Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-11 - Qualified production costs; credit calculation for certain equipment costs

Current through June, 2024
(a) For equipment
				that is purchased for more than $25,000 and specifically for use for a
				qualified production in the State, the amount that may be claimed as a
				qualified production cost in the first year the equipment is used for a
				qualified production shall be limited to the cost incurred for the equipment
				divided by the applicable recovery period under the modified accelerated cost
				recovery system determined by the Internal Revenue Service; provided that a
				deduction has not been taken under section 179 of the Internal Revenue Code of
				1986, as amended, with respect to the equipment.
Example:
XYZ Production Company purchased a
				  camera to film an underwater scene of a feature film in Hawaii. The camera was
				  purchased for $60,000 and has a recovery period under the modified accelerated
				  cost recovery system determined by the Internal Revenue Service of 5 years. A
				  deduction under section 179 of the Internal Revenue Code of 1986, as amended,
				  was not taken with respect to the camera. The amount that may be claimed as a
				  qualified production cost in the first year the equipment is used for a
				  qualified production is $12,000, which is the $60,000 purchase price divided by
				  the applicable recovery period of 5 years.
(b) For equipment that a taxpayer owned prior
				to beginning production in the State or that a taxpayer has previously claimed
				qualified production costs for a qualified production in the State and that has
				an applicable recovery period under the modified accelerated cost recovery
				system determined by the Internal Revenue Service of 5 years or more, the
				taxpayer may claim the amount of the depreciation allowance as a qualified
				production cost. The amount claimed as a qualified production cost shall be
				prorated to reflect the amount of time that the equipment is actually used
				during the calendar year; provided that a deduction has not been taken under
				section 179 of the Internal Revenue Code of 1986, as amended, with respect to
				the equipment. The depreciation allowance under state law shall be utilized to
				calculate the credit amount under this section.
Example 1:
XYZ Production Company has cameras
				  that it ships to the State to film a production for six months. All of these
				  cameras were purchased by the production company prior to production in the
				  State and have been utilized as equipment for the past few years on other film
				  projects. These cameras are available on a checkout basis for all productions
				  being created by XYZ Production Company. Assume that the cameras have an
				  applicable recovery period under the modified accelerated cost recovery system
				  determined by the Internal Revenue Service of 5 years and assume further that a
				  deduction under section 179 of the Internal Revenue Code of 1986, as amended,
				  was not taken with respect to the cameras and that depreciation deductions have
				  been taken in prior years. If XYZ Production Company is entitled to take a
				  $1,000 state depreciation allowance for the cameras for the calendar year, XYZ
				  Production Company may claim $500 as a qualified production cost that
				  represents the $1,000 depreciation allowance adjusted for the time the cameras
				  were used in the State.
Example 2:
XYZ Production Company purchased a
				  camera to film an underwater scene of a feature film in Hawaii. The camera was
				  purchased for $60,000 and has a recovery period under the modified accelerated
				  cost recovery system determined by the Internal Revenue Service of 5 years. A
				  deduction under section 179 of the Internal Revenue Code of 1986, as amended,
				  was not taken with respect to the camera. The amount that may be claimed as a
				  qualified production cost in the first year the equipment is used for a
				  qualified production is $12,000, which is the $60,000 purchase price divided by
				  the applicable recovery period of 5 years. In the subsequent year XYZ
				  Production uses the camera for the qualified production for six months of the
				  year. XYZ Production is entitled to a $10,000 state depreciation allowance for
				  the camera. XYZ Production may claim $5,000 as a qualified production cost that
				  represents the $10,000 depreciation allowance adjusted for the time the camera
				  was used in the State.