Section 15-6-16 - Terms and conditions under which the tax credits and the general excise exemption may be claimed by a certified business(a) A qualified business which has received certification from the department may receive state tax credits and the general excise tax exemption for seven consecutive taxable years. A qualified business engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products may receive state tax credits and the general excise tax exemption for an additional three consecutive taxable years. Except as provided in the force majeure provisions in this chapter, if a business fails to be certified for any taxable year during these qualification periods, the business shall not be entitled to the income tax credits or general excise tax exemption offered by this program. The business, however, is eligible to qualify and be certified for any remaining taxable years of its qualification period.
(b) Except as provided in the force majeure provisions in this chapter, any business which fails to be certified for one or more taxable years during the cycle shall not be allowed to compensate by requesting certification after completion of the original seven consecutive year cycle or the additional three consecutive year cycle for businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products. The application of this provision is illustrated in the following example: Example 1:
ABC Company is certified to receive enterprise zone tax benefits by the department in the initial year of the seven-year cycle. ABC applies for and receives certification from the department in the next two years. The department, however, denies ABC certification in year four. ABC applies for and receives certification in years five, six, and seven. ABC applies for certification in year eight. ABC will not receive certification from the department in year eight as the term of the seven-year cycle has expired.
(c) When a taxpayer conducts business within two or more zones, only one return shall be filed by the taxpayer with attached schedules supporting the amount of the business tax credit or the exemption from the general excise tax.(d) The department shall not provide certification to a business which enters into a transaction where the principal purpose of the transaction is evasion or avoidance of any taxes or unemployment insurance premiums owed the State by securing the benefit of a credit or exemption which the business would not otherwise enjoy. (1) Where a business sells or delivers any tangible personal property or service to or for an affiliated business or person and the consideration paid by the affiliate to the business is not indicative of economic substance or the true value of the property or services delivered, this shall be prima facie evidence that the transaction was for the principal purpose of evasion or avoidance of any taxes or unemployment insurance premiums owed the State.(e) Where a business commences and completes its qualification period, such business or any successor business shall not be eligible to participate in the enterprise zones program. Where a business commences and does not complete its qualification period, the successor business, if any, shall continue the qualification period of the predecessor business. "Successor business" means a business which either continues the historic business of the predecessor business or uses significant portion of the predecessor business' assets.(1) The continuity of business requirement is satisfied if the successor business continues the predecessor business' historic business. The historic business is the business it has conducted most recently. The fact that the successor business is in the same line of business as the predecessor business may establish the requisite continuity, but is not alone sufficient. If the predecessor business has more than one line of business, the successor business must only continue a significant line of business.(2) The continuity of business requirement is also satisfied if the successor business uses a significant portion of the predecessor business' historic business assets, including stock and securities and intangible operating assets such as good will, patents, and trademarks, whether or not they have a tax basis, in a business. The determination of the portion of a business' assets considered 'significant" is based, generally, on the relative importance of the assets to the operation of the business. All facts and circumstances, including the net fair market value of those assets will be considered. [Eff 11/3/90; am and comp2/28/2015] (Auth: HRS § 209E- 8)(Imp: HRS §§ 209E-10, 209E-11)