Current through August, 2024
(a) In general.
There shall be allowed to each taxpayer subject to the tax imposed by chapter
235, HRS, a credit which shall be deductible from the taxpayer's net income tax
liability, if any, for the taxable year in which the credit is properly
claimed, if the following conditions are met:
(1) The taxpayer purchases or imports
eligible property;
(2) The purchase
or import of eligible property results in a transaction which is subject to the
imposition and payment of tax at the rate of four percent under chapters
237 or
238,
HRS;
(3) The eligible property is
used by the taxpayer in a trade or business;
(4) The eligible property is placed in
service within Hawaii after December 31, 1987 (for property acquired during the
period beginning January 1, 1988, to December 31, 1988, see section
18-235-110.7-09); and
(5) The
taxpayer files a claim for the credit on or before the end of the twelfth month
following the close of the taxable year for which the credit may be claimed, or
if an extension of time for filing a return has been granted, within the
extension period.
(b)
Taxable year in which the credit is allowable. The credit shall be allowed only
for the first taxable year in which the property is placed in service by the
taxpayer.
(1) If a taxpayer places property
in service in a taxable year and the property does not qualify as eligible
property (or only a portion of the property qualifies as eligible property) in
that year, no credit (or a credit only as to the portion which qualifies in
that year) shall be allowed to the taxpayer with respect to the property. This
is the rule notwithstanding that the property (or a greater portion of the
property) qualifies as eligible property in a subsequent taxable
year.
(2) Example. Paragraph (1) is
illustrated as follows:
In 1988, a taxpayer places property in service and uses the
property entirely for personal purposes. In 1989, the taxpayer begins using the
property in a trade or business. In this case, no credit is allowable to the
taxpayer, with respect to the property, for either 1988 or 1989.
(3) Constructed, reconstructed, or
erected property which is placed in service over a span of more than one
taxable year, see section 18-235-110.7-11.
(c) Taxpayer who is eligible for the credit
in lease or sale-leaseback transactions.
(1)
In general. The determination of the taxpayer who is entitled to the credit
when the parties characterize a transaction as a lease or sale-leaseback (as
defined in section 18-235-110.7-01) requires an analysis of whether the
transaction is, in fact, a lease or sale-leaseback for federal income tax
purposes. The characterization of a transaction as a lease or sale-leaseback
determines who is the economic owner of the property and thereby entitled to
the tax benefits (i.e., credit) associated with the property. Only one party,
the economic owner of the property, is entitled to claim any available
credit.
(2) Lease. If a transaction
is a lease for federal income tax purposes, the lessor entering into a lease
agreement with respect to property which is eligible for the credit is treated
as the owner of the property. The lessor may thereby claim any available
credit.
(3) Sale-leaseback. If a
transaction is a sale-leaseback for federal income tax purposes, the
buyer/lessor entering into a sale-leaseback arrangement with respect to
property which is eligible for the credit is treated as the owner of the
property. The buyer/lessor may thereby claim any available credit.
(4) Sale. If the parties characterize a
transaction as a lease, but it is in reality a sale for federal income tax
purposes, the lessee is the owner of the property. Assuming that the property
is eligible for the credit, the lessee may thereby claim any available credit.
Note that for purposes of this paragraph, the term "lessee" is used for
convenience, without intending to suggest the propriety of the parties'
characterization of the transaction as a lease.
(d) Solar and wind energy property. If a
taxpayer is eligible for both the income tax credit under section
235-12,
HRS (regarding solar or wind energy devices), and the capital goods excise tax
credit for a particular solar or wind energy property, the credit under section
235-12,
HRS, shall be deducted from the taxpayer's net income tax liability before the
capital goods excise tax credit.
