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INSTRUCTIONS                           STATE OF HAWAII - DEPARTMENT OF TAXATION 
FORM N-312 
(REV. 2023)                            INSTRUCTIONS FOR FORM N-312 
                             CAPITAL GOODS EXCISE TAX CREDIT

GENERAL INSTRUCTIONS                                                                 2. The taxpayer can provide a sales invoice showing that the 
                                                                                        vendor has a Hawaii business address;
PURPOSE OF FORM                                                                      3. If the sales invoice or contract does not separately state the 4% 
                                                                                        GET, (i.e., the seller does not visibly pass-on the tax), then the 
Use Form N-312 to figure and claim the capital goods excise tax credit                  taxpayer must provide the GET license number of the seller, 
under section 235-110.7, Hawaii Revised Statutes (HRS). Form N-312 is                   which is valid at the time of the purchase. The taxpayer should 
also used to determine the increase in tax as a result of the recapture of              also keep records of the seller’s business name, address, and 
the credit.                                                                             other information that the Department may use to verify that the 
                                                                                        seller was GET-licensed at the time of the purchase. In the case 
WHO MAY CLAIM THIS CREDIT                                                               of used property, an affidavit or statement must be obtained 
                                                                                        from the seller certifying that the transaction is not a casual sale 
Each  taxpayer  subject  to  Hawaii’s  net  income  tax  may  claim  a                  as defined by section 237-1, HRS; or 
capital goods excise tax credit for the purchase or importation of eligible 
depreciable tangible personal property which is used by the taxpayer in a            4. A statement or affidavit from the seller representing that the 
trade or business in Hawaii.                                                            GET has been paid.
                                                                                     If the taxpayer is unable to provide any evidence that the GET has been 
FLOW-THROUGH ENTITIES                                                                paid by the seller, then the Department will presume that the GET has not 
In the case of a partnership, S Corporation, estate, or trust, the credit            been paid.
allowable is for eligible depreciable property which is placed in service by the     In the case of eligible depreciable tangible personal property for which a 
entity. The cost upon which the credit is computed is determined at the entity       credit for sales or use taxes paid to another state is allowable under section 
level. Form N-312 shall be completed and attached to the entity’s return.            238-3(i), HRS, the amount of the capital goods excise tax credit allowable 
Each partner, S Corporation shareholder, or beneficiary of an estate or trust        shall not exceed the amount of use tax actually paid under chapter 238, 
shall separately take into account for its taxable year with or within which         HRS, with regard to the property.
the entity’s taxable year ends, the partner’s, shareholder’s, or beneficiary’s 
share of the cost and resulting credit. A partner’s share of the cost shall          If a deduction is taken under IRC section 179 (regarding an election to 
be determined in accordance with the ratio (in effect on the date on which           expense certain depreciable business assets) no credit shall be allowed for 
the eligible property is placed in service) in which the partners divide the         that portion of the cost of eligible depreciable tangible personal property for 
general profits of the partnership. The cost of eligible partnership property        which the deduction was taken.
which  is  subject  to  a  special  allocation  that  is  recognized  under  section A flow-through entity (i.e., partnership, LLC, S corporation, estate, or 
704(a)  and  (b)  of  the  Internal  Revenue  Code  (IRC)  shall  be  recognized     trust)  shall  provide  information  to  the  partners,  members,  shareholders, 
for the purposes of this credit. Each S Corporation shareholder’s cost of            or beneficiaries (members) relating to the credit. The member’s share of 
eligible property is the shareholder’s allocated share of the S Corporation’s        the cost of qualifying property is to be reported on line 16, Schedule K-1, 
cost of the eligible property. A beneficiary’s share of the cost of the eligible     Form N-20; line 16b, Schedule K-1, Form N-35; or line 7a, Schedule K-1, 
property is apportioned between the entity and the beneficiaries based on            Form N-40, of the appropriate line for this credit. The member’s apportioned 
the income of the entity allocable to each on the date the eligible property         amount of sales or use taxes paid to another state or jurisdiction upon the 
is  placed  in  service. The  term  “beneficiary”  includes  an  heir,  legatee,  or acquisition of the property and a statement as to whether 4% use tax was 
devisee.                                                                             paid on purchases from sellers outside Hawaii is to be reported on line 37, 
                                                                                     Schedule  K-1,  Form  N-20;  line  30,  Schedule  K-1,  Form  N-35;  or  line  9, 
WHEN THE CREDIT MAY NOT BE CLAIMED                                                   Schedule K-1, Form N-40. Credit recapture information is to be provided to 
                                                                                     the members on Form N-312, Part II.
This credit may not be claimed for property for which the Motion Picture, 
Digital Media, and Film Production Income Tax Credit is claimed. In addition,        In the case of a taxpayer who is a member of a flow-through entity and 
no credit may be claimed for any cost that is used to claim the Renewable            who claims a credit for the entity’s eligible property, the taxpayer shall attach 
Energy Technologies Income Tax Credit.                                               a copy of Schedule K-1 and any other statement relating to the credit which 
                                                                                     is provided by the flow-through entity, to Form N-312 when the credit is 
CREDIT REQUIREMENTS                                                                  claimed, or when the credit is subject to recapture, or both. Members are to 
                                                                                     enter their allocated amount of the entity’s eligible property on line 1, Part I, 
The property must be depreciable property with an estimated useful life              indicating “from Schedule K-1(or statement) attached.”
or recovery period of three years or more. The property must be placed in 
service within Hawaii and the purchase or importation must be subject to             To claim this credit, you must complete and attach to your Hawaii income 
the imposition and payment of tax at the rate of 4% under General Excise             tax return or Hawaii franchise tax return:
or  Use  Tax  Laws.  Individual  members  of  partnerships,  beneficiaries  of       (1)  Form N-312
estates and trusts, or shareholders of S corporations are also required to be 
furnished information relating to the credit on Schedule K-1 and recapture           (2)  Schedule CR (For tax returns for which Schedule CR is 
information on Part II of Form N-312.  Refer also to Tax Information Release            required)
(TIR)  Nos.  88-6,  88-8,  89-4,  and  2001-4,  and  the  Hawaii Administrative      (3)  Schedule K-1 (Required only if you are a member of a flow-
Rules section 18-235-110.7, for more information relating to claiming and               through entity claiming a credit for the entity’s eligible property)
recapturing the credit.
The amount of the credit shall be determined by applying 4% against                  TAX CREDIT TO BE DEDUCTED FROM INCOME TAX 
the qualifying cost of eligible depreciable property placed in service during        LIABILITY, IF ANY; REFUNDS
the taxable year. No credit is available for the 1/2 of 1% City and County of 
Honolulu, Kauai and Hawaii County surcharges.                                        If the credit allowed exceeds the taxpayer’s net income tax liability, the 
                                                                                     excess of credit over liability shall be refunded to the taxpayer, however, no 
The general excise or use tax at the rate of 4% must be paid in order to             refund on account of the credit shall be made for an amount less than $1.  
claim this credit. TIR No. 2001-4 provides safe harbor guidelines which a            There shall be no carryback or carryover of excess credit over tax liability.
taxpayer may use, solely for the purpose of claiming this credit, to assume 
that the seller has paid the general excise tax (GET). These safe harbors 
include:                                                                             DEADLINE FOR CLAIMING THE CREDIT
1.       The taxpayer can provide a sales invoice or contract showing                The deadline to claim the credit, including amended claims, is 12 months 
         the 4% GET as a separately stated component of the purchase                 after the close of your taxable year. You cannot claim or amend the credit 
         price;                                                                      after the deadline.

Page 2                                                                                                                Instructions for Form N-312 (Rev. 2023)
HOW THE AMOUNT OF CREDIT ALLOWABLE AND                                                  “Tangible personal property” means tangible personal property which is 
                                                                                        placed in service within Hawaii after December 31, 1987, and the purchase 
CLAIMED IS ACCOUNTED FOR                                                                or importation of which resulted in a transaction which was subject to the 
The taxpayer shall treat the amount of credit allowable and claimed as                  imposition and payment of tax at the rate of 4% under Hawaii’s General 
a taxable income item for the taxable year in which it is properly recognized           Excise  or  Use  Tax  Laws.  “Tangible  personal  property”  does  not  include 
under  the  method  of  accounting  used  to  compute  taxable  income.                 tangible personal property which is an integral part of a building or structure 
Alternatively, the basis of eligible property for depreciation or accelerated           or tangible personal property used in a foreign trade zone, as defined under 
cost  recovery  system  (ACRS)  purposes  for  State  income  taxes  shall  be          chapter 212, HRS.
reduced by the amount of credit allowable and claimed.                                  “Placed in service” means the earliest of the following taxable years:
RECAPTURE OF THE CREDIT                                                                 (1)  Taxable year in which, under the 
Use Part II of Form N-312 to determine the increase in tax as a result of               (A)  taxpayer’s depreciation practice, the period for 
the recapture of the credit. The recapture rule requires a recomputation of                          depreciation, or 
a previously taken credit if eligible depreciable tangible personal property is         (B)  ACRS, a claim for recovery allowances, with respect to 
disposed of or otherwise ceases to be eligible property within the recapture                         such property, begins; or
period. The recapture period means the period beginning on the 1st day of 
the month the eligible property is placed in service and extending for a full           (2)  The taxable year in which the property is placed in a condition 
three years. A decrease in business use will trigger a recapture of the credit.         or state of readiness and availability for a specifically assigned 
                                                                                        function.
The credit is recaptured by multiplying the decrease in previously taken 
credit by a recapture percentage, taking into account any prior recapture               “Purchase” means an acquisition of property.
determination in connection with the same property.
An increase in income tax as a result of credit recapture shall be treated              SPECIFIC INSTRUCTIONS
as  income  tax  imposed  on  the  taxpayer  by  chapter  235,  HRS,  for  the 
recapture year. This is the rule despite the fact that absent the increase, the         PART I INSTRUCTIONS
taxpayer has no income tax liability, has a net operating loss, or no income 
tax return is otherwise required for the taxable year. An increase in income            Line  1 col.(a)—List  and  describe  eligible  property  placed  in  service 
tax due to recapture is limited to the total credit claimed. Refer to TIR No.           during the year purchased from Hawaii sellers.  Enter only the qualifying 
88-8 for details and examples illustrating the recapture rule.                          business-use portion of the eligible property. If a deduction is taken under 
                                                                                        IRC  section  179  (regarding  an  election  to  expense  certain  depreciable 
A taxpayer must maintain records from which the taxpayer can establish,                 business  assets),  the  amount  deducted  should  be  eliminated  from  the 
with respect to each item of eligible depreciable tangible personal property,           business-use portion of the asset cost. This is similar to determining the 
the following facts: (1) the date the property is disposed of or otherwise              depreciable  basis  of  the  asset.  Therefore,  if  an  asset  is  purchased  for 
ceases to be eligible property; (2) the estimated useful life or recovery period        $10,000, is used 80% for business purposes, and an election is made to 
that was assigned to the property to determine eligibility for the credit; (3)          currently expense $2,000 of the depreciable basis, the cost of the property 
the month and taxable year in which the property was placed in service;                 would be listed as $6,000 ($10,000 multiplied by 80% minus $2,000).
and (4) the vendor and cost of the property. These facts will be analyzed 
to  determine  both  the  eligibility  for  the  credit,  and  the  necessity  for  any Examples of properties which are not eligible for the credit include:
recapture of the credit. If the taxpayer’s records are insufficient to establish        Air conditioning or heating units;
these facts, it will generally be assumed that the most recently acquired 
eligible depreciable tangible personal property was disposed of first.                  Buildings or their structural components;
Where  the  maintenance  of  records  of  details  on  mass  assets  is                 Computer software;
impractical, the taxpayer may adopt reasonable record keeping practices, 
consistent with good accounting and engineering practices and consistent                Property purchased for use in a foreign trade zone (as defined under 
with the taxpayer’s prior record keeping practices. “Mass assets” is defined            chapter 212, HRS);
in TIR No. 88-8.                                                                        Property  used  by  an  organization  which  is  exempt  from  Hawaii’s  net 
Flow-through  entities  are  to  provide  their  members  with  a  completed            income tax. Exceptions to this general rule are stated in IRC section 
Form N-312, Part II to provide apportioned information regarding the credit             48(a)(4), as amended as of December 31, 1984;
recapture.                                                                              Intangible property (e.g., patent, copyright, subscription list);
                                                                                        Property which is used predominantly to furnish lodging, or in connection 
DEFINITIONS                                                                             with the furnishing of lodging. Three exceptions to this general rule are 
FOR PURPOSES OF THE TAX CREDIT                                                          stated in TIR No. 88-6;
“Cost”  means  (1)  the  actual  invoice  price  of  the  tangible  personal            Elevators and escalators;
property, or (2) the basis from which depreciation is taken under section               Single purpose agricultural or horticultural structures;
167 (with respect to depreciation) or from which a deduction may be taken 
under section 168 (with respect to ACRS) of the IRC of 1954, as amended,                Qualified rehabilitated buildings;
whichever  is  less.  For  purposes  of  determining  the  amount  of  credit           Property completed abroad or predominantly of foreign origin;
available for 2023, the cost is limited to $61,000 for passenger automobiles 
(including electric) used predominantly (over 50%) for business purposes,               Livestock;
and for trucks, vans, and SUVs that are subject to the depreciation limits 
imposed by IRC section 280F.                                                            Movie and television films; and
“Eligible depreciable tangible personal property” is section 38 property as             Property for which the Motion Picture, Digital Media, and Film Production 
defined by the operative provisions of section 48 and having a depreciable              Income Tax Credit is claimed.
life under section 167 or for which a deduction may be taken under section              Members of flow-through entities are to enter their allocated amount of 
168 of the IRC of 1954, as amended.                                                     the entity’s eligible property on this line, indicating “from Schedule K-1 (or 
 The term “section 38 property” (with respect to investment in depreciable              statement) attached” in column (a).
tangible personal property) is defined by section 48(a)(1)(A), (a)(1)(B), (a)           Line  1 col.(b)—Enter  the  date  the  qualifying  property  was  placed  in 
(3), (a)(4), (a)(7), (a)(8), (a)(10)(A), (b), (c), (f), (l), (m), and (s) of the IRC    service. See TIR No. 88-6 for more information relating to the determination 
of 1954, as amended as of December 31, 1984. Computer software is not                   of this date.
section 38 property. Because computer software is not tangible personal 
property as defined, software does not qualify for the credit.                          Line  1 col.(c)—Enter  the  cost  of  qualifying  property  purchased  from 
                                                                                        Hawaii sellers in column (c). For motor vehicles subject to cost limitations, 
                                                                                        do not enter more than the limitation amount.

Instructions For Form N-312 (Rev. 2023)                                                                                                                                    Page 3
Line 2(a)—Follow  the  instructions  for  line  1,  listing  purchases  from                Line 8—This is the amount of credit (a) originally claimed or (b) if you 
sellers outside Hawaii.                                                                 were previously subject to a partial recapture, the recomputed amount of 
                                                                                        the capital goods excise tax credit before the percentage adjustment for 
Line  2(b)—Indicate,  by  checking  the  appropriate  box,  whether  4%                 the period of time the property was held. Do not enter the amount of the 
Hawaii use tax was paid on the purchases from sellers outside Hawaii.                   previously recaptured credit, but the recomputed amount of the credit.  See 
Line 3—Estates and trusts: The total cost on line 3 is to be allocated                  the Instructions for line 9 below for an explanation of the recomputed credit.
between the estate or trust and the beneficiaries in the proportion of the                  Line 9—The credit must be recomputed if you have a partial disposition 
income  allocable  to  each  party.  On  the  dotted  line  to  the  left  of  line  3, of the property. For a total disposition, enter zero. If the business use of 
enter the cost allocable to the estate or trust with the designation “N-40              property  subject  to  IRC  section  280F  decreases  to  50%  or  less,  a  total 
PORTION.” Attach Form N-312 to the N-40 return and show the distributive                disposition of the property is considered to have occurred. The recomputed 
share of the costs for each beneficiary.                                                credit  is  the  amount  of  credit  allowed  based  on  the  original  cost  of  the 
Cooperatives: A cooperative may claim the capital goods excise tax credit               property multiplied by (a) the current business-use percentage, or (b) the 
to the extent it is subject to the income tax and has an income tax liability.          current percentage of the total ownership interest held at the time that the 
Any excess tax credit is allocated among the members of the cooperative.                property  was  originally  placed  in  service. The  recomputed  credit  can  be 
The cooperative is to prepare a statement showing the distributive share of             computed by completing the following worksheet:
the tax credit to each cooperative member.
                                                                                        a.  Original cost of the property ....................................              _______________
Line 6—Section 238-3(i), HRS, allows a credit for the Hawaii use tax                    b.  Current business-use or ownership %;  if a total 
imposed upon imported tangible personal property where the taxpayer has 
paid sales or use taxes to another state or any subdivision thereof which                   disposition, enter zero .............................................           _______________
had jurisdiction on that property. Enter on line 6, the amount of taxes paid            c.  Unadjusted cost or basis of the property (line a 
to another state that relates to the cost of qualifying property listed on lines            multiplied by line b) .................................................         _______________
1 and 2 for which a credit was claimed under section 238-3(i), HRS. The                 d.  Deduction under IRC section 179 ...........................                     _______________
maximum use tax credit amount to be entered on line 6 is the actual amount              e.  Adjusted cost or basis of the property (line c minus 
of the tax paid up to 4% of the basis of the property. Include on this line the 
amount shown on line 37, Schedule K-1, Form N-20; line 30, Schedule K-1,                    line d) ......................................................................  _______________
Form N-35; or line 9, Schedule K-1, Form N-40; if applicable.                           f.  Original rate of credit claimed for the property ........                       _______________4%
                                                                                        g.  Credit before adjustment (line e multiplied by line f).  _______________
PART II INSTRUCTIONS—Refer to TIR No. 88-8 relating                                     h.  Sales or use tax credit under section 238-3(i), 
to the capital goods excise tax credit recapture.                                           HRS; up to the amount of the credit available on the 
Flow-through entities are to provide their members with Form N-312,                         property (4% of the qualifying basis of the property). 
Part II to provide apportioned information regarding the credit recapture.                  If this amount is zero, enter zero here and on line j   _______________
Enter  the  member’s  and  the  entity’s  names  and  identification  numbers           i.  Adjusted business-use or ownership % (line e 
where indicated. The entity is to complete lines 1 through 7. Members are                   divided by amount on line a) ...................................                _______________
to attach a copy of this Part II prepared by the entity to their Hawaii return          j.  Credit on line h above applicable to the business-use 
reporting the recapture of the credit.
                                                                                            or ownership (line h multiplied by line i) ..................                   _______________
Line 1—The original rate of credit for the property subject to recapture  
is 4%.                                                                                  k.  Recomputed credit (line g minus line j) ...................                     _______________
Line 2—The date that the recapture period begins is the 1st day of the 
month within which the qualifying property was placed in service.                           Line  11—Enter  the  recapture  percentage  from  the  following  table:                          
Line 3—This  date  is  the  actual  date  that  the  property  ceases  to  be                                Number of                               Recapture  
eligible depreciable property (e.g., a sale, transfer, etc.) or, if for any other                            full years on                           percentage  
reason  such  as  a  decrease  in  business  use  of  property  subject  to  IRC                                    line 4                           is: 
section 280F, the 1st day of the taxable year.                                                                                                                             
Line 4—Do not enter partial years.  If the property was held for less than                                          0                                100 
12 months, enter zero.                                                                                              1                                66 
                                                                                                                    2                                33 
Line 5 - 7— Lines 5 through 7 are to be completed by a flow-through                                                 3                                                     0
entity reporting to it’s member.