High-Tech Tax Credit Bill Renewed with Minor Revisions

Amid criticism from taxpayers, legislators in Hawaii agreed to renew the widely debated bill that extends high-technology tax credit for another five years, without a provision requiring the disclosure of companies that receive the credits, the Honolulu Advertiser recently reported.

Act 221 was first enacted in 2001 to encourage high-tech business in Hawaii and to diversify the state’s economy away from tourism and the military. Based on a survey of businesses that claimed the credits, the state Department of Taxation says the tax credits helped generate at least 600 new jobs in 2002, with an average salary of $46,000.

Hawaii taxpayers grew upset when they learned that credits from the bill were being used to finance one-shot movie deals, the Honolulu Advertiser reports. The bill, which allows for confidentiality of companies involved, investors and the amount of credits claimed, makes it difficult to verify actual benefits of the program. Under the renewed bill, companies will now be required to disclose more information to the Department of Taxation, but not to the public.

Gov. Linda Lingle has said the law is too liberal and allows for businesses not targeted by the act to avoid paying taxes. Others argue the bill is overly generous with credits and fails to produce tangible economic benefits.

The revised act is still among the most generous tax incentives in the nation. The research credit provision provides a refund valued at 20 percent of a company’s qualifying research and development expenses and the investment credit provides a maximum 200 percent return on investments in a tech company.

The full text of Act 221 is available through the Hawaii State Legislature at: http://www.capitol.hawaii.gov/session2001/bills/HB175_cd1_.htm