State agency liberalizes high-tech tax credits
The state clarifies the standards for deals that qualify for the credit
Hawaii's top tax official announced plans yesterday to make it easier for businesses and investors to take advantage of a state tax credit designed to promote investment in high-tech ventures.
The statement drafted by the Hawaii Department of Taxation does not represent policy or rule change, said Kurt Kawafuchi, the department's director. Rather, the statement clarifies the standards that the department will use when deciding whether a deal will automatically qualify for the investor credits.
Kawafuchi said that the department's statement, which is called a tax information release, will "liberalize" some of these standards.
Kawafuchi unveiled the plan yesterday before a crowd of approximately 200 business executives and technology professionals attending a luncheon produced by the Hawaii Science & Technology Council.
Billed as a trip by Kawafuchi to "the lion's den," the luncheon presented the opportunity for professionals to grill Kawafuchi about a business incentive that has been the subject of often-vigorous debate since it was implemented in 2001.
Known as Acts 221/215, the legislation provides 100 percent tax credits for investments in qualified high-tech businesses, which include biomedical firms and software companies, as well as performing-arts projects such as film and television productions.
Proponents of the measure have said it has helped seed a fledgling tech industry in Hawaii that includes promising firms such as Hawaii Biotech Inc. and Hoku Scientific Inc. But critics have charged that the program has been subjected to abuse in the past.
Between 2001 and 2004, the state has issued $184.5 million in tax credits, which can be claimed over five years, Kawafuchi reported yesterday. Of that total, taxpayers so far have claimed $74.9 million, which is money that the state essentially has given up.
Despite the robust amount of public money that has been given up under the program so far, there has been relatively little information made public on the program's economic benefits. For example, the state has never produced information quantifying the number of jobs produced. And Kawafuchi could not immediately say how many companies had benefited from the program.
This has left the industry without information that might rebut critics and allow the public and Legislature make informed decisions concerning the program.
Ann Chung, vice president of the Hawaii Science & Technology Council, said the industry recognizes the need for some kind of economic analysis. Chung said the council is considering commissioning a study. However, Chung would not say whether the industry would support legislation mandating that the state produce an annual study.
Regardless, Chung said it was important to note that $184.5 million was invested in qualified high tech and performing arts ventures between 2001 and 2004. It is safe to assume, Chung said, that that money has been pumped into the local economy through payroll and other business expenses.