July 16, 2001
RE:  Act 309, Session Laws of Hawaii 2001 (Act 309), Relating to Public Schools

As it relates to tax, Act 309 provides a nonrefundable net income tax credit for contributions of in-kind services for the repair and maintenance of Hawaii's public schools.  The credit is equal to ten percent (10%) of the "value of in-kind services" donated by the taxpayer.  This credit is available for taxable years beginning after December 31, 2000.

Act 309 states that taxpayers licensed under chapter 444, 460J, or 464, Hawaii Revised Statutes ("HRS"), (e.g., contractors, architects, engineers, surveyors, landscape architects, and pest control operators) who contribute their services for the repair and maintenance of Hawaii's public schools are eligible for the credit.  To qualify for the credit, the taxpayer cannot owe the State any delinquent taxes, penalties, or interest (a tax clearance is required).

The credit amount will be based upon the "value of contributions of in-kind services," which is defined as the fair market value of uncompensated services or labor.  The value of these donated services will be determined and certified by the Department of Accounting and General Services ("DAGS").  In addition, the "value of contributions of in-kind services" may not exceed $40,000 in the aggregate.  In other words, the credit is capped at $4,000 per eligible taxpayer, per taxable year.

DAGS will maintain a record of taxpayers who are eligible for the credit as well as the total value of the taxpayer's contributions, and will also issue a certificate to the taxpayer showing:

  1. The amount of the contribution;
  2. That the taxpayer is licensed under chapter 444, 460J, or 464, HRS; and
  3. That the taxpayer has obtained a valid tax clearance from the Department of Taxation.
DAGS will keep an accounting of the total amount of contributions it has certified for purposes of the tax credit.  This amount is capped at $2,500,000 for each taxable year, after which no more contributions will be certified for the claiming of this tax credit.  Thus, a maximum total of $250,000 in tax credits will be granted per taxable year.

All claims for the credit, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit is claimed.  Failure to comply with the foregoing filing requirement will constitute a waiver of the right to claim the credit.  If this tax credit exceeds the taxpayer's net income tax liability, then the credit may be used against the taxpayer's net income tax liability in subsequent years until exhausted (i.e., this credit may be carried forward).

The Department of Taxation will be preparing new forms to claim the credit provided by Act 309.

Current forms and other tax information are available at the Department's website at:  On Oahu, forms may be ordered by calling the Department's Forms Request Line at:  587-7572.  Persons who are not calling from Oahu, may call:  1-800-222-7572 (toll-free) to receive forms by mail or by fax.

Director of Taxation

HRS Sections Explained:  235-___ .


For official copies of acts, please contact:
Office of the Lieutenant Governor, State Capitol, 5th Floor, Honolulu 96813.
Phone: 586-0255, Monday - Friday, 7:45 am - 4:30 pm