Hawaii High Technology Business Investment Tax Credit

High Technology Business Investment Tax Credit
Form N-318 Rev 2014 High Technology Business Investment Tax Credit
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STATE OF HAWAII—DEPARTMENT OF TAXATION

TAX
HIGH TECHNOLOGY BUSINESS 	YEAR
	N-318	
INVESTMENT TAX CREDIT
	 (Rev. 2015)
2015
	
Or fiscal year beginning _________________, 2015, and ending __________________, 20___	
			
FORM
	
	

ATTACH FORM N-318 AND REQUIRED SUPPORTING DOCUMENTS TO THE APPLICABLE FORM: FORM N-11,
N-15, N-20, N-30, N-35, N-40, N-70NP, OR F-1; OR FORM 314, THE ANNUAL STATEMENT OF PREMIUMS.
Name(s) as shown on the applicable form: Department of Taxation’s Form N-11, N-15, N-20, N-30, N-35, N-40, N-70NP, or F-1;
or Department of Commerce and Consumer Affairs’ Form 314	

	 Part I

SSN or FEIN

REQUIRED ATTACHMENTS

A separate and complete Form N-318A, Certified Statement of Investment in a Qualified High Technology Business (QHTB) and Claim of the High
Technology Business Investment Tax Credit (Credit), and Schedule K-1 (if applicable) must be attached to Form N-318 for each QHTB for which you are
claiming the credit. (Separate Form N-318As are required for investments received by the QHTB before May 1 and those received by the QHTB on or
after May 1 during tax year 2009.) Enter the number of Form N-318As and Schedule K-1s attached:
________	 Number of Form N-318As
________	 Number of Schedule K-1s.

H	 Part II HIGH TECHNOLOGY BUSINESS INVESTMENT TAX CREDIT
Note: This credit expired on December 31, 2010, i.e., no credit can be claimed for investments made after December 31, 2010.
Note: If you are claiming the Ethanol Facility Tax Credit, no other credit can be claimed for the taxable year. Skip lines 1 through 7 and begin on line 8.
Note: If you are reporting your share of the credit from a flow-through entity (e.g., partnership, S corporation, etc.) that is
shown on a Schedule K-1, skip lines 1 through 6 and include on line 7 your share of the credit.
Note: Lines 1 through 5 are to be used ONLY by those investors that made direct investments in a QHTB.
Note: If you invested in more than three QHTBs, attach a schedule reporting information requested in lines 1 through 5 of Part II, Form N-318.
Note: If you made investments in the same QHTB in different years, report each year’s investment in a separate column. Also, use separate columns for tax year
2009 for investments received by the QHTB before May 1, 2009 and those received by the QHTB on or after May 1, 2009. If more than three columns are needed,
attach a schedule reporting information requested in lines 1 through 5 of Part II, Form N-318.
Column A
1	

Enter the name and the FEIN of the QHTB and dates
of the investment...........................................................

2	

Enter the investment amount.........................................

3	

Enter applicable rate from instructions. See Rate Table on Page 4.

4	

Multiply the amount on line 2 by the applicable rate on
line 3 and enter the result here. ....................................

5	

Enter maximum credit allowed: Lesser of (a) the
amount on line 4 or (b) the amount listed in the Rate
Table on Page 4. (Partnerships, see Instructions for
the amount to enter on this line)................................

Column B

Column C

6	

Add the amounts on line 5, Columns A through C (including any additional schedules) and enter the
total here...................................................................................................................................................................................................	
7	 Enter your share of the credit as reported on Schedule K-1(s). See Instructions...........................................................	
8	 Enter the amount of unused high technology business investment tax credit allowed to be carried over from prior years.........................	
9	 Add lines 6 through 8. This is your tentative credit for tax year 2015..................................................................................	
Tax Liability Limitations (Form N-20 and Form N-35 filers do not complete lines 10 through 14.)
10	 a Individuals – Enter the amount from Form N-11, line 34 or N-15, line 51
b Corporations – Enter the amount from Form N-30, line 13
c Other filers – Enter the amount from the applicable form....................................................................................................	
11	 If you are claiming other credits, complete the Credit Worksheet on Page 4 and enter the total here......................	
12	 Line 10 minus line 11. This represents your adjusted tax liability. If the result is zero or less than zero, enter zero
	
here and on line 13.................................................................................................................................................	
13	 Total credit allowed — Enter the smaller of line 9 or line 12, rounded to the nearest dollar. This is your high
	
technology business investment tax credit for tax year 2015. Enter this amount on Schedule CR, line 6 (for
	
Form N-11, N-15, N-30, and N-70NP filers), on Form N-40, Schedule E, line 6, on Form F-1, or on Form 314,
	
whichever is applicable..........................................................................................................................................	
14	 Line 9 minus line 13. This represents your carryover of unused credit. The amount of any unused tax credit
	
may be carried over and used as a credit against your income tax liability in subsequent years until exhausted.	
		

6
7
8
9

10
11
12

13
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FORM N-318

PAGE 2		
		

	 Part III

FORM N-318
(REV. 2015)

RECAPTURE OF HIGH TECHNOLOGY BUSINESS INVESTMENT TAX CREDIT
	

Column A	

Column B	

Column C

1	

Enter the name and FEIN of the QHTB for which the
credit is being recaptured. See section 235-110.9(c),
HRS, and General Instructions on Page 3....................

2	

Enter the amount of the credit claimed in tax year 2013
attributable to the QHTB listed on line 1, Part III...........

3	

Enter the amount of the credit claimed in tax year 2014
attributable to the QHTB listed on line 1, Part III...........

4	
5	

Add lines 2 and 3 and enter the result here..................
Recapture rate....................................................... 	
.10	.10	.10

6	

Multiply the credit on line 4 by the recapture rate
on line 5.........................................................................
Add the amounts on line 6, Columns A thru C
(including any additional schedules), and enter
the total here.................................................................
Enter your share of the recapture of the credits as
reported on Schedule K-1(s). See Instructions.............
Add lines 7 and 8. This amount represents the
recapture of the credit which is to be added to your
tax liability for tax year 2015

7	

8	
9	

Enter or include the amount on line 9 of Part III on the appropriate
form as indicated below:
Form F-1, line 66;
Form N-11, line 27;
Form N-15, line 44;
Form N-20, Schedule K, line 31, and Schedule K-1, line 33;
Form N-30, Schedule J, line 19;
Form N-35, Schedule K, line 21, and Schedule K-1, line 26;
Form N-40, Schedule G, line 1 or
Form N-70NP, line 13.

		

FORM N-318

FORM N-318		
(REV. 2015)

GENERAL INSTRUCTIONS
Note: The High Technology Business Investment Tax Credit expired on December 31, 2010, i.e., no credit can be claimed for investments made after December 31, 2010.
Note: If you are claiming the Ethanol Facility Tax Credit, no other
credit can be claimed for the taxable year.
Form N-318 is used to claim the nonrefundable High Technology Business Investment Tax Credit (credit). Section 235-110.9, HRS, provides
that the credit is available for investments made in taxable years beginning
after December 31, 2000 as follows:
(1)	 In the year the investment was made, 35% of the investment, up to a
maximum credit of $700,000 per each qualified high technology business (QHTB);
(2)	 In the first year following the year in which the investment was made,
25% of the investment, up to a maximum credit of $500,000 per each
QHTB;
(3)	 In the second year following the investment, 20% of the investment,
up to a maximum credit of $400,000 per each QHTB;
(4)	 In the third year following the investment, 10% of the investment, up
to a maximum credit of $200,000 per each QHTB; and
(5)	 In the fourth year following the investment, 10% of the investment, up
to a maximum credit of $200,000 per each QHTB.
The tax credit may be claimed for income tax, franchise tax (financial
institutions), and insurance premium tax purposes for tax years 20012010.
For income and franchise tax purposes, the credit is claimed against
the tax liability for the taxable year. Tax liability means tax liability reduced
by all other credits, except for the technology infrastructure renovation tax
credit, allowed the taxpayer under chapter 235, HRS, and chapter 241,
HRS (if applicable).
To claim the credit for insurance tax purposes, contact the Department
Commerce and Consumer Affairs, Insurance Division.
A taxpayer shall not claim the credit for an investment in a QHTB for
the year that it ceases to be a QHTB (i.e., the business fails, terminates, or
is dissolved).
If at the close of any taxable year in the five-year period:
(1)	 The business no longer qualifies as a QHTB;
(2)	 The business or an interest in the business has been sold by the taxpayer investing in the QHTB; or
(3)	 The taxpayer has withdrawn the taxpayer’s investment wholly or partially from the QHTB;
the credit claimed shall be recaptured. The recapture shall be equal to
10% of the amount of the credit claimed in the preceding two taxable
years. The amount of the recaptured credit determined shall be added to
the taxpayer’s tax liability for the taxable year in which the recapture occurs.
For the purposes of this credit, “QHTB” is defined as a business employing
or owning capital or property, or maintaining an office in Hawaii provided
that:
(1)	 More than 50% of its total business activities are qualified research;
and more than 75% of the qualified research is conducted in Hawaii;
or
(2)	 More than 75% of its gross income is derived from qualified research;
provided that this income is received from:
A.	 Products sold from, manufactured in, or produced in Hawaii; or
B.	 Services performed in Hawaii.
For the purposes of this credit, “Qualified Research” is defined in section
235-7.3, HRS, as:
(1)	 Research and development work qualifying under section 41(d) of the
Internal Revenue Code;
(2)	 The development and design of computer software for ultimate commercial sale, lease, license or to be otherwise marketed, for economic consideration. With respect to the software’s development and
design, the business shall have substantial control and retain substantial rights to the resulting intellectual property. See also section
235-1, HRS;
(3)	 Biotechnology — fundamental knowledge regarding the function
of biological systems from the macro level to the molecular and
subatomic levels that has application to development including the
development of novel products, services, technologies, and subtech		

PAGE 3
nologies from insights gained from research advances that add to the
body of fundamental knowledge. See also section 235-1, HRS;
(4)	 Performing arts products;
(5)	 Sensor and optic technologies;
(6)	 Ocean sciences;
(7)	 Astronomy; or
(8)	 Nonfossil fuel energy-related technology.
For the purpose of this credit, “Investment” is defined in section 235-1,
HRS, as a nonrefundable investment at risk, as the term is used in section
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
transfer of which is in connection with a transaction in exchange for stock,
interests in partnerships, joint ventures, or other entities, licenses (exclusive or nonexclusive), rights to use technology, marketing rights, warrants,
options, or any items similar to those included in this definition, including
but not limited to options or rights to acquire any of the items included
in this definition. The nonrefundable investment is entirely at risk of loss
where repayment depends upon the success of the QHTB. If the money
invested is to be repaid to the taxpayer, no repayment except for dividends
or interest shall be made for at least one year from the date the investment
is made. The annual amount of any dividend and interest payment to the
taxpayer shall not exceed twelve per cent of the amount of the investment.
Generally, an investment is deemed to be received by the QHTB when
it is documented as received in exchange for an equity interest in the
QHTB. The relevant date is the date the QHTB has control and custody of
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
determining when an investment has been made in the QHTB.

Attachments
The taxpayer must attach to Form N-318: a separate Form N-318A for
each investment in a QHTB and all Schedule K-1s which reported the taxpayer’s share of the credit.
For example, a partner of a partnership must attach a Form N-318A
and a copy of the partner’s Schedule K-1 from the partnership for the partner’s investment in the QHTB made via the partnership.
Note: Failure to provide the required attachments or incomplete attachments will constitute a failure to properly claim the credit and all or a portion of the credit may be disallowed.

Deadline for Claiming the Credit
The deadline to claim the credit, including amended claims, is twelve
months after the close of your taxable year. You cannot claim the credit
after the deadline.
For example, a taxpayer, who files an income tax return for calendar
year 2015, must claim the credit by December 31, 2016. The taxpayer
uses Form N-318 to claim the credit. The taxpayer attaches to the taxpayer’s tax return Forms N-318, N-318A, and Schedule K-1s (if applicable),
and all required supporting documents.

Internet Address
Additional information regarding Hawaii tax laws and tax forms can be
found on the Department of Taxation’s website at:
tax.hawaii.gov

SPECIFIC INSTRUCTIONS
PART II.  HIGH TECHNOLOGY BUSINESS INVESTMENT
TAX CREDIT
Partnerships and S Corporation filers.—Complete lines 1 through 9
to compute the amount of credit to pass-through to the members, partners
or shareholders. Do not complete lines 10 through 14.
Note: The ratio of the credit over the amount of cash invested cannot exceed 1 for an individual partner for investments received by the QHTB on
or after May 1, 2009.
Estates and Trusts.—Complete lines 1 through 9 to compute the
credit to be allocated between the estate or trust and the beneficiaries in
the proportion of the income allocable to each party. Continue to line 10 if
the estate or trust has an allocable portion of the credit.
Line 1.—In each column, enter the name of the QHTB, the QHTB’s Federal Employer Identification Number (FEIN), and the date(s) of investment
for which the tax credit is being claimed. If you invested in more than three
QHTBs, attach a schedule to Form N-318. If you made investments in the
FORM N-318

PAGE 4		
		
same QHTB in different years, report each year’s investment in a separate
column (if more than three years, attach a schedule to Form N-318). Also,
if the tax year includes periods both before and after May 1, 2009, use
separate columns for investments received by the QHTB before May 1,
2009 and those received on or after May 1, 2009.
Line 2.—Enter the amount of the investment for each QHTB (see General
Instructions for the definition of “Investment”).
Line 3.—Enter the rate applicable to the tax year in which the investment
was made. For applicable rates, refer to the Rate Table as follows:

Rate Table
Applicable rate for investments made in
tax year 2010
a
Year of investment
Tax Year 2010:
35% Up to max of $700,000 per QHTB
a
First year following year of
Tax Year 2011:
investment
25% Up to max of $500,000 per QHTB
Second year following year of aTax Year 2012:
20% Up to max of $400,000 per QHTB
investment
a
Third year following year of
Tax Year 2013:
investment
10% Up to max of $200,000 per QHTB
Fourth year following year of a,bTax Year 2014:
10% Up to max of $200,000 per QHTB
investment
a

The twelve-month period to claim the credit (including claims on amended returns) has expired for the indicated tax years.
b
In the case of a partnership, S corporation, estate, or trust, which has a
fiscal year end, the partner, member, shareholder, and beneficiary may still
claim the credit. For example, a partnership with a fiscal year beginning
December 1, 2014 would file a 2014 tax return. However, the partner will
report the income from the partnership on the partner’s 2015 tax return.
Line 5.—Partnerships.—First, multiply the number of partners in the
partnership by $2,000,000. Next, multiply the first result by the percentage
entered on line 3. Compare the second result with the amount on line 4
and enter the lesser amount on line 5.
Line 7.—Enter the total amount of credit reported on all Schedule K-1s issued to the taxpayer for the indicated investments.
Line 11.—The law requires that ALL other credits, except for the technology infrastructure renovation tax credit, offset a taxpayer’s tax liability
BEFORE allowing a credit for investment in a QHTB. Complete the Credit
Worksheet on this page and enter the result on line 11.

		

FORM N-318
(REV. 2015)

PART III.  RECAPTURE OF HIGH TECHNOLOGY BUSINESS INVESTMENT TAX CREDIT
Line 8.—Enter the total amount of recapture of the credit reported on all
Schedule K-1s issued to the taxpayer.
CREDIT WORKSHEET
Tax Credit	

Amount

a.	 Income Taxes Paid to Another
State or Foreign Country........	 	
b.	 Enterprise Zone Tax Credit.....	 	
c.	 Carryover of the Energy
Conservation Tax Credit..........	 	
d.	 Credit for Employment of
Vocational Rehabilitation
Referrals.................................	 	
e.	 Carryover of the Individual
Development Account
Contribution Tax Credit...........	 	
f.	

Credit for School Repair and
Maintenance...........................	 	

g.	 Carryover of the Renewable
Energy Technologies Income
Tax Credit (For Systems
Installed and Placed In Service
Before July 1, 2009)................	 	
h.	 Renewable Energy Technologies
Income Tax Credit (Nonrefundable)	
i.	

Low-Income Housing Tax Credit	

j.	

Add lines a through i. Enter
the amount here and on
Part II, line 11..........................	 	

FORM N-318