LINDA LINGLEKURT KAWAFUCHIGOVERNORDIRECTOR OF TAXATIONJAMES R. AIONA, JR.

STANLEY SHIRAKILT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII

DEPARTMENT OF TAXATIONP.O. BOX 259
HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1510
FAX NO: (808) 587-1560

August 3, 2009

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2009-23
RE:Act 178, Session Laws of Hawaii 2009, Relating to Taxation.

On July 15, 2009, Senate Bill 199, SD 1, HD 1, CD 2 became law without Governor
Linda Lingle's signature, pursuant to Section 16 of Article III of the State Constitution.
The Act amends section 235-110.9, Hawaii Revised Statutes (HRS), also known as theHigh Technology Business Investment Tax Credit. For investments made on or after May 1,
2009 and on or before December 31, 2010, the Act limits claims of the high technology business
investment tax credit to 80 percent of tax liability, allows only a one-to-one credit allocation
ratio, and eliminates carryovers. The amendments also apply to claims for this credit underChapters 241 and 431:7, HRS.
For renovation costs incurred on or after May 1, 2009 and on or before December 31,
2010, the Act also limits claims for the Technology Infrastructure Renovation Tax Credit undersection 235-110.51, HRS, to 80 percent of tax liability.
The Act also amends section 235-2.45(d), HRS by making section 704(b)(2) of theInternal Revenue Code operative with regard to investments made on or after May 1, 2009.
For eligible depreciable tangible property placed in service on or after May 1, 2009 andon or before December 31, 2009, the Act also suspends the Capital Goods Excise Tax Credit
under section 235-110.7, HRS.
For Qualified High Technology Business (QHTB) Investments Made Before
May 1, 2009
No changes apply to investments made before May 1, 2009. Any credits frominvestments made before May 1, 2009 are not affected by this Act and may be taken as allowed
under prior law, including any allocations of credits in excess of the amount of the investment orcarryovers.

Department of Taxation Announcement No. 2009-23
August 3, 2009
Page 2 of 3

For QHTB Investments Made On or After May 1, 2009
1.
80% Limitation. Credits are limited to 80% of a taxpayer's tax liability (income,franchise or gross premiums) for tax years 2009 and 2010 and no credit carryovers are allowed.
The following examples illustrate this concept.
EXAMPLE 1: If an investor invests $100 in a QHTB on December 1, 2009, generating a $35
credit ($100 times 35%) for 2009 and investor's tax liability for tax year 2009 is $20, the investor
can only claim $16 of the credit (80% of $20). The remainder of the credit (credit carryover) of$19 ($35-$16) is lost forever.
For the 2010 tax year, investor's credit would be $25 ($100 times 25%). If the investor'stax liability for tax year 2010 is $20, the investor again can only claim $16 of the credit (80% of$20). The remainder of the credit (credit carryover) of $9 ($25-$16) is lost forever.
For the 2011 tax year, the 80% limitation no longer applies and the investor can claim acredit of $20 ($100 times 20%). If the investor's tax liability for 2011 is $20, the investor canclaim the full $20 of credit against his or her tax liability.
EXAMPLE 2: Using the same example as above, if the investor's tax liability for tax year 2009
was $50, the investor could claim the full $35 credit against his or her tax liability because $35 isless than 80% of the investor's tax liability (80% of $50 = $40.) Therefore, in somecircumstances, this limitation will have no affect on the credit claimed.
EXAMPLE 3: An investor invested $100 in a QHTB on December 1, 2008 and another $100 on
December 1, 2009. As in Example 1, the $100 invested on December 1, 2009 generates a $35
credit ($100 times 35%) for 2009. If the investor's tax liability for tax year 2009 is $20, theinvestor can only claim $16 of the credit from the 2009 investment (80% of $20). The remainderof the credit generated from the 2009 investment (credit carryover) of $19 ($35-$16) is lostforever.
The 2008 investment is unaffected by this Act because it was made prior to May 1, 2009. The$100 invested on December 1, 2008 generates a $25 credit ($100 times 25%) for 2009. This
credit may be claimed against the remaining $4 of tax liability after the 2009 investment credit istaken into account, leaving a $21 credit carryover, which is not lost and can be claimed in future
tax years.
2.
No multiples. For investments made on or after May 1, 2009, an investor may not receivea credit in excess of the amount that the investor invested. If the investor makes an investment of$1, then the investor can only receive $1 in credits to be paid out over a 5-year period beginningwith the year of the investment. Investors may no longer make an investment of $1 and receive
more than $1 in credits through special allocations from entities taxed as a partnership.

Department of Taxation Announcement No. 2009-23
August 3, 2009
Page 3 of 3

Temporary Suspension of Capital Goods Excise Tax Credit for Part of 2009
In general, a credit of 4% of the cost of eligible depreciable tangible property used in atrade or business in Hawaii is allowed. However, this Act provides that property placed inservice on or after May 1, 2009 and on or before December 31, 2009 is not eligible for a credit.
Eligible property placed in service prior to May 1, 2009 will still be eligible for the 4%credit, as will eligible property placed in service after December 31, 2009.
For more information on this Act, please contact the Rules Office at 808-587-1577.

KURT KAWAFUCHI
Director of Taxation