Instructions For Form N-314 - Hotel Construction And Remodeling Tax Credit - State Of Hawaii Department Of Taxation - 2001

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INSTRUCTIONS
STATE OF HAWAII—DEPARTMENT OF TAXATION
FORM N-314
INSTRUCTIONS FOR FORM N-314
( 2001)
HOTEL CONSTRUCTION AND REMODELING TAX CREDIT
GENERAL INSTRUCTIONS
Each taxpayer subject to Hawaii’s net income
When credit can be claimed. The credit may
party. In the space above line 4, enter the cost al-
tax and transient accommodations tax may claim
be claimed for the taxable year in which the costs
locable to the estate or trust with the designation
a hotel construction and remodeling tax credit for
were incurred. When costs are incurred depends
“N-40 PORTION”. Attach Form N-314 to the
each qualified hotel facility located in Hawaii. The
on a taxpayer’s method of accounting. For cash
N-40 return and show the distributive share of the
credit is 4 percent of the qualified construction or
basis taxpayers, costs are incurred when paid.
costs for each beneficiary.
renovation costs incurred during the taxable year
For accrual basis taxpayers, costs are incurred
Form N-20 and N-35 filers, stop here. Form
for costs incurred prior to 11/2/01 and after
when the expense is recognized.
N-20 filers, enter the amount on line 3 on Sched-
6/30/03, and 10% of costs incurred after 11/1/01
Time for filing. All claims for the tax credit
ule K, line 28. Form N-35 filers, enter the amount
and before 7/1/03. See Department of Taxation
must be filed on or before the end of the 12th
on line 3 on Schedule K, line 17. Form N-40 filers
Announcement No. 2001-20.
month following the close of the taxable year for
enter the distributive share amount on line 10 of
No tax credit shall be allowed for that portion
which the tax credit may be claimed. An exten-
Schedule K-1, Form N-40, for each beneficiary,
of the construction or renovation costs for which
sion of time for filing a return does not extend the
otherwise continue to line 4. Identify this amount
another tax credit was claimed under Hawaii’s
time for claiming the tax credit. Failure to comply
as pre 11/2/01 costs. All others, continue to line
net income tax law for the taxable year.
with the foregoing provision shall constitute a
4.
waiver of the right to claim the tax credit.
If a deduction is taken under Internal Reve-
Line 5 — Enter this portion of the tax credit
nue Code (IRC) section 179 (regarding an elec-
Definitions. For purposes of the tax credit:
claimed for the year on this line and on Schedule
tion to expense certain depreciable business as-
CR, Line 13 or enter the estate’s or trust’s share
“Qualified hotel facility” means a hotel/ho-
sets) no tax credit shall be allowed for that portion
on Form N-40, Schedule F, line 3. For individual
tel-condo as defined in section 486K-1, HRS, and
of the construction or renovation costs for which
taxpayers, round the amount on line 5 to the
includes a time share facility or project.
the deduction was taken.
nearest dollar.
“Construction or renovation cost” means any
The basis of eligible property for depreciation
Tax credit to be deducted from income tax
cost incurred after December 31, 1998, for plans,
or ACRS purposes for state income taxes shall
liability, if any; refunds. If this portion of the tax
design, construction, and equipment related to
be reduced by the amount of tax credit allowable
credit exceeds the taxpayer’s income tax liability,
new construction, alterations, or modifications to
and claimed. Alternatively, you may treat the
the excess of tax credit over liability shall be re-
a qualified hotel facility. The plain meaning of the
amount of the credit allowable and claimed as a
funded to the taxpayer; provided that no refunds
terms “alter” and “modify” require actions which
taxable income item for the taxable year in which
or payment on account of the tax credit shall be
change a property by renewing its condition.
it is properly recognized under the method of ac-
made for amounts less than $1.
Maintenance is the act of making repairs to pre-
counting used to compute taxable income.
Part II - Computation of Tax Credit
vent a decline or lapse in the existing state or con-
The tax credit shall be available for taxable
dition. Routine maintenance would not qualify for
for Costs Incurred After 11/1/01
years beginning after December 31, 1998, and
the credit because routine maintenance does not
Line 6 — Enter the qualifying construction or
shall not be available for taxable years beginning
change a property by renewing its condition. To
renovation costs incurred during the taxable year
after December 31, 2005.
the extent that incidental maintenance repairs
after 11/1/01 for qualified hotel facility(ies) lo-
are incurred as part of a general plan of renova-
In the case of a partnership, S corporation,
cated in Hawaii. Do not include that portion of the
tion, however, these expenses will qualify for the
estate, trust, association of apartment owners of
construction or renovation costs for which an-
credit since they are incurred as part of an expen-
a qualified hotel facility, time share owners asso-
other tax credit was claimed under chapter 235,
diture to improve a property. See Tax Information
ciation, or any developer of a time share project,
HRS, for the taxable year. Do not include that
Release No. 2000-2.
the tax credit allowable is for qualified construc-
portion of the renovation cost for which a deduc-
SPECIFIC INSTRUCTIONS
tion or renovation costs incurred by the entity for
tion is taken under IRC section 179. Do not in-
the taxable year. The construction or renovation
clude costs for routine maintenance or repairs.
Part I - Computation of Tax Credit
costs upon which the tax credit is computed is de-
for Costs Incurred Prior to 11/2/01
Line 7 — Flow through of qualifying construc-
termined at the entity level. Each partner, S cor-
tion or renovation costs received from other enti-
poration shareholder, or beneficiary of an estate
Line 1 — Enter the qualifying construction or
ties, if any. In the case of a taxpayer who is a
or trust shall separately take into account for its
renovation costs incurred during the taxable year
member of a pass-through entity (i.e., partner-
taxable year with or within which the entity’s tax-
prior to 11/2/01 for qualified hotel facility(ies) lo-
ship, S corporation, estate, or trust) and who
able year ends, the partner’s, shareholder’s, or
cated in Hawaii. Do not include that portion of the
claims a tax credit for the entity’s qualified con-
beneficiary’s share of the construction or renova-
construction or renovation costs for which an-
struction or renovation costs, enter the amount of
tion costs and resulting tax credit. A partner’s
other tax credit was claimed under chapter 235,
the costs incurred after 11/1/01 received from the
share of the construction or renovation costs
HRS, for the taxable year. Do not include that
entity on line 7.
shall be determined in accordance with the ratio
portion of the renovation cost for which a deduc-
in which the partners divide the general profits of
Line 8 — Estates and trusts: The total cost in-
tion is taken under IRC section 179. Do not in-
the partnership. The construction or renovation
curred after 11/1/01 on line 8 is to be allocated be-
clude costs for routine maintenance or repairs.
costs of the partnership which are subject to a
tween the estate or trust and the beneficiaries in
Line 2 — Flow through of qualifying construc-
special allocation that is recognized under IRC
the proportion of the income allocable to each
tion or renovation costs received from other enti-
section 704(a) and (b) shall be recognized for the
party. In the space above line 9, enter the cost al-
ties, if any. In the case of a taxpayer who is a
purposes of this tax credit. Each S corporation
locable to the estate or trust with the designation
member of a pass-through entity (i.e., partner-
shareholder’s construction or renovation costs is
“N-40 PORTION”. Attach Form N-314 to the
ship, S corporation, estate, or trust) and who
the shareholder’s allocated share of the S corpo-
N-40 return and show the distributive share of the
claims a tax credit for the entity’s qualified con-
ration’s construction or renovation costs. A bene-
costs for each beneficiary.
struction or renovation costs, enter the amount of
ficiary’s share of the construction or renovation
Form N-20 and N-35 filers, stop here. Form
the costs incurred prior to 11/2/01 received from
costs is apportioned between the entity and the
N-20 filers, enter the amount on line 8 on Sched-
the entity on line 2.
beneficiaries based on the income of the entity al-
ule K, line 28. Form N-35 filers, enter the amount
locable to each. The term “beneficiary” includes
Line 3 — Estates and trusts: The total cost in-
on line 8 on Schedule K, line 17. Form N-40 filers
an heir, legatee, or devisee. Associations of
curred prior to 11/2/01 on line 3 is to be allocated
enter the distributive share amount on line 10 of
apartment owners and timeshare owners associ-
between the estate or trust and the beneficiaries
Schedule K-1, Form N-40, for each beneficiary,
ations, see the instructions for Part III.
in the proportion of the income allocable to each

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