Why Choose Maui For Your Business Venture?
Maui, Hawaii is well renown for its natural beauty, the aloha spirit, and nearly perfect weather. Add to that, exquisite beaches, world class resorts, majestic mountains, and lush rain forests, and it is easy to see why Condé Nast readers have chosen Maui as the “best island” for 10 consecutive years.Aside from being a paradise in which to live and play, Maui is quickly becoming a business paradise for qualified “High Tech” and/or “Research and Development” companies.In 2001, Hawaii substantially expanded on technology tax incentives enacted in previous years. Act 221 was designed to increase the growth momentum in Hawaii for technology industries, and to attract the attention of technology companies and investors worldwide looking for expansion and investment opportunities. Many of the incentives had a five-year life.
100% high tech investment credit (now extended through December 31, 2010)
Act 221 provides for a rich high tech investment credit. Structured as a 100% return on cash investment in a qualified high tech business (QHTB) on a front loaded basis over 5 years—35% credit in the year of investment, 25% in the following year, 20% in the third year, then 10% each in the forth and fifth following. The credit is designed to give a full 100% return for investments up to two million per year per QHTB. If QHTB fails to qualify as such or if the investment is sold or withdrawn, in any year during the 5-year period, there will be a recapture of 10% of the total tax credit claimed in the preceding two taxable years. Note that this credit is nonrefundable (Applied against Hawaii income tax liability only) not only by individuals and corporations paying Hawaii income tax, but also by banks and insurance companies against their franchise and insurance premium tax, respectively.One main feature of this incentive is the ability to allocate credits from one investor to another through partnerships or limited liability companies.
A QHTB is defined as a business that conducts more than 50% of its total activities in “Qualified research” (for the investment credit, more than 75% of its qualified research must be done in Hawaii). “Qualified research” is a defined term and means research & development work, computer software development, biotechnology, sensor and optic technologies, ocean sciences, astronomy, non fossil fuel energy-related technology, or performing arts products. These categories play on Hawaii’s unique geography, natural resources, and culture.
Generous R & D refundable income tax credit (now sunsets December 31, 2010)
Hawaii’s 20% refundable credit on top of the federal 20% credit is already generous but does one better by being refundable.Effective July 1, 2004, QHTB status is required as a condition to qualify for this credit. As before, the research work must be performed in Hawaii and must be expanded for activities that constitute the carrying on of a trade or business.
New Reporting and Certification Requirements (effective July 1, 2004)
New procedures apply to both the 100% high tech investment credit and 20% research and development credit. Before March 31 of each year following the year in which an investment in a QHTB is made, or research activity conducted, every taxpayer must file a certified statement to the department of taxation of qualified investments or expenditures made in the previous year and the amount of tax credits claimed in the previous year.
Technology infrastructure renovation income tax credit (now extended through December 31, 2010)
Act 221 provides a 4% nonrefundable income tax credit for renovation work on office buildings that support high tech tenants by providing high volume digital or analog telecommunications, physical security systems, environmental systems, and backup power systems.
GET and PSC exemption for public IDC’s (for income received 7/01/01 through 12/31 05)
Act 221 exempts public internet data centers (IDCs) from the general exercise tax (GET) and public service company (PSC) tax. IDCs are defined as facilities designed to house data center, operate continuously, have redundant utility systems, and provide Internet-related data and complex web hosting services.
GET related party exemption (effective 7/01/01: no sunset)
General exercise tax related party exemption to include IT services, use of software and hardware, and database management services.
Stock option income tax exclusion (effective 2001: no sunset)
The stock option income tax exemption was expanded by Act 221 to include stock options issued by the holding company of a QHTB, and to include equity interests in entities other than corporations.
Royalty income tax exclusion (effective 2001: no sunset)
The performing arts products activity previously limited to the royalty exclusion is now expanded to include all QHTB tax incentives.The State of Hawaii offers some of the most generous business incentives in the country for qualified high tech companies, and Maui has been voted the “No. 1 destination by Condé Nast readers” for 10 years in a row – making it an ideal place to work, play and live, with a business environment designed to help you succeed and prosper. Maui – the business side of paradise.For more information on these and other incentives, please visit following websites:State of Hawai`i Department of Taxation Websitehttp://www.state.hi.us/tax/a2_b2_6hi_tech.htmChun, Kerr, Dodd, Beaman & Wong, LLChttp://www.ckdbw.com/techtax.asp