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INSTRUCTIONS

STATE OF HAWAII—DEPARTMENT OF TAXATION

FORM N-332

INSTRUCTIONS FOR FORM N-332

(2001)

RESIDENTIAL CONSTRUCTION AND REMODELING TAX CREDIT

GENERAL INSTRUCTIONS

Pursuant to Act 10, Third Special

the partner’s, shareholder’s, or benefi-

“Construction or remodeling cost”

Session Laws of Hawaii 2001, each

ciary’s share of the construction or ren-

means any cost incurred after Decem-

homeowner or developer subject to

ovation costs and resulting tax credit. A

ber 31, 2000 (and before July 1, 2002),

Hawaii’s net income tax may claim a

partner’s share of the construction or

for plans, design, construction, and

residential construction and remodel-

renovation costs shall be determined in

equipment related to new construction,

ing tax credit of 4 percent of the quali-

accordance with the ratio in which the

alterations, or modifications to residen-

fied construction or renovation costs in-

partners divide the general profits of the

tial real property. The plain meaning of

curred during the taxable year for resi-

partnership. The construction or reno-

the terms “alter” and “modify” require

dential real property located in Hawaii.

vation costs of the partnership which

actions which change a property by

are subject to a special allocation that is

renewing its condition. Maintenance is

No tax credit shall be allowed for that

recognized under IRC section 704(a)

the act of making repairs to prevent a

portion of the construction or renova-

and (b) shall be recognized for the pur-

decline or lapse in the existing state or

tion costs for which another tax credit

poses of this tax credit. Each S corpo-

condition.

Routine maintenance or

was claimed under Hawaii’s net in-

ration shareholder’s construction or

repairs would not qualify for the credit

come tax law for the taxable year.

renovation costs is the shareholder’s

because

routine

maintenance

If a deduction is taken under Internal

allocated share of the S corporation’s

repairs do not change a property by

Revenue Code (IRC) section 179 (re-

construction or renovation costs. A

renewing its condition. To the extent

garding an election to expense certain

beneficiary’s share of the construction

that incidental maintenance or repairs

depreciable business assets) no tax

or renovation costs is apportioned be-

are incurred as part of a general plan of

credit shall be allowed for that portion of

tween the entity and the beneficiaries

renovation, however, these expenses

will qualify for the credit since they are

the construction or renovation costs for

based on the income of the entity allo-

which the deduction was taken.

cable to each. The term “beneficiary”

incurred as part of an expenditure to

includes an heir, legatee, or devisee.

improve a property.

Examples of

The basis of eligible property for de-

Associations of apartment owners see

improvements which would qualify for

preciation or ACRS purposes for state

the instructions for Part II.

the credit include the addition of a new

income taxes shall be reduced by the

room, putting in new plumbing or

amount of tax credit allowable and

Tax credit to be deducted from in-

wiring, putting on a new roof, or install-

claimed. Alternatively, you may treat

come tax liability. Tax credits which

ing new carpet. Examples of things

the amount of the credit allowable and

exceed the taxpayer’s net income tax li-

which would not qualify include repaint-

claimed as a taxable income item for

ability may be used as credit against

ing your house inside or outside, fixing

the taxable year in which it is properly

the taxpayer’s net income tax liability in

your gutters or floors, or replacing broken

recognized under the method of ac-

subsequent years until exhausted.

windows.

counting used to compute taxable in-

Time for filing. All claims for the tax

come.

“Net income tax liability” means in-

credit must be filed on or before the end

come tax liability reduced by all other

The tax credit shall be available for

of the 12th month following the close of

credits allowed under Hawaii’s income

taxable years beginning after Decem-

the taxable year for which the tax credit

tax law.

ber 31, 2000, and shall not be available

may be claimed. An extension of time

for taxable years beginning after De-

for filing a return does not extend the

SPECIFIC INSTRUCTIONS

cember 31, 2003 for costs incurred be-

time for claiming the tax credit. Failure

Part I

fore July 1, 2002.

to comply with the foregoing provision

shall constitute a waiver of the right to

In the case of a partnership, S corpo-

Line 1 — Enter the qualifying con-

claim the tax credit.

ration, estate, trust, or association of

struction or renovation costs incurred

apartment owners, the tax credit allow-

When credit can be claimed. The

during the taxable year for residential

able is for qualified construction or ren-

credit may be claimed for the taxable

real property located in Hawaii. Do not

ovation costs incurred by the entity for

year in which the costs were incurred.

include that portion of the construction

the taxable year. The construction or

When costs are incurred depends on a

or renovation costs for which another

renovation costs upon which the tax

taxpayer’s method of accounting. For

tax credit was claimed under chapter

credit is computed is determined at the

cash basis taxpayers, costs are in-

235, HRS, for the taxable year. Do not

entity level. Each partner, S corporation

curred when paid. For accrual basis

include that portion of the renovation

shareholder, or beneficiary of an estate

taxpayers, costs are incurred when the

cost for which a deduction is taken un-

or trust shall separately take into ac-

expense is recognized.

der IRC section 179. Do not include

count for its taxable year with or within

costs for routine maintenance or re-

Definitions. For purposes of the tax

which the entity’s taxable year ends,

pairs. Costs are limited to $250,000

credit:

Instructions For Form N-332 - Residential Construction And Remodeling Tax Credit - State Of Hawaii Department Of Taxation - 2001

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