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Tuesday, December 27, 2016
Tax Credits: Cronies and Phonies Rake in Millions
By Andrew Walden @ 3:52 PM :: 1267 Views :: Ethics, Tax Credits
 

by Andrew Walden

The State paid $318.47M in tax credits for 2014, according to a December, 2016 report posted by DoTAX.  

The Act 221 High-Tech Tax Credit Scam, abolished in 2010, still cost Hawaii $38.4M four years later.  The money was given away to 1,939 so-called taxpayers for pretending to be high-tech entrepreneurs or because they bought the credits from the fake entrepreneurs. 

Another $34.4M was given to 30 ‘taxpayers’ under auspices of the “Motion Picture, Digital Media, and Film Production Income Tax Credit.” 

Divided between homeowners and “solar leasing” scams—mostly run by national Democrat contributors--$112.1M went to “Renewable Energy Technologies.” These credits have allowed solar contractors to jack up their prices so they can make more campaign contributions. 

Tax credits for the little people include $27.7M for the Refundable Food/Excise Tax Credit—set to be reduced 25%—$3.6M for low income renters, and $9.5M for child care.

Here are the details:

Refundable Food/Excise Tax Credit (HRS §235-55.85)

To claim the tax credit, the taxpayer must be a Hawaii resident with federal adjusted gross income (adjusted gross income as defined by the Internal Revenue Code) of less than $50,000 who is not claimed or eligible to be claimed as a dependent by another taxpayer. The tax credit is computed by multiplying an allowable tax credit amount by the number of qualified exemptions. The qualified exemptions are personal exemptions permitted under Hawaii law, excluding the additional exemptions for being age 65 or older or for having a disability….

The refundable food/excise tax credit was the most commonly claimed tax credit in tax year 2014. The tax credit appeared on 325,713 individual income tax returns, or almost half of the total number of such returns filed for the tax year (703,548 returns). Claims for the tax credit totaled $27.7 million for tax year 2014, down slightly from the $28.3 million claimed for tax year 2013.

This credit is claimed on 46% of tax returns with an average value of $85.  This would reimburse the GE Tax for $2,125 of purchases ($41 per week) on sister isles or $1,889 of purchases ($36 per week) on Oahu at 4.5%.  If the legislature does not act, this tax credit will lose 25% of its value in 2017.

  *   *   *   *   *

Tax Credit for Low-Income Household Renters (HRS §235-55.7)

The $30,000 income limitation has not been changed since 1989, when it was raised from $20,000. The amount of the tax credit per exemption was raised from $20 to $50 in 1981, but has remained unchanged since then, despite substantial rises in the cost of housing. The renter's tax credit was claimed on 35,030 individual income tax returns for tax year 2014. It was the second most commonly claimed tax credit. The amount claimed for tax year 2014 totaled $3.6 million, down slightly from $3.9 million claimed for tax year 2013.

This credit is claimed on 5% of tax returns with an average value of $103.

  *   *   *   *   *

Tax Credit for Child and Dependent Care Expenses (HRS §235-55.6)

For tax year 2014, the dependent care tax credit was the third most commonly claimed tax credit and was reported on 26,299 individual income tax returns. The amounts claimed for tax year 2014 totaled $9.5 million, up slightly from the $9.3 million claimed in tax year 2013.

This credit is claimed on 4% of tax returns with an average value of $361.

  *   *   *   *   *  

Income Tax Paid to Another State or Foreign Country (HRS §235-55)

A Hawaii resident individual or other person may claim a credit for income taxes paid to another state or to a foreign country if the income was earned in the other state or country and is not exempt from Hawaii or federal income tax, and if certain other requirements are met. The tax credit was claimed on 7,558 tax returns for tax year 2014 and the amounts claimed totaled $38.4 million, up from $36.0 million claimed for tax year 2013.

This credit is claimed on 1.1% of tax returns with an average value of $4,763.

  *   *   *   *   *

Renewable Energy Technologies Tax Credit (HRS §235-12.5 and §241-4.6)

Table 4 shows the number of returns and the amount of the tax credit claimed for the renewable energy tax credit, and also for carryovers of the energy conservation tax credit that expired June 30, 2003. The first part of the table shows carryovers of tax credits for the renewable energy systems that were installed and placed in service prior to July 1, 2009, along with carryovers of the energy conservation tax credit and carryovers of the renewable energy tax credit for which the date of installation could not be determined. Carryovers of these tax credits were reported on 827 tax returns for tax year 2014 and the amounts claimed totaled $1.9 million.

The second and third parts of Table 4 show the renewable energy tax credit for systems that were installed on or after July 1, 2009, by type of system, by type of taxpayer, and by whether the claim was for a refundable or nonrefundable tax credit. Because unused tax credits can be carried over, and because extensions of existing systems made in later years are also eligible for the tax credit, the number of returns claiming the credit in a year may be larger than the number of new systems installed that year. The tax credit for systems installed and placed in service on or after July 1, 2009 was claimed on 14,902 returns for tax year 2014 and the amounts claimed totaled $110.2 million. Claims for all systems, including carryovers of the energy conservation tax credit, totaled $112.1 million for tax year 2014, down from the $118.3 million claimed for these tax credits in tax year 2013.

This credit is claimed on 2.2% of tax returns with an average value of $7,127.

  *   *   *   *   *

High Technology Business Investment Tax Credit (HRS §235-110.9, §241-4.8, §431:7- 209) (Yes, we’re still paying for this scam.)

The tax credit expired for taxable years beginning after December 31, 2010, but claims for the tax credit can be made for four years after the year of the investment and carryovers of the tax credit can continue indefinitely. The tax credit was claimed on 1,939 tax returns for tax year 2014 and the amounts claimed totaled $38.4 million, down slightly from $40.4 million claimed for tax year 2013. The tax credit was the third biggest in terms of the amount claimed in tax year 2014.

This credit is claimed on 0.3% of tax returns with an average value of $19,804 each.

  *   *   *   *   *

Motion Picture, Digital Media, and Film Production Income Tax Credit (HRS §235-17)

In tax year 2014, taxpayers could claim a refundable tax credit equal to 20% of qualified production costs incurred in a county in Hawaii with a population over 700 thousand and 25% for qualified production costs incurred in a county in Hawaii with a population of 700 thousand or less. The total tax credits allowed for a single qualified production was capped at $15 million. The tax credit was claimed on 30 tax returns for tax year 2014 and the total amount claimed was $34.4 million, up slightly from $31.9 million claimed for tax year 2013.

This credit is claimed on 0.00004% of tax returns with an average value of $1.15M each.

  *   *   *   *   *

Important Agricultural Land Tax Credit (HRS §235-110.93)

Tax credits must be certified by the Department of Agriculture and the aggregate amount of credits claimed cannot exceed $7.5 million in any tax year. The tax credit was not available for tax year 2014, because the Department of Agriculture had not certified any claims for the tax credit.

  *   *   *   *   *

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