Hawaii – Proposed Amendments to Exemption for Scientific Contracts

1/23/2013

SALT Report 2071 – The Hawaii State Legislature introduced a bill that limits the scope of the general excise tax exemption for scientific research contracts with the United States.  The amendments are as follows:

Hawaii Revised Statutes Section 237-26, Exemption of certain scientific contracts with the United States

(a) Any provision of law to the contrary notwithstanding, there shall be exempted from the measure of the taxes imposed by chapter 237, gross proceeds received under a contract or subcontract entered into with the United States (including any agency or instrumentality thereof but not including national banks) in an amount equal to “qualified research expenses for the taxable year over the base amount”, “basic research payments determined under Internal Revenue Code section 41(e)(1)(A)”, and “amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research”. Gross proceeds exempted under this section shall not exceed the amount claimed and allowable under section 41 of the Internal Revenue Code for the same taxable period.

(b) “qualified research expenses for the taxable year over the base amount”, “basic research payments determined under Internal Revenue Code section 41(e)(1)(A)”, and “amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research” shall have the same meaning as under section 41 of the Internal Revenue Code and its judicial and administrative interpretations.”

If enacted this Bill would take effect on January 1, 2014.

For Further Information

Hawaii State Legislature – House Bill 329