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June 27, 2002
RE: Act 146, Session Laws of Hawaii 2002 (Act 146), Relating to Enterprise Zones

Certain incentives are available to a “qualified business” in an enterprise zone (EZ). A qualified business is exempt from the general excise tax for seven years on the gross proceeds from the manufacture of tangible personal property, the wholesale sales of tangible personal property, or the engaging in a service business. The qualified business also may claim credits, which are reduced over the course of seven years, against the state income tax and for unemployment taxes paid. Hawaii Revised Statutes (HRS) §§ 209E-10, 209E-11. A county may propose incentives, including reduction of permit fees, reduction of user fees, reduction of real property taxes, and regulatory flexibility in the areas of special zoning districts, permit processing, and exemptions from local ordinances. HRS § 209E-12.

Act 146 allows all firms enrolled in the EZ program before September 11, 2001, to use their average number of employees from the beginning of their current fiscal year to August 31, 2001, to determine whether the firms qualify for EZ tax benefits for the entire current fiscal year. Act 146 also allows those firms to reduce their base of full time employees-- the number used to calculate their future annual increases--to the average annual number of full-time employees at the end of their current fiscal year if lower than their annual base number of full-time employees.

Act 146 also repeals the provision in HRS § 209E-11, which exempted the purchases of qualified businesses from the use tax.

Act 146 is effective beginning June 7, 2002.

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 Section Explained: HRS Sections 209E-9, 209E-10, 209E-11, 209E-12.