Instructions For Form N-756 - Enterprise Zone Tax Credit
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INSTRUCTIONS
STATE OF HAWAII - DEPARTMENT OF TAXATION
FORM N-756
INSTRUCTIONS FOR FORM N-756
(REV. 2011)
ENTERPRISE ZONE TAX CREDIT
sale of tangible property and services, the service business shall segregate
GENERAL INSTRUCTIONS
the sale of services from the sale of tangible personal property.
Note: If you are claiming the Ethanol Facility Tax Credit, no other
Value must be added to materials or products that are manufactured with-
credit can be claimed for the same taxable year.
in the enterprise zone.
A qualified business which has received certification from the Department
Each partner, S corporation shareholder, or LLC member (member) of
of Business, Economic Development & Tourism may claim the enterprise
a business that has been certified shall separately determine for the mem-
zone tax credit.
ber’s taxable year within which the business’ taxable year ends, the member’s
share of the credit. The member’s share of the entity’s net income or loss and
A business that has been certified is entitled, subject to the apportion-
unemployment insurance credit shall be determined in accordance with the
ment provisions, to an enterprise zone tax credit against Hawaii income tax
ratio in which the members divide the profits and losses of the partnership, S
under chapter 235, Hawaii Revised Statutes (HRS), according to the follow-
corporation, or LLC respectively.
ing formula:
SPECIFIC INSTRUCTIONS
First year
80% of tax due
Second year
70% of tax due
PART I
Third year
60% of tax due
Fourth year
50% of tax due
Line 1. — Enter the total tax liability from Form N-11, line 26; Form N-15, line
Fifth year
40% of tax due
43; Form N-30, Schedule J, line 23; or Form N-70NP , line 16; whichever is ap-
plicable. (Note: For Forms N-11 and N-15, do not include the separate tax from
Sixth year
30% of tax due
Forms N-2, N-103, N-152, N-168, N-312, N-318, N-405, N-586, N-615, or N-814
Seventh year
20% of tax due
in your total tax liability.)
Qualified businesses engaged in the manufacturing of tangible personal
Line 2a. — Enter the total gross income of the qualified business from trade or
property or the producing or processing of agricultural products may continue
business within the zone during the taxable year. Gross income from trade or
to claim the credit in an amount equal to 20% of the taxes paid during each of
business within the zone is received when tangible personal property is sold at
the subsequent three tax years
wholesale to business firms, a qualified business engages in a service business,
In addition, a business that has been certified is entitled, subject to the
or value is added to materials or products that are manufactured by a qualified
apportionment provisions, to an enterprise zone tax credit against Hawaii in-
business.
come tax under chapter 235, HRS, in an amount equal to a percentage of
unemployment insurance premiums paid on the payroll of all the business’
For an individual operating as a sole proprietorship, enter the amount of the busi-
employees employed in the enterprise zone, according to the following for-
ness’ net income which is attributable to the conduct of trade or business within the
mula:
zone. This is calculated by multiplying the business’ net income by a fraction; the
First year
80% of premiums paid
numerator being the total gross receipts of the trade or business within the zone and
the denominator being the total gross receipts of the business within Hawaii.
Second year
70% of premiums paid
Third year
60% of premiums paid
Members should enter the amount from Form N-756A, line 2e.
Fourth year
50% of premiums paid
Line 2b. — Enter the total gross income of the qualified business within Hawaii
Fifth year
40% of premiums paid
during the taxable year, including sales within and outside the enterprise zone.
Sixth year
30% of premiums paid
A business is taxable outside the enterprise zone if the business has: 1) income
from business activity within the zone which does not fall within the definition of
Seventh year
20% of premiums paid
trade or business, or 2) income from business activity conducted outside the
Qualified businesses engaged in the manufacturing of tangible personal
zone. This term includes work that a business located within a zone subcon-
property or the producing or processing of agricultural products may continue
tracts to a business located outside the zone and the work is delivered outside
to claim the credit in an amount equal to 20% of the premiums paid during
the zone.
each of the subsequent three tax years
For an individual, enter the total gross income required to be reported to
If the enterprise zone tax credit exceeds the taxpayer’s tax liability,
Hawaii, including your business’s net income (if operating as a sole propri-
the excess of credit over liability shall not be refunded to the taxpayer,
etorship), salary, interest income, dividend income, etc.
nor shall it be carried over or carried back to another tax period.
Members should include in the total amount reported on line 2b, the
The enterprise zone tax credit shall apply only to the extent that a qualified
amount from Form N-756A, line 2a.
business conducts trade or business within the zone. A business which has
income taxable both within and outside Hawaii shall apportion and allocate
Line 4. — Enter the total amount of unemployment insurance premiums paid on
the business’ net income under sections 235-21 to 235-39, HRS, prior to cal-
the payroll of all the business’ employees employed in Hawaii.
culating the enterprise zone tax credit.
Members claiming their share of the entity’s unemployment insurance
“Trade or business” means all business activity by a qualified business
premiums paid within the zone should skip lines 4, and 5a-5c; and enter the
within an enterprise zone, whereby 1) tangible personal property is sold at
amount from Form N-756A, line 3e, on line 6. On the dotted line next to line
wholesale and the sale takes place within the zone, 2) a qualified business
6, write “From Form N-756A.”
engages in a service business within the zone, or 3) value is added to ma-
Line 5a. — Enter the total payroll for employees employed within the zone dur-
terials or products that are manufactured within the zone. “Trade or busi-
ing the taxable year. Caution: The determination of “employees employed within
ness” also includes engaging in producing agricultural products where the
the zone” is different than the increase in employees required in determining the
business is a producer as defined in section 237-5; engaging in research, de-
velopment, sale or production of all types of genetically-engineered medical,
eligibility for the income tax credit as set by the Department of Business, Eco-
agricultural, or maritime biotechnology products; and engaging in producing
nomic Development, and Tourism. In order to qualify for the income tax benefits,
electric power from wind energy for sale primarily to a public utility company
an employee’s services to the EZ company must be: 1) performed entirely within
for resale to the public.
enterprise zones in the same county that the company has been qualified in, or
2) the individual’s service must be performed both within and outside enterprise
“Service business” means any corporation, partnership, or sole proprietor-
ship that repairs ships, aircraft, or assisted technology equipment, provides
zones within the same county, but the service performed outside of enterprise
telecommunication services, information technology design and production ser-
zones in the same county is only incidental to the individual’s service within the
vices, medical and health care services, or education and training services as
zones.
defined in Chapter 209E, HRS.
Line 5b. — Enter the total payroll for all employees within Hawaii.
Tangible personal property shall be sold at wholesale at an establishment
of a qualified business located within an enterprise zone. The transfer of title
Part II
to the buyer of the tangible personal property shall take place in the same
should be completed if your 7 or 10-year cycle began at the start of
enterprise zone in which the tangible personal property is sold.
your taxable year.
Services shall be sold at an establishment of a qualified business en-
Part III
should be completed if your 7 or 10-year cycle began during your tax-
gaged in a service business within an enterprise zone and the services shall
able year rather than at the start of your taxable year.
be delivered in the same enterprise zone in which the services are sold.
Where the service business, in the same transaction, engages in both the
Part IV
must be completed by all taxpayers claiming this credit.
See other side for Credit Worksheet
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