Form N-318 - High Technology Business Investment Tax Credit - 2015 Page 3
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4FORM N-318
PAGE 3
(REV. 2015)
GENERAL INSTRUCTIONS
nologies from insights gained from research advances that add to the
body of fundamental knowledge. See also section 235-1, HRS;
Note: The High Technology Business Investment Tax Credit ex-
(4) Performing arts products;
pired on December 31, 2010, i.e., no credit can be claimed for invest-
(5) Sensor and optic technologies;
ments made after December 31, 2010.
(6) Ocean sciences;
Note: If you are claiming the Ethanol Facility Tax Credit, no other
(7) Astronomy; or
credit can be claimed for the taxable year.
(8) Nonfossil fuel energy-related technology.
Form N-318 is used to claim the nonrefundable High Technology Busi-
ness Investment Tax Credit (credit). Section 235-110.9, HRS, provides
For the purpose of this credit, “Investment” is defined in section 235-1,
that the credit is available for investments made in taxable years beginning
HRS, as a nonrefundable investment at risk, as the term is used in section
after December 31, 2000 as follows:
465 (with respect to deductions limited to amount at risk) of the Internal
Revenue Code, in a QHTB, of cash that is transferred to the QHTB, the
(1) In the year the investment was made, 35% of the investment, up to a
transfer of which is in connection with a transaction in exchange for stock,
maximum credit of $700,000 per each qualified high technology busi-
interests in partnerships, joint ventures, or other entities, licenses (exclu-
ness (QHTB);
sive or nonexclusive), rights to use technology, marketing rights, warrants,
(2) In the first year following the year in which the investment was made,
options, or any items similar to those included in this definition, including
25% of the investment, up to a maximum credit of $500,000 per each
but not limited to options or rights to acquire any of the items included
QHTB;
in this definition. The nonrefundable investment is entirely at risk of loss
(3) In the second year following the investment, 20% of the investment,
where repayment depends upon the success of the QHTB. If the money
up to a maximum credit of $400,000 per each QHTB;
invested is to be repaid to the taxpayer, no repayment except for dividends
(4) In the third year following the investment, 10% of the investment, up
or interest shall be made for at least one year from the date the investment
to a maximum credit of $200,000 per each QHTB; and
is made. The annual amount of any dividend and interest payment to the
(5) In the fourth year following the investment, 10% of the investment, up
taxpayer shall not exceed twelve per cent of the amount of the investment.
to a maximum credit of $200,000 per each QHTB.
Generally, an investment is deemed to be received by the QHTB when
The tax credit may be claimed for income tax, franchise tax (financial
it is documented as received in exchange for an equity interest in the
institutions), and insurance premium tax purposes for tax years 2001-
QHTB. The relevant date is the date the QHTB has control and custody of
2010.
the funds, not when the funds are deposited in a bank or when the check
is dated. All of the facts and circumstances will be taken into account in
For income and franchise tax purposes, the credit is claimed against
determining when an investment has been made in the QHTB.
the tax liability for the taxable year. Tax liability means tax liability reduced
by all other credits, except for the technology infrastructure renovation tax
Attachments
credit, allowed the taxpayer under chapter 235, HRS, and chapter 241,
The taxpayer must attach to Form N-318: a separate Form N-318A for
HRS (if applicable).
each investment in a QHTB and all Schedule K-1s which reported the tax-
To claim the credit for insurance tax purposes, contact the Department
payer’s share of the credit.
Commerce and Consumer Affairs, Insurance Division.
For example, a partner of a partnership must attach a Form N-318A
A taxpayer shall not claim the credit for an investment in a QHTB for
and a copy of the partner’s Schedule K-1 from the partnership for the part-
the year that it ceases to be a QHTB (i.e., the business fails, terminates, or
ner’s investment in the QHTB made via the partnership.
is dissolved).
Note: Failure to provide the required attachments or incomplete attach-
If at the close of any taxable year in the five-year period:
ments will constitute a failure to properly claim the credit and all or a por-
(1) The business no longer qualifies as a QHTB;
tion of the credit may be disallowed.
(2) The business or an interest in the business has been sold by the tax-
t
Deadline for Claiming the Credi
payer investing in the QHTB; or
The deadline to claim the credit, including amended claims, is twelve
(3) The taxpayer has withdrawn the taxpayer’s investment wholly or par-
months after the close of your taxable year. You cannot claim the credit
tially from the QHTB;
after the deadline.
the credit claimed shall be recaptured. The recapture shall be equal to
For example, a taxpayer, who files an income tax return for calendar
10% of the amount of the credit claimed in the preceding two taxable
year 2015, must claim the credit by December 31, 2016. The taxpayer
years. The amount of the recaptured credit determined shall be added to
uses Form N-318 to claim the credit. The taxpayer attaches to the taxpay-
the taxpayer’s tax liability for the taxable year in which the recapture oc-
er’s tax return Forms N-318, N-318A, and Schedule K-1s (if applicable),
curs.
and all required supporting documents.
For the purposes of this credit, “QHTB” is defined as a business employing
Internet Address
or owning capital or property, or maintaining an office in Hawaii provided
that:
Additional information regarding Hawaii tax laws and tax forms can be
(1) More than 50% of its total business activities are qualified research;
found on the Department of Taxation’s website at:
and more than 75% of the qualified research is conducted in Hawaii;
tax.hawaii.gov
or
(2) More than 75% of its gross income is derived from qualified research;
SPECIFIC INSTRUCTIONS
provided that this income is received from:
A.
Products sold from, manufactured in, or produced in Hawaii; or
PART II. HIGH TECHNOLOGY BUSINESS INVESTMENT
B.
Services performed in Hawaii.
TAX CREDIT
For the purposes of this credit, “Qualified Research” is defined in section
Partnerships and S Corporation filers.—Complete lines 1 through 9
235-7.3, HRS, as:
to compute the amount of credit to pass-through to the members, partners
(1) Research and development work qualifying under section 41(d) of the
or shareholders. Do not complete lines 10 through 14.
Internal Revenue Code;
Note: The ratio of the credit over the amount of cash invested cannot ex-
(2) The development and design of computer software for ultimate com-
ceed 1 for an individual partner for investments received by the QHTB on
mercial sale, lease, license or to be otherwise marketed, for eco-
or after May 1, 2009.
nomic consideration. With respect to the software’s development and
Estates and Trusts.—Complete lines 1 through 9 to compute the
design, the business shall have substantial control and retain sub-
credit to be allocated between the estate or trust and the beneficiaries in
stantial rights to the resulting intellectual property. See also section
the proportion of the income allocable to each party. Continue to line 10 if
235-1, HRS;
the estate or trust has an allocable portion of the credit.
(3) Biotechnology — fundamental knowledge regarding the function
Line 1.—In each column, enter the name of the QHTB, the QHTB’s Fed-
of biological systems from the macro level to the molecular and
eral Employer Identification Number (FEIN), and the date(s) of investment
subatomic levels that has application to development including the
for which the tax credit is being claimed. If you invested in more than three
development of novel products, services, technologies, and subtech-
QHTBs, attach a schedule to Form N-318. If you made investments in the
FORM N-318
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