Tax Credits Claimed by Hawaii Taxpayers Tax Year 2016
From DoTax, December 20, 2018 (excerpts)
…This study examines tax credits that may be applied against Hawaii’s net income taxes, against the tax on insurance premiums, or against the tax on public utilities. Tax credits are subtracted directly from the tax liability, so they reduce the amount of taxes dollar-for-dollar. This makes them more valuable to taxpayers than ordinary deductions, which merely reduce the amount of income against which tax is applied. Tax credits may be refundable or nonrefundable. If a tax credit is nonrefundable, it can provide a tax benefit only to the extent that the taxpayer has a tax liability.1 In contrast, the taxpayer is ensured of receiving the full amount of a refundable tax credit in the year it is claimed, because if the tax credit exceeds the tax liability, the taxpayer receives a check from the government for the difference. The study reports the value of tax credits that were applied against (and deducted from) tax liability, or that were refunded to taxpayers in tax year 2016.
The study does not include the value of tax credits that were claimed in tax year 2016 if the tax credits were denied or carried over to a future year.
The tax returns examined for this study were those filed for tax year 2016 and processed by March 31, 2018. The tax year is the same as the calendar year for most taxpayers, but for taxpayers that have a fiscal year that differs from the calendar year, tax year 2016 is the fiscal year ending in calendar year 2016.
Hawaii’s first tax credit was established in 1957 to avoid double taxation of income. Since then, numerous tax credits have been enacted. Most of them are designed to promote social welfare or to encourage certain industries or economic activities. The total number of tax credits reached a peak in tax year 2008, when 21 tax credits were active. In tax year 2016, there were 19 active tax credits. 2 There were also 6 expired tax credits for which excess credits from prior years could be carried over into tax year 2016. 3
The Department of Taxation (Department) has prepared studies on tax credits for tax years 1965, 1970, 1977 through 2005, and 2011 through 2016 (the present study). 4.…
…In tax year 2016, a total of $289.1 million was claimed in tax credits….
…the largest tax credit by dollar value was the renewable energy technologies tax credit which, along with a small amount of carryovers of the energy conservation tax credit, amounted to $85.8 million, or 29.7% of the total tax credits claimed in tax year 2016. The second largest tax credit was income taxes paid to another state or foreign country, which amounted to $43.4 million, or 15% of the total….
…Individual taxpayers with Hawaii AGI less than $10,000 claimed a total of $18 million in tax credits for the tax year, which was more than double their aggregate tax liability before tax credits of $7.5 million. The largest tax credits claimed by this income group (with Hawaii AGI less than $10,000) were the refundable food/excise tax credit ($12.4 million, or 68.8% of their total tax credits) and the renewable energy technologies tax credit ($3 million, or 16.8% of their total tax credits).
Taxpayers with Hawaii AGI of $200,000 or more accounted for the largest dollar value of tax credits ($68.1 million) and also for the largest aggregate tax liability before tax credits ($764.9 million). The largest tax credits claimed by this income group (with Hawaii AGI of $200,000 or more) were the tax credit for income taxes paid to another state or foreign country ($35.8 million, or 52.5% of their total tax credits), the renewable energy technologies tax credit ($17.7 million, or 26% of their total tax credits), and the capital goods excise tax credit ($5.9 million, or 8.7% of their total tax credits).
The largest tax credit claimed by taxpayers with Hawaii AGI of $10,000 to $29,999 and taxpayers with Hawaii AGI of $30,000 to $59,999 was the refundable food/excise tax credit. For the $10,000 to $29,999 income group, the refundable food/excise tax credit amounted to $13.5 million, or 69.7% of the group's total tax credits; and for the $30,000 to $59,999 income group, this tax credit amounted to $4.8 million, or 39.3% of the group's total tax credits.
Finally, the largest tax credit claimed by taxpayers with Hawaii AGI of $60,000 to $99,999, and taxpayers with Hawaii AGI of $100,000 to $199,999 was the renewable energy technologies tax credit. For the $60,000 to $99,999 income group, the renewable energy technologies tax credit amounted to $6.9 million, or 63% of the group's total tax credits; and for the $100,000 to $199,999 income group, this tax credit amounted to $12.7 million, or 60.8% of the group's total tax credits….
Refundable Food/Excise Tax Credit (HRS §235-55.85)
…The refundable food/excise tax credit was the most commonly claimed tax credit in tax year 2016. The tax credit appeared on 254,463 individual income tax returns, or 35.1% of the total number of such returns filed for the tax year (725,467 returns). Claims for the tax credit totaled $30.8 million for tax year 2016, up from the $26.9 million claimed for tax year 2015 and $27.7 million for tax year 2014. This reflects the increase in the tax credit amounts by Act 223, SLH 2015 for tax year 2016, although the number of individual income tax returns claiming this tax credit went down. The number of claims was 325,283 for tax year 2014 and 323,283 for tax year 2015, which went down to 254,463 for tax year 2016. …
4.1.1. Tax Credits to Promote Social Welfare
Tax Credit for Low-Income Household Renters (HRS §235-55.7)
…The renter's tax credit was claimed on 26,709 individual income tax returns for tax year 2016. It was the second most commonly claimed tax credit. The amount claimed for tax year 2016 totaled $2.7 million, down from $3.3 million claimed for tax year 2015 and $3.6 million for tax year 2014. …
Tax Credit for Child and Dependent Care Expenses (HRS §235-55.6)
…For tax year 2016, the dependent care tax credit was the third most commonly claimed tax credit and was reported on 26,233 individual income tax returns. The amount claimed for tax year 2016 totaled $10.1 million, up from $9.5 million claimed for tax years 2015 and 2014. This increase reflects the changes in the adjusted gross income ranges for the tax credit by Act 235, SLH 2016 for tax year 2016, although the number 15 of individual income tax returns claiming this tax credit went down slightly (from 26,372 for tax year 2015, and 26,299 for tax year 2014 to 26,233 in tax year 2016)….
Tax Credit for Child Passenger Restraint Systems (HRS §235-15)
…For tax year 2016, the tax credit was claimed on 2,813 individual income tax returns and the total amount claimed was $70,000, down from $74,000 claimed for tax year 2015 and $72,000 for tax year 2014….
Tax Credit for Employment of Vocational Rehabilitation Referrals (HRS §235-55.91)
…The tax credit was claimed on 6 tax returns for tax year 2016 and the total amount claimed was $14,000, up from $10,000 claimed for tax year 2015 and $7,000 for tax year 2014….
Low-Income Housing Tax Credit (HRS §235-110.8 and §241-4.7, §431:7-208)
…The tax credit was claimed on 45 tax returns for tax year 2016 and the total amount claimed was $23.5 million, up from claims of $19.5 million for tax year 2015 and $18.2 million for tax year 2014….
Tax Credit for School Repair and Maintenance (HRS §235-110.2)
…The tax credit was claimed on 6 tax returns for tax 16 year 2016 and the total amount claimed was only $339. Data on the tax credit for tax years 2014 and 2015 were suppressed to prevent potential disclosure of confidential taxpayer information….
Lifeline Telephone Service Tax Credit (HRS §239-6.5)
…The tax credit was claimed on behalf of 1,767 subscribers as of the end of calendar year 2016 and the amount claimed by the public utility for tax year 2016 was $48,000, down from $54,000 claimed for tax year 2015 and $58,000 for tax year 2014….
4.1.2. Tax Credits to Encourage Certain Industries or Economic Activities
Fuel Tax Credit for Commercial Fishers (HRS §235-110.6)
…The tax credit was claimed on 169 tax returns for tax year 2016 and the total amount claimed was $373,000, up from $294,000 claimed for tax year 2015 and $293,000 for tax year 2014. …
Motion Picture, Digital Media, and Film Production Income Tax Credit (HRS §235-17)
…The tax credit was claimed on 36 tax returns for tax year 2016 and the total amount claimed was $31.9 million, down from $39.9 million claimed for tax year 2015 and $34.4 million for tax year 2014. The tax credit was the fourth largest in terms of the amount claimed for tax year 2016….
Renewable Energy Technologies Tax Credit (HRS §235-12.5 and §241-4.6)
…The tax credit for systems installed and placed in service on or after July 1, 2009 was claimed on 11,078 returns for tax year 2016 and the amounts claimed totaled $83.8 million, down from $96.9 million claimed for tax year 2015.
Claims for all systems, including carryovers of the energy conservation tax credit, totaled $85.8 million for tax year 2016, down from the $98.6 million claimed for these tax credits in tax year 2015 and $112.1 million for tax year 2014. This was the largest tax credit in terms of the amount claimed in tax year 2016….
Enterprise Zone Tax Credit (HRS §209E-10, §209E-11)
…The tax credit was claimed on 87 tax returns for tax year 2016 and the amounts claimed totaled $748,000, down from $890,000 claimed for tax year 2015 and $1 million for tax year 2014….
Ethanol Facility Tax Credit (HRS §235-110.3)
…No claims for the tax credit were made for tax years 2016, 2015, and 2014. …
Important Agricultural Land Qualified Agricultural Cost Tax Credit (HRS §235-110.93)
…The number of returns claiming this credit has been suppressed to prevent potential disclosure of confidential taxpayer information for tax years 2015 and 2016. The total amount claimed was $1.4 million for tax year 2016 up from $388,000 for tax year 2015. The tax credit was not available for tax year 2014, because the Department of Agriculture had not certified any claims for the tax credit….
Tax Credit for Research Activities (HRS §235-110.91)
…The tax credit was claimed on 58 tax returns for tax year 2016 and the amounts claimed totaled $3.1 million, up from $2.9 million claimed for tax years 2015 and 2014…
Capital Infrastructure Tax Credit (HRS §235-17.5, §241-4.4)
…The tax credit was claimed on 44 tax returns for tax year 2016 and the amounts claimed totaled $1.4 million, up from $1.1 million claimed for tax year 2015 and $989,000 for tax year 2014….
Cesspool Upgrade, Conversion or Connection Income Tax Credit (HRS §235-16.5)
…This newly established tax credit was claimed on 6 tax returns for tax year 2016 and the amounts claimed totaled $19,000….
4.1.3. Tax Credits to Avoid Double Taxation or Pyramiding of Hawaii Taxes
Capital Goods Excise Tax Credit (HRS §235-110.7, §241-4.5)
…The tax credit was claimed on 4,161 tax returns for tax year 2016 and the amounts claimed totaled $34.7 million, up from $30.2 million claimed for tax year 2015 and $28.3 million for tax year 2014. The tax credit was the third largest in terms of the amount claimed in tax year 2016….
Income Tax Paid to Another State or Foreign Country (HRS §235-55)
…This nonrefundable tax credit was claimed on 8,507 tax returns for tax year 2016 and the amounts claimed totaled $43.4 million, down from $45 million claimed for tax year 2015 but up from $38.4 million claimed for tax year 2014. The tax credit was the second largest in terms of the amount claimed in tax year 2016….
4.2. Expired Tax Credits
4.2.1. Tax Credits to Promote Social Welfare
Individual Development Account Contribution Tax Credit (HRS §235-5.6)
…The tax credit was effective for taxable years 22 2000 to 2004 with an aggregate limit of $1 million. Data on the tax credit for tax years 2016 and 2014 were suppressed to prevent potential disclosure of confidential taxpayer information and there were no claims for tax year 2015….
4.2.2. Tax Credits to Encourage Certain Industries or Economic Activities
High Technology Business Investment Tax Credit (HRS §235-110.9, §241-4.8, §431:7- 209)
…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 carry-overs of the tax credit can continue indefinitely. The tax credit was claimed on 411 tax returns for tax year 2016 and the amounts claimed totaled $16.3 million, down from $24.2 million claimed for tax year 2015 and $37.7 million for tax year 2014. …
Energy Conservation Tax Credit (HRS §235-12)
…The tax credit expired on June 30, 2003, but unused tax credits may be carried over to subsequent years until exhausted. Data on carryovers of the tax credit are included with those for the renewable energy technologies tax credit….
Hotel Construction and Remodeling Tax Credit (HRS §235-110.4, repealed)
…This nonrefundable tax credit was claimed on 4 tax returns for tax year 2016 and the amount claimed totaled $1.2 million, up from $248,000 claimed for tax year 2015 but down from $3.3 million claimed for tax year 2014….
Technology Infrastructure Renovation Tax Credit (HRS §235-110.51)
…The tax credit is not available for taxable years beginning after December 31, 2010, but amounts claimed for the tax credit prior to its expiration can be carried forward and applied against tax liability in later years until exhausted…. Data on the tax credit for tax years 2015 and 2016 were suppressed to prevent potential disclosure of confidential taxpayer information and the total amount claimed for tax year 2014 was only $9,000…..
Residential Construction and Remodeling Tax Credit (HRS §235-110.45)
…The tax credit expired on June 30, 2003, but any unused tax credit may be carried over to subsequent years until exhausted. Carryovers of the tax credit were claimed on 34 tax returns for tax year 2016 and the amounts claimed totaled $1.5 million, up from $826,000 claimed for tax year 2015 and $195,000 for tax year 2015. …
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