HONOLULU — Lt. Governor James R. “Duke” Aiona, Jr., as acting governor, today vetoed Senate Bill 2401, which would have suspended the Act 221 investment and infrastructure renovation tax credits for three years.
Currently, Act 221 provides a 100 percent non-refundable credit for investments in qualified high-technology businesses. Individuals and companies that make these investments can claim the credit against their income taxes over a five-year period under the following schedule: 35 percent the first year, 25 percent the second year, 20 percent the third year and 10 percent the fourth and fifth years.
“This bill would damage Hawai‘i’s reputation as a place to do business,” said Lt. Governor Aiona. “It will discourage individuals and companies from investing in our state by changing the rules with little notice or rationale.”
Numerous businesses and individuals testified against the bill stating potential investors are waiting to see what happens with this measure before deciding to invest in current or new ventures in Hawai‘i. Several small businesses also testified that the pool of capitol for their firms has dried up and they may face closure and more layoffs if the bill becomes law.
In 2009, Hawai‘i was ranked 42nd in the nation in an assessment of its state business climate by the Small Business and Entrepreneurship Council. Senate Bill 2401 would have added to that negative perception by further making Hawai‘i’s tax laws unfriendly to businesses and investors.
Advantage Capital Partners, a venture capital firm based in St. Louis, Missouri, that issues tax credit bonds which include portions of Act 221 credits, has written the State the credit suspension will lead to a downgrade of these bonds from investment grade junk.
In addition, it was uncertain whether the revenues from this measure could have been counted toward the State budget because a number of investors and businesses have stated their intent to challenge this measure in court if it became law. Their additional tax payments under this measure would have likely been transferred to the Litigated Claims Fund until all matters were resolved.
Submitted by Jonathan Bolivar, Office of the Lieutenant Governor