claiming the tax credit.
The department
of taxation shall submit a report of its findings on the performance indicators
for tax credits claimed under this Act and its recommendations including any proposed
legislation, to the legislature no later than twenty days prior to the
convening of the regular session of 2024.
SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 5. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
SECTION 6. New statutory material is underscored.
SECTION 7. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2021, and shall be repealed on December 31, 2027.
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INTRODUCED BY: |
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Report Title:
Income Tax Credit; Small Business Employers; COVID-19; Financial Relief; Employment; Department of Taxation
Description:
Establishes a nonrefundable small business hiring tax credit for the taxable year beginning on or after 1/1/2022 and before 1/1/2023, that may be applied against the net income tax liability of qualified small business employers in an amount equal to $1,000 for each net increase in the number of qualified employees not to exceed a total of $25,000 for any qualified small business employer and a total of $100,000,000 for the State. Requires the qualified small business employer to apply for a tentative credit tax reservation amount to receive the tax credit. Requires the Department of Taxation to allocate the tax credit on a first-come, first-served basis. Requires the Department of Taxation to report to the Legislature. Applies to taxable years beginning after 12/31/2021. Repeals 12/31/2027.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
