HI HB964

Amends Hawaii's general excise tax exemption for scientific contracts with the United States to align with Internal Revenue Code section 41 regarding research and development tax credits.

Replaces the broad exemption for all gross proceeds from scientific work with a narrower exemption limited to qualified research expenses over the base amount, basic research payments, and energy research consortium contributions as defined under IRC section 41.

Addresses concerns that the current exemption has resulted in annual tax losses estimated between $20,000,000 to $40,000,000 per year, with over 98 percent of contracts held by out-of-state entities paying no tax.

Reduces administrative burden on the Department of Taxation by eliminating the need for 10 percent of audit staff to evaluate exemption claims under the previous broad definition.

Takes effect for taxable years beginning after December 31, 2013.