Governor Linda Lingle signed a bill into law Tuesday that extends to the year 2010 tax-credits for high-technology companies, but tightens the definition of who can benefit from those tax credits. Act 221, which is now Act 215, also establishes
Governor Linda Lingle signed a bill into law Tuesday that extends to the year 2010 tax-credits for high-technology companies, but tightens the definition of who can benefit from those tax credits.
Act 221, which is now Act 215, also establishes a State Private Investment Fund (SPIF) to create additional venture capital for technology companies that have moved beyond the start-up phase and require additional rounds of funding to grow and remain in Hawai‘i.
But Lingle said she’s concerned that the new law’s final language does not allow the new venture capital program to be implemented for an entire year, and that delays could mean the potential loss of technology companies that may relocate to other states to obtain appropriate financing.
“Instead of just talking about creating quality, high-paying jobs, we need to take bold action,” Lingle said.
“The Legislature’s delay in implementation may result in successful Hawai’i companies moving to the Mainland to obtain the financing they need.” The law was intended to encourage investment in technology- related companies and, according to the state, helped create 600 technology jobs in 2002.
But Act 221 has, since its creation in 2001, been criticized for not producing tangible economic benefits and for allowing lessthan- high-tech companies to benefit from those tax credits.
Consequently, the new law deletes the “liberal construction” language in Act 221 the administration contended was too openended in interpreting what kind of activity could be eligible for the high-technology tax credit.
The new language now says the law shall be construed “in a manner consistent with the intent of this Act.” In other words, in order to benefit from the tax credits, businesses will have to prove they are, indeed, high-tech and that they are benefiting the community.
The second part of HB2396 “fell short,” said the administration, because the Legislature didn’t appropriate any tax credits to enable the fund to be operational for fiscal year 2005.
As a result, says the administration, the governor will have to request authorization to launch the program from the Legislature next year, rather than start immediately to provide venture capital to qualified companies.
“It took us a year to convince the Legislature to tighten Act 221, and in the process we wasted time and lost millions in tax revenue,” Lingle said. “Now we find ourselves in a similar situation where we will have to wait yet another year until we go back to the Legislature and show them the soundness of our original proposal. Unfortunately, this has become an all too-familiar pattern in dealing with our Legislature.”
