Upload
ngotuong
View
225
Download
1
Embed Size (px)
Citation preview
INCOME TAX LAW
CHAPTER235,Page1(UnofficialCompilation)
CHAPTER 235INCOME TAX LAW
PartI.GeneralProvisions
Section235-1 Definitions235-2 Repealed235-2.1 Repealed235-2.2 Repealed235-2.3 ConformancetothefederalInternalRevenueCode;generalapplication235-2.35 OperationofcertainInternalRevenueCodeprovisionsnotoperativeundersection235-2.3235-2.4 OperationofcertainInternalRevenueCodeprovisions;sections63to530235-2.45 OperationofcertainInternalRevenueCodeprovisions;sections641to7518235-2.5 Administration,adoption,andinterrelationshipofInternalRevenueCodeandPublicLawswiththis
chapter235-3 Legislativeintent,howInternalRevenueCodeshallapply,ingeneral235-4 IncometaxesbytheState;residents,nonresidents,corporations,estates,andtrusts235-4.3 Repealed235-4.5 Taxationoftrusts,beneficiaries;credit235-5 Allocationofincomeofpersonsnottaxableuponentireincome235-5.5 Individualhousingaccounts235-5.6 Individualdevelopmentaccountcontributiontaxcredit235-6 Foreignmanufacturingcorporation;warehousingofproducts235-7 Otherprovisionsastogrossincome,adjustedgrossincome,andtaxableincome235-7.3 Royaltiesderivedfrompatents,copyrights,ortradesecretsexcludedfromgrossincome235-7.5 Certainunearnedincomeofminorchildrentaxedasifparent’sincome235-8 Repealed235-9 Exemptions;generally235-9.5 Stockoptionsfromqualifiedhightechnologybusinessesexcludedfromtaxation235-10,11 Repealed235-12 Energyconservation;incometaxcredit235-12.2 Repealed235-12.5 Renewableenergytechnologies;incometaxcredit235-13 Salesofresidentiallandtolessees;involuntaryconversion235-15 Taxcreditstopromotethepurchaseofchildpassengerrestraintsystems235-16 Repealed235-16.5 Cesspoolupgrade,conversion,orconnection;incometaxcredit235-17 Motionpicture,digitalmedia,andfilmproductionincometaxcredit235-17.5 Capitalinfrastructuretaxcredit235-18 Depositbeveragecontainerdepositexemption235-19 Exceptionaltrees;taxdeduction235-20 Comfortletters;authoritytoassessfees;established235-20.5 Taxadministrationspecialfund;established235- Taxcreditforfloodvictims(temporary uncodified section)235- Relating to Income Tax Credit tax year 2007 (temporary uncodified section)235- Relating to Income Tax Credit tax year 2008 (temporary uncodified section)235- Relating to Income Tax Credit tax year 2009 (temporary uncodified section)235- Itemizeddeductions;limitations (temporary uncodified section)
PartII.UniformDivisionofIncomeforTaxPurposes
235-21 Definitions235-22 Taxpayersaffected235-23 Taxableinanotherstate
INCOME TAX LAW
CHAPTER235,Page2(UnofficialCompilation)
235-24 Specifiednonbusinessincome235-25 Rents;royalties235-26 Allocationofcapitalgainsandlosses235-27 Allocationofinterestanddividends235-28 Allocationofpatentandcopyrightroyalties235-29 Apportionmentofbusinessincome;percentage235-30 Apportionment;propertyfactor235-31 Apportionment;propertyfactor;ownedandusedproperty235-32 Apportionment;propertyfactor;averagevalue235-33 Apportionment;payrollfactor235-34 Compensation;wherepaid235-35 Apportionment;salesfactor235-36 Apportionment;salesfactor;tangiblepersonalty235-37 Apportionment;salesfactor;nontangiblepersonalty235-38 Equitableadjustmentofformula235-38.5 Application235-39 Citationofpart
PartIII.IndividualIncomeTax
235-51 Taximposedonindividuals;rates235-52 Taxincaseofjointreturnorreturnofsurvivingspouse235-53 Taxtablesforindividuals235-54 Exemptions235-55 Taxcreditsforresidenttaxpayers235-55.5 Repealed235-55.6 Expensesforhouseholdanddependentcareservicesnecessaryforgainfulemployment235-55.7 Incometaxcreditforlow-incomehouseholdrenters235-55.75 Earnedincometaxcredit235-55.8 Repealed235-55.85 Refundablefood/excisetaxcredit235-55.9 Repealed235-55.91 Creditforemploymentofvocationalrehabilitationreferrals235-56to58.2Repealed235-59 Decedents235-60 Repealed
WithholdingandCollectionofTaxatSource
235-61 Withholdingoftaxonwages235-62 Returnandpaymentofwithheldtaxes235-63 Statementstoemployees235-64 Taxeswithheldbyemployerheldintrust;employer’sliability235-65 Repealed235-66 Furtherwithholdingsatsource;creditingofwithheldtaxes235-67 Indemnityofwithholder235-68 Withholdingoftaxonthedispositionofrealpropertybynonresidentpersons235-69 Voluntarydeductionandwithholdingofstateincometaxfromunemploymentcompensation
PartIV.CorporationIncomeTax
235-71 Taxoncorporations;rates;creditofshareholderofregulatedinvestmentcompany235-71.5 Alternativetaxforcorporations235-72 Corporationscarryingonbusinessinpartnership
PartV.ElectionbySmallBusinessCorporation
235-81to89 Repealed
INCOME TAX LAW
CHAPTER235,Page3(UnofficialCompilation)
PartVI.ReturnsandPayments;Administration
235-91 Repealed235-91.5 Incometaxcredits;orderingofcreditclaims235-92 Returns,whoshallmake235-93 Jointreturns235-93.4 Effectofcivilunion235-93.5 Repealed235-94 Returnsbyagent,guardian,etc.;liabilityoffiduciaries235-94.5 Repealed235-95 Partnershipreturns235-96 Returnsbypersonsmakingpayments235-96.5 Returnsrelatingtounemployment235-97 Estimates;taxpayments;returns235-98 Returns;form,verificationandauthentication,timeoffiling235-99 Same;placeforfiling235-100 Personsinmilitaryservice235-100.5 Abatementofincometaxesofmembersofarmedforcesondeath235-101 Federalreturnsandassessments,whencopiesarerequired235-102 Recordsandspecialreturns235-102.5 Incomecheck-offauthorized235-102.6 Refundsplitting235-103 Distortionofincome235-104 Penalties235-105 Failuretokeeprecords,renderreturns,ormakereportsbyresponsiblepersons235-106 Repealed235-107 Procedureuponfailuretofilereturn235-108 Auditofreturn;procedure;additionaltaxes235-109 Jeopardyassessments,securityforpayment,etc.235-109.5 Repealed235-110 Creditsandrefunds235-110.2 Creditforschoolrepairandmaintenance235-110.3 Repealed235-110.31 Renewablefuelsproductiontaxcredit235-110.4 Repealed235-110.45 Repealed235-110.46 Repealed235-110.5 Repealed235-110.51 Technologyinfrastructurerenovationtaxcredit235-110.6 Fueltaxcreditforcommercialfishers235-110.7 Capitalgoodsexcisetaxcredit235-110.8 Low-incomehousingtaxcredit235-110.9 Hightechnologybusinessinvestmenttaxcredit235-110.91 Taxcreditforresearchactivities235-110.92 Repealed235-110.93 Importantagriculturallandqualifiedagriculturalcosttaxcredit235-110.94 Organicfoodsproductiontaxcredit235-111 Limitationperiodforassessment,levy,collection,orcredit;netoperatinglosscarrybacks235-111.5 Hightechnology;saleofunusednetoperatinglosscarryover235-112 Timeforassessmentofdeficiencyattributabletogainuponconversion235-113 Timeforassessmentofdeficiencyattributabletogainuponsaleofaresidence
Appeal
235-114 Appeals
GeneralProvisions
235-115 Assessments,etc.,primafacieproof
§235-1 INCOME TAX LAW
CHAPTER235,Page4(UnofficialCompilation)
235-116 Disclosureofreturnsunlawful;penalty235-117 Reciprocalsupplyingoftaxinformation235-118 Rulesandregulations235-119 Taxes,staterealizations
PartVII.HawaiiSCorporationIncomeTaxAct
235-121 Title;definitions;federalconformity;construction235-122 TaxationofanScorporationanditsshareholders235-123 Modificationandcharacterizationofincome235-124 Basisandadjustments235-125 Carryforwardsandcarrybacks;losslimitation235-125.5 Transitionrule235-126 Part-yearresidence235-127 Distributions235-128 Returns;shareholderagreements;mandatorypayments235-129 Taxcredits235-130 LIFOrecapture
ThisisanunofficialcompilationoftheHawaiiRevisedStatutes.
Note
Itemizeddeductions;limitations(repealedJanuary1,2016).L2011,c97,§§3,6;L2013,c256.
Cross Reference
Civilreliefforstatemilitaryforces,seechapter657D.TaxInformationReleaseNo.90-3,“IncomeTaxationandEligibilityforCreditsofanIndividualTaxpayerWhoseStatusChangesfromResident
toNonresidentorfromNonresidenttoResident” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.90-10,“ClarificationofTaxationandtheEligibilityforPersonalExemptions&CreditsofResidents&Nonresidents
intheMilitaryandSpousesandDependentsofPersonsintheMilitary” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
Law Journals and Reviews
TaxesinHawaiiSinceJuly1,1968:AReportontheUnreportedDecisionsofJudgeDickYinWong.ArthurB.Reinwald,9HBJ95.TaxesinHawaii1983-1988:AFunnyThingHappenedattheForum.22HBJ53.
PART I. GENERAL PROVISIONS
§235-1 Definitions.“Biotechnology”means fundamental knowledge regarding the function of biological systems from the macro
level to themolecularandsubatomiclevels thathasapplicationtodevelopment includingthedevelopmentofnovelproducts,services,technologies,andsubtechnologiesfrominsightsgainedfromresearchadvancesthataddtothatbodyoffundamentalknowledge.
“Blind”meansapersonwhosecentralvisualacuitydoesnotexceed20/200inthebettereyewithcorrectinglenses,orwhosevisualacuityisgreaterthan20/200butisaccompaniedbyalimitationinthefieldofvisionsuchthatthewidestdiameterofthevisualfieldsubtendsananglenogreaterthantwentydegrees.Theimpairmentofsightshallbecertifiedtoonformsprescribedbythedepartmentoftaxationonthebasisofawrittenreportonanexaminationperformedbyaqualifiedophthalmologistorqualifiedoptometrist.
“Computerdata”meansanyrepresentationofinformation,knowledge,facts,concepts,orinstructionsthatisbeingpreparedorhasbeenpreparedandisintendedtobeprocessed,isbeingprocessed,orhasbeenprocessedinacomputerorcomputernetwork.
“Computerprogram”meansanorderedsetofcomputerdatarepresentingcodedinstructionsorstatements,that,whenexecutedbyacomputer,causesthecomputertoperformoneormorecomputeroperations.
“Computersoftware”meanscomputerdata,acomputerprogram,orasetofcomputerprograms,procedures,orassociateddocumentationconcernedwiththeoperationandfunctionofacomputersystem,andincludesbothsystemsandapplicationprogramsandsubdivisions,suchasassemblers,compilers,routines,generators,andutilityprograms.
“Corporation”meansthesameasintheInternalRevenueCode.A“domesticcorporation”isoneorganizedunderthelawsoftheState.A“foreigncorporation”isanyothercorporation.
18-235-1
INCOME TAX LAW §235-1
CHAPTER235,Page5(UnofficialCompilation)
“Deaf”meansapersonwhoseaveragelossinthespeechfrequencies(500-2000Hertz)inthebettereariseighty-twodecibels,A.S.A.,orworse.Theimpairmentofdeafnessshallbecertifiedtobyaqualifiedotolaryngologistoralicensedaudiologistunderchapter468Eonformsprescribedbythedepartmentoftaxation.
“Dividend”meansanydistributionbyacorporationtoitsshareholdersorholdersonaninterestthereinwhichistreatedasadividendbytheInternalRevenueCode.
“Employee”meansthesameasintheInternalRevenueCode.“Fiduciary”meansthesameasintheInternalRevenueCode.“Fiscalyear”meansthesameasintheInternalRevenueCode.“Grossincome”,“adjustedgrossincome”,“ordinaryincome”,“ordinaryloss”,and“taxableincome”respectively
meanthesameasgrossincome,adjustedgrossincome,ordinaryincome,ordinaryloss,andtaxableincomeasdefinedanddeterminedundertheInternalRevenueCode,exceptasotherwiseprovidedinthischapter.
“Headofhousehold”meansanyindividualwhoqualifiesasaheadofhouseholdundertheInternalRevenueCode.“Husbandandwife”meansthesameasintheInternalRevenueCode.“Incometaxlawof1901”meanstheincometaxlawenactedbyAct20oftheSessionLawsof1901asitreadfrom
timetotimepriortotheenactmentoftheincometaxlawof1932.“Incometaxlawof1932”meanstheincometaxlawenactedbyAct44oftheSecondSpecialSessionLawsof1932,
asitreadfromtimetotimepriortotheenactmentoftheincometaxlawof1957.“Incometaxlawof1957”meanstheincometaxlawenactedbytheTwenty-NinthLegislature,asitreadsfromtime
totime.“Includes”and“including”whenusedinadefinitionshallnotbedeemedtoexcludeotherthingsotherwisewithin
themeaningofthetermdefined.“Individual”meansapersonotherthanatrust,estate,partnership,orcorporation,asdefined.“InternalRevenueCodeof1954,asamended”includestheInternalRevenueCodeof1986andtheInternalRevenue
Codeof1986,asamended.“Investment”meansanonrefundableinvestment,atrisk,asthattermisusedinsection465(withrespecttodeductions
limitedtoamountatrisk)oftheInternalRevenueCode,inaqualifiedhightechnologybusiness,ofcashthatistransferredtothequalifiedhightechnologybusiness,thetransferofwhichisinconnectionwithatransactioninexchangeforstock,interestsinpartnerships,jointventures,orotherentities,licenses(exclusiveornonexclusive),rightstousetechnology,marketingrights,warrants,options,oranyitemssimilartothoseincludedinthisdefinition,includingbutnotlimitedtooptionsorrightstoacquireanyoftheitemsincludedinthisdefinition.Thenonrefundableinvestmentisentirelyatriskoflosswhererepaymentdependsuponthesuccessofthequalifiedhightechnologybusiness.Ifthemoneyinvestedistoberepaidtothetaxpayer,norepaymentexceptfordividendsorinterestshallbemadeforatleastoneyearfromthedatetheinvestmentismade.Theannualamountofanydividendandinterestpaymenttothetaxpayershallnotexceedtwelvepercentoftheamountoftheinvestment.
“Legalserviceplan”or“plan”meansaplaninwhichthecostoftheservicesarepaidbyamemberorbysomeotherpersonororganizationinthemember’sbehalf.Alegalserviceplanisaplanbywhichlegalservicesarerenderedtomembersidentifiableintermsofsomecommoninterest.Aplanshallprovide:
(1) Thatindividualmembersshallbeaffordedfreedomofchoiceintheselectionof theirownattorneyorattorneystoprovidelegalservicesundertheplan;and
(2) Forthepaymentofequalamountsforthecostofservicesrenderedwithoutregardtotheidentityoftheattorneyorattorneysselectedbytheplanmemberormembers.Noplanshallotherwisediscriminateonthebasisoftheselection.
“Nonresident”meanseveryindividualotherthanaresident.“Nonresidentestate”or“nonresidenttrust”meansoneotherthanresident.“Paidorincurred,paidoraccrued”meansthesameasintheInternalRevenueCode.“Partner”meansthesameasintheInternalRevenueCode.“Partnership”meansthesameasintheInternalRevenueCode.“Person”includesanindividual,atrust,estate,partnership,association,company,orcorporation.“Persontotallydisabled”meansapersonwhoistotallyandpermanentlydisabled,eitherphysicallyormentally,
whichresultsintheperson’sinabilitytoengageinanysubstantialgainfulbusinessoroccupation.Thedisabilityshallbecertifiedtobya:(1) Physicianorosteopathicphysicianlicensedunderchapter453;(2) Qualifiedout-of-statephysicianwhoiscurrentlylicensedtopracticeinthestateinwhichthephysician
resides;or(3) CommissionedmedicalofficerintheUnitedStatesArmy,Navy,MarineCorps,orPublicHealthService,
engagedinthedischargeoftheofficer’sofficialduty.Certificationshallbeonformsprescribedbythedepartmentoftaxation.
“Regulatedinvestmentcompany”meansacorporationwhichqualifiesassuchundersections851and852oftheInternalRevenueCode.
“Resident”meansevery:
18-235-1.01
18-235-1.11
18-235-1.01
§235-1 INCOME TAX LAW
CHAPTER235,Page6(UnofficialCompilation)
(1) IndividualdomiciledintheState;and(2) Otherindividual,whetherdomiciledintheStateornot,whoresidesintheState.To“reside”intheState
meanstobeintheStateforotherthanatemporaryortransitorypurpose.EveryindividualwhoisintheStatemorethantwohundreddaysofthetaxableyearintheaggregateshallbepresumedtobearesidentoftheState.Thispresumptionmaybeovercomebyevidencesatisfactorytothedepartmentoftaxationthat the individualmaintainsapermanentplaceofabodeoutsideof theStateand is in theState foratemporaryor transitorypurpose.Nopersonshallbedeemedtohavegainedorlostaresidencesimplybecauseoftheperson’spresenceorabsenceincompliancewithmilitaryornavalordersoftheUnitedStates,orwhileengagedinaviationornavigation,orwhileastudentatanyinstitutionoflearning.
“Residentestate”meansanestateofaresidentdecedentthefiduciaryofwhichwasappointedbyacourtofthisStateandtheadministrationofwhichiscarriedoninthisState,and“residenttrust”meansatrustofwhichthefiduciaryisaresidentoftheStateortheadministrationofwhichiscarriedonintheState.
“Shareholder”meansthesameasintheInternalRevenueCode.“Stock”meansthesameasintheInternalRevenueCode.“Taxableyear”meansthecalendaryearorthefiscalyearendingduringsuchcalendaryearuponthebasisofwhich
incomeiscomputedunderthischapter.“Taxableyear”includes,inthecaseofareturnmadeforafractionalpartofayearunderthischapterorunderregulationsprescribedbythedepartmentoftaxation,theperiodforwhichsuchreturnismade,andincaseswherethedepartmentterminatesthetaxableyearinaccordancewithsection231-24andleviesajeopardyassessmentonincomeforsuchportionorperiodofayearundersection235-109,thentheperiodorportionoftheyearforwhichthejeopardyassessmentismade.
“Taxpayer”meansapersonsubjecttoataximposedbythischapter.“Tradeorbusiness”includestheperformanceofthefunctionsofapublicoffice.“UniformedservicesoftheUnitedStates”meanstheArmy,Navy,AirForce,MarineCorps,CoastGuard,Coast
andGeodeticSurvey,andPublicHealthService,andallregularandreservecomponentsthereof,includingtheNationalGuard.Theterm“uniformedservicesoftheUnitedStates”appliesonlytopersonswhoaredeemedmembersthereofunderthelawsoftheUnitedStatesrelatingtopayandallowances.Servicesasamemberof theuniformedservicesincludesinactivedutytraining.
“WithoutregardtosourceintheState”shallmeanincomederivedorearnedfromallsourceswhetherfromsourceslocatedwithinorfromsourceslocatedwithouttheState.[LSp1957,c1,ptof§2;amL1959,c246,§13andc277,ptof§6;amLSp19592d,c1,§§16,19;Supp,§121-1;amL1967,c250,§2;HRS§235-1;amL1968,c42,§3;amL1970,c90,§1;amL1971,c97,§1;amL1973,c217,§10;amL1974,c42,§2;amL1976,c156,§5andc208,§1;amL1978,c173,§2(3),(4),and(5);amimpL1984,c90,§1;gench1985;amL1987,c239,§1(4);amL1988,c81,§1;amL1990,c17,§1;amL1997,c178,§1;amL2000,c297,§4;amL2001,c36,§1;amL2009,c11,§27;amL2012,c34,§17;amL2017,c12,§39]
Note
Definitionof“prepaidlegalserviceplan”changedto“legalserviceplan”.L2012,c34,§17.
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETax InformationReleaseNo. 89-3, “StateTaxBenefitsAvailable toPersonsWith ImpairedSight, ImpairedHearing, orWhoAreTotally
Disabled”TaxInformationReleaseNo.90-3,“IncomeTaxationandEligibilityforCreditsofanIndividualTaxpayerWhoseStatusChangesfromResident
toNonresidentorfromNonresidenttoResident” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.90-10,“ClarificationofTaxationandtheEligibilityforPersonalExemptions&CreditsofResidents&Nonresidents
intheMilitaryandSpousesandDependentsofPersonsintheMilitary” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.90-14,“WithholdingofTaxontheDispositionofRealPropertybyNonresidentPersons” SupersededbyTIR
2017-01TaxInformationReleaseNo.94-2,“StateTaxBenefitsAvailabletoPersonsTotallyDisabled”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”Tax InformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the ‘Check-the-box’Regulations to the
HawaiiIncomeTaxandOtherTaxes”TaxInformationReleaseNo.2003-1,“ApplicationofSection235-110.9,HawaiiRevisedStatutes(HRS), relating to theHighTechnology
BusinessInvestmentCredit”Tax InformationReleaseNo.2007-03,“ImpositionofHawaiiState IncomeTaxon IncomeEarnedbyNonresidentMerchantSeamenand
WithholdingObligationsofEmployersofNonresidentMerchantSeamen”TaxInformationReleaseNo.2008-04,“CertainPrototypeCostsThatMayBeEligiblefortheHawaiiTaxCreditForResearchActivitiesUnder
Section235-110.91,HawaiiRevisedStatutes”TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”TaxInformationReleaseNo.2017-01,“WithholdingofStateIncomeTaxesontheDispositionofHawaiiRealProperty”
Attorney General Opinions
Definitionsof“marriage”and“spouse”underthefederalDefenseofMarriageAct,Pub.L.No.104-199,110Stat.2419,mayprecludecivilunionpartnersofthesamegenderundertheState’sCivilUnionActfromfilingjointlyforfederalincometaxpurposes,buttheydonotprecludecivilunionpartnersfromfilingjointtaxreturnsforHawaiiincometaxpurposes.Att.Gen.Op.11-2.
18-235-1.16
INCOME TAX LAW §235-2.3
CHAPTER235,Page7(UnofficialCompilation)
“Resident”clarified.Att.Gen.Op.65-5.
Case Notes
Redemptionofstocktaxableasgainorprofitheldnotdividend.79F.2d761.“Taxableyear”.33H.766.AbandonmentofHawaiiandomicileandacquisitionofnew.51H.339,461P.2d131.
§235-2 REPEALED. L2016,c53,§2.
§235-2.1 REPEALED. L2016,c53,§3.
§235-2.2 REPEALED. L2016,c53,§4.
§235-2.3 Conformance to the federal Internal Revenue Code; general application. (a)Forall taxableyearsbeginningafterDecember31,2016,asusedinthischapter,exceptasprovidedinsection235-2.35,“InternalRevenueCode”meanssubtitleA,chapter1,ofthefederalInternalRevenueCodeof1986,asamendedasofDecember31,2016,asitappliestothedeterminationofgrossincome,adjustedgrossincome,ordinaryincomeandloss,andtaxableincome,except thoseprovisionsof theInternalRevenueCodeandfederalpublic lawswhich,pursuant to thischapter,donotapplyorareotherwiselimitedinapplicationandexceptfortheprovisionsofPublicLaw109-001,whichapplytoSection170oftheInternalRevenueCode.TheprovisionsofPublicLaw109-001toacceleratethedeductionforcharitablecashcontributionsforthereliefofvictimsofthe2004IndianOceantsunamiareapplicableforthecalendaryearthatendedDecember31,2004,andthecalendaryearendingDecember31,2005.
Priorlawshallcontinuetobeusedtodetermine:(1) Thebasisofproperty,ifataxpayerfirstdeterminedthebasisofpropertyinataxableyeartowhichprior
lawapplies;and(2) Grossincome,adjustedgrossincome,ordinaryincomeandloss,andtaxableincomeforataxableyearto
whichpriorlawapplies.(b) ThefollowingInternalRevenueCodesubchapters,partsofsubchapters,sections,subsections,andpartsof
subsectionsshallnotbeoperativeforthepurposesofthischapter,unlessotherwiseprovided:(1) SubchapterA(Sections1to59A)(withrespecttodeterminationoftaxliability),exceptSection1(h)(2)
(relating to net capital gain reducedby the amount taken into account as investment income), exceptSections2(a),2(b),and2(c)(withrespecttothedefinitionof“survivingspouse”and“headofhousehold”),exceptSection41(withrespecttothecreditforincreasingresearchactivities),exceptSection42(withrespecttolow-incomehousingcredit),exceptSections47and48,asamended,asofDecember31,1984(withrespecttocertaindepreciabletangiblepersonalproperty),andexceptSection48(d)(3),asamended,asofFebruary17,2009(withrespecttothetreatmentofUnitedStatesDepartmentofTreasurygrantsmadeunderSection1603oftheAmericanRecoveryandReinvestmentTaxActof2009).Fortreatment,seesections235-110.91,235-110.7,and235-110.8;
(2) Section78(withrespecttodividendsreceivedfromcertainforeigncorporationsbydomesticcorporationschoosingforeigntaxcredit);
(3) Section86(withrespecttosocialsecurityandtier1railroadretirementbenefits);(4) Section103(withrespecttointerestonstateandlocalbonds).Fortreatment,seesection235-7(b);(5) Section114(withrespect toextraterritorial income).For treatment,any transactionasspecified in the
transitionalrulefor2005and2006asspecifiedintheAmericanJobsCreationActof2004Section101(d)andanytransactionthathasoccurredpursuanttoabindingcontractasspecifiedintheAmericanJobsCreationActof2004Section101(f)areinoperative;
(6) Section120(withrespecttoamountsreceivedunderqualifiedgrouplegalservicesplans).Fortreatment,seesection235-7(a)(9)to(11);
(7) Section122(withrespecttocertainreduceduniformedservicesretirementpay).Fortreatment,seesection235-7(a)(3);
(8) Section135(withrespecttoincomefromUnitedStatessavingsbondsusedtopayhighereducationtuitionandfees).Fortreatment,seesection235-7(a)(1);
(9) Section139C(withrespecttoCOBRApremiumassistance);(10)SubchapterB(Sections141to150)(withrespecttotaxexemptionrequirementsforstateandlocalbonds);(11)Section151(withrespecttoallowanceofdeductionsforpersonalexemptions).Fortreatment,seesection
235-54;(12)Section 179B (with respect to expensing of capital costs incurred in complying with Environmental
ProtectionAgencysulphurregulations);(13)Section181(withrespecttospecialrulesforcertainfilmandtelevisionproductions);(14)Section196(withrespecttodeductionforcertainunusedinvestmentcredits);(15)Section199(withrespecttotheU.S.productionactivitiesdeduction);
18-235-2.3
§235-2.3 INCOME TAX LAW
CHAPTER235,Page8(UnofficialCompilation)
(16)Section222(withrespecttoqualifiedtuitionandrelatedexpenses);(17)Sections241to247(withrespecttospecialdeductionsforcorporations).Fortreatment,seesection235-
7(c);(18)Section280C(withrespecttocertainexpensesforwhichcreditsareallowable).Fortreatmentsee,section
235-110.91;(19)Section291(withrespecttospecialrulesrelatingtocorporatepreferenceitems);(20)Section367(withrespecttoforeigncorporations);(21)Section501(c)(12),(15),(16)(withrespecttoexemptorganizations);exceptthatsection501(c)(12)shall
beoperativeforcompaniesthatprovidepotablewatertoresidentialcommunitiesthatlackanyaccesstopublicutilitywaterservices;
(22)Section515(withrespecttotaxesofforeigncountriesandpossessionsoftheUnitedStates);(23)SubchapterG(sections531to565)(withrespecttocorporationsusedtoavoidincometaxonshareholders);(24)SubchapterH(sections581to597)(withrespecttobankinginstitutions),exceptSection584(withrespect
tocommontrustfunds).Fortreatment,seechapter241;(25)Section642(a)and(b)(withrespecttospecialrulesforcreditsanddeductionsapplicabletotrusts).For
treatment,seesections235-54(b)and235-55;(26)Section646(withrespecttotaxtreatmentofelectingAlaskaNativesettlementtrusts);(27)Section668(withrespecttointerestchargeonaccumulationdistributionsfromforeigntrusts);(28)SubchapterL(sections801 to848) (with respect to insurancecompanies).For treatment, seesections
431:7-202and431:7-204;(29)Section853(withrespecttoforeigntaxcreditallowedtoshareholders).Fortreatment,seesection235-55;(30)Section853A(withrespecttocreditsfromtaxcreditbondsallowedtoshareholders);(31)SubchapterN(Sections861to999)(withrespecttotaxbasedonincomefromsourceswithinorwithout
the United States), except Sections 985 to 989 (with respect to foreign currency transactions). Fortreatment,seesections235-4,235-5,235-7(b),and235-55;
(32)Section1042(g) (with respect to salesof stock in agricultural refiners andprocessors to eligible farmcooperatives);
(33)Section1055(withrespecttoredeemablegroundrents);(34)Section1057(withrespecttoelectiontotreattransfertoforeigntrust,etc.,astaxableexchange);(35)Sections1291to1298(withrespecttotreatmentofpassiveforeigninvestmentcompanies);(36)SubchapterQ (sections1311 to1351) (with respect to readjustmentof taxbetweenyears and special
limitations);(37)SubchapterR (sections 1352 to 1359) (with respect to election to determine corporate tax on certain
internationalshippingactivitiesusingpertonrate);(38)SubchapterU(Sections1391to1397F)(withrespecttodesignationandtreatmentofempowermentzones,
enterprisecommunities,andruraldevelopmentinvestmentareas).Fortreatment,seechapter209E;(39)SubchapterW(Sections1400to1400C)(withrespecttoDistrictofColumbiaenterprisezone);(40)Section1400O(withrespecttoeducationtaxbenefits);(41)Section1400P(withrespecttohousingtaxbenefits);(42)Section1400R(withrespecttoemploymentrelief);(43)Section1400T(withrespecttospecialrulesformortgagerevenuebonds);(44)Section1400U-1(withrespecttoallocationofrecoveryzonebonds);(45)Section1400U-2(withrespecttorecoveryzoneeconomicdevelopmentbonds);and(46)Section1400U-3(withrespecttorecoveryzonefacilitybonds).[L1978,c173,§2(1);amL1979,c62,
§2(1)to(3);amL1980,c235,§1andc238,§2;amL1981,c3,§2(2),c208,§2,andc209,§1;amL1982,c22,§1(1)andc25,§1;amL1983,c88,§1;amL1984,c99,§1;amL1985,c19,ptof§1;amL1986,c283,§1;amL1987,c39,§2,andc239,§1(5);amL1988,c10,§1(2),c102,§1,c107,§2,andc216,§3;amL1989,c13,§1;amL1990,c15,§1andc289,§2;amL1991,c54,§1andc137,§2;amL1992,c37,§1;amL1993,c73,§1;amL1994,c13,§2;amL1995,c7,§1;amL1996,c187,§1;amL1997,c297,§2;amL1998,c113,§1;amL1999,c178,§28andc198,§1;amL2000,c174,§2;amL2001,c199,§1;amL2002,c223,§2;amL2003,c172,§2;amL2004,c89,§3;amL2005,c60,§2;amL2006,c124,§1;amL2007,c84,§1;amL2008,c93,§1;amL2009,c133,§2;amL2010,c112,§4;amL2011,c91,§2;amL2012,c179,§2andc184,§2;amL2013,c43,§2;amL2014,c88,§2;amL2015,c52,§2;amL2016,c33,§2andc53,§1;amL2017,c95,§2]
Note
The2017amendmentappliestotaxableyearsbeginningafterDecember31,2016.L2017,c95,§5.
Cross Reference
TaxInformationReleaseNo.53-77,“BenefitsReceivedUnderIndividualRetirementPlansandSelf-EmployedRetirementPlans”TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETE
INCOME TAX LAW §235-2.4
CHAPTER235,Page9(UnofficialCompilation)
TaxInformationReleaseNo.83-3,“StateTaxTreatmentofPensionandProfitSharingPlans,IndividualRetirementAccounts,H.R.10PlansandtheLike”
TaxInformationReleaseNo.84-1,“TaxabilityofInterestonU.S.Obligations”TaxInformationReleaseNo.90-4,“TaxabilityofBenefitPaymentsfromPensionPlantoParticipantsWhoAttainAge70-1/2asRequiredby
theInternalRevenueCode(IRC)Section401(a)(9)(C)”TaxInformationReleaseNo.91-4,“HawaiiTaxObligationsofNonprofitOrganizations”TaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.93-6,“MovingExpenses-HawaiiQuarantineFees”Tax InformationReleaseNo. 94-4, “Application of StateTaxes onRebates for the Purchase and Installation ofUltra-low FlushToilets”
OBSOLETETaxInformationReleaseNo.96-5,“TaxationPensionsundertheHawaiiNetIncomeTaxLaw:DeferredCompensationArrangements;Rollover
IRAs;Sub-AccountsofPensionPlans;SocialSecurityandRailroadRetirementActBenefits;LimitationsonDeductionsforContributionstoaNonqualifiedPlan”
Tax InformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the ‘Check-the-box’Regulations to theHawaiiIncomeTaxandOtherTaxes”
TaxInformationReleaseNo.2001-1,“TheApplicationofCertainHawaiiTaxestoQualifiedSubchapterSSubsidiaryCorporations,QualifiedSubchapterSTrusts,andElectingSmallBusinessTrusts”
TaxInformationReleaseNo.2003-2,“ExtensionofDeadlinesandOtherTaxReliefforMembersoftheArmedForces,Reserves,andHawaiiNationalGuard”
Attorney General Opinions
Hawaii’snetincometaxlawincorporatesInternalRevenueCodeof1954,asamended,withcertainexceptions,forpurposesofdetermininggrossincome.Att.Gen.Op.91-03.
§235-2.35 Operation of certain Internal Revenue Code provisions not operative under section 235-2.3. Thefollowingsectionsof thefederal InternalRevenueCodeof1986,asamended,shallbeoperativeforpurposesof thischapter:
(1) Section6038(D) (with respect to informationwith respect to foreignfinancialassets).With respect topersonsrequiredtoreportinformationunderthissection,section6662(j)(withrespecttoimpositionofaccuracy-relatedpenaltiesonunderpayments)andsection6501(e)(1)(A)(ii)(withrespecttolimitationsonassessment and collection) shall also be operative for purposes of this chapter and shall be appliedconsistentlywiththecorrelatingprovisionsofsections231-36.6and235-111;
(2) Section6045B(withrespecttoreturnsrelatingtoactionsaffectingbasisinsecurities);and(3) Section6050W(withrespecttoreturnsrelatingtopaymentsmadeinsettlementofpaymentcardandthird
partynetworktransactions).[L2010,c112,§2;amL2011,c43,§5andc91,§3;amL2012,c179,§3]Note
The2012amendmentappliestotaxableyearsbeginningafterDecember31,2011.L2012,c179,§5.
§235-2.4 Operation of certain Internal Revenue Code provisions; Sections 63 to 530. (a)Section63 (withrespecttotaxableincomedefined)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,subjecttothefollowing:
(1) Section 63(c)(1)(B) (relating to the additional standard deduction), 63(c)(1)(C) (relating to the realpropertytaxdeduction),63(c)(1)(D)(relatingtothedisasterlossdeduction),63(c)(1)(E)(relatingtothemotorvehiclesalestaxdeduction,63(c)(4)(relatingtoinflationadjustments),63(c)(7)(definingtherealproperty tax deduction), 63(c)(8) (defining the disaster loss deduction), 63(c)(9) (defining the motorvehiclesalestaxdeduction),and63(f)(relatingtoadditionalamountsfortheagedorblind)oftheInternalRevenueCodeshallnotbeoperativeforpurposesofthischapter;
(2) [Paragraph effective until December 31, 2012. For paragraph effective January 1, 2013, see below.] Section63(c)(2)(relatingtothebasicstandarddeduction)oftheInternalRevenueCodeshallbeoperative,exceptthatthestandarddeductionamountsprovidedthereinshallinsteadmean:(A) $4,000inthecaseof: (i)Ajointreturnasprovidedbysection235-93;or (ii)Asurvivingspouse(asdefinedinSection2(a)oftheInternalRevenueCode);(B) $2,920inthecaseofaheadofhousehold(asdefinedinSection2(b)oftheInternalRevenueCode);(C) $2,000inthecaseofanindividualwhoisnotmarriedandwhoisnotasurvivingspouseorheadof
household;or(D) $2,000inthecaseofamarriedindividualfilingaseparatereturn;
(2) [Paragraph effective January 1, 2013. For paragraph effective until December 31, 2012, see above.] Section63(c)(2)(relatingtothebasicstandarddeduction)oftheInternalRevenueCodeshallbeoperative,exceptthatthestandarddeductionamountsprovidedthereinshallinsteadmean:(A) $4,400inthecaseof: (i)Ajointreturnasprovidedbysection235-93;or (ii)Asurvivingspouse(asdefinedinsection2(a)oftheInternalRevenueCode);
§235-2.4 INCOME TAX LAW
CHAPTER235,Page10(UnofficialCompilation)
(B) $3,212inthecaseofaheadofhousehold(asdefinedinSection2(b)oftheInternalRevenueCode);(C) $2,200inthecaseofanindividualwhoisnotmarriedandwhoisnotasurvivingspouseorheadof
household;or(D) $2,200inthecaseofamarriedindividualfilingaseparatereturn;
(3) Section63(c)(5)(limitingthebasicstandarddeductioninthecaseofcertaindependents)oftheInternalRevenueCodeshallbeoperative,exceptthatthelimitationshallbethegreaterof$500ortheindividual’searnedincome;and
(4) Thestandarddeductionamountfornonresidentsshallbecalculatedpursuanttosection235-5.(b) Section68(withrespecttotheoveralllimitationonitemizeddeductions)oftheInternalRevenueCodeshall
beoperative;providedthatthethresholdsshallbethosethatwereoperativeforfederaltaxyear2009.(c) Section72(withrespect toannuities;certainproceedsofendowmentand life insurancecontracts)of the
InternalRevenueCodeshallbeoperativeforpurposesofthischapterandbeinterpretedwithdueregardtosection235-7(a),exceptthatthetenpercentadditionaltaxonearlydistributionsfromretirementplansinsection72(t)shallnotbeoperativeforpurposesofthischapter.
(d) Section85(withrespecttounemploymentcompensation)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptthatsection85(c)shallnotbeoperativeforpurposesofthischapter.
(e) Section108(withrespecttoincomefromdischargeofindebtedness)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptthatsection108(i)(relatingtodeferralandratableinclusionofincomearisingfrombusinessindebtednessdischargedbythereacquisitionofadebtinstrument)shallnotbeoperativeforpurposesofthischapter.
(f) Section121(withrespecttoexclusionofgainfromsaleofprincipalresidence)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptthatfortheelectionundersection121(f),areferencetosection1034treatmentmeansareferencetosection235-2.4(s)ineffectfortaxableyear1997.
(g) Section132 (with respect to certain fringebenefits) of the InternalRevenueCode shall beoperative forpurposesofthischapter,exceptthattheprovisioninsection132(f)(2)thatequalizesthedollaramountsforsection132(f)(2)(A)and(B)shallnotbeoperativeandexceptthatsection132(n)shallnotapplytoUnitedStatesDepartmentofDefenseHomeownersAssistanceprogrampaymentsauthorizedbytheAmericanRecoveryandReinvestmentActof2009.
(h) Section163(withrespecttointerest)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatprovisionsinsection163(d)(4)(B)(definingnetinvestmentincometoexcludedividends),section163(e)(5)(F) (suspensionof applicablehigh-yielddiscountobligation (AHYDO) rules) and section163(i)(1) as itappliestodebtinstrumentsissuedafterJanuary1,2010,(definingAHYDO)shallnotbeoperativeforthepurposesofthischapter.
(i) Section164(withrespecttotaxes)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthat:
(1) Section164(a)(6)and(b)(6)shallnotbeoperativeforthepurposesofthischapter;(2) Thedeductionsundersection164(a)(3)and(b)(5)shallnotbeoperativeforcorporatetaxpayersandshall
beoperativeonlyforthefollowingindividualtaxpayers:(A) Ataxpayerfilingasinglereturnoramarriedpersonfilingseparatelywithafederaladjustedgross
incomeoflessthan$100,000;(B) Ataxpayerfilingasaheadofhouseholdwithafederaladjustedgrossincomeoflessthan$150,000;
and(C) Ataxpayerfilingajointreturnorasasurvivingspousewithafederaladjustedgrossincomeofless
than$200,000;and(3) Section164(a)(3)shallnotbeoperativeforanyamountsforwhichthecreditundersection235-55has
beenclaimed.(j) Section165(withrespect to losses)of theInternalRevenueCodeshallbeoperativeforpurposesof this
chapter,exceptthattheamountprescribedbysections165(h)(1)(relatingtothelimitationpercasualty)oftheInternalRevenueCodeshallbea$100limitationpercasualty,andsection165(h)(3)(A)and(B)(bothofwhichrelatetospecialrulesforpersonalcasualtygainsandlossesinfederallydeclareddisasters)oftheInternalRevenueCodeshallnotbeoperativeforthepurposesofthischapter.Section165asoperativeforthischaptershallalsoapplytolossessustainedfromthesaleofstocksorotherinterestsissuedthroughtheexerciseofthestockoptionsorwarrantsgrantedbyaqualifiedhightechnologybusinessasdefinedinsection235-7.3.
(k) Section168(withrespect totheacceleratedcostrecoverysystem)of theInternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptthatsections168(j)(relatingtopropertyonIndianreservations),168(k)(relatingtothespecialallowanceforcertainpropertyacquiredduringtheperiodspecifiedtherein),168(m)(relatingtothespecialallowanceforcertainreuseandrecyclingproperty),and168(n)(relatingtothespecialallowanceforqualifieddisasterassistanceproperty)oftheInternalRevenueCodeshallnotbeoperativeforpurposesofthischapter.
(1) Section172(withrespecttonetoperatinglossdeductions)oftheInternalRevenueCodeshallbeoperativeforpurposesof thischapter,asfurtherprovidedinsection235-7(d),except thatsection172(b)(1)(J)and(j) (both
INCOME TAX LAW §235-2.4
CHAPTER235,Page11(UnofficialCompilation)
ofwhichrelatetoqualifieddisasterlosses)oftheInternalRevenueCodeshallnotbeoperativeforpurposesofthischapter.
(m)Section 179 (with respect to the election to expense certain depreciable business assets) of the InternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptasprovidedinthissubsection:
(1) Theaggregatecostprovidedinsection179(b)(1),whichmaybetakenintoaccountundersection179(a)foranytaxableyear,shallnotexceed$25,000;
(2) Theamountatwhichthereductioninlimitationprovidedinsection179(b)(2)beginsshallexceed$200,000foranytaxableyear;and
(3) Thefollowingshallnotbeoperativeforpurposesofthischapter:(A) Definingsection179propertytoincludecomputersoftwareinsection179(d)(1);(B) Inflationadjustmentsinsection179(b)(5);(C) Irrevocableelectioninsection179(c)(2);and(D) Specialrulesforqualifieddisasterassistancepropertyinsection179(e).
(n) Section 198A (with respect to the expensing of qualified disaster assistances expenses) of the InternalRevenueCodeshallnotbeoperativeforpurposesofthischapter.
(o) Section219 (with respect to retirement savings)of the InternalRevenueCode shallbeoperative for thepurposeofthischapter.Forthepurposeofcomputingthelimitationonthedeductionforactiveparticipantsincertainpensionplansforstateincometaxpurposes,adjustedgrossincomeasusedinsection219asoperativeforthischaptermeansfederaladjustedgrossincome.
(p) Section220 (with respect tomedical savings accounts) of the InternalRevenueCode shall be operativeforthepurposeofthischapter,butonlywithrespecttomedicalservicesaccountsthathavebeenapprovedbytheSecretaryoftheTreasuryoftheUnitedStates.
(q) Section265(withrespecttoexpensesandinterestrelatingtotax-exemptincome)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter;exceptthatsection265(b)(3)(G)and(7)shallnotbeoperativeandsection265shallnotapplytoexpensesforroyaltiesandotherincomederivedfromanypatents,copyrights,andtradesecretsbyanindividualoraqualifiedhightechnologybusinessasdefinedinsection235-7.3.Theseexpensesshallbedeductible.
(r) Section 280E (with respect to expenditures in connectionwith the illegal sale of drugs) of the InternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsection280Eshallnotbeoperativewithrespecttotheproductionandsaleofmedicalcannabisandmanufacturedcannabisproductsbydispensarieslicensedunderchapter329Dandtheirsubcontractors,asdefinedinsection329D-1.
(s) Section 382 (with respect to limitation on net operating loss carryforwards and certain built-in lossesfollowingownershipchange)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsection382(n)shallnotbeoperativeforpurposesofthischapter.
(t) Section408A(withrespecttoRothIndividualRetirementAccounts)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsection408A(d)(3)(A)(iii)shallnotbeoperativeforpurposesofthischapter.ForthepurposesofdeterminingtheaggregateamountofcontributionstoaRothIndividualRetirementAccountorqualifiedrollovercontributiontoaRothIndividualRetirementAccountfromanindividualretirementplanotherthanaRothIndividualRetirementAccount,adjustedgrossincomeasusedinsection408Aasoperativeforthischaptermeansfederaladjustedgrossincome.
(u) Inadministering theprovisionsofsections410 to417(with respect tospecial rules relating topensions,profitsharing,stockbonusplans,etc.),sections418to418E(withrespecttospecialrulesformultiemployerplans),andsections419and419A(withrespect to treatmentofwelfarebenefitfunds)of theInternalRevenueCode, thedepartmentoftaxationshalladoptrulesunderchapter91relatingtothespecificrequirementsunderthosesectionsandtootheradministrativerequirementsunderthosesectionsasmaybenecessaryfortheefficientadministrationofsections410to419A.
Inadministeringsections401to419A(withrespecttodeferredcompensation)oftheInternalRevenueCode,PublicLaw93-406,section1017(i),shallbeoperativeforthepurposesofthischapter.
Inadministeringsection402(withrespecttothetaxabilityofbeneficiaryofemployees’trust)oftheInternalRevenueCode,thetaximposedonlumpsumdistributionsbysection402(e)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthetaximposedthereinisherebyimposedbythischapterattheratedeterminedunderthischapter.
(v) Inadministeringsection403(withrespecttotaxationofemployeeannuities)oftheInternalRevenueCode,anyfundsthatrepresentpre-taxemployeedeferralsorcontributionsthataredistributedfromtheannuityandusedsolelytoobtainretirementcreditsunderthestateemployees’retirementsystemshallnotbetreatedasarolloverforpurposesofsection403(b)(8)(A)oftheInternalRevenueCode,andthosefundsshallbesubjecttoincometaxunderthischapter.
(w) Section451(whichprovidesgeneralrulesfortaxableyearofinclusion)oftheInternalRevenueCodeshallbeoperative,exceptthatsection451(i)(3)and(6),asitrelatestoaqualifiedelectricutility,shallnotbeoperativeforpurposesofthischapter.
§235-2.4 INCOME TAX LAW
CHAPTER235,Page12(UnofficialCompilation)
(x) In administering section 457 (with respect to compensation plans of state and local governments andtax-exempt organizations) of the Internal Revenue Code, any funds that represent pre-tax employee deferrals orcontributionsthataredistributedfromthedeferredcompensationplanandusedsolelytoobtainretirementcreditsunderthestateemployees’retirementsystemshallnotbetreatedasarolloverforpurposesofsection457(e)(16)(A)oftheInternalRevenueCodeandthosefundsshallbesubjecttoincometaxunderthischapter.
(y) Section468B(withrespecttospecialrulesfordesignatedsettlementfunds)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthetaximposedthereinisherebyimposedbythischapteratarateequaltothemaximumrateineffectforthetaxableyearimposedonestatesandtrustsundersection235-51.
(z) Section469(withrespect topassiveactivitiesandcredits limited)of theInternalRevenueCodeshallbeoperativeforthepurposesofthischapter.Forthepurposeofcomputingtheoffsetforrentalrealestateactivitiesforstateincometaxpurposes,adjustedgrossincomeasusedinsection469asoperativeforthischaptermeansfederaladjustedgrossincome.
(aa)Sections512 to514 (with respect to taxationofbusiness incomeofcertainexemptorganizations)of theInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinthissubsection.
“Unrelatedbusinesstaxableincome”meansthesameasintheInternalRevenueCode,exceptthatinthecomputationthereof sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall apply, and in the determination of the netoperatinglossdeductionthereshallnotbetakenintoaccountanyamountofincomeordeductionthatisexcludedincomputingtheunrelatedbusinesstaxableincome.Unrelatedbusinesstaxableincomeshallnotincludeanyincomefromalegalserviceplan.
Forapersondescribedinsection401or501oftheInternalRevenueCode,asmodifiedbysection235-2.3,thetaximposedbysection235-51or235-71shallbeimposedupontheperson’sunrelatedbusinesstaxableincome.
(bb)Section 521 (with respect to cooperatives) and subchapter T (sections 1381 to 1388, with respect tocooperativesandtheirpatrons)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterastoanycooperativefullymeetingtherequirementsofsection421-23,exceptthatInternalRevenueCodesection521cooperativesneednotbeorganizedinHawaii.
(cc)Sections 527 (with respect to political organizations) and 528 (with respect to certain homeownersassociations)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthetaxesimposedineachsectionareherebyimposedbythischapterattheratesdeterminedundersection235-71.
(dd)Section529(withrespecttoqualifiedtuitionprograms)shallbeoperativeforthepurposesofthischapter,exceptthatsections529(c)(6)and529(e)(3)(A)(iii)shallnotbeoperative.
(ee)Section529A(withrespecttoqualifiedABLEprograms)shallbeoperativeforthepurposesofthischapter,exceptthatsection529A(c)(3)(withrespecttoadditionaltaxfordistributionsnotusedfordisabilityexpenses)shallnotbeoperative.
(ff) Section530(withrespecttoCoverdelleducationsavingsaccounts)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter.Forthepurposeofdeterminingthemaximumamountthatacontributorcouldmake to an education individual retirement account for state income taxpurposes,modified adjustedgrossincomeasusedinsection530asoperativeforthischaptermeansfederalmodifiedadjustedgrossincomeasdefinedinsection530.[L1985,c19,ptof§1;amL1987,c239,§1(6);amL1989,c13,§2andc321,§2;amL1990,c16,§2;amL1991,c207,§1;amL1996,c187,§2;amL1997,c297,§3;amL1998,c113,§2;amL1999,c198,§2,c253,§2,andc270,§2;amL2000,c148,ptof§2,c174,§3,andc297,ptof§5;amL2001,c221,§5;amL2002,c223,§3;L2003,c172,§3;amL2004,c89,§4;amL2005,c60,§3;amL2006,c110,§2;amL2008,c93,§2;amL2009,c60,§1,c133,§3,c165,§2,andc181,§1;amL2010,c23,§1,andc112,§§5,6;amL2011,c91,§4andc97,§§2,4;amL2012,c34,§§9,18;amL2014,c88,§3;amL2015,c52,§3;amL2016,c230,§4;amL2017,c170,§2]
Note
The2015amendmentappliestotaxableyearsbeginningafterDecember31,2014.L2015,c52,§5.The2016amendmentappliestotaxableyearsbeginningafterDecember31,2015.L2016,c230,§25.
Cross Reference
TaxInformationReleaseNo.81-3,“NewHebridesLandInvestment”OBSOLETETaxInformationReleaseNo.83-3,“StateTaxTreatmentofPensionandProfitSharingPlans,IndividualRetirementAccounts,H.R.10Plans
andtheLike”TaxInformationReleaseNo.90-6,“Act16,SessionLawsofHawaii1990,RelatingtoSCorporations”TaxInformationReleaseNo.91-4,“HawaiiTaxObligationsofNonprofitOrganizations”TaxInformationReleaseNo.91-7,“WithholdingofTaxontheDispositionofRealPropertybyNonresidentPersonsandRolloverofGainon
theSaleofaPrincipalResidencebyPersonsintheMilitary” SupersededbyTIR2017-01TaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”TaxInformationReleaseNo.2017-01,“WithholdingofStateIncomeTaxesontheDispositionofHawaiiRealProperty”
INCOME TAX LAW §235-2.45
CHAPTER235,Page13(UnofficialCompilation)
§235-2.45 Operation of certain Internal Revenue Code provisions; sections 641 to 7518. (a)Section641(withrespecttoimpositionoftax)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischaptersubjecttothefollowing:
(1) Thedeductionforexemptionsshallbeallowedasprovidedinsection235-54(b);(2) Thedeductionforcontributionsandgiftsindeterminingtaxableincomeshallbelimitedtotheamount
allowedinthecaseofanindividual,unlessthecontributionsandgiftsaretobeusedexclusivelyinthestate;and
(3) Thetaximposedbysection1(e)oftheInternalRevenueCodeasappliedbysection641oftheInternalRevenueCodeisherebyimposedbythischapterattherateandamountasdeterminedundersection235-51onestatesandtrusts.
(b) Section667(withrespecttotreatmentofamountsdeemeddistributedbytrustsinprecedingyears)oftheInternalRevenueCode shall be operative for the purposes of this chapter and the tax imposed therein is herebyimposedbythischapterattheratedeterminedunderthischapter;exceptthatthereferencetotax-exemptinteresttowhichsection103oftheInternalRevenueCodeappliesinsection667(a)oftheInternalRevenueCodeshallinsteadbeareferencetotax-exemptinteresttowhichsection235-7(b)applies.
(c) Section685 (with respect to treatmentofqualified funeral trusts) of the InternalRevenueCode shall beoperativeforpurposesofthischapter,exceptthatthetaximposedunderthischaptershallbecomputedat thetaxratesprovidedundersection235-51,andnodeductionfortheexemptionamountprovidedinsection235-54(b)shallbeallowed.Thecost-of-livingadjustmentdeterminedundersection1(f)(3)of theInternalRevenueCodeshallbeoperativeforthepurposeofapplyingsection685(c)(3)underthischapter.
(d) Section704oftheInternalRevenueCode(withrespecttoapartner’sdistributiveshare)shallbeoperativeforpurposesofthischapter;exceptthatsection704(b)(2)shallnotapplyto:
(1) Allocations of the high technology business investment tax credit allowed by section 235-110.9 forinvestmentsmadebeforeMay1,2009;
(2) Allocationsofnetoperatinglosspursuanttosection235-111.5;or(3) Allocationsoflow-incomehousingtaxcreditsamongpartnersundersection235-110.8.
(e) Section1202(withrespecttopartialexclusionforgainfromcertainsmallbusinessstock)oftheInternalRevenueCode shallbeoperative forpurposesof this chapter, except that section1202(a)(3) and (4) shallnotbeoperativeforpurposesofthischapter.
(f) Section1212(withrespecttocapitallosscarrybacksandcarryforwards)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter;exceptthatforthepurposesofthischapterthecapitallosscarrybackprovisionsofsection1212shallnotbeoperativeandthecapitallosscarryforwardallowedbysection1212(a)shallbelimitedtofiveyears;exceptforaqualifiedhightechnologybusinessasdefinedinsection235-7.3,whichshallbelimitedtofifteenyears.
(g) Section1221(withrespecttothedefinitionofcapitalassets)isoperative;providedthattheprovisionsofsection301ofPublicLaw110-343,whichprovide thatgainor loss from the saleor exchangeof anyapplicablepreferredstockbyanyapplicablefinancial institution(such termsbeingdefinedbyPublicLaw110-343)shallbetreatedasordinaryincomeorloss,shallnotbeoperative.Asaleorexchangeofanyapplicablepreferredstockbyanyapplicablefinancialinstitution(asthosetermsaredefinedbysection301ofPublicLaw110-343)shallbetreatedasasaleofacapitalassetandtaxedaccordingly.
(h) SubchapterS(sections1361to1379)(withrespecttotaxtreatmentofScorporationsandtheirshareholders)ofChapter1oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinpartVII;exceptthatsection1374(d)(7)(B),(C),and(D)shallnotbeoperativeforpurposesofthischapter.
(i) Section1400N(withrespecttotaxbenefitsforGulfOpportunityZone)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsections1400N(a)(withrespecttotax-exemptbondfinancing);1400N(b)(withrespecttoadvancerefundingsofcertaintax-exemptbonds);1400N(c)(withrespecttothelowincomehousing credit);1400N(d) (with respect to special allowance for certain property acquired on or afterAugust 28,2005);1400N(e) (with respect to increase inexpensingundersection179);1400N(h) (with respect to increase inrehabilitationcredit);1400N(l)(withrespecttocredittoholdersofGulftaxcreditbonds);1400N(m)(withrespecttoapplicationofnewmarketstaxcredittoinvestmentsincommunitydevelopmententitiesservingGulfOpportunityZone);1400N(n)(withrespecttotreatmentofrepresentationsregardingincomeeligibilityforpurposesofqualifiedresidentialrentalprojectrequirements)shallnotbeoperativeforpurposesofthischapter.
(j) Section1400S(withrespecttoadditionaltaxreliefprovisions)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsection1400S(d)(withrespecttothespecialrulefordeterminingearnedincome)shallnotbeoperativeforthepurposesofthischapter.
(k) Section6015(withrespecttorelieffromjointandseveralliabilityonjointreturn)oftheInternalRevenueCodeisoperativeforpurposesofthischapter.
(l) Sections6103(i)(3)(C)and6103(i)(7)(withrespecttodisclosuresofinformationtotheUnitedStatesJusticeDepartmentorappropriatefederalorstatelawenforcementagencyforpurposesofinvestigatingterroristincidents,
§235-2.5 INCOME TAX LAW
CHAPTER235,Page14(UnofficialCompilation)
threats,oractivities,andforanalyzingintelligenceconcerninginvestigatingterroristincidents,threats,oractivities)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter.
(m)Sections6221,6222,and6231(withrespecttotaxtreatmentofpartnershipitems)ofsubchapterCofchapter63oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter.
(n) Subchapter D (sections 6240 to 6255) (with respect to simplified audit procedures for electing largepartnerships)of the InternalRevenueCodeshallbeoperative for thepurposesof thischapter,withdueregard toChapter232relatingtotaxappeals.
(o) Section6501(e)(withrespecttolimitationonassessmentandcollectionwherethereisasubstantialomissionofitems)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter.
(p) Section 6511(h) (with respect to running of periods of limitation suspendedwhile taxpayer is unable tomanagefinancialaffairsduetodisability)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter,withdueregardtosection235-111relatingtothelimitationperiodforassessment,levy,collection,orcredit.
(q) Section 7518 (with respect to capital construction fund for commercial fishers) of the Internal RevenueCodeshallbeoperativeforthepurposesofthischapter.Qualifiedwithdrawalsfortheacquisition,construction,orreconstructionofanyqualifiedassetthatisattributabletodepositsmadebeforetheeffectivedateofthissectionshallnotreducethebasisoftheassetwhenwithdrawn.Qualifiedwithdrawalsshallbetreatedonafirst-in-first-outbasis.[L2000,c148,ptof§2,c,174,§1,andc297,ptof§5;amL2001,c45,§2andc221,§6;amL2003,c100,§4;amL2005,c60,§4;amL2006,c124,§2;amL2008,c93,§3;amL2009,c133,§4andc178,§2;amL2010,c112,§7;amL2014,c88,§4;amL2017,c3,§4]
Note
The2014amendmentappliestotaxableyearsbeginningafterDecember31,2013.L2014,c88,§7.
Cross Reference
TaxInformationReleaseNo.81-3,“NewHebridesLandInvestment”OBSOLETETaxInformationReleaseNo.83-3,“StateTaxTreatmentofPensionandProfitSharingPlans,IndividualRetirementAccounts,H.R.10Plans
andtheLike”TaxInformationReleaseNo.90-6,“Act16,SessionLawsofHawaii1990,RelatingtoSCorporations”TaxInformationReleaseNo.91-4,“HawaiiTaxObligationsofNonprofitOrganizations”TaxInformationReleaseNo.91-7,“WithholdingofTaxontheDispositionofRealPropertybyNonresidentPersonsandRolloverofGainon
theSaleofaPrincipalResidencebyPersonsintheMilitary” SupersededbyTIR2017-01TaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;and
PaymenttoStateUnderProtest”TaxInformationReleaseNo.2017-01,“WithholdingofStateIncomeTaxesontheDispositionofHawaiiRealProperty”
§235-2.5 Administration, adoption, and interrelationship of Internal Revenue Code and Public Laws with this chapter. (a)ReferenceinprovisionsoftheInternalRevenueCodewhichareoperativeinthisStatetoprovisionsintheInternalRevenueCodewhicharenotoperativeinthisStateshallbeconsideredinoperativeforthepurposesofdetermininggrossincome,adjustedgrossincome,ordinaryincomeandloss,andtaxableincome;providedthat:
(1) ReferencestotimelimitsandotheradministrativeprovisionsinsubtitleF(sections6001to7873)oftheInternalRevenueCodecontained inoperativesectionsof the InternalRevenueCodeshallbedeemedreferencestoapplicableprovisionsofthischapterorchapter231or232,andintheabsenceofapplicableprovisionsinthischapterorchapter231or232,thentorulesadoptedbythedirectoroftaxationundersubsection(b);
(2) IfinoperativeprovisionsoftheInternalRevenueCodehavebeencodifiedinthischaptersuchreferencesshallbedeemedreferencestothecodifiedprovisionsinthischapter.TransitoryandsavingsprovisionsinfederalPublicLawsamendingsectionsoftheInternalRevenueCodeoperativeinthischaptershallbeoperativeforthepurposesofthischapter.Provisionsinthischapterorchapter231or232inconflictwiththeInternalRevenueCodeortransitoryorsavingsprovisionsinfederalPublicLawshallcontrol;and
(3) RetroactiveandprospectiveprovisionsinfederalPublicLawsamendingsectionsofthefederalInternalRevenueCodeoperativeinthischapteraffectingtaxableyearsbeginningorendingbeforetheDecember31dateinsection235-2.3shallbeoperativeforthepurposesofthischapter;providedthattheeffectivedatesinPublicLaw96-471placingitineffectforthetaxableyear1980shallbeoperativeforthepurposesofthischapter.
(b) Thedirectoroftaxationmayadoptbyruleunderchapter91therulesandregulationspromulgatedbytheUnitedStatesSecretaryofTreasuryoradelegateoftheSecretaryrelatingtotheprovisionsofsubtitleA,chapter1or6,oftheInternalRevenueCodeoperativeinthischapterandanyadministrativeprovisionsoftheInternalRevenueCode(subtitleF,sections6001to7873)notinconflictwithorsimilartoprovisionscontainedinthischapterorchapter231or232eitherbyreferenceorbysettingthemforthinfull.
(c) Thedepartmentoftaxationshallsubmittoeachregularsessionofthelegislatureabilltoamendsections235-2.3,235-2.4,and235-2.45andsuchothersectionsandsubsectionsofthischapterasmaybenecessarytoadopt
INCOME TAX LAW §235-3
CHAPTER235,Page15(UnofficialCompilation)
theInternalRevenueCodeasitexistsontheDecember31precedingsuchregularsession.InsubmittingthebillthedepartmentmayprovidethatcertainamendmentstotheInternalRevenueCodebyCongressduringtheprecedingcalendaryearshallnotbeoperativeinthisStateorasoperativearelimitedintheiroperation.Thedepartmentshallalsoprepareadigest andexplanationof theamendedprovisionsof the InternalRevenueCode recommended foroperation,aswellasthoseprovisionsthatarelimitedintheiroperation,orthatarenotrecommendedforoperation,andshallsubmitwiththebillrequiredbythissubsectionthedigest,explanation,andastatementofrevenueimpactoftheadoptionofthebill.Inpreparingthebill,digest,andexplanationthedepartmentmayrequesttheassistanceoftheofficeofthelegislativereferencebureau.
ItistheintentofthelegislaturethatitshalleachyearadoptallamendmentstotheInternalRevenueCodeforthecalendaryearprecedingtheyearinwhichthelegislaturemeets;providedthatthelegislaturemaychoosetoadoptnoneoftheamendmentstotheInternalRevenueCodeormayprovidethatcertainamendmentsarelimitedintheiroperation.[L1985,c19,ptof§1;amL1988,c102,§2;amL1989,c13,§3;amL1996,c187,§3;amL2001,c199,§2;amL2008,c93,§4;amL2013,c43,§3;amL2014,c88,§5]
Note
The2014amendmentappliestotaxableyearsbeginningafterDecember31,2013.L2014,c88,§7.
Cross Reference
TaxInformationReleaseNo.98-6,“ApplicationofIncomeTaxandFranchiseTaxLawstoRealEstateInvestmentTrustsandTheirOwners”
§235-3 Legislative intent, how Internal Revenue Code shall apply, in general. (a)Itistheintentofthischapter,inadditiontotheessentialpurposeofraisingrevenue,toconformtheincometaxlawoftheStateascloselyasmaybewiththeInternalRevenueCodeinordertosimplifythefilingofreturnsandminimizethetaxpayer’sburdensincomplyingwiththeincometaxlaw.Therulesandregulations,formsandproceduresadoptedandestablishedunderthischaptershallconformasnearlyaspossible,andunlessthereisgoodreasontothecontrary,totherulesandregulations,formsandproceduresadoptedandestablishedundertheInternalRevenueCode.
(b) TheInternalRevenueCode,sofarasmadeoperativebythischapter,isastatuteadoptedandincorporatedbyreference.TheInternalRevenueCodeshallbeappliedusingchangesinnomenclatureandotherlanguage,includingtheomissionofinapplicablelanguage,wherenecessarytoeffectuatetheintentofthissection.IntheInternalRevenueCode,referencestotermssuchas:
(1) “Secretary or his delegate” shall refer to the director of taxation and the director’s duly authorizedsubordinates;
(2) “Estate taxes” shall refer to the estate and transfer tax imposed by chapter 236D or the estate andgeneration-skippingtaximposedbychapter236E,asapplicable;
(3) “The highest rate of tax imposed upon individuals” or “39.6 per cent” shall refer to the highest rateimposeduponindividualsundersection235-51;
(4) “The highest rate of tax imposed upon corporations” shall refer to the highest rate imposed uponcorporationsundersection235-71;and
(5) “Interestattheunderpaymentrate”or“interestattheoverpaymentrate”shallrefertotheinterestratesetforthinsection231-39(b)(4)orsection231-23(d)(1),asthecasemaybe.
(c) Where,underaprovisionof the InternalRevenueCodemadeoperative in thischapter, theallowanceordisallowancetoataxpayerofadeduction,exclusion,adjustment,credit,orexemptionisdependentonwhether,undertheInternalRevenueCodeorapriorapplicablefederalincometaxlaw,thefollowingwasorwasnot,isorisnot,inrelationtothesametaxpayeroranothertaxpayer,forthesametaxableyearorapriortaxableyear,anoperativefactor:theimpositionorpaymentofanincometax,aninclusioningrossincome,anexclusionfromgrossincome,oradeductionfromgrossincome—theallowanceordisallowanceunderthischapterofsuchdeduction,exclusion,adjustment,credit,orexemptionshalldependon theoperativenessof such factoror factorsunder thischapterorapriorapplicableincometaxlawoftheState.ThissubsectionshallgoverntheapplicationofsuchsectionsoftheInternalRevenueCodeas,forexample,sections111,215,668(b),and7852(c)andallmattersofasimilarnature.
(d) Whenever,inataxableyearofacorporationoritsshareholdersnotgovernedbytheincometaxlawof1957,adistributionofmoney,stock,securities,orotherproperty(whetherincompleteorpartialliquidationorotherwise)hasbeenmadebyacorporationtoshareholdersowningsuchsharesintheState,orstock,securities,orotherpropertyhasbeentransferredtoacorporation,orcorporatestockorsecuritiesexchanged,inthecourseofacorporateorganizationorreorganizationeffectedunderthelawsoftheState,intheapplicationoftheincometaxlawof1957effectshallbegiventotherecognitionofincomebytheincometaxlawsof1901and1932,ifany,totheextentnecessarytoavoiddoubletaxation,forexample,indeterminingtheearningsandprofitsofanycorporationinvolvedorthebasisofanystock,securities,orotherpropertysoreceived,transferred,orexchanged.Noincreaseinbasisshallbeallowedonaccountofsucheventsintaxableyearsnotgovernedbytheincometaxlawof1957,exceptasprovidedbythissubsection.Asusedin thissubsectionthewords“double taxation”meanandrefer todouble taxationof thesametaxpayer,ortaxationofbothacorporationanditsshareholderswhenthetaxationofbothwouldnothaveoccurredhadtheincometaxlawof1957governedpriortaxableyears.
§235-4 INCOME TAX LAW
CHAPTER235,Page16(UnofficialCompilation)
(e) Inthedeterminationofthebasisoradjustedbasisofanystock,securities,orotherproperty:(1) Ifthepropertywasacquiredbyanexchange(includinganinvoluntaryconversionorthesaleofanold
residenceandpurchaseofanewresidencewherebothoccurwithinaone-yearperiod)the“cost”thereoftothetaxpayershallbedeemedtoincludeamongotherthings,anyincomeofthetaxpayerrecognizedbytheincometaxlawsof1901and1932asaresultoftheexchange;
(2) Ifthebasisisdependentuponacquisitionfromadecedent,thepropertyshallbedeemedtohavebeenacquiredfromadecedentifdeemedsoacquiredforthepurposesofchapter236priortoJuly1,1983,orafterJune30,1983,underthischapterbutnototherwise,andtheresidenceornonresidenceofthedecedent,thelocationoftheproperty,andchapter236forpropertyacquiredpriortoJuly1,1983,orthischapterwherethepropertyhasbeenacquiredafterJune30,1983,shallbeconsidered;
(3) Ifthebasisisdependentupondeductions,exclusions,orexemptionstakenorallowable,undertheInternalRevenueCodeorapriorapplicablefederalincometaxlaw,inaprioryear,itshalldependupondeductions,exclusions,orexemptionstakenorallowableundertheincometaxlawoftheStategoverningsuchprioryears;
(4) Ifthebasisisdependentupontheelectionprovidedforbysection307,InternalRevenueCode,itshallbegovernedbytheelectionactuallymadeundertheInternalRevenueCodeforthetaxableyear,whetherornotthetaxableyearwasgovernedbytheincometaxlawof1957.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-2;HRS§235-3;amL1979,c62,§ptof§2;amL1983,c217,§§7(1),(2);amimpL1984,c90,§1;gench1985;amL1996,c187,§4;amL2014,c43,§1]
Note
The2014amendmentisretroactivetoJanuary26,2012.L2014,c43,§3.
§235-4 Income taxes by the State; residents, nonresidents, corporations, estates, and trusts. (a)Residents.Thetaximposedbythischapterappliestotheentireincomeofaresident,computedwithoutregardtosourceintheState.
(b) Nonresidents.Inthecaseofanonresident,thetaxappliestotheincomereceivedorderivedfrompropertyowned,personalservicesperformed,trade,orbusinesscarriedon,andanyandeveryothersourceintheState.
Inthecaseofanonresidentspousefilingajointreturnwitharesidentspouse,thetaxappliestotheentireincomeofthenonresidentspousecomputedwithoutregardtosourceintheState.
(c) Changeofstatus.Exceptwhereajointreturnisfiled,whenthestatusofataxpayerchangesduringthetaxableyearfromresidenttononresident,orfromnonresidenttoresident,thetaximposedbythischapterappliestotheentireincomeearnedduring theperiodof residence in themannerprovided insubsection (a)of thissectionandduringtheperiodofnonresidencethetaxshallapplyupontheincomereceivedorderivedasanonresidentinthemannerprovidedinsubsection(b)ofthissection;providedthatifitcannotbedeterminedwhetherincomewasreceivedorderivedduringtheperiodofresidenceorduringtheperiodofnonresidence,thereshallbeattributedtotheStatesuchportionoftheincomeasisdeterminedbyapplyingtosuchincomeforthewholetaxableyeartheratiowhichtheperiodofresidenceintheStatebearstothewholetaxableyear,unlessthetaxpayershowstothesatisfactionofthedepartmentoftaxationthattheresultistoattributetothestateincome,dependentuponresidence,receivedorderivedduringtheperiodofnonresidence,inwhicheventtheamountofincomeastowhichsuchshowingismadeshallbeexcluded.
TheapportionmentofincomeprovidedbythissubsectionshallnotapplywhereonespouseisaresidentofthisStateandajointreturnisfiledwiththenonresidentspouseinwhicheventthetaxshallbecomputedontheiraggregateincomeinthemannerprovidedinsection235-52withoutregardtosourceintheState.Where,however,bothspouseschangetheirstatusfromresidenttononresidentorfromnonresidenttoresident,theirincomeshallbeapportionedinthemannerprovidedinthissubsection.
(d) Acorporation,foreignordomestic,istaxableupontheincomereceivedorderivedfrompropertyowned,tradeorbusinesscarriedon,andanyandeveryothersourceintheState.Inadditiontheretoadomesticcorporationistaxableuponitsincomefrompropertyowned,tradeorbusinesscarriedon,andanyandeveryothersourceoutsidetheState,unlesssubjectedtoincometaxthereoninanyotherjurisdiction.Subjectiontofederaltaxdoesnotconstitutesubjectionto incometaxinanother jurisdiction.“Corporation”includesanyprofessionalcorporationincorporatedpursuanttochapter415Aor416.
(e)(1) The incomeof a resident estateor trust shallbe computedwithout regard to source in theState.TheincomeofanonresidentestateortrustshallbethatreceivedorderivedfromsourcesintheState.
(2) Abeneficiaryofanestateortrust,orpersontreatedastheownerofanyportionofatrust,whoistaxableupon income thereof under the Internal Revenue Code, shall be taxed thereon as herein provided,irrespectiveofthetaxabilityoftheestateortrustorwhetheritisrequiredtomakeafiduciaryreturnunderthischapter.Ifallsuchincomeconsistsofincomewhichwouldbetaxableunderthischapterifreceiveddirectlybythebeneficiaryorperson,thebeneficiaryorpersonshallbetaxeduponallofit.Ifsomeofitconsistsof incomewhichwouldnotbe taxable if receiveddirectlyby thebeneficiaryorperson, thenunless the trust instrumentprovidesotherwise the incomeofeach suchbeneficiaryorperson shallbe
18-235-4
INCOME TAX LAW §235-5
CHAPTER235,Page17(UnofficialCompilation)
conclusivelypresumedtohavebeenreceivedorderivedoutofeachclassofincomeoftheestateortrust,andthebeneficiaryorpersonshallbetaxeduponsuchpartofitaswouldbetaxableifreceiveddirectlybythebeneficiaryorperson.
(3) Eachestateortrustshallincludeinitsreturnalloftheinformationnecessarytodeterminethetaxabilityoftheincomeoftheestateortrust,regardlessofsource.OnlyinthecaseofanonresidentestateortrustofwhichallthebeneficiariesarenonresidentsandnopartofwhichistreatedasownedbyaresidentshallthereturnbeconfinedtoincomefromsourcesintheState.Thisparagraphshallnotcauseincometobetaxedtoanestateortrustthatotherwisewouldnothavebeensotaxed.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-3;HRS§235-4;amL1969,c226,§5;amL1974,c9,§1;amL1976,c60,§1;amL1978,c95,§1;amL1983,c167,§18andc206,§1;amimpL1984,c90,§1;gench1985;amL1988,c141,§19]
Note
Chapter416referredtointextisrepealed.
Cross Reference
Professionalcorporations,seechapter415A.TaxInformationReleaseNo.92-7,“ApplicationofStateTaxesonInventoryandBusinessInterruptionInsuranceProceeds”TaxInformationReleaseNo.96-1,“ComputerCompany’sProvisionofIn-StateRepairServicesCreatesNexus”Tax InformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the ‘Check-the-box’Regulations to the
HawaiiIncomeTaxandOtherTaxes”TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
Attorney General Opinions
Refundofrealpropertytaxafterterminationofatrustbecomesincometothebeneficiaries.Att.Gen.Op.64-5.Taxabilityofincomeearnedout-of-statebyresident.Att.Gen.Op.65-5.
Case Notes
Incometaxnotapplicabletoinheritanceunderterritoriallaws.14H.38.Taxonannuityfrompropertyheldintrustispayablebyannuitantandnottrustee.20H.589.Annuitiespaidfromtrusttaxableasincome.32
H.51.Taxpaidbyemployerforemployeeisincomeofemployee.38H.188.Giftsintervivosdeemednotincome.25H.603.Taxonincomeinyearpaymentmadefordamagescausedbylaborstrike.StockofmainlandagentsistaxablebyTerritory.26H.299,aff’d
289F.664.Onlytaxesactuallypaidduringthetaxableyeardeductibleasexpensesandnotreservefortaxesforsucceedingyears.27H.336.Intangibles.31H.264,aff’d47F.2d869.Profitsrealizedfromsaleofstocktaxableinyearoftransaction.Taxonprofitonstockredeemedbycorporation.32H.896,aff’d79F.2d671.Retrospectivetaxlaws.33H.766.Taxonincomeofcorporationisvalid.1U.S.D.C.Haw294,aff’d121F.772.AbilityofStatetotaxincomeofnonresidentsturnsonsitusofpropertygeneratingincome.64H.258,640P.2d282.IntangiblepropertygeneratingincomeacquiredabusinesssitusinHawaiiandcouldbetaxedundersubsections(b)and(e)(2).64H.258,640
P.2d282.
§235-4.3 REPEALED. L1999,c253,§5.
§235-4.5 Taxation of trusts, beneficiaries; credit. (a)Thereshallbeexcludedfromgrossincomeanyintangibleincome,suchasdividendsandinterest,earnedbyatrustsitedinthisStatetotheextentthat,duringthetaxableyearofthetrust,thebeneficialinterestinthetrustshallbeheldbyabeneficiaryorbeneficiariesresidingoutsidethisState.Thisexclusionshallnotapplytoincomereceivedfromrealpropertyheldinalandtrustformedunderchapter558.
(b) If a trust sited in thisStateownsonehundredpercentof the stockofa foreigncorporationwhichdoesnotengage inanactive tradeorbusinessbutacts solelyasaholdingcompanyreceiving intangible income,suchasdividendsandinterest,theintangibleincomeoftheforeigncorporationshallbeexcludedfromgrossincomeforHawaiiincometaxpurposesbutonlytotheextentthattheincomeofthetrustbeneficiariesisexcludedfromtaxationundersubsection(a).Asusedinthissection,foreigncorporationmeansacorporationnotcreatedororganizedintheUnitedStatesorunderthelawsoftheUnitedStates,Hawaii,oranyotherstate.
(c) Anyresidentbeneficiaryofatrustwithasitusinanotherstatemayclaimacreditforincometaxespaidbythetrusttotheotherstateonanyincomereceivedwhichisattributabletoassetsotherthanintangibles.[L1985,c283,§1;amL1988,c33,§1]
§235-5 Allocation of income of persons not taxable upon entire income. (a)ThissectionappliestoincomenotsubjecttopartIIofthischapter,includingnonbusinessincomeandcertainsection235-22income.
(b) Income(includinggains),alsolosses,frompropertyownedintheStateandfromanyothersourceintheStateshallbedeterminedbyanallocationandseparateaccountingsofaraspracticable.LossesfrompropertyownedoutsidetheStateandfromothersourcesoutsidetheStateshallnotbededucted.
18-235-5
§235-5.5 INCOME TAX LAW
CHAPTER235,Page18(UnofficialCompilation)
(c) Deductionsconnectedwithincometaxableunderthischaptershallbeallowed,butdeductionsconnectedwithincomenottaxableunderthischaptershallnotbeallowed.Deductionsfromadjustedgrossincomethatarenotconnectedwithparticularpropertyorincome,suchasmedicalexpenses,shallbeallowedonlytotheextentoftheratiooftheadjustedgrossincomeattributedtothisStatetotheentireadjustedgrossincomecomputedwithoutregardtosourceintheState.
Deductions by individual taxpayers fromgross income for alimony and separatemaintenance payments undersection215oftheInternalRevenueCodeshallbeallowedonlytotheextentoftheratioofgrossincomeattributedtothisStatetotheentiregrossincomecomputedwithoutregardtosourceinthisState;providedthatasusedinthissentence“grossincome”meansgrossincomeasdefinedintheInternalRevenueCode,minusthedeductionsallowedbysection62oftheInternalRevenueCode,otherthanthedeductionsforalimonyandseparatemaintenancepaymentsundersection215oftheInternalRevenueCode.
Deductionsbyindividual taxpayersfromgross incomeforpension,profit-sharing,stockbonusplans,andotherplansqualifiedundersections401to409oftheInternalRevenueCode,assuchsectionsareoperativeforthepurposesofthischapter,shallbeallowedonlytotheextentthatsuchdeductionsareattributedtocompensationearnedinthisState.
(d) Thestandarddeductionasprovidedinsection235-2.4andpersonalexemptionsasprovidedinsection235-54shallbeallowedonlytotheextentoftheratiooftheadjustedgrossincomeattributedtothisStatetotheentireadjustedgrossincomecomputedwithoutregardtosourceintheState.
(e) IfintheopinionofthedepartmenttheallocationshereinaboveprovideddonotclearlyandaccuratelyreflecttheactualamountoftheadjustedgrossincomeandtaxableincomereceivedorderivedfromallpropertyownedandanyandeveryothersourceintheState,orifanypersonshowsthattheallocationshereinaboveprovidedresultinadjustedgrossincomeortaxableincomebeingattributedtotheStateinalargeramountthanisjustandequitable,thenthesameshallbedetermined,allocated,andapportionedundersuchrules,processes,andformulasasthedepartmentprescribesasbeingjustandequitable.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-4;HRS§235-5;amL1978,c173,§2(6);amL1983,c88,§2;amimpL1984,c90,§1;gench1985;amL1989,c11,§1;amL1999,c253,§3]
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens”SupplementedbyTIR97-1
§235-5.5 Individual housing accounts. (a)Thereshallbeallowedasadeductionfromgrossincometheamount,nottoexceed$5,000,paidincashduringthetaxableyearbyanindividualtaxpayertoanindividualhousingaccountestablishedfortheindividual’sbenefittoprovidefundingforthepurchaseoftheindividual’sfirstprincipalresidence.Adeductionnottoexceed$10,000shallbeallowedforamarriedcouplefilingajointreturn.Nodeductionshallbeallowedonanyamountsdistributedlessthanthreehundredsixty-fivedaysfromthedateonwhichacontributionismadetotheaccount.Anydeductionclaimedforaprevioustaxableyearforamountsdistributedlessthanthreehundredsixty-fivedaysfromthedateonwhichacontributionwasmadeshallbedisallowedandtheamountdeductedshallbeincludedintheprevioustaxableyear’sgrossincomeandthetaxreassessed.Theinterestpaidoraccruedwithinthetaxableyearontheaccountshallnotbeincludedintheindividual’sgrossincome.Forpurposesofthissection,theterm“firstprincipalresidence”meansaresidentialpropertypurchasedwiththepaymentordistributionfromtheindividualhousingaccountwhichshallbeownedandoccupiedastheonlyhomebyanindividualwhodidnothaveanyinterestin,individually,orwhosespousedidnothaveanyinterestin,iftheindividualismarried,aresidentialpropertywithinthelastfiveyearsofopeningtheindividualhousingaccount.
Inthecaseofamarriedcouplefilingseparatereturns,thesumofthedeductionsallowabletoeachofthemforthetaxableyearshallnotexceed$5,000,or$10,000forajointreturn,foramountspaidincash,excludinginterestpaidoraccruedthereon.
Theamountspaidincashallowableasadeductionunderthissectiontoanindividualforalltaxableyearsshallnotexceed$25,000,excludinginterestpaidoraccrued.Inthecaseofmarriedindividualshavingseparateindividualhousingaccounts, thesumoftheseparateaccountsandthedeductionunderthissectionshallnotexceed$25,000,excludinginterestpaidoraccruedthereon.
(b) Forpurposesof thissection, theterm“individualhousingaccount”meansatrustcreatedororganizedinHawaiifortheexclusivebenefitofanindividual,or,inthecaseofamarriedindividual,fortheexclusivebenefitoftheindividualandspousejointly,butonlyifthewrittengoverninginstrumentcreatingthetrustmeetsthefollowingrequirements:
(1) Contributionsshallnotbeacceptedforthetaxableyearinexcessof$5,000(or$10,000inthecaseofajointreturn)orinexcessof$25,000foralltaxableyears,exclusiveofinterestpaidoraccrued;
(2) Thetrusteeisabank,asavingsandloanassociation,acreditunion,oradepositoryfinancialservicesloancompany,chartered,licensed,orsupervisedunderfederalorstatelaw,whoseaccountsareinsuredbytheFederalDepositInsuranceCorporation,theNationalCreditUnionAdministration,oranyagencyofthis
18-235-5.5
INCOME TAX LAW §235-5.5
CHAPTER235,Page19(UnofficialCompilation)
Stateoranyfederalagencyestablishedforthepurposeofinsuringaccountsinthesefinancialinstitutions.ThefinancialinstitutionmustactivelymakeresidentialrealestatemortgageloansinHawaii;
(3) Theassetsofthetrustshallbeinvestedonlyinfullyinsuredsavingsortimedeposits.Fundsheldinthetrustmaybecommingledforpurposesofinvestment,butindividualrecordsshallbemaintainedbythetrusteeforeachindividualhousingaccountholderthatshowalltransactionsindetail;
(4) Theentireinterestofanindividualormarriedcoupleforwhosebenefitthetrustismaintainedshallbedistributedtotheindividualorcouplenotlaterthanonehundredtwentymonthsafterthedateonwhichthefirstcontributionismadetothetrust;
(5) Exceptasprovidedinsubsection(g),thetrusteeshallnotdistributethefundsintheaccountunlessthetrustee:(A) VerifiesthatthemoneyistobeusedforthepurchaseofafirstprincipalresidencelocatedinHawaii,
andprovidesthattheinstrumentofpaymentispayabletothemortgagor,constructioncontractor,orothervendorofthepropertypurchased;or
(B) Withholdsanamountequaltotenpercentoftheamountwithdrawnfromtheaccountandremitsthisamounttothedirectorwithintendaysafterthedateofthewithdrawal.Theamountwithheldshallbeappliedtotheliabilityofthetaxpayerundersubsections(c)and(e);and
(6) Ifanyamountsaredistributedbefore theexpirationof threehundredsixty-fivedays fromthedateonwhichacontributionismadetotheaccount,thetrusteeshallsonotifyinwritingthetaxpayerandthedirector. If the trusteemakes the verification required in paragraph (5)(A), then the department shalldisallowthedeductionundersubsection(a)andsubsections(c),(e),and(f)shallnotapplytothatamount.Ifthetrusteewithholdsanamountunderparagraph(5)(B),thenthedepartmentshalldisallowthedeductionundersubsection(a)andsubsection(e)shallapply,butsubsection(c)shallnotapply.
(c) Anycontributionspaidordistributedoutofanindividualhousingaccountshallbeincludedingrossincomebytheindividualforwhosebenefittheaccountwasestablishedforthetaxableyearinwhichthepaymentordistributionisreceived,unlesstheamountisusedexclusivelyinconnectionwiththepurchaseofthefirstprincipalresidenceinHawaiifortheindividualforwhosebenefittheaccountwasestablished.
(d) Thetransferofanindividual’sinterestinanindividualhousingaccounttoaspouseunderadissolutionofmarriagedecreeorunderawritteninstrumentincidenttoadissolutionofmarriageshallnotbeconsideredataxabletransfermadebytheindividual,andtheinterest,atthetimeofthetransfer,shallbetreatedaspartofanindividualhousingaccountofthetransferee,andnotofthetransferor.Afterthetransfer,theaccountshallbetreated,forpurposesofthissection,asmaintainedforthebenefitofthetransferee.
(e) If a distribution from an individual housing account to an individual forwhose benefit the accountwasestablishedismadeandnotusedinconnectionwiththepurchaseofthefirstprincipalresidenceinHawaiifortheindividual,thetaxliabilityoftheindividualunderthischapterforthetaxableyearinwhichthedistributionisreceivedshallbeincreasedbyanamountequal totenpercentof theamountof thedistributionwhichis includableintheindividual’sgrossincomeforthetaxableyear.
If,duringanytaxableyear,theindividualusestheaccountoranyportionthereofassecurityforaloan,theportionsousedshallbetreatedasifithadbeendistributedtothatindividual.
(f) If theindividualforwhosebenefittheindividualhousingaccountwasestablishedpurchasesaresidentialpropertyinHawaiiwiththedistributionfromtheindividualhousingaccount:
(1) BeforeJanuary1,1990,andiftheindividualsellsinanymannerormethodorbyuseofanyinstrumentconveyingortransferringtheresidentialproperty,thegrossincomeoftheindividualunderthischapterforthetaxableyearinwhichtheresidentialpropertyissold,conveyed,ortransferred,whicheverisapplicable,shallincludeanamountequaltotheamountofthedistributionfromtheindividualhousingaccount,andinaddition,thegrossincomeoftheindividualshallbeincreasedbyanamountequaltotenpercentofthetotaldistributionfromtheindividualhousingaccount;or
(2) AfterDecember31,1989,theindividualshallreportone-tenthofthetotaldistributionfromtheindividualhousingaccountusedtopurchasetheresidentialpropertyasgrossincomeinthetaxableyearinwhichthedistributioniscompletedandineachtaxableyearthereafteruntilallofthedistributionhasbeenincludedintheindividual’sgrossincomeattheendofthetenthtaxableyearafterthepurchaseoftheresidentialproperty. If the individual sells in anymanner ormethod or by use of any instrument conveying ortransferringtheresidentialproperty,thegrossincomeoftheindividualunderthischapterforthetaxableyear inwhich the residentialproperty is sold, conveyed,or transferred,whichever is applicable, shallinclude an amount equal to the amount of the distribution from the individual housing account notpreviouslyreportedasgrossincome,andinaddition,thetaxliabilityoftheindividualshallbeincreasedbyanamountequaltotenpercentofthetotaldistributionfromtheindividualhousingaccount.Iftheindividual sells the residential property in anymanner as provided in this paragraph after all of thedistributionhasbeenincludedintheindividual’sgrossincomeattheendofthetenthtaxableyearafterthepurchaseoftheresidentialproperty,thetaxliabilityoftheindividualshallnotbeincreasedbyanamountequaltotenpercentofthetotaldistributionfromtheindividualhousingaccount.
[§235-5.6] INCOME TAX LAW
CHAPTER235,Page20(UnofficialCompilation)
AnindividualwhopurchasedaresidentialpropertyinHawaiiwiththedistributionfromanindividualhousingaccountbeforeJanuary1,1990,whoissubjecttoparagraph(1)mayelecttoreportasprovidedinparagraph(2).TheelectionshallbemadebeforeJanuary1,1991.Iftheindividualmakestheelection,theindividualshallreportone-tenthofthetotaldistributionfromtheindividualhousingaccountasgrossincomeinthetaxableyearinwhichtheelectionoccursandineachtaxableyearthereafteruntilallofthedistributionhasbeenincludedingrossincomeasprovidedbyparagraph(2).If theindividualmakingtheelectionsells theresidentialpropertyinanymannerasprovidedinparagraph(2),thentheindividualshallincludeasincometheamountofthedistributionnotpreviouslyreportedasincomeandincreasetheindividual’staxliabilityasprovidedinthesecondsentenceofparagraph(2),exceptwhenthethirdsentenceofparagraph(2)applies.
Inthealternative,anyindividualsubjecttoparagraph(2)whoestablishedtheindividualhousingaccountbeforeJanuary1,1990,mayelectwithinoneyearafterthedateofpurchase,tobesubjecttoparagraph(1).
(g) Notaxliabilityshallbeimposedunderthissectionif:(1) Thepaymentordistributionisattributabletotheindividualdyingorbecomingtotallydisabled;or(2) Residentialpropertysubjecttosubsection(f)istransferredbywillorbyoperationoflaworsolddueto
thedeathortotaldisabilityofanindividualorindividual’sspouse,subjecttothefollowing:
Anindividualshallnotbeconsideredtobetotallydisabledunlessproofisfurnishedofthetotaldisabilityintheformandmannerasthedirectormayrequire.
Uponthedeathofanindividualforwhosebenefitanindividualhousingaccounthasbeenestablished,thefundsin the account shall be payable to the estate of the individual; provided that if the accountwas held jointly by thedecedentandaspouseofthedecedent,theaccountshallterminateandbepaidtothesurvivingspouse;or,ifthesurvivingspousesoelects, thespousemaycontinuetheaccountasanindividualhousingaccount.Uponthetotaldisabilityofanindividualforwhosebenefitanindividualhousingaccounthasbeenestablished,theindividualortheindividual’sauthorizedrepresentativemayelecttocontinuetheaccountorterminatetheaccountandbepaidtheassets;providedthatiftheaccountwasheldjointlybyatotallydisabledpersonandaspouseofthatperson,thenthespouseoranauthorizedrepresentativemayelecttocontinuetheaccountorterminatetheaccountandbepaidtheassets.
(h) Iftheindividualforwhosebenefittheindividualhousingaccountwasestablishedsubsequentlymarriesapersonwhohasorhashadanyinterestinresidentialproperty,theindividual’shousingaccountshallbeterminated,thefundsthereinshallbedistributedtotheindividual,andtheamountofthefundsshallbeincludableintheindividual’sgross incomefor thetaxableyear inwhichsuchmarriagetookplace;providedthat thetaxliabilitydefinedundersubsection(f)shallnotbeimposed.
(i) Thetrusteeofanindividualhousingaccountshallmakereportsregardingtheaccounttothedirectorandtotheindividualforwhomtheaccountismaintainedwithrespecttocontributions,distributions,andothermattersasthedirectormayrequireunderrules.Thereportsshallbefiledatatimeandinamannerasmayberequiredbyrulesadoptedunderchapter91.Apersonwhofailstofilearequiredreportshallbesubjecttoapenaltyof$10tobepaidtothedirectorforeachinstanceoffailuretofile.[L1982,c285,§2;amL1986,c231,§2;amL1990,c99,§§1,2;amL1992,c183,§§1,2;amL1994,c49,§1;amL1998,c120,§2;amL2017,c12,§40]
[§235-5.6] Individual development account contribution tax credit. (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaximposedunderthischapter,anindividualdevelopmentaccountcontributiontaxcreditcertifiedunderchapter257whichshallbeappliedagainstthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) Theindividualdevelopmentaccountcontributiontaxcreditshallbeequal tofiftypercentof theamountcontributedbythetaxpayertoafiduciaryorganizationasdefinedbyandinthemannerprescribedinchapter257.Ifadeductionistakenundersection170(withrespecttocharitablecontributionsandgifts)oftheInternalRevenueCode,notaxcreditshallbeallowedforthatportionofthecontributionforwhichthedeductionwastaken.
(c) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthetaxcreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaims,includinganyamendedclaims,fortaxcreditsunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(d) Applicationforthecreditunderthissectionshallbeuponformsprovidedbythedepartment.(e) ThecreditunderthissectionshallbeavailablefortaxableyearsbeginningafterDecember31,1999,butshall
notbeavailablefortaxableyearsbeginningafterDecember31,2004.[L2000,c184,§1]
§235-6 Foreign manufacturing corporation; warehousing of products. (a)Forthepurposesofsections235-21to235-39,aforeigncorporationengagedinthebusinessofmanufacturingwithouttheState,havingitsmanufacturedproductswarehousedinthisStatebyanotherpersonwhoisengagedinthebusinessofwarehousinginthisStateandwhosecompensationforprovidingthewarehousingisincludedinthemeasureofthetaximposedbychapter237or239,shallnotbedeemedtobecarryingonatradeorbusinessinthisStateifallofthefollowingrequirementsaremet:
INCOME TAX LAW §235-7
CHAPTER235,Page21(UnofficialCompilation)
(1) Everydeliveryofsaleofsuchproductssowarehousedismadeatthewarehousetofillanorderforsuchpropertyprocuredbyarepresentative(asdefinedinsubsection(b))fromasellerlicensedunderchapter237andpurchasingsuchpropertyforpurposesofresale;
(2) EveryordersoprocuredwasmadesubjecttoacceptanceandwasacceptedbythecorporationatanofficelocatedoutofthisState;
(3) Nocollectionforthepaymentoftheproductsdeliveredasdescribedinparagraph(1)ismadeinthisStatebyanyofitsemployeesoragentsorbyanyrepresentative;and
(4) Exceptasprovidedinthissection,itisnotcarryingonatradeorbusinessinthisStatewithinthemeaningofsections235-21to235-39.
(b) “Representative”means a salesperson, commission agent, broker, or other person who is authorized oremployedasanindependentcontractorandnotasanemployeebytheforeignmanufacturingcorporationdescribedinsubsection(a)toassistthemanufacturerinsellingitsproductsinthisState,byprocuringordersforsuchsale,andwhocarriesonsuchactivitiesinthisState(itbeingimmaterialwhethersuchactivitiesareregularorintermittent),butwhosefunctionsandauthoritydonotincludetheacceptingofordersfor,orthemakingofdeliveriesof,orthecollectingofpaymentfordeliveriesofsuchproducts.[L1963,c70,§1;Supp,§121-4.1;HRS§235-6;amL1992,c134,§1;gench1993]
§235-7 Other provisions as to gross income, adjusted gross income, and taxable income. (a) Thereshallbeexcludedfromgrossincome,adjustedgrossincome,andtaxableincome:
(1) IncomenotsubjecttotaxationbytheStateundertheConstitutionandlawsoftheUnitedStates;(2) Rights,benefits,andotherincomeexemptedfromtaxationbysection88-91,havingtodowiththestate
retirementsystem,andtherights,benefits,andotherincome,comparabletotherights,benefits,andotherincomeexemptedbysection88-91,underanyotherpublicretirementsystem;
(3) Anycompensationreceivedintheformofapensionforpastservices;(4) CompensationpaidtoapatientaffectedwithHansen’sdiseaseemployedbytheStateortheUnitedStates
inanyhospital,settlement,orplaceforthetreatmentofHansen’sdisease;(5) Exceptasotherwiseexpresslyprovided,paymentsmadebytheUnitedStatesorthisState,underanactof
CongressoralawofthisState,whichbyexpressprovisionoradministrativeregulationorinterpretationareexemptfromboththenormalandsurtaxesoftheUnitedStates,eventhoughnotsoexemptedbytheInternalRevenueCodeitself;
(6) Anyincomeexpresslyexemptedorexcludedfromthemeasureofthetaximposedbythischapterbyanyother lawof theState, it being the intent of this chapter not to repeal or supersede any such expressexemptionorexclusion;
(7) IncomereceivedbyeachmemberofthereservecomponentsoftheArmy,Navy,AirForce,MarineCorps,orCoastGuard of theUnitedStates ofAmerica, and theHawaii national guard as compensation forperformanceofduty,equivalenttopayreceivedforforty-eightdrills(equivalentoftwelveweekends)andfifteendaysofannualduty,atan:(A) E-1paygradeaftereightyearsofservice;providedthatthissubparagraphshallapplytotaxableyears
beginningafterDecember31,2004;(B) E-2paygradeaftereightyearsofservice;providedthatthissubparagraphshallapplytotaxableyears
beginningafterDecember31,2005;(C) E-3paygradeaftereightyearsofservice;providedthatthissubparagraphshallapplytotaxableyears
beginningafterDecember31,2006;(D) E-4paygradeaftereightyearsofservice;providedthatthissubparagraphshallapplytotaxableyears
beginningafterDecember31,2007;and(E) E-5paygradeaftereightyearsofservice;providedthatthissubparagraphshallapplytotaxableyears
beginningafterDecember31,2008;(8) IncomederivedfromtheoperationofshipsoraircraftiftheincomeisexemptundertheInternalRevenue
CodepursuanttotheprovisionsofanincometaxtreatyoragreemententeredintobyandbetweentheUnitedStatesandaforeigncountry,providedthatthetaxlawsofthelocalgovernmentsofthatcountryreciprocallyexemptfromtheapplicationofalloftheirnetincometaxes, theincomederivedfromtheoperationofshipsoraircraftthataredocumentedorregisteredunderthelawsoftheUnitedStates;
(9) Thevalueoflegalservicesprovidedbyalegalserviceplantoataxpayer,thetaxpayer’sspouse,andthetaxpayer’sdependents;
(10)Amountspaid,directlyorindirectly,byalegalserviceplantoataxpayeraspaymentorreimbursementfortheprovisionoflegalservicestothetaxpayer,thetaxpayer’sspouse,andthetaxpayer’sdependents;
(11)Contributionsbyanemployertoalegalserviceplanforcompensation(throughinsuranceorotherwise)totheemployer’semployeesforthecostsoflegalservicesincurredbytheemployer’semployees,theirspouses,andtheirdependents;and
18-235-7-0118-235-7-02
18-235-7-03
§235-7 INCOME TAX LAW
CHAPTER235,Page22(UnofficialCompilation)
(12)Amountsreceivedintheformofamonthlysurchargebyautilityactingonbehalfofanaffectedutilityundersection269-16.3;providedthatamountsretainedbytheactingutilityforcollectionorothercostsshallnotbeincludedinthisexemption.
(b) Thereshallbeincludedingrossincome,adjustedgrossincome,andtaxableincome:(1) Unlessexcludedby thischapter relating to theuniformedservicesof theUnitedStates,cost-of-living
allowancesandotherpaymentsexemptedbySection912oftheInternalRevenueCode,butSection119oftheInternalRevenueCodeneverthelessshallapply;and
(2) Unlessexpresslyexemptedorexcludedasprovidedbysubsection(a)(6),interestontheobligationsofaStateorapoliticalsubdivisionthereof.
(c) The deductions of or based on dividends paid or received, allowed to a corporation under Chapter 1,SubchapterB,PartVIIIoftheInternalRevenueCode,shallnotbeallowed.Inlieuthereofthereshallbeallowedasadeductiontheentireamountofdividendsreceivedbyanycorporationuponthesharesofstockofanationalbankingassociation,qualifyingdividends,asdefinedinSection243(b)oftheInternalRevenueCode,receivedbymembersofanaffiliatedgroup,ordividendsreceivedbyasmallbusinessinvestmentcompanyoperatingundertheSmallBusinessInvestmentActof1958(PublicLaw85-699)uponsharesofstockqualifyingunderparagraph(3),seventypercentoftheamountreceivedbyanycorporationasdividends:
(1) Uponthesharesofstockofanothercorporation,ifatthedateofpaymentofthedividendatleastninety-fivepercentoftheothercorporation’scapitalstockisownedbyoneormorecorporationsdoingbusinessinthisstateandiftheothercorporationissubjectedtoanincometaxinanotherjurisdiction(butsubjectiontofederaltaxdoesnotconstitutesubjectiontoincometaxinanotherjurisdiction);and
(2) UponthesharesofstockofabankorinsurancecompanyorganizedanddoingbusinessunderthelawsoftheState;
(3) Upon the shares of stockof another corporation, if at leastfifteenper cent of the latter corporation’sbusiness,forthetaxableyearofthelattercorporationprecedingthepaymentofthedividend,hasbeenattributedtothisState.
However,exceptfornationalbankdividends,thedeductionsunderthissubsectionarenotallowedwhentheywouldnothavebeenallowedundersection243oftheInternalRevenueCode,asamendedbyPublicLaw85-866,byreasonofsubsections(b)and(c)ofsection246oftheInternalRevenueCode.Forthepurposesofthissubsectionfifteenpercentofacorporation’sbusinessshallbedeemedtohavebeenattributedtothisStateiffifteenpercentormoreoftheentiregrossincomeofthecorporationasdefinedinthischapter(whichforthepurposesofthissubsectionshallbecomputedwithoutregardtosourceinthestateandshallincludeincomenottaxablebyreasonofthefactthatitisfrompropertynotownedinthestateorfromatradeorbusinessnotcarriedoninthestateinwholeorinpart),undersection235-5andtheotherprovisionsofthischapter,shallhavebeenattributedtotheStateandsubjectedtoassessmentofthetaxableincometherefrom(includingthedeterminationoftheresultingnetloss,ifany).
(d)(1) FortaxableyearsendingbeforeJanuary1,1967,thenetoperatinglossdeductionsallowedascarrybacksandcarryoversbytheInternalRevenueCodeshallnotbeallowed.Inlieuthereofthenetoperatinglossdeductionshallconsistof theexcessof thedeductionsallowedbythischapterover thegross income,computed with the modifications specified in paragraphs (1) to (4) of section 172(d) of the InternalRevenueCode,andwiththefurthermodificationstatedinparagraph(3)hereof;andshallbeallowedasadeductionincomputingthetaxableincomeofthetaxpayerforthesucceedingtaxableyear;
(2)(A) With respect tonetoperating lossdeductions resulting fromnetoperating losses for taxableyearsendingafterDecember31,1966,thenetoperatinglossdeductionprovisionsoftheInternalRevenueCodeshallapply,provided that there shallbenonetoperating lossdeductioncarriedback toanytaxableyearendingpriortoJanuary1,1967;
(B) In the case of a taxable year beginning in 1966 and ending in 1967, the entire amount of all netoperatinglossdeductionscarriedbacktothetaxableyearshallbelimitedtothatportionoftaxableincomeforsuchtaxableyearwhichthenumberofdaysin1967bearstothetotaldaysinthetaxableyearendingin1967;and
(C) Thecomputationofanynetoperatinglossdeductionforataxableyearcoveredbythissubsectionshallrequirethefurthermodificationsstatedinparagraphs(3),(4),and(5)ofthissubsection;
(3) Incomputingthenetoperatinglossdeductionallowedbythissubsectionthereshallbeincludedingrossincometheamountofinterestwhichisexcludedfromgrossincomebysubsection(a),decreasedbytheamountofinterestpaidoraccruedwhichisdisallowedasadeductionbysubsection(e).Indeterminingtheamountofthenetoperatinglossdeductionunderthissubsectionofanycorporation,thereshallbedisregardedthenetoperatinglossofsuchcorporationforanytaxableyearforwhichthecorporationisanelectingsmallbusinesscorporation;
(4) Nonetoperatinglosscarrybackorcarryovershallbeallowedbythischapterifnotallowedundersection172oftheInternalRevenueCode;
(5) Theelectiontorelinquishtheentirecarrybackperiodwithrespecttoanetoperatinglossallowedundersection172(b)(3)(C)of theInternalRevenueCodeshallbeoperativefor thepurposesof thischapter;
18-235-7-15
INCOME TAX LAW §235-7.3
CHAPTER235,Page23(UnofficialCompilation)
providedthatnotaxpayershallmakesuchanelectionastoanetoperatinglossofabusinesswheresuchnetoperatinglossoccurredinthetaxpayer’sbusinesspriortothetaxpayerenteringbusinessinthisstate;
(6) Thefive-yearcarrybackperiodfornetoperatinglossesforanytaxableyearendingduring2001and2002in section 172(b)(1)(H) of the InternalRevenueCode as it read onDecember 31, 2008, shall not beoperativeforpurposesofthischapter;and
(7) Theelectionforthecarrybackfor2008or2009netoperatinglossesofsmallbusinessesasprovidedinsection172(b)(1)(H)oftheInternalRevenueCodeasitreadonDecember31,2009,shallnotbeoperativeforpurposesofthischapter.
(e) Thereshallbedisallowedasadeductiontheamountofinterestpaidoraccruedwithinthetaxableyearonindebtednessincurredorcontinued,(1)topurchaseorcarrybondstheinterestuponwhichisexcludedfromgrossincomebysubsection(a);or(2)topurchaseorcarrypropertyownedwithoutthestate,ortocarryontradeorbusinesswithoutthestate,ifthetaxpayerisapersontaxableonlyuponincomefromsourcesinthestate.
(f) Lossesofpropertyastheresultoftidalwave,hurricane,earthquake,orvolcaniceruption,orasaresultoffloodwatersoverflowingthebanksorwallsofariverorstream,orfromanyothernaturaldisaster,totheextentoftheamountdeductible,underthischapter,notcompensatedforbyinsuranceorotherwise,maybedeductedinthetaxableyearinwhichsustained,orattheoptionofthetaxpayermaybedeductedinequalinstallmentsoveraperiodoffiveyears,thefirstsuchyeartobethecalendaryearorfiscalyearofthetaxpayerinwhichsuchlossoccurred.[LSp1957,c1,ptof§2;amL1959,c276,§2andc277,§8(a);amLSp19591st,c29,§8;amL1963,c26,§1,c47,§1,c91,§2andc146,§4;amL1965,c155,§31(a)andc201,§5;Supp,§121-5;amL1967,c32,§1;HRS§235-7;amL1968,c18,§2;amL1969,c152,§1;amL1970,c180,§1;amL1971,c95,§1;amL1976,c156,§6;amL1978,c173,§2(7);amL1979,c62,§2(6),(7),c105,§21,andc224,§3;amL1981,c185,§1andc209,§2;amL1982,c25,§2;amL1983,c124,§16;amimpL1984,c90,§1;gench1985;amL1987,c39,§3andc239,§1(7),(8);amL1990,c340,§2;amL1992,c103,§1;amL1993,c337,§5;amLSp1995,c10,§3;amL2003,c172,§4;amL2004,c197,§2;amL2007,c166,§1;amL2008,c28,§21;amL2010,c59,§1andc112,§8;amL2012,c34,§19andc165,§5;amL2017,c205,§4]
Note
ThefollowingactsexemptedtheiramendmentsfromtheJanuary1,2018repealandreenactmentconditionofL2007,c166,§3asamendedbyL2012,c220,§5:
L2010,c59;L2012,c34andc165.
Cross Reference
TaxInformationReleaseNo.53-77,“BenefitsReceivedUnderIndividualRetirementPlansandSelf-EmployedRetirementPlans”TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETaxInformationReleaseNo.80-5,“DeductionsforPoliticalContributions”OBSOLETETaxInformationReleaseNo.84-1,“TaxabilityofInterestonU.S.Obligations”TaxInformationReleaseNo.88-7,“TaxabilityofAmountsReceivedUndertheCivilLibertiesActof1988forIncomeTaxPurposes”TaxInformationReleaseNo.90-4,“TaxabilityofBenefitPaymentsfromPensionPlantoParticipantsWhoAttainAge70-1/2asRequiredby
theInternalRevenueCode(IRC)Section401(a)(9)(C)”TaxInformationReleaseNo.95-3,“ImmunityfromNetIncomeTaxationUnderPublicLaw86-272”TaxInformationReleaseNo.96-1,“ComputerCompany’sProvisionofIn-StateRepairServicesCreatesNexus”Tax InformationReleaseNo.96-5, “TaxationofPensionsunder theHawaiiNet IncomeTaxLaw:DeferredCompensationArrangements;
RolloverIRAs;Sub-AccountsofPensionPlans;SocialSecurityandRailroadRetirementActBenefits;LimitationsonDeductionsforContributionstoaNonqualifiedPlan”
TaxInformationReleaseNo.98-6,“ApplicationofIncomeTaxandFranchiseTaxLawstoRealEstateInvestmentTrustsandTheirOwners”TaxInformationReleaseNo.98-7,“ChangeinAccountingPeriodfromCalendartoFiscalYearforPublicServiceCompanies”TaxInformationReleaseNo.99-2,“DividendsReceivedDeduction”TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
Attorney General Opinions
Federalhomeloanbanks,notbeingnationalbanks,dividendsreceivedtherefromaretaxable.Att.Gen.Op.65-8.
Case Notes
Depreciationnotactuallysustainedduringyear,notdeductible.18H.15.Nofederalorterritorialinhibitionagainstimpositionoftaxuponincomeaccruingpriortoenactment.33H.766.Insurancepremiumsonlifeofpresidentnotanactualbusinessexpense.36H.11.Cited:18H.530;18H.596;34H.515,583.
§235-7.3 Royalties derived from patents, copyrights, or trade secrets excluded from gross income. (a) Inadditiontotheexclusionsinsection235-7,thereshallbeexcludedfromgrossincome,adjustedgrossincome,andtaxableincome,amountsreceivedbyanindividualoraqualifiedhightechnologybusinessasroyaltiesandotherincomederivedfromanypatents,copyrights,andtradesecrets:
(1) Ownedbytheindividualorqualifiedhightechnologybusiness;and(2) Developedandarisingoutofaqualifiedhightechnologybusiness.
(b) Withrespecttoperformingartsproducts,thisexclusionshallextendto:
§235-7.5 INCOME TAX LAW
CHAPTER235,Page24(UnofficialCompilation)
(1) Theauthorsofperformingartsproducts,oranyparts thereof,without regard to theapplicationof thework-for-hiredoctrineunderUnitedStatescopyrightlaw;
(2) The authors of performing arts products, or anyparts thereof, under thework-for-hire doctrineunderUnitedStatescopyrightlaw;and
(3) Theassignors,licensors,andlicenseesofanycopyrightrightsinperformingartsproducts,oranypartsthereof.
(c) Forthepurposesofthissection:“Performingartsproducts”means:(1) Audiofiles,videofiles,audiovideofiles,computeranimation,andotherentertainmentproductsperceived
byorthroughtheoperationofacomputer;and(2) Commercialtelevisionandfilmproductsforsaleorlicense,andreuseorresidualfeepaymentsfromthese
products.“Qualifiedhightechnologybusiness”meansabusinessthatconductsmorethanfiftypercentofitsactivitiesin
qualifiedresearch.“Qualifiedresearch”means:(1) Thesameasinsection41(d)oftheInternalRevenueCode;(2) Thedevelopmentanddesignofcomputersoftwareforultimatecommercialsale,lease,licenseortobe
otherwisemarketed,foreconomicconsideration.Withrespecttothesoftware’sdevelopmentanddesign,thebusinessshallhavesubstantialcontrolandretainsubstantialrightstotheresultingintellectualproperty;
(3) Biotechnology;(4) Performingartsproducts;(5) Sensorandoptictechnologies;(6) Oceansciences;(7) Astronomy;or(8) Nonfossilfuelenergy-relatedtechnology.[L1999,c178,§22;amL2000,c297,§6;amL2001,c221,
§7;amL2004,c215,§6]Cross Reference
TaxInformationReleaseNo.2007-05,“DepartmentofTaxation’sPositiononQualifiedHighTechnologyBusinessStatus forDisregardedEntities”
TaxInformationReleaseNo.2008-02,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
TaxInformationReleaseNo.2009-05,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
§235-7.5 Certain unearned income of minor children taxed as if parent’s income. (a)Inthecaseofanychildtowhomthissectionapplies,thetaximposedbythischaptershallbeequaltothegreaterof:
(1) Thetaximposedbysection235-51withoutregardtothissection,or(2) Thesumof:
(A) Thetaxwhichwouldbeimposedbysection235-51ifthetaxableincomeofsuchchildforthetaxableyearwerereducedbythenetunearnedincomeofsuchchild,plus
(B) Suchchild’sshareofallocableparentaltax.(b) Thissectionshallapplytoanychildforanytaxableyearif:
(1) Suchchildhasnotattainedagefourteenbeforethecloseofthetaxableyear,and(2) Eitherparentofsuchchildisaliveatthecloseofthetaxableyear.
(c) Forthepurposeofthissection:(1) Theterm“allocableparentaltax”meanstheexcessof:
(A) Thetaxwhichwouldbeimposedbysection235-51ontheparent’staxableincomeifsuchincomeincludedthenetunearnedincomeofallchildrenoftheparenttowhomthissectionapplies,over,
(B) Thetaximposedbysection235-51ontheparentwithoutregardtothissection. Forpurposesofsubparagraph(A),netunearnedincomeofallchildrenoftheparentshallnotbetakeninto
accountincomputinganyexclusion,deduction,orcreditoftheparent.(2) Achild’sshareofanyallocableparentaltaxofaparentshallbeequaltoanamountwhichbearsthesame
ratio to the total allocable parental tax as the child’s net unearned income bears to the aggregate netunearnedincomeofallchildrenofsuchparenttowhomthissectionapplies.
(3) Exceptasprovidedinrules,iftheparentdoesnothavethesametaxableyearasthechild,theallocableparentaltaxshallbedeterminedonthebasisofthetaxableyearoftheparentendinginthechild’staxableyear.
(d) Forpurposesofthissection:(1) Theterm“netunearnedincome”meanstheexcessof:
INCOME TAX LAW §235-9
CHAPTER235,Page25(UnofficialCompilation)
(A) The portion of the adjusted gross income for the taxable yearwhich is not attributable to earnedincomeasdefinedintheInternalRevenueCode,over,
(B) Thesumof: (i)Theamountineffectforthetaxableyearundersection63(c)(5)(A)(relatingtothelimitationon
standarddeductioninthecaseofcertaindependents)oftheInternalRevenueCodeasoperativeundersection235-2.4(a),plus
(ii)Thegreateroftheamountdescribedinclause(i)or,ifthechilditemizesthechild’sdeductionsforthetaxableyear,theamountoftheitemizeddeductionsallowedbythischapterforthetaxableyearwhicharedirectlyconnectedwiththeproductionoftheportionofadjustedgrossincomereferredtoinsubparagraph(A).
(2) Theamountof thenetunearned incomeforany taxableyearshallnotexceed the individual’s taxableincomeforsuchtaxableyear.
(e) Forpurposesofthissection,theparentwhosetaxableincomeshallbetakenintoaccountshallbe:(1) Inthecaseofparentswhoarenotmarried(withinthemeaningofsection235-93),thecustodialparent
(withinthemeaningofsection152(e)(withrespecttothesupporttestincaseofchildofdivorcedparents,etc.)oftheInternalRevenueCode)ofthechild,and
(2) Inthecaseofmarriedindividualsfilingseparately,theindividualwiththegreatertaxableincome.(f) Theparentofanychildtowhomthissectionappliesforanytaxableyearshallprovidethesocialsecurity
numberofsuchparenttosuchchildandsuchchildshallincludesuchparent’ssocialsecuritynumberonthechild’sreturnoftaximposedbythissectionforsuchtaxableyear.
(g) Electiontoclaimcertainunearnedincomeofchildonparent’sreturn.(1) If:
(A) Anychildtowhomthissectionapplieshasgrossincomeforthetaxableyearonlyfrominterestanddividends(includingAlaskaPermanentFunddividends),
(B) Suchgrossincomeismorethan$500andlessthan$5,000,(C) Noestimatedtaxpaymentsforsuchyeararemadeinthenameandsocialsecuritynumberofsuch
child,andnoamounthasbeendeductedandwithheldundersection3406(withrespect tobackupwithholding)oftheInternalRevenueCode,and
(D) Theparentofsuchchild(asdeterminedundersubsection(e))electstheapplicationofparagraph(2), suchchildshallbetreated(otherthanforpurposesofthisparagraph)ashavingnogrossincomeforsuch
yearandshallnotberequiredtofileareturnunderthischapter.(2) Inthecaseofaparentmakingtheelectionunderthissubsection:
(A) Thegrossincomeofeachchildtowhomsuchelectionapplies(totheextentthegrossincomeofsuchchildexceeds$1,000)shallbeincludedinsuchparent’sgrossincomeforthetaxableyear,
(B) Thetaximposedbythissectionforsuchyearwithrespecttosuchparentshallbetheamountequaltothesumof:
(i)Theamountdeterminedundersection235-51aftertheapplicationofsubparagraph(A),plus (ii)Foreachsuchchild,thelesserof$10ortwopercentoftheexcessofthegrossincomeofsuch
childover$500.(3) Thedirectorshallprescribesuchrulesasmaybenecessaryorappropriatetocarryoutthepurposesofthis
subsection.[L1987,c239,§1(3);amL1989,c13,§4;amL1990,c15,§2;amL1991,c54,§2;amL2001,c199,§3]
Cross Reference
TaxInformationReleaseNo.90-7,“Parent’sElectiontoIncludeCertainUnearnedIncomeofChildrenonParent’sHawaiiNetIncomeTaxReturn”
§235-8 REPEALED. L1987,c239,§1(9).
§235-9 Exemptions; generally. Exceptasprovided in sections235-61 to235-67 relating towithholdingandcollectionoftaxatsource,andsection235-2.4relatingto“unrelatedbusinesstaxableincome”,thefollowingpersonsandorganizationsshallnotbetaxableunderthischapter:banks,buildingandloanassociations,financialservicesloancompanies, financial corporations, small business investment companies, trust companies,mortgage loan companies,financialholdingcompanies, subsidiariesoffinancialholdingcompaniesasdefined inchapter241,anddevelopmentcompanies taxableunder chapter 241; insurance companies, agricultural cooperative associations, andfishmarketingassociationsexclusivelytaxableunderotherlaws;andpersonsengagedinthebusinessofmotionpictureandtelevisionfilmproductionasdefinedbythedirectoroftaxation.[LSp1957,c1,ptof§2;amL1965,c224,§4;Supp,§121-6;HRS§235-9;amL1976,c156,§7andc203,§4;amL1979,c62,§2(8);amL1982,c92,§4;amimpL1984,c90,§1;gench1985;amL1987,c239,§1(10);amL1989,c266,§3;amL1992,c106,§2;amL1997c107,§2]
§235-9.5 INCOME TAX LAW
CHAPTER235,Page26(UnofficialCompilation)
Cross Reference
TaxInformationReleaseNo.65-79,“StateTaxationofHomeownersAssociationsforIncome,GeneralExciseandUseTaxes”TaxInformationReleaseNo.98-1,“IncomeTaxExemptionandCreditsAvailableforPersonsEngagedintheMotionPictureandTelevision
FilmProductionBusiness”SupersededbyTIR2006-02relatingtoHRS§235-17.TaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”TaxInformationReleaseNo.2009-05,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureand
TelevisionFilmProductionIndustry”
Attorney General Opinions
Definitionsof“marriage”and“spouse”underthefederalDefenseofMarriageAct,Pub.L.No.104-199,110Stat.2419,mayprecludecivilunionpartnersofthesamegenderundertheState’sCivilUnionActfromfilingjointlyforfederalincometaxpurposes,buttheydonotprecludecivilunionpartnersfromfilingjointtaxreturnsforHawaiiincometaxpurposes.Att.Gen.Op.11-2.
Case Notes
Exemptingparticularclassesfromincometaxesdoesnotrenderlawobjectionableongroundsofinequality.35H.855,aff’d130F.2d786.Exemptionisgrantofimmunitywhereotherwiseliabletoassessment.35H.855,aff’d130F.2d786.Claimsforexemptionstrictlyconstrued.36H.340.
§235-9.5 Stock options from qualified high technology businesses excluded from taxation. (a)Notwithstandingany law to the contrary, all incomeearnedandproceedsderived fromstockoptionsor stock, including stock issuedthroughtheexerciseofstockoptionsorwarrants,fromaqualifiedhightechnologybusinessorfromaholdingcompanyofaqualifiedhightechnologybusinessbyanemployee,officer,ordirectorofthequalifiedhightechnologybusiness,orinvestorwhoqualifiesforthecreditundersection235-110.9,thatwouldotherwisebetaxedasordinaryincomeorascapitalgainstothosepersonsshallbeexcludedfromtaxationunderthischapter.
Similarprovisionsshallapplytooptionstoacquireequityinterestsandtoequityintereststhemselveswithregardtoentitiesotherthancorporations.
(b) Forthepurposesofthissection:“Holdingcompanyofaqualifiedhightechnologybusiness”meansanybusinessentitythatpossesses:(1) Atleasteightypercentofthetotalvotingpowerofthestockorotherinterest;and(2) Atleasteightypercentofthetotalvalueofthestockorotherinterest;inthequalifiedhightechnology
business.“Incomeearnedandproceedsderivedfromstockoptionsorstock”includesincomefrom:(1) Dividendsfromstockorstockreceivedthroughtheexerciseofstockoptionsorwarrants;(2) Thereceiptortheexerciseofstockoptionsorwarrants;or(3) Thesaleofstockoptionsorstock,includingstockissuedthroughtheexerciseofstockoptionsorwarrants.
“Qualifiedhightechnologybusiness”meansthesameasdefinedinsection235-7.3.[L1999,c178,§20,amL2000,c297,§7;amL2001,c221,§8]
Note
AppliestotaxableyearsbeginningafterDecember31,1999. L1999,c178,§31(2).Applicabilityof2000amendment. L2000,c297,§§10,35(1). [It is the intentionof the legislature inmakingamendments in thisPart to
sections235-7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,thattheamendmentsbeliberallyconstrued,andinthisregard,thedepartmentoftaxationgivenliberallatitudetointerpretthoseamendmentsinlightofcurrentindustrystandards.TheamendmentsmadeinthisParttosections235-7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,shallnotbeconstruedtodisqualifyanytaxpayerwhohasreceivedafavorablewrittendeterminationfromthedepartmentoftaxationundertheoriginalprovisionsofthosesectionsasenactedbyAct178,SessionLawsofHawaii,1999.]
The2001amendmentappliestotaxableyearsbeginningafterDecember31,2001.L2001,c221,§15(1).Applicabilityof2004amendment.L2004,c215,§10.ItistheintentionofthelegislatureinmakingamendmentsinthisParttosections235-
7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,thattheamendmentsbeconstruedinamannerconsistentwiththeintentofthisAct.Thedepartmentoftaxationfurthergivenliberallatitudetointerpretthoseamendmentsinlightofcurrentindustrystandards.Theamendmentsmade in thisPart to sections 235-7.3, 235-9.5, 235-110.9, and235-110.91,HawaiiRevisedStatutes, shall not be construed to disqualify anytaxpayerwhohasreceivedafavorablewrittendeterminationfromthedepartmentoftaxationundertheoriginalprovisionsofthosesectionsasenactedbyAct178,SessionLawsofHawaii,1999.
Cross Reference
TaxInformationReleaseNo.2007-05,“DepartmentofTaxation’sPositiononQualifiedHighTechnologyBusinessStatus forDisregardedEntities”
§235-10 REPEALED. L1978,c173,§2(8).
§235-11 REPEALED. L1988,c107,§1.
§235-12 Energy conservation; income tax credit. (a)FortaxableyearsendingbeforeJanuary1,1990,exceptinthecaseoficestoragesystemsfortaxableyearsendingbeforeJanuary1,1991,eachindividualandcorporateresident
18-235-12
INCOME TAX LAW §235-12
CHAPTER235,Page27(UnofficialCompilation)
taxpayerwhofilesanindividualorcorporatenetincometaxreturnforataxableyear,mayclaimataxcreditunderthissectionagainsttheHawaiistateindividualorcorporatenetincometax.Thetaxcreditmaybeclaimedforanysolarorwindenergydevice,heatpump,oricestoragesysteminanamountnottoexceedtenpercentofthetotalcostofthedevice,heatpump,oricestoragesystem;providedthatthetaxcreditshallapplyonlytotheactualcostofthesolarorwindenergydevice,theheatpump,oricestoragesystem,theiraccessories,andinstallationandshallnotincludethecostofconsumerincentivepremiumsunrelatedtotheoperationofthesolarorwindenergydevice,theheatpump,oricestoragesystemofferedwiththesaleofthesolarorwindenergydevice,theheatpump,oricestoragesystem.Thecreditshallbeclaimedagainstnetincometaxliabilityfortheyearinwhichthesolarorwindenergydevice,theheatpump,oricestoragesystemwaspurchasedandplacedinuse;provided:
(1) The taxcredit shall be applicableonlywith respect to solardevices,whichare erectedandplaced inserviceafterDecember31,1974,butbeforeJanuary1,1990;
(2) Inthecaseofwindenergydevicesandheatpumps,thetaxcreditshallbeapplicableonlywithrespecttowindenergydevicesandheatpumpswhichareinstalledandplacedinserviceafterDecember31,1980,butbeforeJanuary1,1990;and
(3) Inthecaseoficestoragesystems,thetaxcreditshallbeapplicableonlywithrespecttoicestoragesystemswhichareinstalledandplacedinserviceafterDecember31,1985,butbeforeJanuary1,1990.
Taxcreditswhichexceedthetaxpayer’sincometaxliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.IffederalenergytaxcreditsarenotextendedbeyondDecember31,1985,arenotretroactivelyextendedorreenacted,orfederalenergytaxcreditsthesameasorlessinamountthanthecreditsineffectduringthe1985taxableyeararenotenactedduringthetaxableyear1986,thenthestatetaxcreditshallbeincreasedtofifteenpercentofthetotalcostafterDecember31,1985,butbeforeJanuary1,1990.
Asusedinthissubsection:“Solarorwindenergydevice”meansanynewidentifiablefacility,equipment,apparatus,orthelikewhichmakes
useofsolarorwindenergyforheating,cooling,orreducingtheuseofothertypesofenergydependentuponfossilfuelfortheirgeneration.
“Heatpump”meansandreferstoanelectricpoweredcompressionheatingsystemwhichextractsenergyfromwarmambientairorrecoverswasteheattoassistintheproductionofhotwater.
“Icestoragesystem”referstoicebanksorothercoolenergystoragetanks,containers,accessories,andcontrolsthatarespecificallydesignedtostoreiceorchilledfluidsfortheexpresspurposeofshiftingtheconsumptionofenergytooff-peakperiods.
(b) FortaxableyearsbeginningafterDecember31,1989,eachindividualorcorporateresidenttaxpayerwhofilesan individualorcorporatenet incometaxreturnfora taxableyear,mayclaima taxcreditunder thissectionagainsttheHawaiistateindividualorcorporatenetincometax.Thetaxcreditmaybeclaimedasfollows:
(1) ForwindenergysystemsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,thecreditshallbetwentypercentoftheactualcost;
(2) ForsolarenergysystemsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,onnewandexistingsinglefamilyresidentialbuildings,thecreditshallbeinanamountnottoexceedthirty-fivepercentor$1,750,whicheverisless,oftheactualcostofthesolarenergysystem;
(3) ForsolarenergysystemsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,onnewandexistingmultiunitbuildingsusedprimarilyforresidentialpurposes,thecreditshallbeinanamountnottoexceedthirty-fivepercentor$350perbuildingunit,whicheverisless,oftheactualcostofthesolarenergysystem;
(4) ForsolarenergysystemsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,innewandexistinghotel,commercial,andindustrialfacilities,thecreditshallbeinanamountnottoexceedthirty-fivepercentoftheactualcostofthesolarenergysystem;
(5) ForheatpumpsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,innewandexistingsingle-familyresidentialbuildings, thecreditshallbe inanamountnot toexceedtwentypercentor$400,whicheverisless,oftheactualcostoftheheatpump;
(6) ForheatpumpsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,innewandexistingmultiunitbuildingsusedprimarilyforresidentialpurposes,thecreditshallbeinanamountnottoexceedtwentypercentor$200perbuildingunit,whicheverisless,oftheactualcostoftheheatpump;providedthatalicensedprofessionalengineerreviewsthedesignofthesystemandprovidesawritten opinion that the system, in accordancewith recognized engineering practice, is designed toprovidenotlessthanninetypercentofthedailyannualaveragehotwaterneedsofalloftheoccupantsofthebuilding;
(7) ForheatpumpsthatareinstalledandplacedinserviceafterDecember31,1989,butbeforeJuly1,2003,innewandexistinghotel,commercial,andindustrialfacilities, thecreditshallbeinanamountnottoexceedtwentypercentoftheactualcostoftheheatpump;and
§235-12.2 INCOME TAX LAW
CHAPTER235,Page28(UnofficialCompilation)
(8) ForicestoragesystemsthatareinstalledandplacedinserviceafterDecember31,1990,butbeforeJuly1,2003,thecreditshallbeinanamountnottoexceedfiftypercentoftheactualcostoftheicestoragesystem.
Theperunitofactualcostofasolarenergysystemorheatpumpreferredtoinsubsection(b)(3)and(6)shallbedeterminedbymultiplyingtheactualcostofthesolarenergysystemorheatpumpinstalledandplacedinserviceinthemultiunitbuildingbyafraction,thenumeratorbeingthetotalsquarefeetofthatunitinthemultiunitbuilding,andthedenominatorbeingthetotalsquarefeetofalltheunitsinthemultiunitbuilding.
Iffederalenergytaxcreditssimilartoanyofthoseprovidedinparagraphs(1)to(8)areestablishedafterJune30,1998,butbeforeJuly1,2003,thenthestatetaxcreditprovidedintherespectiveparagraphorparagraphsshallbereducedbytheamountoftheapplicablefederalenergytaxcredit.
(c) Taxcreditsshallapplyonlytotheactualcostofthesolarorwindenergysystem,heatpump,oricestoragesystem,includingtheiraccessoriesandinstallation,andshallnotincludethecostofconsumerincentivepremiumsunrelatedtotheoperationofthesystemorofferedwiththesaleofthesystemorheatpump.Thetaxcreditshallbeclaimedagainstnet income tax liability for theyear inwhich thesolarorwindenergysystem,heatpump,or icestoragesystemwaspurchasedandplacedinuseinHawaii.Taxcreditsthatexceedthetaxpayer’sincometaxliabilitymaybeusedascreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.
(d) Thedirectoroftaxationshallpreparesuchformsasmaybenecessarytoclaimacreditunderthissection.Thedirectormayalsorequirethetaxpayertofurnishreasonableinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.
(e) Asusedinthissection:“Solarorwindenergysystem”meansanynewidentifiablefacility,equipment,apparatus,orthelikethatconverts
solarinsolationorwindenergytousefulthermalorelectricalenergyforheating,cooling,orreducingtheuseofothertypesofenergydependentuponfossilfuelfortheirgeneration.
“Heatpump”meansanelectricpoweredcompressionheatingsystemthatextractsenergyfromwarmambientairorrecoverswasteheattoassistintheproductionofhotwater.
“Icestoragesystem”referstoicebanksorothercoolenergystoragetanks,containers,accessories,andcontrolsthatarespecificallydesignedtostoreiceorchilledfluidsfortheexpresspurposeofshiftingtheconsumptionofenergytooff-peakperiods.[L1976,c189,§1;amL1980,c177,§2;amL1981,c233,§1;amL1983,c67,§1;amimpL1984,c90,§1;gench1985;amL1985,c232,§2;amL1986,c66,§1,c70,§1andc339,§18;amL1989,c307,§2;amL1990,c319,§3;amL1993,c93,§1;amL1998,c163,§2]
Cross Reference
TaxInformationReleaseNo.80-3,“SolarEnergyDevicesIncomeTaxCredit”TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”TaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”
§235-12.2 REPEALED. L1988,c64,§2.
§235-12.5 Renewable energy technologies; income tax credit. (a)Whentherequirementsofsubsection(d)aremet,eachindividualorcorporatetaxpayerthatfilesanindividualorcorporatenetincometaxreturnforataxableyearmayclaimataxcreditunderthissectionagainsttheHawaiistateindividualorcorporatenetincometax.ThetaxcreditmaybeclaimedforeveryeligiblerenewableenergytechnologysystemthatisinstalledandplacedinserviceintheStatebyataxpayerduringthetaxableyear.Thetaxcreditmaybeclaimedasfollows:
(1) For each solar energy system: thirty-fiveper cent of the actual cost or the cap amount determined insubsection(b),whicheverisless;or
(2) Foreachwind-poweredenergysystem:twentypercentoftheactualcostorthecapamountdeterminedinsubsection(b),whicheverisless;
providedthatmultipleownersofasinglesystemshallbeentitledtoasingletaxcredit;andprovidedfurtherthatthetaxcreditshallbeapportionedbetweentheownersinproportiontotheircontributiontothecostofthesystem.
Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforeveryeligiblerenewableenergytechnologysystemthatisinstalledandplacedinserviceintheStatebytheentity.Thecostuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedpursuanttosection235-110.7(a).
(b) Theamountofcreditallowedforeacheligiblerenewableenergytechnologysystemshallnotexceedtheapplicablecapamount,whichisdeterminedasfollows:
(1) Iftheprimarypurposeofthesolarenergysystemistouseenergyfromthesuntoheatwaterforhouseholduse,thenthecapamountsshallbe:(A) $2,250persystemforsingle-familyresidentialproperty;(B) $350perunitpersystemformulti-familyresidentialproperty;and
18-235-12.5
INCOME TAX LAW §235-12.5
CHAPTER235,Page29(UnofficialCompilation)
(C) $250,000persystemforcommercialproperty;(2) Forallothersolarenergysystems,thecapamountsshallbe:
(A) $5,000persystemforsingle-familyresidentialproperty;providedthatifalloraportionofthesystemisusedtofulfillthesubstituterenewableenergytechnologyrequirementpursuanttosection196-6.5(a)(3),thecreditshallbereducedbythirty-fivepercentoftheactualsystemcostor$2,250,whicheverisless;
(B) $350perunitpersystemformulti-familyresidentialproperty;and(C) $500,000persystemforcommercialproperty;and
(3) Forallwind-poweredenergysystems,thecapamountsshallbe:(A) $1,500persystemforsingle-familyresidentialproperty;providedthatifalloraportionofthesystem
isusedtofulfillthesubstituterenewableenergytechnologyrequirementpursuanttosection196-6.5(a)(3),thecreditshallbereducedbytwentypercentoftheactualsystemcostor$1,500,whicheverisless;
(B) $200perunitpersystemformulti-familyresidentialproperty;and(C) $500,000persystemforcommercialproperty.
(c) Forthepurposesofthissection:“Actual cost”means costs related to the renewable energy technology systems under subsection (a), including
accessoriesandinstallation,butnotincludingthecostofconsumerincentivepremiumsunrelatedtotheoperationofthesystemorofferedwiththesaleofthesystemandcostsforwhichanothercreditisclaimedunderthischapter.
“Householduse”meansanyusetowhichheatedwateriscommonlyputinaresidentialsetting,includingcommercialapplicationofthoseuses.
“Renewableenergy technologysystem”meansanewsystem thatcapturesandconvertsa renewable sourceofenergy,suchassolarorwindenergyinto:
(1) Ausablesourceofthermalormechanicalenergy;(2) Electricity;or(3) Fuel.
“Solarorwindenergysystem”meansanyidentifiablefacility,equipment,apparatus,orthelikethatconvertssolarorwindenergytousefulthermalorelectricalenergyforheating,cooling,orreducingtheuseofothertypesofenergythataredependentuponfossilfuelfortheirgeneration.
(d) FortaxableyearsbeginningafterDecember31,2005,thedollaramountofanyutilityrebateshallbedeductedfromthecostofthequalifyingsystemanditsinstallationbeforeapplyingthestatetaxcredit.
(e) The director of taxation shall prepare any forms thatmay be necessary to claim a tax credit under thissection,includingformsidentifyingthetechnologytypeofeachtaxcreditclaimedunderthissection,whetherforsolarorwind.Thedirectormayalsorequirethetaxpayertofurnishreasonableinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.
(f) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted,unlessotherwiseelectedbythetaxpayerpursuanttosubsection(g)or(h).Allclaimsforthetaxcreditunderthissection,includingamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththissubsectionshallconstituteawaiveroftherighttoclaimthecredit.
(g) Forsolarenergysystems,ataxpayermayelecttoreducetheeligiblecreditamountbythirtypercentandifthisreducedamountexceedstheamountofincometaxpaymentduefromthetaxpayer,theexcessofthecreditamountoverpaymentsdueshallberefundedtothetaxpayer;providedthattaxcreditamountsproperlyclaimedbyataxpayerwhohasnoincometaxliabilityshallbepaidtothetaxpayer;andprovidedfurtherthatnorefundonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
Theelectionrequiredbythissubsectionshallbemadeinamannerprescribedbythedirectoronthetaxpayer’sreturnforthetaxableyearinwhichthesystemisinstalledandplacedinservice.Aseparateelectionmaybemadeforeachseparatesystemthatgeneratesacredit.Anelectiononcemadeisirrevocable.
(h) Notwithstandingsubsection(g),foranyrenewableenergytechnologysystem,anindividualtaxpayermayelecttohaveanyexcessofthecreditoverpaymentsduerefundedtothetaxpayer,if:
(1) Allofthetaxpayer’sincomeisexemptfromtaxationundersection235-7(a)(2)or(3);or(2) Thetaxpayer’sadjustedgrossincomeis$20,000orless(or$40,000orlessiffilingataxreturnasmarried
filingjointly);providedthattaxcreditsproperlyclaimedbyataxpayerwhohasnoincometaxliabilityshallbepaidtothetaxpayer;andprovidedfurtherthatnorefundonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
Ahusbandandwifewhodonotfileajointtaxreturnshallonlybeentitledtomakethiselectiontotheextentthattheywouldhavebeenentitledtomaketheelectionhadtheyfiledajointtaxreturn.
[§235-13] INCOME TAX LAW
CHAPTER235,Page30(UnofficialCompilation)
Theelectionrequiredbythissubsectionshallbemadeinamannerprescribedbythedirectoronthetaxpayer’sreturnforthetaxableyearinwhichthesystemisinstalledandplacedinservice.Aseparateelectionmaybemadeforeachseparatesystemthatgeneratesacredit.Anelectiononcemadeisirrevocable.
(i) Notaxpayershallbeallowedacreditunderthissectionfortheportionoftherenewableenergytechnologysystemrequiredbysection196-6.5 that is installedandplaced in serviceonanynewlyconstructedsingle-familyresidentialpropertyauthorizedbyabuildingpermitissuedonorafterJanuary1,2010.
(j) Totheextentfeasible,usingexistingresourcestoassisttheenergy-efficiencypolicyreviewandevaluation,thedepartmentshallassistwithdatacollectiononthefollowingforeachtaxableyear:
(1) Thenumberofrenewableenergytechnologysystemsthathavequalifiedforataxcreditduringthecalendaryearby:(A) Technologytype;and(B) Taxpayertype(corporateandindividual);and
(2) ThetotalcostofthetaxcredittotheStateduringthetaxableyearby:(A) Technologytype;and(B) Taxpayertype.
(k) This sectionshallapply toeligible renewableenergy technologysystems thatare installedandplaced inserviceonorafterJuly1,2009.[L2003,c207,§2;amL2004,c97,§1;amL2006,c240,§3;amL2007,c151,§1;amL2008,c204,§4;amL2009,c154,§1andc155,§15]
Note
TheL2009,c154amendmentappliestotaxableyearsbeginningafterDecember31,2008.L2009,c154,§3.
Cross Reference
Tax InformationRelease 2012-01, “TemporaryAdministrative Rules Relating to the Renewable EnergyTechnologies IncomeTaxCredit(RETITC)”
TaxInformationRelease2007-02,“RelatingtotheRenewableEnergyTechnologiesIncomeTaxCredit”TaxInformationRelease2010-02,“Furtherguidanceregardingtheterm“system”forpurposesoftheRenewableEnergyTechnologiesIncome
TaxCredit,HRS§235-12.5”Tax Information Release 2010-03, “Further technical clarification regarding the term “system” for purposes of the Renewable Energy
TechnologiesIncomeTaxCredit,HRS§235-12.5”TaxInformationRelease2010-10,“CommonIncomeTax&GeneralExciseTaxIssuesAssociatedwiththeRenewableEnergyTechnologies
IncomeTaxCredit,HRS§235-12.5”
[§235-13] Sales of residential land to lessees; involuntary conversion. (a)Asalebyanorganizationexemptundersection501(c)(3),ortreatedasanestateortrustunderSubchapterJoftheInternalRevenueCodetoalesseeoftheentireinterestinthelandofthelessororganization,estate,ortrustshallbeaninvoluntaryconversionofpropertyusedintradeorbusinessoracapitalassetofthelessororganization,estate,ortrustandshallnotbeasaleofpropertyheldbythelessororganization,estateortrustintheordinarycourseofatradeorbusiness,irrespectiveofthenumberofsuchsalesinanytaxableyear,if:
(1) Thelesseehasarighttoterminatesuchleaseandtoacquiretheentireinterestofthelessorintheland,whichrightexistsbyvirtueofchapter516andnotbecauseofanyprivateagreementorprivatelycreatedcondition;
(2) Thelesseeexercisesthelessee’srighttopurchasesuchentireinterest;(3) Thelessororganization,estate,ortrusthasheldthelandforaperioddeterminedundersubsection(b)prior
tothedateofpurchasebylessee;and(4) Thelandisdevelopedsingle-familyresidentialland.
(b) Theperiodforwhichalessororganization,estate,ortrusthasheldland,withinthemeaningofsubsection(a)(3),shallbedeterminedundertherulesofsection1223oftheInternalRevenueCode,exceptthatifsuchlandshallhavebeenacquiredbythelessororganization,estate,ortrustfromadecedent,withinthemeaningofsection1014oftheInternalRevenueCode,orifsuchlandshallhavebeenacquiredbythelessororganization,estate,ortrustfromadonor,withinthemeaningofsection1015(otherthansection1015(c))oftheInternalRevenueCode,theholdingperiodshallincludetheperiodduringwhichsuchlandshallhavebeenheldbysuchdecedentorbysuchdonorandalsotheperiodifanyforwhichsuchlandshallhavebeenheldbyanintervivosortestamentarytrustestatecreatedbysuchdecedentorbysuchdonor.
(c) Thissectionshallnotapplywithrespecttoanytransactiongovernedbysection1055oftheInternalRevenueCode.
(d) Asusedinthissection:(1) “Lessee”meanstheoriginallesseeandanysuccessorwhohastherightunderchapter516tobringabout
aninvoluntaryconversion.(2) “Lessor”meansany fee simpleowner, any sublessor, andanypersonentitled to share in the rentsor
subrentsofthelandinvolvedinaninvoluntaryconversiondescribedinsubsection(a).
INCOME TAX LAW §235-16.5
CHAPTER235,Page31(UnofficialCompilation)
(e) Thegainderivedfromsalesqualifiedasinvoluntaryconversionofpropertyunderthissectionshallbetreatedasprovidedinsection1033oftheInternalRevenueCodeof1954,asamended.[L1977,c75,§1;amimpL1984,c90,§1;gench1985]
[§235-15] Tax credits to promote the purchase of child passenger restraint systems. (a)AnytaxpayerwhofilesanindividualincometaxreturnforataxableyearmayclaimanincometaxcreditunderthissectionagainsttheHawaiistateindividualnetincometax.
(b) Thetaxcreditshallbe$25;providedthatthetaxpayerpurchasesoneormorenewchildpassengerrestraintsystemsinthetaxyearforwhichthecreditisproperlyclaimed;andprovidedthatsuchrestraintsystemcanbeshowntobeinsubstantialconformitywithspecificationsforsuchrestraintsystemssetforthbythefederalmotorvehiclesafetystandardswhichwereineffectatthetimeofsuchpurchase.
(c) Ifthetaxcreditclaimedbythetaxpayerunderthissectionexceedstheamountoftheincometaxpaymentsduefromthetaxpayer,theexcessofcreditoverpaymentsdueshallberefundedtothetaxpayer;providedthatthetaxcreditproperlyclaimedbyataxpayerwhohasnoincometaxliabilityshallbepaidtothetaxpayer;andprovidedthatnorefundsorpaymentsonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
(d) Thedirectoroftaxationshallpreparesuchformsasmaybenecessarytoclaimacreditunderthissection,mayrequireproofoftheclaimforthetaxcredit,andmayadoptrulespursuanttochapter91.
(e) Alloftheprovisionsrelatingtoassessmentsandrefundsunderthischapterandundersection231-23(c)(1)shallapplytothetaxcreditunderthissection.
(f) Claimsforthetaxcreditunderthissection,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthetaxableyearforwhichthecreditmaybeclaimed.[L1982,c134,§1]
Revision Note
Insubsection(e),“231-23(c)(1)”substitutedfor“231-23(d)(1)”.
Cross Reference
TaxInformationReleaseNo.83-1,“TaxCreditforPurchaseofChildPassengerRestraintSystem”TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”
§235-16 REPEALED. L2003,c135,§9.
§235-16.5 Cesspool upgrade, conversion, or connection; income tax credit. [Section repealed December 31, 2020. L 2015, c 120 §4.] (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaximposedunderthischapter,acesspoolupgrade,conversion,orconnectionincometaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforqualifiedexpensesincurredbytheentityforthetaxableyear.Theexpensesuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedbyrule.
(c) Thecesspoolupgrade,conversion,orconnectionincometaxcreditshallbeequaltothequalifiedexpensesofthetaxpayer,uptoamaximumof$10,000;providedthat,inthecaseofaqualifiedcesspoolthatisaresidentiallargecapacitycesspool,theamountofthecreditshallbeequaltothequalifiedexpensesofthetaxpayer,uptoamaximumof$10,000perresidentialdwellingconnectedtothecesspool,ascertifiedbythedepartmentofhealthpursuanttosubsection(e).Thereshallbeallowedamaximumofonecesspoolupgrade,conversion,orconnectionincometaxcreditperqualifiedcesspoolorpertaxmapkeynumberwheremorethanoneresidenceisconnectedtoaresidentiallarge-capacitycesspool.Thecesspoolupgrade,conversion,orconnectionincometaxcreditshallbeavailableonlyforthetaxableyearinwhichthetaxpayer’squalifiedexpensesarecertifiedbytheappropriategovernmentagency.
(d) Thetotalamountoftaxcreditsallowedunderthissectionshallnotexceed$5,000,000foralltaxpayersinanytaxableyear;providedthatanytaxpayerwhoisnoteligibletoclaimthecreditinataxableyearduetothe$5,000,000caphavingbeenexceededforthattaxableyearshallbeeligibletoclaimthecreditinthesubsequenttaxableyear.
(e) Thedepartmentofhealthshall:(1) Certify all qualified cesspools for the purposes of this section; provided that, as a pilot program, the
departmentofhealth,initsdiscretion,maycertifynomorethantworesidentiallargecapacitycesspoolsasqualifiedcesspools;
(2) Collectandmaintainarecordofallqualifiedexpensescertifiedbyanappropriategovernmentagencyforthetaxableyear;and
(3) Certifytoeachtaxpayertheamountofcreditthetaxpayermayclaim;providedthatif,inanyyear,theannualamountofcertifiedcredits reaches$5,000,000 in theaggregate, thedepartmentofhealth shallimmediatelydiscontinuecertifyingcreditsandnotifythedepartmentoftaxation.
Thedirectorofhealthmayadoptrulesunderchapter91asnecessarytoimplementthecertificationrequirementsunderthissection.
(f) Thedirectoroftaxation:
§235-17 INCOME TAX LAW
CHAPTER235,Page32(UnofficialCompilation)
(1) Shallprepareanyformsthatmaybenecessarytoclaimataxcreditunderthissection;(2) Mayrequirethetaxpayertofurnishreasonableinformationtoascertainthevalidityoftheclaimforthetax
creditmadeunderthissection;and(3) Mayadoptrulesunderchapter91necessarytoeffectuatethepurposesofthissection.
(g) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaims for the tax credit under this section, including amended claims, shall befiledonor before the endof thetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(h) ThissectionshallnotapplytotaxableyearsbeginningafterDecember31,2020.(i) Asusedinthissection:“Aerobictreatmentunitsystem”meansanindividualwastewatersystemthatconsistsofanaerobictreatmentunit
tank,aerationdevice,piping,andadischargemethodthatisinaccordancewithrulesadoptedbythedepartmentofhealthrelatingtohouseholdaerobicunits.
“Cesspool”meansanindividualwastewatersystemconsistingofanexcavationinthegroundwhosedepthisgreaterthanitswidestsurfacedimension,whichreceivesuntreatedwastewater,andretainsorisdesignedtoretaintheorganicmatterandsolidsdischarged into it,butpermits the liquid to seep through itsbottomor sides togainaccess to theundergroundgeographicformation.
“Qualifiedcesspool”meansacesspoolthatis:(1) Certifiedbythedepartmentofhealthtobe:
(A) Locatedwithin: (i)Fivehundredfeetofashoreline,perennialstream,orwetland;or (ii)Asourcewaterassessmentprogramarea(twoyeartimeoftravelfromacesspooltoapublic
drinkingwatersource);(B) Showntoimpactdrinkingwatersuppliesorrecreationalwaters;or(C) Aresidentiallargecapacitycesspool;or
(2) Certifiedbyacountyorprivatesewercompany tobeappropriate forconnection to itsexistingsewersystem.
“Qualifiedexpenses”meanscoststhatarenecessaryanddirectlyincurredbythetaxpayerforupgradingorconvertingaqualifiedcesspoolintoasepticsystemoranaerobictreatmentunitsystem,orconnectingaqualifiedcesspooltoasewersystem,andthatarecertifiedassuchbytheappropriategovernmentagency.
“Residentiallargecapacitycesspool”meansacesspoolthatisconnectedtomorethanoneresidentialdwelling.“Septicsystem”meansanindividualwastewatersystemthattypicallyconsistsofaseptictank,piping,andadrainage
fieldwherethereisnaturalbiologicaldecontaminationaswastewaterdischargedintothesystemisfilteredthroughsoil.“Sewer system”means a systemof piping,with appurtenances, for collecting and conveyingwastewater from
sourcetodischargefollowingtreatment.“Wastewater”meansanyliquidwaste,whetherornottreatedandwhetheranimal,mineral,orvegetable,including
agricultural,industrial,andthermalwastes.”[L2015,c120,§2;amL2016,c182,§1;amL2017,c125,§2]Note
SectionappliestotaxableyearsbeginningafterDecember31,2015.L2015,c120,§4.The2016amendmentappliestotaxableyearsbeginningafterDecember31,2015.L2016,c182,§3.The2017amendmentshalltakeeffectonJuly1,2017.
§235-17 Motion picture, digital media, and film production income tax credit. [Section effective until December 31, 2018. For section effective January 1, 2019, see below.] (a)Anylawtothecontrarynotwithstanding,thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapter,anincometaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.Theamountofthecreditshallbe:
(1) TwentypercentofthequalifiedproductioncostsincurredbyaqualifiedproductioninanycountyoftheStatewithapopulationofoversevenhundredthousand;or
(2) Twenty-fivepercentofthequalifiedproductioncostsincurredbyaqualifiedproductioninanycountyoftheStatewithapopulationofsevenhundredthousandorless.
Aqualifiedproductionoccurringinmorethanonecountymayprorateitsexpendituresbasedupontheamountsspentineachcounty,ifthepopulationbasesdifferenoughtochangethepercentageoftaxcredit.
Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforqualifiedproductioncostsincurredbytheentityforthetaxableyear.Thecostuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedbyrule.
Ifadeductionistakenundersection179(withrespecttoelectiontoexpensedepreciablebusinessassets)oftheInternalRevenueCodeof1986,asamended,notaxcreditshallbeallowedforthosecostsforwhichthedeductionistaken.
INCOME TAX LAW §235-17
CHAPTER235,Page33(UnofficialCompilation)
Thebasisforeligiblepropertyfordepreciationofacceleratedcostrecoverysystempurposesforstateincometaxesshallbereducedbytheamountofcreditallowableandclaimed.
(b) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.Forthepurposesofthissection,“netincometaxliability”meansnetincometaxliabilityreducedbyallothercreditsallowedunderthischapter.
(c) If the taxcreditunder this sectionexceeds the taxpayer’s income tax liability, theexcessofcreditsoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.Allclaims,includinganyamendedclaims,fortaxcreditsunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(d) Toqualifyforthistaxcredit,aproductionshall:(1) Meetthedefinitionofaqualifiedproductionspecifiedinsubsection(l);(2) Havequalifiedproductioncoststotalingatleast$200,000;(3) ProvidetheState,ataminimum,ashared-card,end-titlescreencredit,whereapplicable;(4) Provideevidenceofreasonableeffortstohirelocaltalentandcrew;and(5) Provideevidenceoffinancialorin-kindcontributionsoreducationalorworkforcedevelopmentefforts,in
partnershipwithrelatedlocalindustrylabororganizations,educationalinstitutions,orboth,towardthefurtheranceofthelocalfilmandtelevisionanddigitalmediaindustries.
(e) OnorafterJuly1,2006,noqualifiedproductioncostthathasbeenfinancedbyinvestmentsforwhichacreditwasclaimedbyanytaxpayerpursuanttosection235-110.9iseligibleforcreditsunderthissection.
(f) Toreceivethetaxcredit,thetaxpayershallfirstprequalifytheproductionforthecreditbyregisteringwiththe department of business, economic development, and tourism during the development or preproduction stage.Failuretocomplywiththisprovisionmayconstituteawaiveroftherighttoclaimthecredit.
(g) Thedirectoroftaxationshallprepareformsasmaybenecessarytoclaimacreditunderthissection.Thedirectormayalsorequirethetaxpayertofurnishinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.
(h) Everytaxpayerclaimingataxcreditunderthissectionforaqualifiedproductionshall,nolaterthanninetydaysfollowingtheendofeachtaxableyear inwhichqualifiedproductioncostswereexpended,submitawritten,swornstatementtothedepartmentofbusiness,economicdevelopment,andtourism,identifying:
(1) Allqualifiedproductioncostsasprovidedbysubsection(a),ifany,incurredintheprevioustaxableyear;(2) Theamountoftaxcreditsclaimedpursuanttothissection,ifany,intheprevioustaxableyear;and(3) Thenumberoftotalhiresversusthenumberoflocalhiresbycategoryandbycounty.
This information may be reported from the department of business, economic development, and tourism to thelegislatureinredactedformpursuanttosubsection(i)(4).
(i) Thedepartmentofbusiness,economicdevelopment,andtourismshall:(1) Maintainrecordsofthenamesofthetaxpayersandqualifiedproductionsthereofclaimingthetaxcredits
undersubsection(a);(2) Obtainandtotaltheaggregateamountsofallqualifiedproductioncostsperqualifiedproductionandper
qualifiedproductionpertaxableyear;(3) Providealettertothedirectoroftaxationspecifyingtheamountofthetaxcreditperqualifiedproduction
foreachtaxableyearthatataxcreditisclaimedandthecumulativeamountofthetaxcreditforallyearsclaimed;and
(4) Submitareporttothelegislaturenolaterthantwentydayspriortotheconveningofeachregularsessiondetailingthenon-aggregatedqualifiedproductioncoststhatformthebasisofthetaxcreditclaimsandexpenditures,itemizedbytaxpayer,inaredactedformattopreservetheconfidentialityofthetaxpayersclaimingthecredit.
Uponeachdeterminationrequiredunderthissubsection,thedepartmentofbusiness,economicdevelopment,andtourismshallissuealettertothetaxpayer,regardingthequalifiedproduction,specifyingthequalifiedproductioncostsand the taxcreditamountqualified for ineach taxableyeara taxcredit isclaimed.The taxpayer foreachqualifiedproductionshallfiletheletterwiththetaxpayer’staxreturnforthequalifiedproductiontothedepartmentoftaxation.Notwithstandingtheauthorityofthedepartmentofbusiness,economicdevelopment,andtourismunderthissection,thedirectoroftaxationmayauditandadjustthetaxcreditamounttoconformtotheinformationfiledbythetaxpayer.
(j) Totaltaxcreditsclaimedperqualifiedproductionshallnotexceed$15,000,000.(k) Qualifiedproductionsshallcomplywithsubsections(d),(e),(f),and(h).(l) Forthepurposesofthissection:“Commercial”:(1) Meansanadvertisingmessagethatisfilmedusingfilm,videotape,ordigitalmedia,fordisseminationvia
televisionbroadcastortheatricaldistribution;
§235-17 INCOME TAX LAW
CHAPTER235,Page34(UnofficialCompilation)
(2) Includesaseriesofadvertisingmessagesifallpartsareproducedatthesametimeoverthecourseofsixconsecutiveweeks;and
(3) DoesnotincludeanadvertisingmessagewithInternet-onlydistribution.“Digitalmedia”meansproductionmethods andplatformsdirectly related to the creationof cinematic imagery
andcontent,specificallyusingdigitalmeans,includingbutnotlimitedtodigitalcameras,digitalsoundequipment,andcomputers,tobedeliveredviafilm,videotape,interactivegameplatform,orotherdigitaldistributionmedia.
“Post-production”meansproductionactivitiesandservicesconductedafterprincipalphotographyiscompleted,includingbutnotlimitedtoediting,filmandvideotransfers,duplication,transcoding,dubbing,subtitling,credits,closedcaptioning,audioproduction,specialeffects(visualandsound),graphics,andanimation.
“Production”meansaseriesofactivitiesthataredirectlyrelatedtothecreationofvisualandcinematicimagerytobedeliveredviafilm,videotape,ordigitalmediaand tobesold,distributed,ordisplayedasentertainmentor theadvertisementofproductsformasspublicconsumption,includingbutnotlimitedtoscripting,casting,setdesignandconstruction,transportation,videography,photography,soundrecording,interactivegamedesign,andpost-production.
“Qualifiedproduction”:(1) Meansaproduction,withexpendituresinthestate,forthetotalorpartialproductionofafeature-length
motion picture, short film, made-for-television movie, commercial, music video, interactive game,televisionseriespilot,singleseason(uptotwenty-twoepisodes)ofatelevisionseriesregularlyfilmedinthestate(ifthenumberofepisodespersingleseasonexceedstwenty-two,additionalepisodesforthesameseasonshallconstituteaseparatequalifiedproduction),televisionspecial,singletelevisionepisodethatisnotpartofatelevisionseriesregularlyfilmedorbasedinthestate,nationalmagazineshow,ornationaltalkshow.Forthepurposesofsubsections(d)and(j),eachoftheaforementionedqualifiedproductioncategoriesshallconstituteseparate,individualqualifiedproductions;and
(2) Doesnotinclude:(A) News;(B) Publicaffairsprograms;(C) Non-nationalmagazineortalkshows;(D) Televisedsportingeventsoractivities;(E) Productionsthatsolicitfunds;(F) Productionsproducedprimarilyforindustrial,corporate,institutional,orotherprivatepurposes;and(G) Productionsthatincludeanymaterialorperformanceprohibitedbychapter712.
“Qualifiedproductioncosts”meansthecostsincurredbyaqualifiedproductionwithinthestatethataresubjecttothegeneralexcisetaxunderchapter237orincometaxunderthischapterandthathavenotbeenfinancedbyanyinvestmentsforwhichacreditwasorwillbeclaimedpursuanttosection235-110.9.Qualifiedproductioncostsincludebutarenotlimitedto:
(1) Costsincurredduringpreproductionsuchaslocationscoutingandrelatedservices;(2) Costsofsetconstructionandoperations,purchasesorrentalsofwardrobe,props,accessories,food,office
supplies,transportation,equipment,andrelatedservices;(3) Wagesorsalariesofcast,crew,andmusicians;(4) Costsofphotography,soundsynchronization,lighting,andrelatedservices;(5) Costsofediting,visualeffects,music,otherpost-production,andrelatedservices;(6) Rentalsandfeesforuseoflocalfacilitiesandlocations,includingrentalsandfeesforuseofstateand
countyfacilitiesandlocationsthatarenotsubjecttogeneralexcisetaxunderchapter237orincometaxunderthischapter;
(7) Rentalsofvehiclesandlodgingforcastandcrew;(8) AirfareforflightstoorfromHawaii,andinterislandflights;(9) Insuranceandbonding;(10)ShippingofequipmentandsuppliestoorfromHawaii,andinterislandshipments;and(11)Otherdirectproductioncostsspecifiedbythedepartmentinconsultationwiththedepartmentofbusiness,
economicdevelopment,andtourism;providedthatanygovernment-imposedfines,penalties,orinterestthatareincurredbyaqualifiedproductionwithintheStateshallnotbe“qualifiedproductioncosts.[L1997,c107,§1;amL1998,c156,§11;amL2006,c88,§2;amL2013,c89,§2]
Note
AppliestotaxableyearsbeginningafterDecember31,1996.L1997,c107,§7.The1998amendmentappliestotaxableyearsbeginningafterDecember31,1998.L1998,c156,§13.The2006amendmentiseffectiveJuly1,2006andappliestoqualifiedproductioncostsincurredonorafterJuly1,2006,andbeforeJanuary1,
2016.Act88shallberepealedonJanuary1,2016,andsection235-17,HRS,shallbereenactedintheforminwhichitreadonthedaybeforetheeffectivedateoftheAct.
The2013amendmentiseffectiveonJuly1,2013,andappliestotaxableyearsbeginningafterDecember31,2012.L2013,c89,§6.L2013,c89,§3amendsAct88,L2006§4:
INCOME TAX LAW §235-17
CHAPTER235,Page35(UnofficialCompilation)
“SECTION4.ThisActshalltakeeffectonJuly1,2006;providedthat:(1)Section2ofthisActshallapplytoqualifiedproductioncostsincurredonorafterJuly1,2006,andbeforeJanuary1,[2016;]2019;and(2)ThisActshallberepealedonJanuary1,[2016,]2019,andsection235-17,HawaiiRevisedStatutes,shallbereenactedintheforminwhich
itreadonthedaybeforetheeffectivedateofthisAct.”
Cross Reference
TaxInformationReleaseNo.98-1,“IncomeTaxExemptionandCreditsAvailableforPersonsEngagedintheMotionPictureandTelevisionFilmProductionBusiness”SupersededbyTIR2006-02relatingtoHRS§235-17.
TaxInformationReleaseNo.2006-02,“RefundableIncomeTaxCreditforPersonsEngagedintheMotionPicture,Television,andDigitalMediaProductionBusiness”
TaxInformationReleaseNo.2008-02,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
TaxInformationReleaseNo.2009-05,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
TaxInformationReleaseNo.2010-04,“Interpretationof“QualifiedProduction”forpurposesofTaxCreditClaimsundertheMotionPicture,DigitalMedia,andFilmProductionIncomeTaxCredit,HRS§235-17”
§235-17 Motion picture, digital media, and film production income tax credit. [Section effective January 1, 2019. For section effective until December 31, 2018, see above. Repeal and reenactment on January 1, 2026. L 2017, c 143, §3] (a)Anylawtothecontrarynotwithstanding,thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapter,anincometaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.Theamountofthecreditshallbe:
(1) TwentypercentofthequalifiedproductioncostsincurredbyaqualifiedproductioninanycountyoftheStatewithapopulationofoversevenhundredthousand;or
(2) Twenty-fivepercentofthequalifiedproductioncostsincurredbyaqualifiedproductioninanycountyoftheStatewithapopulationofsevenhundredthousandorless.
Aqualifiedproductionoccurringinmorethanonecountymayprorateitsexpendituresbasedupontheamountsspentineachcounty,ifthepopulationbasesdifferenoughtochangethepercentageoftaxcredit.
Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforqualifiedproductioncostsincurredbytheentityforthetaxableyear.Thecostuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedbyrule.
Ifadeductionistakenundersection179(withrespecttoelectiontoexpensedepreciablebusinessassets)oftheInternalRevenueCodeof1986,asamended,notaxcreditshallbeallowedforthosecostsforwhichthedeductionistaken.
Thebasisforeligiblepropertyfordepreciationofacceleratedcostrecoverysystempurposesforstateincometaxesshallbereducedbytheamountofcreditallowableandclaimed.
(b) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.Forthepurposesofthissection,“netincometaxliability”meansnetincometaxliabilityreducedbyallothercreditsallowedunderthischapter.
(c) If the taxcreditunder this sectionexceeds the taxpayer’s income tax liability, theexcessofcreditsoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.Allclaims,includinganyamendedclaims,fortaxcreditsunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(d) Toqualifyforthistaxcredit,aproductionshall:(1) Meetthedefinitionofaqualifiedproductionspecifiedinsubsection(m);(2) Havequalifiedproductioncoststotalingatleast$200,000;(3) ProvidetheStateaqualifiedHawaiipromotion,whichshallbeataminimum,ashared-card,end-title
screencredit,whereapplicable;(4) Provideevidenceofreasonableeffortstohirelocaltalentandcrew;(5) Provideevidencewhenmakinganyclaimforproductsorservicesacquiredorrenderedoutsideofthis
StatethatreasonableeffortswereunsuccessfultosecureandusecomparableproductsorserviceswithinthisState;
(6) Provideevidenceoffinancialorin-kindcontributionsoreducationalorworkforcedevelopmentefforts,inpartnershipwithrelatedlocalindustrylabororganizations,educationalinstitutions,orboth,towardthefurtheranceofthelocalfilmandtelevisionanddigitalmediaindustries.
(e) OnorafterJuly1,2006,noqualifiedproductioncostthathasbeenfinancedbyinvestmentsforwhichacreditwasclaimedbyanytaxpayerpursuanttosection235-110.9iseligibleforcreditsunderthissection.
(f) Toreceivethetaxcredit,thetaxpayershallfirstprequalifytheproductionforthecreditbyregisteringwiththedepartmentofbusiness,economicdevelopment,andtourismduringthedevelopmentorpreproductionstage.
§235-17 INCOME TAX LAW
CHAPTER235,Page36(UnofficialCompilation)
(g) Thedirectoroftaxationshallprepareformsasmaybenecessarytoclaimacreditunderthissection.Thedirectormayalsorequirethetaxpayertofurnishinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.
(h) Everytaxpayerclaimingataxcreditunderthissectionforaqualifiedproductionshall,nolaterthanninetydaysfollowingtheendofeachtaxableyear inwhichqualifiedproductioncostswereexpended,submitawritten,sworn statement to the department of business, economic development, and tourism, togetherwith a verificationreviewbyaqualifiedcertifiedpublicaccountantusingproceduresprescribedbythedepartmentofbusiness,economicdevelopment,andtourism,identifying:
(1) Allqualifiedproductioncostsasprovidedbysubsection(a),ifany,incurredintheprevioustaxableyear;(2) Theamountoftaxcreditsclaimedpursuanttothissection,ifany,intheprevioustaxableyear;and(3) Thenumberoftotalhiresversusthenumberoflocalhiresbycategoryandbycounty.
This information may be reported from the department of business, economic development, and tourism to thelegislatureinredactedformpursuanttosubsection(i)(4).
(i) Thedepartmentofbusiness,economicdevelopment,andtourismshall:(1) Maintainrecordsofthenamesofthetaxpayersandqualifiedproductionsthereofclaimingthetaxcredits
undersubsection(a);(2) Obtainandtotaltheaggregateamountsofallqualifiedproductioncostsperqualifiedproductionandper
qualifiedproductionpertaxableyear;(3) Providealettertothedirectoroftaxationspecifyingtheamountofthetaxcreditperqualifiedproduction
foreachtaxableyearthatataxcreditisclaimedandthecumulativeamountofthetaxcreditforallyearsclaimed;and
(4) Submitareporttothelegislaturenolaterthantwentydayspriortotheconveningofeachregularsessiondetailingthenon-aggregatedqualifiedproductioncoststhatformthebasisofthetaxcreditclaimsandexpenditures,itemizedbytaxpayer,inaredactedformattopreservetheconfidentialityofthetaxpayersclaimingthecredit.
Uponeachdeterminationrequiredunderthissubsection,thedepartmentofbusiness,economicdevelopment,andtourismshallissuealettertothetaxpayer,regardingthequalifiedproduction,specifyingthequalifiedproductioncostsand the taxcreditamountqualified for ineach taxableyeara taxcredit isclaimed.The taxpayer foreachqualifiedproductionshallfiletheletterwiththetaxpayer’staxreturnforthequalifiedproductiontothedepartmentoftaxation.Notwithstandingtheauthorityofthedepartmentofbusiness,economicdevelopment,andtourismunderthissection,thedirectoroftaxationmayauditandadjustthetaxcreditamounttoconformtotheinformationfiledbythetaxpayer.
(j) Totaltaxcreditsclaimedperqualifiedproductionshallnotexceed$15,000,000.(k) Qualifiedproductionsshallcomplywithsubsections(d),(e),(f),and(h).(l) The total amount of tax credits allowed under this section in any particular year shall be $35,000,000;
however, if the totalamountofcreditsapplied for inanyparticularyearexceeds theaggregateamountofcreditsallowedforsuchyearunderthissection,theexcessshallbetreatedashavingbeenappliedforinthesubsequentyearandshallbeclaimedinsuchyear;providedthatnoexcessshallbeallowedtobeclaimedafterDecember31,2025.
(m)Forthepurposesofthissection:“Commercial”:(1) Meansanadvertisingmessagethatisfilmedusingfilm,videotape,ordigitalmedia,fordisseminationvia
televisionbroadcastortheatricaldistribution;(2) Includesaseriesofadvertisingmessagesifallpartsareproducedatthesametimeoverthecourseofsix
consecutiveweeks;and(3) DoesnotincludeanadvertisingmessagewithInternet-onlydistribution.
“Digitalmedia”meansproductionmethods andplatformsdirectly related to the creationof cinematic imageryandcontent,specificallyusingdigitalmeans,includingbutnotlimitedtodigitalcameras,digitalsoundequipment,andcomputers,tobedeliveredviafilm,videotape,interactivegameplatform,orotherdigitaldistributionmedia.
“Post-production”meansproductionactivitiesandservicesconductedafterprincipalphotographyiscompleted,includingbutnotlimitedtoediting,filmandvideotransfers,duplication,transcoding,dubbing,subtitling,credits,closedcaptioning,audioproduction,specialeffects(visualandsound),graphics,andanimation.
“Production”meansaseriesofactivitiesthataredirectlyrelatedtothecreationofvisualandcinematicimagerytobedeliveredviafilm,videotape,ordigitalmediaand tobesold,distributed,ordisplayedasentertainmentor theadvertisementofproductsformasspublicconsumption,includingbutnotlimitedtoscripting,casting,setdesignandconstruction,transportation,videography,photography,soundrecording,interactivegamedesign,andpost-production.
“Qualifiedproduction”:(1) Meansaproduction,withexpendituresinthestate,forthetotalorpartialproductionofafeature-length
motion picture, short film, made-for-television movie, commercial, music video, interactive game,televisionseriespilot,singleseason(uptotwenty-twoepisodes)ofatelevisionseriesregularlyfilmedinthestate(ifthenumberofepisodespersingleseasonexceedstwenty-two,additionalepisodesforthesameseasonshallconstituteaseparatequalifiedproduction),televisionspecial,singletelevisionepisodethatis
INCOME TAX LAW §235-17
CHAPTER235,Page37(UnofficialCompilation)
notpartofatelevisionseriesregularlyfilmedorbasedinthestate,nationalmagazineshow,ornationaltalkshow.Forthepurposesofsubsections(d)and(j),eachoftheaforementionedqualifiedproductioncategoriesshallconstituteseparate,individualqualifiedproductions;and
(2) Doesnotinclude:(A) News;(B) Publicaffairsprograms;(C) Non-nationalmagazineortalkshows;(D) Televisedsportingeventsoractivities;(E) Productionsthatsolicitfunds;(F) Productionsproducedprimarilyforindustrial,corporate,institutional,orotherprivatepurposes;and(G) Productionsthatincludeanymaterialorperformanceprohibitedbychapter712.
“Qualifiedproductioncosts”meansthecostsincurredbyaqualifiedproductionwithinthestatethataresubjecttothegeneralexcisetaxunderchapter237orincometaxunderthischapterandthathavenotbeenfinancedbyanyinvestmentsforwhichacreditwasorwillbeclaimedpursuanttosection235-110.9.Qualifiedproductioncostsincludebutarenotlimitedto:
(1) Costsincurredduringpreproductionsuchaslocationscoutingandrelatedservices;(2) Costsofsetconstructionandoperations,purchasesorrentalsofwardrobe,props,accessories,food,office
supplies,transportation,equipment,andrelatedservices;(3) Wagesorsalariesofcast,crew,andmusicians;(4) Costsofphotography,soundsynchronization,lighting,andrelatedservices;(5) Costsofediting,visualeffects,music,otherpost-production,andrelatedservices;(6) Rentalsandfeesforuseoflocalfacilitiesandlocations,includingrentalsandfeesforuseofstateand
countyfacilitiesandlocationsthatarenotsubjecttogeneralexcisetaxunderchapter237orincometaxunderthischapter;
(7) Rentalsofvehiclesandlodgingforcastandcrew;(8) AirfareforflightstoorfromHawaii,andinterislandflights;(9) Insuranceandbonding;(10)ShippingofequipmentandsuppliestoorfromHawaii,andinterislandshipments;and(11)Otherdirectproductioncostsspecifiedbythedepartmentinconsultationwiththedepartmentofbusiness,
economicdevelopment,andtourism;providedthatanygovernment-imposedfines,penalties,orinterestthatareincurredbyaqualifiedproductionwithintheStateshallnotbe“qualifiedproductioncosts.[L1997,c107,§1;amL1998,c156,§11;amL2006,c88,§2;amL2013,c89,§2;amL2017,c143,§2]
Note
AppliestotaxableyearsbeginningafterDecember31,1996.L1997,c107,§7.The1998amendmentappliestotaxableyearsbeginningafterDecember31,1998.L1998,c156,§13.The2006amendmentiseffectiveJuly1,2006andappliestoqualifiedproductioncostsincurredonorafterJuly1,2006,andbeforeJanuary1,
2016.Act88shallberepealedonJanuary1,2016,andsection235-17,HRS,shallbereenactedintheforminwhichitreadonthedaybeforetheeffectivedateoftheAct.
The2013amendmentiseffectiveonJuly1,2013,andappliestotaxableyearsbeginningafterDecember31,2012.L2013,c89,§6.L2013,c89,§3amendsAct88,L2006§4:“SECTION4.ThisActshalltakeeffectonJuly1,2006;providedthat:(1)Section2ofthisActshallapplytoqualifiedproductioncostsincurredonorafterJuly1,2006,andbeforeJanuary1,[2016;]2019;and(2)ThisActshallberepealedonJanuary1,[2016,]2019,andsection235-17,HawaiiRevisedStatutes,shallbereenactedintheforminwhich
itreadonthedaybeforetheeffectivedateofthisAct.”The2017amendmentiseffectiveonDecember31,2018,andappliestotaxableyearsbeginningafterDecember31,2018.L2017,c143,§9.L2017,c143,§3amendsAct88,L2006§4andAct89,L2013§4:“SECTION4.ThisActshalltakeeffectonJuly1,2006;providedthat:(1)Section2ofthisActshallapplytoqualifiedproductioncostsincurredonorafterJuly1,2006,andbeforeJanuary1,[2016;][2019;]2026
and(2)ThisActshallberepealedonJanuary1,[2016,][2019,]2026,andsection235-17,HawaiiRevisedStatutes,shallbereenactedintheform
inwhichitreadonthedaybeforetheeffectivedateofthisAct.”
Cross Reference
TaxInformationReleaseNo.98-1,“IncomeTaxExemptionandCreditsAvailableforPersonsEngagedintheMotionPictureandTelevisionFilmProductionBusiness”SupersededbyTIR2006-02relatingtoHRS§235-17.
TaxInformationReleaseNo.2006-02,“RefundableIncomeTaxCreditforPersonsEngagedintheMotionPicture,Television,andDigitalMediaProductionBusiness”
TaxInformationReleaseNo.2008-02,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
TaxInformationReleaseNo.2009-05,“AdvancedNoticeofProposedAdministrativeRulesRelatingtotheTaxationoftheMotionPictureandTelevisionFilmProductionIndustry”
TaxInformationReleaseNo.2010-04,“Interpretationof“QualifiedProduction”forpurposesofTaxCreditClaimsundertheMotionPicture,DigitalMedia,andFilmProductionIncomeTaxCredit,HRS§235-17”
§235-17.5 INCOME TAX LAW
CHAPTER235,Page38(UnofficialCompilation)
§235-17.5 Capital infrastructure tax credit.(a)Thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapteracapitalinfrastructuretaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecapitalinfrastructurecostswerepaidorincurred.
(b) Forthepurposeofthissection:“Capitalinfrastructurecosts”meanscapitalexpenditures,asusedinsection263oftheInternalRevenueCode
andtheregulationspromulgatedthereunder,orcapitalexpendituresforrealproperty,fixtures,structures,machinery,equipment,orcapitalassetsthatarepaidorincurredinconnectionwiththedisplacedtenant’smoveofthetenant’scurrent active trade or business to the tenant’s new location within Honolulu harbor; provided that the capitalinfrastructurecostsshallnotincludeamountsforwhichanothercreditisclaimedoranyamountsreceivedinanyformfromtheState.
“Netincometaxliability”meansincometaxliabilityreducedbyallothercreditsallowedunderthischapter.“Qualifiedinfrastructuretenant”meansabusiness:
(1) That currently owns capital or property ormaintains an office, operations, or facilities at the formerKapalamamilitaryreservationsite;
(2) Whoseprincipalbusinessismaritime,andwaterfrontdependent,andisincludedundertheState’splantorelocatethebusinesstopierstwenty-fourthroughtwenty-eightwithinHonoluluharbor;and
(3) ThatwillbedisplacedandrelocatedbytheStatepursuanttotheKapalamacontainerterminalproject.(c) Theamountofthetaxcreditshallbeequaltofiftypercentofthecapitalinfrastructurecostspaidorincurred
by thequalified infrastructure tenantduring the taxableyear,up toamaximumcreditof$2,500,000perqualifiedinfrastructuretenantpertaxableyear.Ifthecapitalinfrastructurecostspaidorincurredbythequalifiedinfrastructuretenantbusinessresultinataxcreditinexcessof$2,500,000inanytaxableyear,theexcesscapitalinfrastructurecostsmaybecarriedovertoasubsequenttaxyearoryears,untilexhausted,forgenerationofthecredit;providedthat:
(1) Aqualifiedinfrastructuretenantmayformaspecialpurposeentityforthepurposesofraisinginvestorcapitalandclaimingthecreditonbehalfofthequalifiedinfrastructuretenant;
(2) Thequalifiedinfrastructuretenant,togetherwithallofitsspecialpurposeentities,includingallpartnersandmembersof thequalified infrastructure tenantand itsspecialpurposeentities,shallnotclaimanycreditinanyonetaxableyearthatexceeds$2,500,000;and
(3) InnoeventshallaqualifiedinfrastructuretenantoranyofitsspecialpurposeentitiesoranyothertaxpayerclaimacreditunderthissectionafterDecember31,2019.
(d) Inthecaseofanentitytaxedasapartnership,creditshallbedeterminedattheentitylevel,butdistributionandshareofthecreditmaybedeterminednotwithstandingsection704orsection706oftheInternalRevenueCode.
(e) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthetaxcreditoverliabilitymaybeusedasacreditagainstthetaxpayer’snetincometaxliabilityinsubsequentyearsuntilexhausted.Allclaims,includingamendedclaims,forataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(f) ThissectionshallnotapplytotaxableyearsbeginningafterDecember31,2019.(g) Anycreditclaimedunderthissectionshallberecapturedfollowingthecloseofthetaxableyearforwhichthe
creditisclaimedif:(1) Withinthreeyears:
(A) ThequalifiedinfrastructuretenantfailstocontinuethelineofbusinessitconductedasofJuly1,2014;or
(B) Theinterestinthequalifiedinfrastructuretenant,whetherinwholeorinpart,hasbeensold,exchanged,withdrawn,orotherwisedisposedofbythetaxpayerclaimingacreditunderthissection;or
(2) ThequalifiedinfrastructuretenantfailstorelocatefromtheformerKapalamamilitaryreservationsitetoanother location, pursuant to a leasewith the department of transportation,within ninety days of theexecutionofthelease.
Therecaptureshallbeequaltoonehundredpercentoftheamountofthetotaltaxcreditclaimedunderthissectionintheprecedingfivetaxableyears,andshallbeaddedtothetaxpayer’staxliabilityforthetaxableyearinwhichtherecaptureoccurspursuanttothissubsection.
(h) Thedirectoroftaxationshallprepareanyformsthatmaybenecessarytoclaimacreditunderthissection.Thedirectormayalsorequirethetaxpayertofurnishinformationtoascertainthevalidityoftheclaimforcreditmadeunder this section.Thedirectorof taxationmayadopt rules to effectuate thepurposesof this sectionpursuant tochapter91.”
(i) Anytaxpayerclaimingataxcreditunderthissectionshall,withinninetydaysoftheendofthecalendaryearinwhichcostsforwhichthecreditisproperlyclaimable,submitthefollowinginformationtothedepartment’oftaxation:
(1) Theamountoftheeligiblecostsforthatyearforwhichthetaxcreditmaybeclaimed;and
INCOME TAX LAW [§235- ]
CHAPTER235,Page39(UnofficialCompilation)
(2) Thequalifiedinfrastructuretenantincurringthecosts.Failuretotimelysubmittheinformationshallbesubjecttoapenaltyof$5,000permonthorafractionthereof,nottoexceed$25,000.[L2014,c200,§2;amL2017,c213,§1]
Note
SectionappliestotaxableyearsbeginningafterDecember31,2013.L2014,c200,§6.
[§235-18] Deposit beverage container deposit exemption.ThischaptershallnotapplytoamountsreceivedasadepositbeveragecontainerdepositcollectedunderpartVIIIofchapter342G.[L2004,c241,§1]
[§235-19] Exceptional trees; tax deduction. (a)Subjecttosubsection(b),thereshallbeallowedasadeductionfromgrossincometheamount,nottoexceed$3,000perexceptionaltree,foramountspaid,excludinginterestpaidoraccruedthereon,duringthetaxableyearbyanindividualtaxpayerforexpenditurestomaintain,onthetaxpayer’srealproperty,eachexceptionaltreethathasbeendesignatedbythecountyarboristadvisorycommitteeunderchapter58asanexceptionaltree.
(b) Nodeduction shall be allowed to exceed the amountof expendituresdeemed reasonablynecessaryby acertifiedarborist.Nodeductionshallbeallowedinmorethanonetaxableyearoutofeverythreeconsecutivetaxableyears.
(c) Thedirectoroftaxationshallpreparesuchformsasmaybenecessarytoclaimataxdeductionunderthissection,mayrequireproofoftheclaimforthetaxdeduction,includinganaffidavitsignedbythecertifiedarborist,andmayadoptrulespursuanttochapter91.
(d) Forthepurposeofthissection,theterm“exceptionaltree”shallhavethesamemeaningasdefinedinsection58-3.[L2004,c195,§2]
Note
SectionappliestoamountspaidintaxableyearsbeginningafterDecember31,2003.L2004,c195,§4.
[§235-20] Comfort letters; authority to assess fees; established. Thedepartmentmayassessandcollectafeefortheissuanceofanycomfortletterofthedepartment.Allfeescollectedunderthissectionshallbedepositedintothetaxadministrationspecialfundestablishedundersection235-20.5.[L2004,c215,ptof§3]
Note
L2004,c215,§13provides:“SECTION13.AnycomfortletterorotherwrittencommunicationissuedbythedepartmentoftaxationpriortotheeffectivedateofthisAct
[July1,2004]maycontinuetoberelieduponbythetaxpayertowhomsuchcomfortletterorotherwrittencommunicationwasissued(includingthequalifiedhightechnologybusinessanditsinvestors)andshallberespectedbythedepartmentoftaxation,notwithstandinganyoftheamendmentscontainedinthisAct,providedthattheassumptionsandrepresentationscontainedinsuchcomfortletterorotherwrittencommunicationremaintrueandaccurateinallmaterialrespects.Thehightechnologyprovisionsofsections235-2.4,235-2.45,235-7.3,235-9.5,235-110.51,235-110.9,235-110.91,235-111.5,and237-23.5,HawaiiRevisedStatutes,ineffectatthetimeofthecomfortletterorotherwrittencommunicationshallcontinuetoapplywithoutregardtoanyamendmentstosuchprovisionsunderthisActwithrespecttoanytransactionsorinvestmentsmadeorcommittedpriortotheeffectivedateofthisAct[July1,2004].”
§235-20.5 Tax administration special fund; established. (a)Thereisestablishedataxadministrationspecialfund,intowhichshallbedeposited:
(1) Feescollectedundersections235-20,235-110.9,and235-110.91;(2) Revenuescollectedbythespecialenforcementsectionpursuanttosection231-85;providedthatineach
fiscalyear,ofthetotalrevenuescollectedbythespecialenforcementsection,allrevenuesinexcessof$700,000shallbedepositedintothegeneralfund;and
(3) Finesassessedpursuanttosection237D-4.(b) Themoneysinthefundshallbeusedforthefollowingpurposes:
(1) Issuingcomfortletters,letterrulings,writtenopinions,andotherguidancetotaxpayers;(2) Issuingcertificatesundersections235-110.9and235-110.91;(3) Administeringtheoperationsofthespecialenforcementsection;and(4) Developing, implementing,andproviding taxpayereducationprograms, including taxpublications. [L
2004,c215,ptof§3;amL2007,c206,§3;amL2009,c134,§5;amL2014,c89,§1;amL2015,c204,§2]
[§235- ] Tax credit for flood victims. [Note: section is temporary and uncodified, no title was given section, effective for taxable years after December 31, 2003 and ending before January 1, 2007] (a)ThereshallbeallowedtoeachtaxpayerwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyanothertaxpayerforfederalorHawaiistateindividualincometaxpurposes,whofilesanetincometaxreturnforataxableyear,aone-timenonrefundable
18-235-20.5
[§235- ] INCOME TAX LAW
CHAPTER235,Page40(UnofficialCompilation)
floodvictimtaxcredit,exceptasotherwiseprovidedinthisAct.Thetaxcreditshallbedeductiblefromthetaxpayer’snetincometaxliabilityimposedbychapter235.
(b) Theamountofthetaxcreditshallbetenpercentoftheamountexpendedbythetaxpayerforcostsdirectlyrelatedtothedamagedirectlycausedbyheavyrainandfloodingoccurringonthedatesspecifiedinsubsection(c)tothetaxpayer’srealorpersonalproperty;providedthat:
(1) The expenses or costs are not reimbursable by insurance proceeds or disaster relief payments fromgovernmentagenciesornon-profitorganizations;
(2) Thetaxcreditshallnotexceed$10,000pertaxpayer;and(3) Norefundasprovidedinsubsection(f)orpaymentonaccountofthetaxcreditallowedbythisActshall
bemadeforamountslessthan$1.(c) Thetaxcreditshallapplytoataxpayerwhosuffereddamagetothetaxpayer’srealorpersonalpropertythat
issituatedintheState,havingoccurred:(1) OnOctober30of2004inManoa,Oahu;or(2) DuringFebruary20toApril9of2006inKauai,Hawaii,MauiandHonolulucounties.
(d) Toqualifyfortheincometaxcredit,thetaxpayershallcertifytothedepartmentoftaxationthatthetaxpayerisincompliancewithallapplicablefederal,state,andcountystatutes,rules,andregulations.
(e) Toqualifyfortheincometaxcredit,thetaxpayershallsignastatementandprovideinformationdeterminedbythedepartmentoftaxationasnecessarytoclaimthecreditunderpenaltiesofperjury.
(f) Ifthetaxcreditunderthissectionexceedsthetaxpayer’snetincometaxliability,anyexcessofthetaxcreditmaybeusedasacreditagainstthetaxpayer’sincometaxliabilityforthetaxableyearthecreditisclaimed;providedthat tax credits properly claimedby a taxpayer shall be refunded to the taxpayer after being credited against thetaxpayer’sincometaxliabilityforthetaxableyear,ifthetaxpayerqualifiesunderoneofthefollowingtests:
(1) Allofthetaxpayer’sincomeisexemptfromtaxationundersection235-7(a)(2)orsection235-7(a)(3);or(2) Thetaxpayer’sadjustedgrossincomeis$20,000orless.
(g) Inthecaseofapartnership,Scorporation,estate,trust,orassociationofapartmentowners,thetaxcreditallowableisforexpensesincurredandpaidforbytheentityforthetaxableyear.Thecostuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.
(h) Ifadeductionistakenundersection179(withrespecttoelectiontoexpensecertaindepreciablebusinessassets) of the InternalRevenueCodeof 1986, as amended, no tax credit shall be allowed for that portionof theexpensesforwhichthedeductionistaken.
Thebasisofpropertyshallnotbeincreasedbyanyamountforwhichthecreditisallowableandclaimed.Inthealternative, the taxpayershall treat theamountof thecreditallowableandclaimedasa taxable incomeitemfor thetaxableyearinwhichitisproperlyrecognizedunderthemethodofaccountingusedtocomputetaxableincome.
(i) Notaxpayerwhoclaimsthetaxcreditunderthissectionshallclaimanyothercreditordeductionforthesamelossesorotherexpensesorcosts.
(j) Every claim, including amended claims, for the tax credit under this section shall be filed on or beforeDecember31,2007.Failuretomeetthefilingrequirementsofthissubsectionshallconstituteawaiveroftherighttoclaimthetaxcredit.
(k) Ifatanytimeafterclaimingthetaxcredit,thetaxpayernolongerqualifiesforthecreditbecauseofsubsequentrecoveryforexpensesutilizedtocalculatethecredit,thecreditsclaimedshallberecaptured.Therecaptureshallbeequaltoonehundredpercentofthetaxcreditsthatweresubsequentlyineligibleasaresultoflaterrecovery.Theamountoftherecapturedtaxcreditsshallbeaddedtothetaxpayer’staxliabilityforthetaxableyearinwhichtherecaptureoccurs.
(l) Inthecaseoffraud,makingofafalsestatement,orwillfuldisregardforthefacts,associatedwithmakingareturnorotherwiseclaimingthetaxcredit,thereshallbeaddedtotheamountwrongfullyclaimedonareturnapenaltyof50percentoftheamountofsuchcreditclaimed.
(m)Thedirectoroftaxationshallprepareanyformsasmaybenecessarytoclaimataxcreditunderthissection,mayrequireproofoftheclaimforthetaxcredit,andmayadoptruleswithoutregardtochapter91toeffectuatethepurposesofthissection.[L2006,c110,§4]
[§235- ] [Note: section is temporary and uncodified, no title was given section, shall apply to the taxable year 2007.] L2007,c210,§2 (a)Thereshallbeallowedforeachresidentindividualtaxpayerforthetaxableyear2007,arefundableone-timegeneralincometaxcreditthatshallbedeductedfromincometaxliabilitycomputedunderchapter235,HawaiiRevisedStatutes;providedthatnorefundsorpaymentsonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.
(b) Thereshallbeallowedtoahusbandandwifewhofileajointreturnaone-timegeneralincometaxcreditinaccordancewiththefollowingtable:Iftheadjustedgrossincomeis: Thecreditshallbe:Under$5,000 $160
INCOME TAX LAW [§235- ]
CHAPTER235,Page41(UnofficialCompilation)
$5,000andoverbutunder$10,000 150$10,000andoverbutunder$15,000 140$15,000andoverbutunder$20,000 130$20,000andoverbutunder$30,000 120$30,000andoverbutunder$40,000 110$40,000andoverbutunder$50,000 100$50,000andoverbutunder$60,000 90$60,000andover 0
(c) Thereshallbeallowedtoeverytaxpayerfilingaheadofhouseholdtaxreturnaone-timegeneralincometaxcreditinaccordancewiththefollowingtable:Iftheadjustedgrossincomeis: Thecreditshallbe:Under$5,000 $140$5,000andoverbutunder$10,000 130$10,000andoverbutunder$15,000 120$15,000andoverbutunder$20,000 110$20,000andoverbutunder$30,000 100$30,000andoverbutunder$40,000 90$40,000andoverbutunder$50,000 80$50,000andoverbutunder$60,000 70$60,000andover 0
(d) There shall be allowed to every (1) unmarried individual (other than a surviving spouse, or the head ofhousehold)and(2)marriedindividualfilingaseparatetaxreturnaone-timegeneralincometaxcreditinaccordancewiththefollowingtable:Iftheadjustedgrossincomeis: Thecreditshallbe:Under$5,000 $65$5,000andoverbutunder$10,000 55$10,000andoverbutunder$15,000 45$15,000andoverbutunder$20,000 35$20,000andoverbutunder$30,000 25$30,000andover 0
L2007,c210,§3(a)Eachtaxpayerthatclaimstheone-timegeneralincometaxcreditshallhavebeenaresidentofthestate,asdefinedinsection235-1,HawaiiRevisedStatutes,foratleastninemonthsregardlessofwhethertheresidentwasphysicallyinthestateforninemonths.
(b) Theone-timegeneralincometaxcreditshallnotbeavailableto:(1) Anypersonwhohasbeenconvictedofa felonyandwhohasbeencommitted toprisonandhasbeen
physicallyconfinedforthefulltaxableyear;(2) Anypersonwhowouldotherwisebeeligibletobeclaimedasadependentbutwhohasbeencommittedto
ayouthcorrectionalfacilityandhasresidedatthefacilityforthefulltaxableyear;or(3) Anymisdemeanantwhohasbeencommittedtojailandhasbeenphysicallyconfinedforthefulltaxable
year.(c) ThetaxcreditclaimedbyaresidenttaxpayerpursuanttothisActshallbedeductiblefromthetaxpayer’s
individual income tax liability for the taxableyear2007. If the taxcreditclaimedbya resident taxpayerexceedstheamountofincometaxpaymentduefromtheresidenttaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtotheresidenttaxpayer;providedthatataxcreditproperlyclaimedbyaresidentindividualwhohasnoincometaxliabilityshallbepaidtotheresidentindividual.
(d) AllclaimsfortaxcreditsunderthisAct,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththisfilingrequirementshallconstituteawaiveroftherighttoclaimthecredit.
(e) Ahusbandandwifewhodonotfileajointtaxreturn,shallonlybeentitledtoclaimtheone-timegeneralincometaxcredittotheextentthattheywouldhavebeenentitledtotheone-timegeneralincometaxcredithadtheyfiledajointtaxreturn.
(f) ThetaxrefundpaidtoaresidenttaxpayerpursuanttothisActshallnotbeincludedintheresidenttaxpayer’sgrossincome.
(g) ForthepurposethisAct,“adjustedgrossincome”meansadjustedgrossincomeasdefinedbytheInternalRevenueCode.
Note
Act210appliestothetaxableyearbeginningafterDecember31,2006.L2007,c210,§5.
[§235- ] INCOME TAX LAW
CHAPTER235,Page42(UnofficialCompilation)
[§235- ] [Note: section is temporary and uncodified, no title was given section, shall apply to the taxable year 2008.] L2008,c58,§2 (a)Thereshallbeallowedeachresidentindividualtaxpayerwhofilesanindividualincometaxreturnforthetaxableyear2008andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyanothertaxpayerforfederalorHawaiistateindividualincometaxpurposes,ageneralincometaxcreditof$1,whichshallbedeductedfromincometaxliabilitycomputedunderchapter235,HawaiiRevisedStatutes;providedthataresidentindividualwhohasnoincomeornoincometaxableunderchapter235,HawaiiRevisedStatutes,andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyataxpayerforfederalorHawaiistateindividualincometaxpurposesmayclaimthiscredit.
Eachresidentindividualtaxpayermayclaimthegeneralincometaxcreditmultipliedbythenumberofqualifiedexemptionstowhichthetaxpayerisentitled.
Eachpersonforwhomthegeneralincometaxcreditisclaimedshallhavebeenaresidentofthestate,asdefinedin section235-1,HawaiiRevisedStatutes, forat leastninemonths regardlessofwhether thequalified residentwasphysicallyinthestateforninemonths.Multipleexemptionsshallnotbegrantedforthegeneralincometaxcreditbecauseofageordeficienciesinvision,hearing,orotherdisability.
Thegeneralincometaxcreditshallnotbeavailableto:(1) Anypersonwhohasbeenconvictedofa felonyandwhohasbeencommitted toprisonandhasbeen
physicallyconfinedforthefulltaxableyear;(2) Anypersonwhowouldotherwisebeeligibletobeclaimedasadependentbutwhohasbeencommittedto
ayouthcorrectionalfacilityandhasresidedatthefacilityforthefulltaxableyear;or(3) Anymisdemeanantwhohasbeencommittedtojailandhasbeenphysicallyconfinedforthefulltaxable
year.ThetaxcreditclaimedbyaresidenttaxpayerpursuanttothisActshallbedeductiblefromtheresidenttaxpayer’s
individualincometaxliabilityforthetaxableyear2008.Ifthetaxcreditclaimedbyaresidenttaxpayerexceedstheamountofincometaxpaymentduefromtheresidenttaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtotheresident taxpayer;providedthata taxcreditproperlyclaimedbyaresident individualwhohasnoincometaxliabilityshallbepaidtotheresidentindividual.
AllclaimsfortaxcreditsunderthisAct,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththisfilingrequirementshallconstituteawaiveroftherighttoclaimthecredit.
(b) ThissectionimplementstheprovisionsofarticleVII,section6,oftheHawaiiConstitution,enactedbythe1978constitutionalconvention,whichreadsasfollows:
DISPOSITIONOFEXCESSREVENUES
Section 6.Wheneverthestategeneralfundbalanceatthecloseofeachoftwosuccessivefiscalyearsexceedsfivepercentofgeneralfundrevenuesforeachofthetwofiscalyears,thelegislatureinthenextregularsessionshallprovideforataxrefundortaxcredittothetaxpayersoftheState,asprovidedbylaw.[L2008,c58,§2.]
[§235- ] [Note: section is temporary and uncodified, no title was given section, shall apply to the taxable year 2009.]L2009,c84,§2 (a)Thereshallbeallowedtoeachresidentindividualtaxpayer,whofilesanindividualincometaxreturnforthetaxableyear2009,andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyanothertaxpayerforfederalorHawaiistateindividualincometaxpurposes,ageneralincometaxcreditof$1thatshallbedeductedfromincometaxliabilitycomputedunderchapter235,HawaiiRevisedStatutes;providedthataresidentindividualwhohasnoincomeornoincometaxableunderchapter235,HawaiiRevisedStatutes,andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyataxpayerforfederalorHawaiistateindividualincometaxpurposes,mayclaimthiscredit.
Eachresidentindividualtaxpayermayclaimthegeneralincometaxcreditmultipliedbythenumberofqualifiedexemptionstowhichthetaxpayerisentitled.
Eachpersonforwhomthegeneralincometaxcreditisclaimedshallhavebeenaresidentofthestate,asdefinedin section235-1,HawaiiRevisedStatutes, forat leastninemonths regardlessofwhether thequalified residentwasphysicallyinthestateforninemonths.Multipleexemptionsshallnotbegrantedforthegeneralincometaxcreditbecauseofageordeficienciesinvision,hearing,orotherdisability.
Thegeneralincometaxcreditshallnotbeavailableto:(1) Anypersonwhohasbeenconvictedofa felonyandwhohasbeencommitted toprisonandhasbeen
physicallyconfinedforthefulltaxableyear;(2) Anypersonwhowouldotherwisebeeligibletobeclaimedasadependentbutwhohasbeencommittedto
ayouthcorrectionalfacilityandhasresidedatthefacilityforthefulltaxableyear;or(3) Anymisdemeanantwhohasbeencommittedtojailandhasbeenphysicallyconfinedforthefulltaxable
year.
INCOME TAX LAW §235-23
CHAPTER235,Page43(UnofficialCompilation)
ThetaxcreditclaimedbyaresidenttaxpayerpursuanttothisActshallbedeductiblefromtheresidenttaxpayer’sindividualincometaxliabilityforthetaxableyear2009.Ifthetaxcreditclaimedbyaresidenttaxpayerexceedstheamountofincometaxpaymentduefromtheresidenttaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtotheresident taxpayer;providedthata taxcreditproperlyclaimedbyaresident individualwhohasnoincometaxliabilityshallbepaidtotheresidentindividual.
AllclaimsfortaxcreditsunderthisAct,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththisfilingrequirementshallconstituteawaiveroftherighttoclaimthecredit.
(b)ThissectionimplementstheprovisionsofarticleVII,section6,oftheHawaiiConstitution,proposedbythe1978constitutionalconvention,andenactedbythevotersonNovember7,1978,whichreadsasfollows:
DISPOSITIONOFEXCESSREVENUES
Section 6.Wheneverthestategeneralfundbalanceatthecloseofeachoftwosuccessivefiscalyearsexceedsfivepercentofgeneralfundrevenuesforeachofthetwofiscalyears,thelegislatureinthenextregularsessionshallprovideforataxrefundortaxcredittothetaxpayersoftheState,asprovidedbylaw.[L2009,c84,§2.]
§235- Itemized deductions; limitations. [Note: section is temporary and uncodified, shall apply to taxable years beginning after December 31, 2010 and shall be repealed on January 1, 2016 and not apply to taxable years beginning after December 31, 2015. L 2011, c 97, §6] Notwithstandinganyother law to thecontrary, itemized taxdeductionsclaimedpursuanttothischaptershallnotexceedthelesserof:
(1) Thelimitationonitemizeddeductionsundersection68oftheInternalRevenueCode;or(2) Anyofthefollowingthatmaybeapplicable:
(A) $25,000forataxpayerfilingasinglereturnoramarriedpersonfilingseparatelywithafederaladjustedgrossincomeof$100,000ormore;
(B) $37,500forataxpayerfilingasaheadofhouseholdwithafederaladjustedgrossincomeof$150,000ormore;and
(C) $50,000 for a taxpayerfilinga joint returnor as a surviving spousewith a federal adjustedgrossincomeof$200,000ormore;
provided that thecapamountsestablished in thisparagraphshallnotapply tocharitablecontributionsdeductibleunderthischapter.[L2011,c97,§3;amL2013,c256,§1]
PART II. UNIFORM DIVISION OF INCOME FOR TAX PURPOSES
§235-21 Definitions. Asusedinthispart,unlessthecontextotherwiserequires:“Businessincome”meansincomearisingfromtransactionsandactivityintheregularcourseofthetaxpayer’strade
orbusinessandincludesincomefromtangibleandintangiblepropertyiftheacquisition,management,anddispositionofthepropertyconstituteintegralpartsofthetaxpayer’sregulartradeorbusinessoperations.
“Commercialdomicile”meanstheprincipalplacefromwhichthetradeorbusinessofthetaxpayerisdirectedormanaged.
“Compensation”meanswages,salaries,commissions,andanyotherformofremunerationpaidtoemployeesforpersonalservices.
“Nonbusinessincome”meansallincomeotherthanbusinessincome.“Publicutility”hasthemeaninggiventhatterminsection269-1.“Sales”meansallgrossreceiptsofthetaxpayernotallocatedundersections235-24to235-28.“State”meansanystateof theUnitedStates, theDistrictofColumbia, theCommonwealthofPuertoRico,any
territoryorpossessionoftheUnitedStates,andanyforeigncountryorpoliticalsubdivisionthereof.[L1967,c33,ptof§1;HRS§235-21]
Revision Note
Numericdesignationsdeleted.
§235-22 Taxpayers affected. AnytaxpayerhavingincomefrombusinessactivitywhichistaxablebothwithinandwithoutthisState,otherthanactivityasapublicutilityortherenderingofpurelypersonalservicesbyanindividual,shallallocateandapportionthetaxpayer’snetincomeasprovidedinthispart.[L1967,c33,ptof§1;HRS§235-22;amimpL1984,c90,§1;gench1985]
§235-23 Taxable in another state. Forpurposesofallocationandapportionmentof incomeunder thispart, ataxpayeristaxableinanotherstateif:
18-235-21
18-235-22
18-235-23
§235-24 INCOME TAX LAW
CHAPTER235,Page44(UnofficialCompilation)
(1) Inthatstatethetaxpayerissubjecttoanetincometax,afranchisetaxmeasuredbynetincome,afranchisetaxfortheprivilegeofdoingbusiness,oracorporatestocktax,or
(2) Thatstatehasjurisdictiontosubjectthetaxpayertoanetincometaxregardlessofwhether,infact,thestatedoesordoesnot.[L1967,c33,ptof§1;HRS§235-23;amimpL1984,c90,§1;gench1985]
§235-24 Specified nonbusiness income. Rentsandroyaltiesfromrealortangiblepersonalproperty,capitalgains,interest,dividends,orpatentorcopyrightroyalties,totheextentthattheyconstitutenonbusinessincome,shallbeallocatedasprovidedinsections235-25to235-27.[L1967,c33,ptof§1;HRS§235-24]
§235-25 Rents; royalties. (a)NetrentsandroyaltiesfromrealpropertylocatedinthisStateareallocabletothisState.
(b) NetrentsandroyaltiesfromtangiblepersonalpropertyareallocabletothisState:(1) IfandtotheextentthatthepropertyisutilizedinthisState,or(2) Intheirentiretyifthetaxpayer’scommercialdomicileisinthisStateandthetaxpayerisnotorganized
underthelawsofortaxableinthestateinwhichthepropertyisutilized.(c) Theextentofutilizationoftangiblepersonalpropertyinastateisdeterminedbymultiplyingtherentsand
royaltiesbyafraction,thenumeratorofwhichisthenumberofdaysofphysicallocationofthepropertyinthestateduringtherentalorroyaltyperiodinthetaxableyearandthedenominatorofwhichisthenumberofdaysofphysicallocationofthepropertyeverywhereduringallrentalorroyaltyperiodsinthetaxableyear.Ifthephysicallocationofthepropertyduringtherentalorroyaltyperiodisunknownorunascertainablebythetaxpayer,tangiblepersonalproperty isutilized in thestate inwhich thepropertywas locatedat the time the rentalor royaltypayerobtainedpossession.[L1967,c33,ptof§1;HRS§235-25]
Cross Reference
TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
§235-26 Allocation of capital gains and losses. (a)CapitalgainsandlossesfromsalesofrealpropertylocatedinthisStateareallocabletothisState.
(b) CapitalgainsandlossesfromsalesoftangiblepersonalpropertyareallocabletothisStateif:(1) ThepropertyhadasitusinthisStateatthetimeofthesale;or(2) Thetaxpayer’scommercialdomicileisinthisStateandthetaxpayerisnottaxableinthestateinwhich
thepropertyhadasitus.(c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible
personalpropertyareallocabletothisStateifthetaxpayer’scommercialdomicileisinthisState.(d) GainorlossfromthesaleofapartnershipinterestisallocabletothisStateintheratiooftheoriginalcostof
partnershiptangiblepropertyintheStatetotheoriginalcostofpartnershiptangiblepropertyeverywhere,determinedatthetimeofthesale.Ifmorethanfiftypercentofthevalueofapartnership’sassetsconsistsofintangibles,gainorlossfromthesaleofthepartnershipinterestshallbeallocatedtothisStateinaccordancewiththesalesfactorofthepartnershipforitsfirstfulltaxperiodimmediatelyprecedingitstaxperiodduringwhichthepartnershipinterestwassold.[L1967,c33,ptof§1;HRS§235-26;amL1989,c19,§1]
Cross Reference
TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
§235-27 Allocation of interest and dividends. InterestanddividendsareallocabletothisStateifthetaxpayer’scommercialdomicileisinthisState.[L1967,c33,ptof§1;HRS§235-27]
§235-28 Allocation of patent and copyright royalties. (a)Patentandcopyright royaltiesareallocable to thisState:
(1) IfandtotheextentthatthepatentorcopyrightisutilizedbythepayerinthisState,or(2) Ifandtotheextentthatthepatentorcopyrightisutilizedbythepayerinastateinwhichthetaxpayeris
nottaxableandthetaxpayer’scommercialdomicileisinthisState.(b) Apatentisutilizedinastatetotheextentthatitisemployedinproduction,fabrication,manufacturing,or
otherprocessinginthestateortotheextentthatapatentedproductisproducedinthestate.Ifthebasisofreceiptsfrompatentroyaltiesdoesnotpermitallocationtostatesoriftheaccountingproceduresdonotreflectstatesofutilization,thepatentisutilizedinthestateinwhichthetaxpayer’scommercialdomicileislocated.
(c) Acopyrightisutilizedinastatetotheextentthatprintingorotherpublicationoriginatesinthestate.Ifthebasisofreceiptsfromcopyrightroyaltiesdoesnotpermitallocationtostatesoriftheaccountingproceduresdonotreflectstatesofutilization,thecopyrightisutilizedinthestateinwhichthetaxpayer’scommercialdomicileislocated.[L1967,c33,ptof§1;HRS§235-28]
INCOME TAX LAW §235-37
CHAPTER235,Page45(UnofficialCompilation)
Cross Reference
TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
§235-29 Apportionment of business income; percentage. AllbusinessincomeshallbeapportionedtothisStatebymultiplyingtheincomebyafraction,thenumeratorofwhichisthepropertyfactorplusthepayrollfactorplusthesalesfactor,andthedenominatorofwhichisthree.[L1967,c33,ptof§1;HRS§235-29]
§235-30 Apportionment; property factor. Thepropertyfactorisafraction,thenumeratorofwhichistheaveragevalueofthetaxpayer’srealandtangiblepersonalpropertyownedorrentedandusedinthisStateduringthetaxperiodandthedenominatorofwhichistheaveragevalueofallthetaxpayer’srealandtangiblepersonalpropertyownedorrentedandusedduringthetaxperiod.[L1967,c33,ptof§1;HRS§235-30]
§235-31 Apportionment; property factor; owned and used property. Propertyownedbythetaxpayerisvaluedatitsoriginalcost.Propertyrentedbythetaxpayerisvaluedateighttimesthenetannualrentalrate.Netannualrentalrateistheannualrentalratepaidbythetaxpayerlessanyannualrentalratereceivedbythetaxpayerfromsubrentals.[L1967,c33,ptof§1;HRS§235-31]
§235-32 Apportionment; property factor; average value. Theaveragevalueofpropertyshallbedeterminedbyaveragingthevaluesatthebeginningandendingofthetaxperiodbutthedirectoroftaxationmayrequiretheaveragingofmonthlyvaluesduringthetaxperiodifreasonablyrequiredtoreflectproperlytheaveragevalueofthetaxpayer’sproperty.[L1967,c33,ptof§1;HRS§235-32]
§235-33 Apportionment; payroll factor. The payroll factor is a fraction, the numerator ofwhich is the totalamountpaidinthisStateduringthetaxperiodbythetaxpayerforcompensation,andthedenominatorofwhichisthetotalcompensationpaideverywhereduringthetaxperiod.[L1967,c33,ptof§1;HRS§235-33]
§235-34 Compensation; where paid. CompensationispaidinthisStateif:(1) Theindividual’sserviceisperformedentirelywithintheState;(2) Theindividual’sserviceisperformedbothwithinandwithouttheState,buttheserviceperformedwithout
theStateisincidentaltotheindividual’sservicewithintheState;or(3) SomeoftheserviceisperformedintheStateand:
(A) Thebaseofoperationsor,ifthereisnobaseofoperations,theplacefromwhichtheserviceisdirectedorcontrolledisintheState;or
(B) Thebaseofoperationsortheplacefromwhichtheserviceisdirectedorcontrolledisnotinanystateinwhichsomepartoftheserviceisperformed,buttheindividual’sresidenceisinthisState.[L1967,c33,ptof§1;HRS§235-34;amL2017,c12,§41]
§235-35 Apportionment; sales factor. Thesalesfactorisafraction,thenumeratorofwhichisthetotalsalesofthetaxpayerinthisStateduringthetaxperiod,andthedenominatorofwhichisthetotalsalesofthetaxpayereverywhereduringthetaxperiod.[L1967,c33,ptof§1;HRS§235-35]
§235-36 Apportionment; sales factor; tangible personalty. SalesoftangiblepersonalpropertyareinthisStateif:(1) Thepropertyisdeliveredorshippedtoapurchaser,otherthantheUnitedStatesgovernment,withinthis
Stateregardlessofthef.o.b.pointorotherconditionsofthesale;or(2) Thepropertyisshippedfromanoffice,store,warehouse,factory,orotherplaceofstorageinthisStateand
the:(A) PurchaseristheUnitedStatesgovernment;or(B) Taxpayerisnottaxableinthestateofthepurchaser.[L1967,c33,ptof§1;HRS§235-36;amL2017,
c12,§42]
§235-37 Apportionment; sales factor; nontangible personalty. Sales, other than sales of tangible personalproperty,areinthisStateif:
(1) Theincome-producingactivityisperformedinthisState;or(2) Theincome-producingactivityisperformedbothinandoutsidethisStateandagreaterproportionofthe
income-producingactivityisperformedinthisStatethaninanyotherstate,basedoncostsofperformance.[L1967,c33,ptof§1;HRS§235-37]
18-235-29
18-235-30
18-235-31
18-235-32
18-235-33
18-235-34
18-235-35
18-235-36
18-235-37
§235-38 INCOME TAX LAW
CHAPTER235,Page46(UnofficialCompilation)
§235-38 Equitable adjustment of formula. If theallocationandapportionmentprovisionsof thispartdonotfairlyrepresenttheextentofthetaxpayer’sbusinessactivityinthisState,thetaxpayermaypetitionfororthedirectoroftaxationmayrequire,inrespecttoalloranypartofthetaxpayer’sbusinessactivity,ifreasonable:
(1) Separateaccounting;(2) Theexclusionofanyoneormoreofthefactors;(3) Theinclusionofoneormoreadditionalfactorswhichwillfairlyrepresentthetaxpayer’sbusinessactivity
inthisState;or(4) The employment of any othermethod to effectuate an equitable allocation and apportionment of the
taxpayer’sincome.[L1967,c33,ptof§1;HRS§235-38]
[§235-38.5] Application. Itistheintentofthelegislaturethatinadministeringthischapter,thispart,andsections235-4and235-5orasamemberoforadministeringthemultistatetaxcompactunderchapter255thedepartmentoftaxationshallnotuseorallowtheuseoftheworldwidemethodofunitarytaxationupheldinContainerCorporationofAmericav.TheFranchiseTaxBoard,463U.S.159.Itistheintentofthelegislaturethatthedepartmentoftaxationshallcontinuetoapplythischapter,part,sections235-4and235-5,andchapter255astheywereappliedbeforetheabovecasewasdecided.[L1984,c53,§2]
§235-39 Citation of part. Thispartmaybecitedasthe“UniformDivisionofIncomeforTaxPurposesAct”.[L1967,c33,ptof§1;HRS§235-39]
PART III. INDIVIDUAL INCOME TAX
§235-51 Tax imposed on individuals; rates. (a) Thereisherebyimposedonthetaxableincomeofevery:(1) Taxpayerwhofilesajointreturnundersection235-93;and(2) Survivingspouse,ataxdeterminedinaccordancewiththefollowingtable:InthecaseofanytaxableyearbeginningafterDecember31,2001:
Ifthetaxableincomeis: Thetaxshallbe:Notover$4,000 1.40%oftaxableincomeOver$4,000but notover$8,000
$56.00plus3.20%of excessover$4,000
Over$8,000but notover$16,000
$184.00plus5.50%of excessover$8,000
Over$16,000but notover$24,000
$624.00plus6.40%of excessover$16,000
Over$24,000but notover$32,000
$1,136.00plus6.80%of excessover$24,000
Over$32,000but notover$40,000
$1,680.00plus7.20%of excessover$32,000
Over$40,000but notover$60,000
$2,256.00plus7.60%of excessover$40,000
Over$60,000but notover$80,000
$3,776.00plus7.90%of excessover$60,000
Over$80,000 $5,356.00plus8.25%of excessover$80,000
InthecaseofanytaxableyearbeginningafterDecember31,2006:Ifthetaxableincomeis: Thetaxshallbe:Notover$4,800 1.40%oftaxableincomeOver$4,800but notover$9,600
$67.00plus3.20%of excessover$4,800
Over$9,600but notover$19,200
$221.00plus5.50%of excessover$9,600
Over$19,200but notover$28,800
$749.00plus6.40%of excessover$19,200
Over$28,800but notover$38,400
$1,363.00plus6.80%of excessover$28,800
Over$38,400but notover$48,000
$2,016.00plus7.20%of excessover$38,400
Over$48,000but notover$72,000
$2,707.00plus7.60%of excessover$48,000
18-235-38
18-235-38.5
INCOME TAX LAW §235-51
CHAPTER235,Page47(UnofficialCompilation)
Over$72,000but notover$96,000
$4,531.00plus7.90%of excessover$72,000
Over$96,000 $6,427.00plus8.25%of excessover$96,000
InthecaseofanytaxableyearbeginningafterDecember31,2017:Ifthetaxableincomeis: Thetaxshallbe:Notover$4,800 1.40%oftaxableincomeOver$4,800but notover$9,600
$67.00plus3.20%of excessover$4,800
Over$9,600but notover$19,200
$221.00plus5.50%of excessover$9,600
Over$19,200but notover$28,800
$749.00plus6.40%of excessover$19,200
Over$28,800but notover$38,400
$1,363.00plus6.80%of excessover$28,800
Over$38,400but notover$48,000
$2,016.00plus7.20%of excessover$38,400
Over$48,000but notover$72,000
$2,707.00plus7.60%of excessover$48,000
Over$72,000but notover$96,000
$4,531.00plus7.90%of excessover$72,000
Over$96,000but notover$300,000
$6,427.00plus8.25%of excessover$96,000
Over$300,000but notover$350,000
$23,257.00plus9.00%of excessover$300,000
Over$350,000but notover$400,000
$27,757.00plus10.00%of excessover$350,000
Over$400,000 $32,757.00plus11.00%of excessover$400,000
(b) Thereisherebyimposedonthetaxableincomeofeveryheadofahouseholdataxdeterminedinaccordancewiththefollowingtable:InthecaseofanytaxableyearbeginningafterDecember31,2001:Ifthetaxableincomeis: Thetaxshallbe:Notover$3,000 1.40%oftaxableincomeOver$3,000but notover$6,000
$42.00plus3.20%of excessover$3,000
Over$6,000but notover$12,000
$138.00plus5.50%of excessover$6,000
Over$12,000but notover$18,000
$468.00plus6.40%of excessover$12,000
Over$18,000but notover$24,000
$852.00plus6.80%of excessover$18,000
Over$24,000but notover$30,000
$1,260.00plus7.20%of excessover$24,000
Over$30,000but notover$45,000
$1,692.00plus7.60%of excessover$30,000
Over$45,000but notover$60,000
$2,832.00plus7.90%of excessover$45,000
Over$60,000 $4,017.00plus8.25%of excessover$60,000
InthecaseofanytaxableyearbeginningafterDecember31,2006:Ifthetaxableincomeis: Thetaxshallbe:Notover$3,600 1.40%oftaxableincomeOver$3,600but notover$7,200
$50.00plus3.20%of excessover$3,600
Over$7,200but notover$14,400
$166.00plus5.50%of excessover$7,200
Over$14,400but notover$21,600
$562.00plus6.40%of excessover$14,400
Over$21,600but notover$28,800
$1,022.00plus6.80%of excessover$21,600
§235-51 INCOME TAX LAW
CHAPTER235,Page48(UnofficialCompilation)
Over$28,800but notover$36,000
$1,512.00plus7.20%of excessover$28,800
Over$36,000but notover$54,000
$2,030.00plus7.60%of excessover$36,000
Over$54,000but notover$72,000
$3,398.00plus7.90%of excessover$54,000
Over$72,000 $4,820.00plus8.25%of excessover$72,000
InthecaseofanytaxableyearbeginningafterDecember31,2017:Ifthetaxableincomeis: Thetaxshallbe:Notover$3,600 1.40%oftaxableincomeOver$3,600but notover$7,200
$50.00plus3.20%of excessover$3,600
Over$7,200but notover$14,400
$166.00plus5.50%of excessover$7,200
Over$14,400but notover$21,600
$562.00plus6.40%of excessover$14,400
Over$21,600but notover$28,800
$1,022.00plus6.80%of excessover$21,600
Over$28,800but notover$36,000
$1,512.00plus7.20%of excessover$28,800
Over$36,000but notover$54,000
$2,030.00plus7.60%of excessover$36,000
Over$54,000but notover$72,000
$3,398.00plus7.90%of excessover$54,000
Over$72,000but notover$225,000
$4,820.00plus8.25%of excessover$72,000
Over$225,000but notover$262,500
$17,443.00plus9.00%of excessover$225,000
Over$262,500but notover$300,000
$20,818.00plus10.00%of excessover$262,500
Over$300,000 $24,568.00plus11.00%of excessover$300,000
(c) Thereisherebyimposedonthetaxableincomeof(1)everyunmarriedindividual(otherthanasurvivingspouse,ortheheadofahousehold)and(2)onthetaxableincomeofeverymarriedindividualwhodoesnotmakea single return jointlywith the individual’s spouseunder section235-93a taxdetermined inaccordancewith thefollowingtable:
InthecaseofanytaxableyearbeginningafterDecember31,2001:Ifthetaxableincomeis: Thetaxshallbe:Notover$2,000 1.40%oftaxableincomeOver$2,000but notover$4,000
$28.00plus3.20%of excessover$2,000
Over$4,000but notover$8,000
$92.00plus5.50%of excessover$4,000
Over$8,000but notover$12,000
$312.00plus6.40%of excessover$8,000
Over$12,000but notover$16,000
$568.00plus6.80%of excessover$12,000
Over$16,000but notover$20,000
$840.00plus7.20%of excessover$16,000
Over$20,000but notover$30,000
$1,128.00plus7.60%of excessover$20,000
Over$30,000but notover$40,000
$1,888.00plus7.90%of excessover$30,000
Over$40,000 $2,678.00plus8.25%of excessover$40,000
InthecaseofanytaxableyearbeginningafterDecember31,2006:Ifthetaxableincomeis: Thetaxshallbe:Notover$2,400 1.40%oftaxableincomeOver$2,400but notover$4,800
$34.00plus3.20%of excessover$2,400
INCOME TAX LAW §235-51
CHAPTER235,Page49(UnofficialCompilation)
Over$4,800but notover$9,600
$110.00plus5.50%of excessover$4,800
Over$9,600but notover$14,400
$374.00plus6.40%of excessover$9,600
Over$14,400but notover$19,200
$682.00plus6.80%of excessover$14,400
Over$19,200but notover$24,000
$1,008.00plus7.20%of excessover$19,200
Over$24,000but notover$36,000
$1,354.00plus7.60%of excessover$24,000
Over$36,000but notover$48,000
$2,266.00plus7.90%of excessover$36,000
Over$48,000 $3,214.00plus8.25%of excessover$48,000
InthecaseofanytaxableyearbeginningafterDecember31,2017:Ifthetaxableincomeis: Thetaxshallbe:Notover$2,400 1.40%oftaxableincomeOver$2,400but notover$4,800
$34.00plus3.20%of excessover$2,400
Over$4,800but notover$9,600
$110.00plus5.50%of excessover$4,800
Over$9,600but notover$14,400
$374.00plus6.40%of excessover$9,600
Over$14,400but notover$19,200
$682.00plus6.80%of excessover$14,400
Over$19,200but notover$24,000
$1,008.00plus7.20%of excessover$19,200
Over$24,000but notover$36,000
$1,354.00plus7.60%of excessover$24,000
Over$36,000but notover$48,000
$2,266.00plus7.90%of excessover$36,000
Over$48,000but notover$150,000
$3,214.00plus8.25%of excessover$48,000
Over$150,000but notover$175,000
$11,629.00plus9.00%of excessover$150,000
Over$175,000but notover$200,000
$13,879.00plus10.00%of excessover$175,000
Over$200,000 $16,379.00plus11.00%of excessover$200,000
(d) The tax imposed by section 235-2.45 on estates and trusts shall be determined in accordance with thefollowingtable:
InthecaseofanytaxableyearbeginningafterDecember31,2001:Ifthetaxableincomeis: Thetaxshallbe:Notover$2,000 1.40%oftaxableincomeOver$2,000but notover$4,000
$28.00plus3.20%of excessover$2,000
Over$4,000but notover$8,000
$92.00plus5.50%of excessover$4,000
Over$8,000but notover$12,000
$312.00plus6.40%of excessover$8,000
Over$12,000but notover$16,000
$568.00plus6.80%of excessover$12,000
Over$16,000but notover$20,000
$840.00plus7.20%of excessover$16,000
Over$20,000but notover$30,000
$1,128.00plus7.60%of excessover$20,000
Over$30,000but notover$40,000
$1,888.00plus7.90%of excessover$30,000
Over$40,000 $2,678.00plus8.25%of excessover$40,000
(e) Anytaxpayer,otherthanacorporation,actingasabusinessentityinmorethanonestatewhoisrequiredbythischaptertofileareturnmayelecttoreportandpayataxof.5percentofthetaxpayer’sannualgrosssalesifthe:
(1) Taxpayer’sonlyactivitiesinthisStateconsistofsales;
§235-52 INCOME TAX LAW
CHAPTER235,Page50(UnofficialCompilation)
(2) Taxpayerdoesnotownorrentrealestateortangiblepersonalproperty;and(3) Taxpayer’sannualgrosssalesinorintothisStateduringthetaxyearisnotinexcessof$100,000.
(f) Ifataxpayerhasanetcapitalgainforanytaxableyeartowhichthissubsectionapplies,thenthetaximposedbythissectionshallnotexceedthesumof:
(1) Thetaxcomputedattheratesandinthesamemannerasifthissubsectionhadnotbeenenactedonthegreaterof:(A) Thetaxableincomereducedbytheamountofnetcapitalgain,or(B) Theamountoftaxableincometaxedataratebelow7.25percent,plus
(2) Ataxof7.25percentoftheamountoftaxableincomeinexcessoftheamountdeterminedunderparagraph(1).
Thissubsectionshallapplytoindividuals,estates,andtrustsfortaxableyearsbeginningafterDecember31,1986.[LSp1957,c1,ptof§2;amL1965,c155,§31(b),(c);Supp,§121-8;amL1967,c250,§1;HRS§235-51;amL1974,c10,§1;amL1978,c173,§2(10);amL1979,c62,§2(9);amL1982,c22,§1(2);amL1987,c239,§1(11);amL1988,c102,§3;amL1989,c321,§3;L1998,c157,§2;amL2001,c199,§4;amL2006,c110,§3;amL2007c9§11;amL2009,c60§2;amL2011,c97,§4;amL2017,c12,§43andc107,§2]
Note
The 2011 amendment to L 2009, c 60 amendment applies to taxable years beginning afterDecember 31, 2008 and shall be repealed onDecember31,2015andsection235-51(a),(b),and(c),HawaiiRevisedStatutes,shallbereenactedintheforminwhichitreadonthedaybeforetheeffectivedateofAct97,SLH2011.L2011,c97,§4.
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”
Law Journals and Reviews
RuleofStrictConstructioninTaxCases,aQuestionofClassificationorExemption,ArthurB.Reinwald,11HBJ98.
Case Notes
Intangibles,situs.31H.264,aff’d47F.2d869.Incidenceofincometaxesnotproperforjury’sconsiderationinawardingdamages.49H.42,410P.2d976.Statuesimposingtaxesarestrictlyconstruedinfavoroftaxpayer.56H.321,536P.2d91.
§235-52 Tax in case of joint return or return of surviving spouse. Inthecaseofajointreturnofahusbandandwifeundersection235-93,thetaximposed,asnearasmaybe,bythischaptershallbetwicethetaxwhichwouldbeimposedifthetaxableincomewerecutinhalf.Forpurposesofthissectionandsection235-53,areturnofasurvivingspouse,asdefinedintheInternalRevenueCode,shallbetreatedasajointreturnofahusbandandwifeundersection235-93.[LSp1957,c1,ptof§2;Supp,§121-9;HRS§235-52;amL1982,c22,§1(3);amL1987,c239,§1(12)]
Case Notes
Jointreturn,jointresponsibilityfortaxdeficiency.49H.688,427P.2d86.
§235-53 Tax tables for individuals. (a)Impositionoftaxtabletax:(1) Ingeneral.Inlieuofthetaximposedbysection235-51,thereisherebyimposedforeachtaxableyearon
thetaxableincomeofeveryindividual:(A) Whodoesnotitemizetheindividual’sdeductionsforthetaxableyear;and(B) Whosetaxableincomeforsuchtaxableyeardoesnotexceedtheceilingamount,
ataxdeterminedundertables,applicabletosuchtaxableyear,whichshallbeprescribedbythedirector.Inthetablessoprescribed,theamountsoftaxshallbecomputedonthebasisoftheratesprescribedbysection235-51.
(2) Ceilingamountdefined.Forpurposesofparagraph(1),theterm“ceilingamount”means,withrespecttoanytaxpayer,theamount(notlessthan$20,000)determinedbythedirectorforthetaxratecategoryinwhichsuchtaxpayerfalls.
(3) Authoritytoprescribetablesfortaxpayerswhoitemizedeductions.Thedirectormayprovidethat thissection shall apply also for any taxable year to individualswho itemize their deductions.Any tablesprescribedundertheprecedingsentenceshallbeonthebasisoftaxableincome.
(b) Sectioninapplicabletocertainindividuals.Thissectionshallnotapplyto:(1) Anindividualmakingareturnforaperiodoflessthantwelvemonthsonaccountofachangeinannual
accountingperiod,and(2) Anestateortrust.
(c) Taxtreatedasimposedbysection235-51.Forpurposesofthischapter,thetaximposedbythissectionshallbetreatedastaximposedbysection235-51.
18-235-52
18-235-53
INCOME TAX LAW §235-54
CHAPTER235,Page51(UnofficialCompilation)
(d) Taxableincome.Wheneveritisnecessarytodeterminethetaxableincomeofanindividualtowhomthissectionapplies,thetaxableincomeshallbedeterminedundersection235-2.4(a).[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-10;HRS§235-53;amL1968,c8,§2;amL1977,c46,§1;amL1981,c208,§3;amL1987,c239,§§1(13),(14)]
§235-54 Exemptions. (a) [This subsection (a) is effective until December 31, 2012. For subsection (a) effective on January 1, 2013, see below.]Incomputingthetaxableincomeofanyindividual,thereshallbededucted,inlieuofthepersonalexemptionsallowedbytheInternalRevenueCodeof1986,asamended,andexceptasprovidedinsubsection(c),personalexemptionscomputedasfollows:AscertainthenumberofexemptionswhichtheindividualcanlawfullyclaimundertheInternalRevenueCode,addanadditionalexemptionforthetaxpayerorthetaxpayer’sspousewhoissixty-fiveyearsofageorolderwithinthetaxableyear,andmultiplythatnumberby$1,040,fortaxableyearsbeginningafterDecember31,1984.AnonresidentshallproratethepersonalexemptionsonaccountofincomefromsourcesoutsidetheStateasprovidedinsection235-5.Inthecaseofanindividualwithrespecttowhomanexemptionunderthissectionisallowabletoanothertaxpayerforataxableyearbeginninginthecalendaryearinwhichtheindividual’staxableyearbegins,thepersonalexemptionamountapplicabletosuchindividualunderthissubsectionforsuchindividual’staxableyearshallbezero.
(a) [Subsection effective January 1, 2013. For subsection effective until December 31, 2012, see above.] Incomputingthetaxableincomeofanyindividual,thereshallbededucted,inlieuofthepersonalexemptionsallowedbytheInternalRevenueCodeof1986,asamended,andexceptasprovidedinsubsection(c),personalexemptionscomputedasfollows:AscertainthenumberofexemptionswhichtheindividualcanlawfullyclaimundertheInternalRevenueCode,addanadditionalexemptionforthetaxpayerorthetaxpayer’sspousewhoissixty-fiveyearsofageorolderwithinthetaxableyear,andmultiplythatnumberby$1,144,fortaxableyearsbeginningafterDecember31,1984.Anonresidentshallproratethepersonalexemptionsonaccountofincomefromsourcesoutsidethestateasprovidedinsection235-5.Inthecaseofanindividualwithrespecttowhomanexemptionunderthissectionisallowabletoanothertaxpayerforataxableyearbeginninginthecalendaryearinwhichtheindividual’staxableyearbegins,thepersonalexemptionamountapplicabletosuchindividualunderthissubsectionforsuchindividual’staxableyearshallbezero.
(b) Incomputingthetaxableincomeofanestateortrustthereshallbeallowed,inlieuofthedeductionsallowedundersubsection(a),thefollowing:
(1) Anestateshallbeallowedadeductionof$400.(2) Atrustwhich,underitsgoverninginstrument,isrequiredtodistributeallofitsincomecurrentlyshallbe
allowedadeductionof$200.(3) Allothertrustsshallbeallowedadeductionof$80.
(c) Thephaseoutunder section151(d)(3)of the InternalRevenueCodeof1986,asamended, shallapply tothissection;providedthatthethresholdincomeamountsundersection151(d)(3)(C)oftheInternalRevenueCodeof1986,asamended,shallbereducedbytwenty-fivepercentforthepurposesofthissubsection;providedfurtherthatthethresholdincomeamountsundersection151(d)(3)(C)oftheInternalRevenueCodeof1986,asamended,usedtodeterminethetwenty-fivepercentreductionunderthissubsectionshallbemaintainedattheamountsinplaceonJuly1,2008.
(d) Ablindperson,adeafperson,andanypersontotallydisabled,inlieuofthepersonalexemptionsallowedbytheInternalRevenueCode,shallbeallowed,andthereshallbedeductedincomputingthetaxableincomeofablindperson,adeafperson,oratotallydisabledperson,insteadoftheexemptionsprovidedbysubsection(a),theamountof$7,000.[LSp1957,c1,ptof§2;amL1960,c4,§1;Supp,§121-11;HRS§235-54;amL1970,c90,§2andc180,§2;amL1978,c181,§1;amL1980,c241,§2;amL1985,c78,§1;amL1987,c239,§1(15);amL1999,c253,§4;amL2009,c60,§3;amLSp2009,c14,§1;amL2011,c97,§4]
Note
TheL2009,c60amendmentofsubsection(a)appliestotaxableyearsbeginningafterDecember31,2012.L2011,c97,§4.EffectofL2009,c60amendmentonunderpayments.L2009,c60,§4.
TheLSp2009,c14amendmentappliestotaxableyearsbeginningafterDecember31,2008.LSp2009,c14,§3.
Cross Reference
Tax InformationReleaseNo. 89-3, “StateTaxBenefitsAvailable toPersonsWith ImpairedSight, ImpairedHearing, orWhoAreTotallyDisabled”
TaxInformationReleaseNo.90-10,“ClarificationofTaxationandtheEligibilityforPersonalExemptions&CreditsofResidents&NonresidentsintheMilitaryandSpousesandDependentsofPersonsintheMilitary” SupplementedandsupersededinpartbyTIR97-1
TaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens”TaxInformationReleaseNo.94-2,“StateTaxBenefitsAvailabletoPersonsTotallyDisabled”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”
Law Journals and Reviews
RuleofStrictConstructioninTaxCases,aQuestionofClassificationorExemption,ArthurB.Reinwald,11HBJ98.
18-235-54
§235-55 INCOME TAX LAW
CHAPTER235,Page52(UnofficialCompilation)
Case Notes
Statutesgrantingexemptionsarestrictlyconstruedinfavoroftaxpayer.56H.321,536P.2d91.
§235-55 Tax credits for resident taxpayers. (a)Wheneveranindividualorpersonliabletothetaxesimposeduponindividuals,whoisaresidentoftheStateorwhohasfiledajointresidentreturnundersection235-93,hasbecomeliableforincometaxestoastate,ortotheDistrictofColumbia,PuertoRico,oranyotherterritoryorpossessionoftheUnitedStates,ortoaforeigncountryuponanypartoftheindividual’sorperson’staxableincomeforthetaxableyear,derivedorreceivedfromsourceswithouttheStateandtaxedunderthelawsofsuchotherjurisdictionirrespectiveoftheresidenceordomicileoftherecipient,thereshallbecreditedagainstthetaxpayablebytheindividualorpersonunderthischapterthetaxsopaidbytheindividualorpersontotheotherjurisdictionupontheindividual’sorperson’sproducingforthedepartmentoftaxationsatisfactoryevidence:
(1) Ofsuchtaxpayment;and(2) That the lawsof theother jurisdictiondonotallowthe individualorpersonacreditagainst the taxes
imposedbysuchjurisdictionforthetaxespaidorpayableunderthischapter,ordoallowsuchcreditinanamountwhichhasbeendeductedincomputingtheamountofcreditsoughtunderthissection.
(b) Theapplicationofsuchcredit,however:(1) ShallnotbeallowedwithrespecttoanytaxableincomeoranytaxwhichundersubchapterNofchapter
1oftheInternalRevenueCodeof1954(whichisapplicableforfederalpurposesbutnotforstatepurposes)isormaybethesubjectofanexclusion,exemption,ortaxcredit;and
(2) Shallnotoperatetoreducethetaxpayableunderthischaptertoanamountlessthanthatwhichwouldhavebeenpayable had the taxpayer been taxable only on the income fromproperty owned, personalservicesperformed,tradeorbusinesscarriedon,andothersourcesintheState.
(c) Ifanytaxespaidtoanotherjurisdictionforwhichataxpayerhasbeenallowedacreditunderthissectionareatanytimecreditedorrefundedtothetaxpayer,suchfactshallbereportedbythetaxpayertothedepartmentwithintwentydaysafterthecreditorrefund.Failuretomakesuchreportshallbedeemedfailuretomakeareturnandsubjecttothepenaltiesimposedbylawinsuchcases.Ataxequaltothecreditallowedforthetaxessocreditedorrefundedshallbedueandpayablefromthetaxpayeruponnoticeanddemandfromthedepartment.Iftheamountofsuchtaxisnotpaidwithintendaysfromthedateofthenoticeanddemand,thetaxpayershallbesubjecttotheusualpenaltiesandinterestfordelinquencyinpayment.
(d) Nothingin thissectionshallbeconstruedtopermitacreditagainst the taxes imposedbythischapteronaccountoffederalincometaxes.[LSp1957,c1,ptof§2;amL1959,c277,§9(a);amLSp19592d,c1,§16;Supp,§121-12;HRS§235-55;amimpL1984,c90,§1;gench1985;amL1996,c187,§5]
Cross Reference
TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”TaxInformationReleaseNo.90-10,“ClarificationofTaxationandtheEligibilityforPersonalExemptions&CreditsofResidents&Nonresidents
intheMilitaryandSpousesandDependentsofPersonsintheMilitary” SupplementedandsupersededinpartbyTIR97-1TaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”
§235-55.5 REPEALED. L1990,c187,§2.Cross Reference
Forpresentprovision,see§235-55.8.
§235-55.6 Expenses for household and dependent care services necessary for gainful employment. (a)Allowanceofcredit.
(1) Ingeneral.Foreachresidenttaxpayer,whofilesanindividualincometaxreturnforataxableyear,andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyanothertaxpayerforfederalorHawaiistateindividualincometaxpurposes,whomaintainsahouseholdwhichincludesasamemberoneormorequalifying individuals(asdefinedinsubsection(b)(1)), thereshallbeallowedasacreditagainstthetaximposedbythischapterforthetaxableyearanamountequaltotheapplicablepercentageoftheemployment-relatedexpenses(asdefinedinsubsection(b)(2))paidbytheindividualduringthetaxableyear.Ifthetaxcreditclaimedbyaresidenttaxpayerexceedstheamountofincometaxpaymentduefromtheresidenttaxpayer,theexcessofthecreditoverpaymentsdueshallberefundedtotheresidenttaxpayer;providedthattaxcreditproperlyclaimedbyaresidentindividualwhohasnoincometaxliabilityshallbepaidtotheresidentindividual;andprovidedfurtherthatnorefundsorpaymentonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
(2) Applicable percentage. For purposes of paragraph (1), the taxpayer’s applicable percentage shall bedeterminedasfollows:
18-235-55
18-235-55.5
INCOME TAX LAW §235-55.6
CHAPTER235,Page53(UnofficialCompilation)
Adjustedgrossincome ApplicablePercentageNotover$25,000 25%Over$25,000butnotover$30,000 24%Over$30,000butnotover$35,000 23%Over$35,000butnotover$40,000 22%Over$40,000butnotover$45,000 21%Over$45,000butnotover$50,000 20%Over$50,000 15%
(b) Definitionsofqualifyingindividualandemployment-relatedexpenses.Forpurposesofthissection:(1) Qualifyingindividual.Theterm“qualifyingindividual”means:
(A) Adependentofthetaxpayerwhoisundertheageofthirteenandwithrespecttowhomthetaxpayerisentitledtoadeductionundersection235-54(a),
(B) Adependentofthetaxpayerwhoisphysicallyormentallyincapableofcaringforoneself,or(C) Thespouseofthetaxpayer,ifthespouseisphysicallyormentallyincapableofcaringforoneself.
(2) Employment-relatedexpenses.(A) Ingeneral.Theterm“employment-relatedexpenses”meansamountspaidforthefollowingexpenses,
butonlyifsuchexpensesareincurredtoenablethetaxpayertobegainfullyemployedforanyperiodforwhichthereareoneormorequalifyingindividualswithrespecttothetaxpayer:
(i)Expensesforhouseholdservices,and (ii)Expensesforthecareofaqualifyingindividual. Suchtermshallnotincludeanyamountpaidforservicesoutsidethetaxpayer’shouseholdatacamp
wherethequalifyingindividualstaysovernight.(B) Exception. Employment-related expenses described in subparagraph (A) which are incurred for
servicesoutsidethetaxpayer’shouseholdshallbetakenintoaccountonlyifincurredforthecareof: (i)Aqualifyingindividualdescribedinparagraph(1)(A),or (ii)Aqualifyingindividual(notdescribedinparagraph(1)(A))whoregularlyspendsatleasteight
hourseachdayinthetaxpayer’shousehold.(C) Dependent care centers. Employment-related expenses described in subparagraph (A) which are
incurredforservicesprovidedoutsidethetaxpayer’shouseholdbyadependentcarecenter(asdefinedinsubparagraph(D))shallbetakenintoaccountonlyif:
(i)Suchcentercomplieswithallapplicablelaws,rules,andregulationsofthisState,ifthecenterislocatedwithinthejurisdictionofthisState;or
(ii)Suchcentercomplieswithallapplicablelaws,rules,andregulationsofthejurisdictioninwhichthecenterislocated,ifthecenterislocatedoutsidetheState;and
(iii)Therequirementsofsubparagraph(B)aremet.(D) Dependentcarecenterdefined.Forpurposesofthisparagraph,theterm“dependentcarecenter”means
anyfacilitywhich: (i)Providescareformorethansixindividuals(otherthanindividualswhoresideatthefacility),and (ii)Receivesafee,payment,orgrantforprovidingservicesforanyoftheindividuals(regardlessof
whethersuchfacilityisoperatedforprofit).(c) Dollar limit on amount creditable.The amount of the employment-related expenses incurred during any
taxableyearwhichmaybetakenintoaccountundersubsection(a)shallnotexceed:(1) $2,400ifthereisonequalifyingindividualwithrespecttothetaxpayerforsuchtaxableyear,or(2) $4,800iftherearetwoormorequalifyingindividualswithrespecttothetaxpayerforsuchtaxableyear.
Theamountdeterminedunderparagraph(1)or (2) (whichever isapplicable)shallbereducedby theaggregateamountexcludablefromgrossincomeundersection129(withrespecttodependentcareassistanceprograms)oftheInternalRevenueCodeforthetaxableyear.
(d) Earnedincomelimitation.(1) In general. Except as otherwise provided in this subsection, the amount of the employment-related
expensesincurredduringanytaxableyearwhichmaybetakenintoaccountundersubsection(a)shallnotexceed:(A) In thecaseofan individualwhoisnotmarriedat thecloseofsuchyear,suchindividual’searned
incomeforsuchyear,or(B) Inthecaseofanindividualwhoismarriedatthecloseofsuchyear,thelesserofsuchindividual’s
earnedincomeortheearnedincomeoftheindividual’sspouseforsuchyear.
§235-55.6 INCOME TAX LAW
CHAPTER235,Page54(UnofficialCompilation)
(2) Specialruleforspousewhoisastudentorincapableofcaringforoneself.Inthecaseofaspousewhoisastudentoraqualifiedindividualdescribedinsubsection(b)(1)(C),forpurposesofparagraph(1),suchspouseshallbedeemedforeachmonthduringwhichsuchspouseisafull-timestudentataneducationalinstitution,orissuchaqualifyingindividual,tobegainfullyemployedandtohaveearnedincomeofnotlessthan:(A) $200ifsubsection(c)(1)appliesforthetaxableyear,or(B) $400ifsubsection(c)(2)appliesforthetaxableyear.
Inthecaseofanyhusbandandwife,thisparagraphshallapplywithrespecttoonlyonespouseforanyonemonth.(e) Specialrules.Forpurposesofthissection:
(1) Maintaininghousehold.Anindividualshallbetreatedasmaintainingahouseholdforanyperiodonlyifoverhalfthecostofmaintainingthehouseholdfortheperiodisfurnishedbytheindividual(or, if theindividualismarriedduringtheperiod,isfurnishedbytheindividualandtheindividual’sspouse).
(2) Marriedcouplesmustfilejointreturn.Ifthetaxpayerismarriedatthecloseofthetaxableyear,thecreditshallbeallowedundersubsection(a)onlyifthetaxpayerandthetaxpayer’sspousefileajointreturnforthetaxableyear.
(3) Maritalstatus.Anindividuallegallyseparatedfromtheindividual’sspouseunderadecreeofdivorceorofseparatemaintenanceshallnotbeconsideredasmarried.
(4) Certainmarriedindividualslivingapart.If:(A) Anindividualwhoismarriedandwhofilesaseparatereturn: (i)Maintainsastheindividual’shomeahouseholdthatconstitutesformorethanone-halfof the
taxableyeartheprincipalplaceofabodeofaqualifyingindividual,and (ii)Furnishesoverhalfofthecostofmaintainingthehouseholdduringthetaxableyear,and(B) Duringthelastsixmonthsofthetaxableyeartheindividual’sspouseisnotamemberofthehousehold,
theindividualshallnotbeconsideredasmarried.(5) Specialdependencytestincaseofdivorcedparents,etc.If:
(A) Paragraph(2)or(4)ofsection152(e)oftheInternalRevenueCodeof1986,asamended,appliestoanychildwithrespecttoanycalendaryear,and
(B) Thechildisunderagethirteenorisphysicallyormentallyincompetentofcaringforthechild’sself, inthecaseofanytaxableyearbeginninginthecalendaryear,thechildshallbetreatedasaqualifying
individualdescribedinsubsection(b)(1)(A)or(B)(whicheverisappropriate)withrespecttothecustodialparent(withinthemeaningofsection152(e)(1)oftheInternalRevenueCodeof1986,asamended),andshallnotbetreatedasaqualifyingindividualwithrespecttothenoncustodialparent.
(6) Paymentstorelatedindividuals.Nocreditshallbeallowedundersubsection(a)foranyamountpaidbythetaxpayertoanindividual:(A) Withrespecttowhom,forthetaxableyear,adeductionundersection151(c)oftheInternalRevenue
Codeof1986,asamended(relatingtodeductionforpersonalexemptionsfordependents)isallowableeithertothetaxpayerorthetaxpayer’sspouse,or
(B) Whoisachildofthetaxpayer(withinthemeaningofsection151(c)(3)oftheInternalRevenueCodeof1986,asamended)whohasnotattainedtheageofnineteenatthecloseofthetaxableyear.
Forpurposesofthisparagraph,theterm“taxableyear”meansthetaxableyearofthetaxpayerinwhichtheserviceisperformed.
(7) Student.Theterm“student”meansanindividualwho,duringeachoffivecalendarmonthsduringthetaxableyear,isafull-timestudentataneducationalorganization.
(8) Educationalorganization.Theterm“educationalorganization”meansaschooloperatedbythedepartmentofeducationunderchapter302A,aneducationalorganizationdescribedinsection170(b)(1)(A)(ii)oftheInternalRevenueCodeof1986,asamended,orauniversity,college,orcommunitycollege.
(9) Identifying information required with respect to service provider. No credit shall be allowed undersubsection(a)foranyamountpaidtoanypersonunless:(A) Thename,address,taxpayeridentificationnumber,andgeneralexcisetaxlicensenumberoftheperson
areincludedonthereturnclaimingthecredit,(B) IfthepersonislocatedoutsidetheState,thename,address,andtaxpayeridentificationnumber,ifany,
ofthepersonandastatementindicatingthattheserviceproviderislocatedoutsidetheStateandthatthegeneralexcisetaxlicenseand,ifapplicable,thetaxpayeridentificationnumbersarenotrequired,or
(C) Ifthepersonisanorganizationdescribedinsection501(c)(3)oftheInternalRevenueCodeandexemptfromtaxundersection501(a)oftheInternalRevenueCode,thenameandaddressofthepersonareincludedonthereturnclaimingthecredit.
Inthecaseofafailuretoprovidetheinformationrequiredundertheprecedingsentence,theprecedingsentenceshallnotapplyifitisshownthatthetaxpayerexercisedduediligenceinattemptingtoprovidetheinformationsorequired.
INCOME TAX LAW [§235-55.75]
CHAPTER235,Page55(UnofficialCompilation)
(f) Rules.Thedirectoroftaxationshallprescribesuchrulesunderchapter91asmaybenecessarytocarryoutthepurposesofthissection.[L1977,c196,§2;amL1979,c62,§2(10);amL1981,c234,§1;amL1982,c25,§3;amimpL1984,c90,§1;gench1985;amL1985,c19,§2;amL1987,c239,§1(16);amL1988,c102,§4;amL1989,c13,§5,c321,§4andc322,§1;amL1993,c73,§§2,3;amL1996,c89,§10;amL2016,c235,§1]
Note
The2016amendmentappliestotaxableyearsbeginningafterDecember31,2015.L2016,c235,§3.
Cross Reference
TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”
§235-55.7 Income tax credit for low-income household renters. (a)Asusedinthissection:(1) “Adjustedgrossincome”isdefinedbysection235-1.(2) “Qualifiedexemption”includesthoseexemptionspermittedunderthischapter;providedthatapersonfor
whomexemption isclaimedhasphysically resided in theState formore thanninemonthsduring thetaxableyear;andprovidedthatmultipleexemptionshallnotbegrantedbecauseofdeficienciesinvision,hearing,orotherdisability.
(3) “Rent”meanstheamountpaidincashinanytaxableyearfortheoccupancyofadwellingplacewhichisusedbyaresidenttaxpayerortheresidenttaxpayer’simmediatefamilyastheprincipalresidenceinthisState.Rentislimitedtotheamountpaidfortheoccupancyofthedwellingplaceonly,andisexclusiveofchargesforutilities,parkingstalls,storageofgoods,yardservices,furniture,furnishings,andthelike.Rentshallnotincludeanyrentalclaimedasadeductionfromgrossincomeoradjustedgrossincomeforincometaxpurposes,anygroundrentalpaidforuseoflandonly,andanyrentallowanceorsubsidiesreceived.
(b) EachresidenttaxpayerwhooccupiesandpaysrentforrealpropertywithintheStateastheresidenttaxpayer’sresidenceortheresidenceoftheresidenttaxpayer’simmediatefamilywhichisnotpartiallyorwhollyexemptedfromrealpropertytax,whoisnoteligibletobeclaimedasadependentforfederalorstateincometaxesbyanother,andwhofilesanindividualnetincometaxreturnforataxableyear,mayclaimataxcreditunderthissectionagainsttheresidenttaxpayer’sHawaiistateindividualnetincometax.
(c) Eachtaxpayerwithanadjustedgrossincomeoflessthan$30,000whohaspaidmorethan$1,000inrentduringthetaxableyearforwhichthecreditisclaimedmayclaimataxcreditof$50multipliedbythenumberofqualifiedexemptionstowhichthetaxpayerisentitled;providedeachtaxpayersixty-fiveyearsofageorovermayclaimdoublethetaxcredit;andprovidedthataresidentindividualwhohasnoincomeornoincometaxableunderthischaptermayalsoclaimthetaxcreditassetforthinthissection.
(d) Ifarentalunitisoccupiedbytwoormoreindividuals,andmorethanoneindividualisabletoqualifyasaclaimant,theclaimforcreditshallbebaseduponaproratashareoftherentpaid.
(e) Thetaxcreditsshallbedeductiblefromthetaxpayer’sindividualnetincometaxforthetaxyearinwhichthecreditsareproperlyclaimed;providedthatahusbandandwifefilingseparatereturnsforataxableyearforwhichajointreturncouldhavebeenmadebythemshallclaimonlythetaxcreditstowhichtheywouldhavebeenentitledhadajointreturnbeenfiled.Intheeventtheallowedtaxcreditsexceedtheamountoftheincometaxpaymentsduefromthetaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtothetaxpayer;providedthatallowedtaxcreditsproperlyclaimedbyanindividualwhohasnoincometaxliabilityshallbepaidtotheindividual;andprovidedfurtherthatnorefundsorpaymentsonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.
(f) Thedirectoroftaxationshallprepareandprescribetheappropriateformorformstobeusedherein,mayrequireproofoftheclaimfortaxcredits,andmayadoptrulespursuanttochapter91.
(g) Alloftheprovisionsrelatingtoassessmentsandrefundsunderthischapterandundersection231-23(d)(1)shallapplytothetaxcreditshereunder.
(h) Claimsfortaxcreditsunderthissection,includinganyamendedclaimsthereof,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthetaxableyearforwhichthecreditmaybeclaimed.[LSp19771st,c15,§1;amL1981,c230,§1;amimpL1984,c90,§1;gench1985;amL1989,c321,§5;amL1990,c98,§1]
Revision Note
Insubsection(g),“231-23(c)(1)”substitutedfor“231-23(d)(1)”.
Cross Reference
Foradditionaltaxcredits,see§§235-110.6,110.7,110.8.TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”
[§235-55.75] Earned income tax credit. (a)Eachqualifyingindividualtaxpayermayclaimanonrefundableearnedincometaxcredit.Thetaxcredit,fortheappropriatetaxableyear,shallbetwentypercentofthefederalearnedincometax
18-235-55.7
§235-55.8 INCOME TAX LAW
CHAPTER235,Page56(UnofficialCompilation)
creditallowedandproperlyclaimedundersection32oftheInternalRevenueCodeandreportedassuchontheindividual’sfederalincometaxreturn.
(b) Forapart-yearresident,thetaxcreditshallequaltheamountofthetaxcreditcalculatedinsubsection(a)multipliedbytheratioofHawaiiadjustedgrossincometofederaladjustedgrossincome.
(c) Forpurposesofthissection,“qualifyingindividualtaxpayer”meansataxpayerthat:(1) Filesafederalincometaxreturnforthetaxableyearclaimingtheearnedincometaxcreditundersection
32oftheInternalRevenueCode;and(2) Files aHawaii income tax returnusing thefiling statususedon the federal income tax return for the
taxableyearandclaimingthesamedependentsclaimedonthefederalincometaxreturnforthetaxableyear.
(d) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthetaxcreditoverliabilitymaybeusedasacreditagainstthetaxpayer’snetincometaxliabilityinsubsequentyearsuntilexhausted.Allclaims,includingamendedclaims,forataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(e) Nocreditshallbeallowedunderthissectionforanytaxableyearinthedisallowanceperiod.Forpurposesofthissubsection,thedisallowanceperiodis:
(1) Theperiodoftentaxableyearsafterthemostrecenttaxableyearforwhichtherewasafinaladministrativeorjudicialdecisionthatthetaxpayer’sclaimforcreditunderthissectionwasduetofraud;and
(2) Theperiodoftwotaxableyearsafterthemostrecenttaxableyearforwhichtherewasafinaladministrativeorjudicialdecisiondisallowingthetaxpayer’sclaimforcredit.
(f) Thedirectoroftaxation:(1) Shallprepareanyformsnecessarytoclaimataxcreditunderthissection;(2) Mayrequireproofoftheclaimforthetaxcredit;(3) Shallalerteligibletaxpayersofthetaxcreditusingappropriateandavailablemeans;(4) Shallprepareanannualpublicreporttothelegislatureandthegovernorcontainingthe:
(A) Numberofcreditsgrantedforthepriorcalendaryear;(B) Totalamountofthecreditsgranted;and(C) Averagevalueofthecreditsgrantedtotaxpayerswhoseearnedincomefallswithinvariousincome
ranges;and(5) Mayadoptrulespursuanttochapter91toeffectuatethissection.
(g) ThissectionshallapplytotaxableyearsbeginningafterDecember31,2017,butshallnotapplytotaxableyearsbeginningafterDecember31,2022.[L2017,c107,§1]
§235-55.8 REPEALED.L1998,c157,§3.Note
Application.L1998,c157,§7.
§235-55.85 Refundable food/excise tax credit. (a)Each individual taxpayer,whofiles an individual income taxreturnforataxableyear,andwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyanothertaxpayerforfederalorHawaiistateindividualincometaxpurposes,mayclaimarefundablefood/excisetaxcreditagainstthetaxpayer’sindividualincometaxliabilityforthetaxableyearforwhichtheindividualincometaxreturnisbeingfiled;providedthatanindividualwhohasnoincomeornoincometaxableunderthischapterandwhoisnotclaimedorisnototherwiseeligibletobeclaimedasadependentbyataxpayerforfederalorHawaiistateindividualincometaxpurposesmayclaimthiscredit.
(b) Eachindividualtaxpayermayclaimarefundablefood/excisetaxcreditmultipliedbythenumberofqualifiedexemptionstowhichthetaxpayerisentitledinaccordancewiththetablebelow;providedthatahusbandandwifefilingseparatetaxreturnsforataxableyearforwhichajointreturncouldhavebeenfiledbythemshallclaimonlythetaxcredittowhichtheywouldhavebeenentitledhadajointreturnbeenfiled.Adjustedgrossincomefortaxpayersfilingasinglereturn
Creditperexemption
Under$5,000 $110$5,000under$10,000 $100$10,000under$15,000 $ 85$15,000under$20,000 $ 70$20,000under$30,000 $ 55$30,000andover $ 0
18-235-55.8
INCOME TAX LAW §235-55.91
CHAPTER235,Page57(UnofficialCompilation)
Adjustedgrossincomeforheadsofhousehold,marriedindividualsfilingseparatereturns,andmarriedcouplesfilingjointreturns
Creditperexemption
Under$5,000 $110$5,000under$10,000 $100$10,000under$15,000 $ 85$15,000under$20,000 $ 70$20,000under$30,000 $ 55$30,000under$40,000 $ 45$40,000under$50,000 $ 35$50,000andover $ 0
(c) Forthepurposesofthissection,aqualifiedexemptionisdefinedtoincludethoseexemptionspermittedunderthischapter;providedthatnoadditionalexemptionmaybeclaimedbyataxpayerwhoissixty-fiveyearsofageorolder;providedthatapersonforwhomexemptionisclaimedhasbeenphysicallypresentintheStateformorethanninemonthsduringthetaxableyear;andprovidedfurtherthatmultipleexemptionsshallnotbegrantedbecauseofdeficienciesinvisionorhearing,orotherdisability.Forpurposesofclaimingthiscreditonly,aminorchildreceivingsupportfromthedepartmentofhumanservicesoftheState,socialsecuritysurvivor’sbenefits,andthelike,maybeconsideredadependentandaqualifiedexemptionoftheparentorguardian.
(d) Thetaxcreditunderthissectionshallnotbeavailableto:(1) Anypersonwhohasbeenconvictedofa felonyandwhohasbeencommitted toprisonandhasbeen
physicallyconfinedforthefulltaxableyear;(2) Anypersonwhowouldotherwisebeeligibletobeclaimedasadependentbutwhohasbeencommittedto
ayouthcorrectionalfacilityandhasresidedatthefacilityforthefulltaxableyear;or(3) Anymisdemeanantwhohasbeencommittedtojailandhasbeenphysicallyconfinedforthefulltaxable
year.(e) The tax credits claimed by a taxpayer pursuant to this section shall be deductible from the taxpayer’s
individualincometaxliability,ifany,forthetaxyearinwhichtheyareproperlyclaimed.Ifthetaxcreditsclaimedbyataxpayerexceedtheamountofincometaxpaymentduefromthetaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtothetaxpayer;providedthattaxcreditsproperlyclaimedbyaindividualwhohasnoincometaxliabilityshallbepaidtotheindividual;andprovidedfurtherthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.
(f) Allclaimsfortaxcreditsunderthissection,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(g) For thepurposesof thissection,“adjustedgross income”meansadjustedgross incomeasdefinedbytheInternalRevenueCode.[L1998,c157,§1;amL2007,c211,§1;amL2015,c223,§2;amL2017,c107,§3]
Note
The2015amendmentshallapplytotaxableyearsbeginningafterDecember31,2015.L2015,c223,§4.
§235-55.9 REPEALED. L2000,c18,§7.
§235-55.91 Credit for employment of vocational rehabilitation referrals. (a) There shall be allowed to eachtaxpayersubjecttothetaximposedbythischapter,acreditforemploymentofvocationalrehabilitationreferralswhichshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) Theamountofthecreditdeterminedunderthissectionforthetaxableyearshallbeequaltotwentypercentofthequalifiedfirst-yearwagesforthatyear.Theamountofthequalifiedfirst-yearwageswhichmaybetakenintoaccountwithrespecttoanyindividualshallnotexceed$6,000.
(c) Forpurposesofthissection:“Hiringdate”meansthedaythevocationalrehabilitationreferralishiredbytheemployer.“Qualifiedfirst-yearwages”means,withrespecttoanyvocationalrehabilitationreferral,qualifiedwagesattributable
toservicerenderedduringtheone-yearperiodbeginningwiththedaytheindividualbeginsworkfortheemployer.“Qualifiedwages”meansthewagespaidorincurredbytheemployerduringthetaxableyeartoanindividualwho
isavocationalrehabilitationreferralandmorethanone-halfofthewagespaidorincurredforsuchanindividualisforservicesperformedinatradeorbusinessoftheemployer.
“Vocational rehabilitation referral”means any individualwho is certifiedby thedepartmentof human servicesvocationalrehabilitationandservicesfortheblinddivisioninconsultationwiththeHawaiistateemploymentserviceofthedepartmentoflaborandindustrialrelationsas:
§235-55.91 INCOME TAX LAW
CHAPTER235,Page58(UnofficialCompilation)
(1) Havingaphysicalormentaldisabilitywhich,forsuchindividual,constitutesorresultsinasubstantialhandicaptoemployment;and
(2) Having been referred to the employer upon completion of (orwhile receiving) rehabilitative servicespursuantto:(A) An individualized written rehabilitation plan under the State’s plan for vocational rehabilitation
servicesapprovedundertheRehabilitationActof1973,asamended;or(B) Aprogramofvocationalrehabilitationcarriedoutunderchapter31ofTitle38,UnitedStatesCode;or(C) Anindividualworkplandevelopedandimplementedbyanemploymentnetworkpursuanttosubsection
(g)ofsection1148oftheSocialSecurityAct,asamended,withrespecttowhichtherequirementsofsuchsubsectionaremet.
“Wages”hasthemeaninggiventosuchtermbysection3306(b)oftheInternalRevenueCode(determinedwithoutregardtoanydollarlimitationcontainedintheInternalRevenueCodesection).“Wages”shallnotinclude:
(1) Amountspaidorincurredbyanemployerforanyperiodtoanyvocationalrehabilitationreferralforwhomtheemployerreceivesstateorfederallyfundedpaymentsforon-the-jobtrainingoftheindividualfortheperiod;
(2) Amountspaidtoanemployer(howeverutilizedbytheemployer)foranyvocationalrehabilitationreferralunderaprogramestablishedundersection414oftheSocialSecurityAct;and
(3) If theprincipalplaceofemployment isataplantorfacility,andthereisastrikeor lockout involvingvocationalrehabilitationreferralsattheplantorfacility,amountspaidorincurredbytheemployertothevocational rehabilitation referral for serviceswhich are the same as, or substantially similar to, thoseservicesperformedbyemployeesparticipatingin,oraffectedby,thestrikeorlockoutduringtheperiodofstrikeorlockout.
(d) Thefollowingshallapplytocertificationsofvocationalrehabilitationreferrals:(1) Anindividualshallnotbetreatedasavocationalrehabilitationreferralunless,onorbeforethedayon
whichtheindividualbeginsworkfortheemployer,theemployer:(A) Has received a certification from the department of human services vocational rehabilitation and
servicesfortheblinddivisionthattheindividualisaqualifiedvocationalrehabilitationreferral;or(B) Hasrequestedinwritingthecertificationfromthedepartmentofhumanservicesvocationalrehabilitation
andservicesfortheblinddivisionthattheindividualisaqualifiedvocationalrehabilitationreferral. Forpurposesoftheprecedingsentence,ifonorbeforethedayonwhichtheindividualbeginsworkfor
theemployer,theindividualhasreceivedfromthedepartmentofhumanservicesvocationalrehabilitationandservicesfortheblinddivisionawrittenpreliminarydeterminationthattheindividualisavocationalrehabilitationreferral,then“thefifthday”shallbesubstitutedfor“theday”intheprecedingsentence.
(2) Ifanindividualhasbeencertifiedasavocationalrehabilitationreferralandthecertificationisincorrectbecauseitwasbasedonfalseinformationprovidedbytheindividual,thecertificationshallberevokedandwagespaidbytheemployerafterthedateonwhichnoticeofrevocationisreceivedbytheemployershallnotbetreatedasqualifiedwages.
(3) Inanyrequestforacertificationofanindividualasavocationalrehabilitationreferral,theemployershallcertifythatagoodfaitheffortwasmadetodeterminethatsuchindividualisavocationalrehabilitationreferral.
(e) Thefollowingwagespaidtovocationalrehabilitationreferralsareineligibletobeclaimedbytheemployerforthiscredit:
(1) Nowagesshallbetakenintoaccountunderthissectionwithrespecttoavocationalrehabilitationreferralwho:(A) Bearsanyoftherelationshipsdescribedinsection152(d)(2)(A)to(G)oftheInternalRevenueCodeto
thetaxpayer,or,ifthetaxpayerisacorporation,toanindividualwhoowns,directlyorindirectly,morethanfiftypercentinvalueoftheoutstandingstockofthecorporation(determinedwiththeapplicationofsection267(c)oftheInternalRevenueCode);
(B) Ifthetaxpayerisanestateortrust,isagrantor,beneficiary,orfiduciaryoftheestateortrust,orisanindividualwhobearsanyoftherelationshipsdescribedinsection152(d)(2)(A)to(G)oftheInternalRevenueCodetoagrantor,beneficiary,orfiduciaryoftheestateortrust;or
(C) Isadependent(describedinsection152(d)(2)(H)oftheInternalRevenueCode)ofthetaxpayer,or,ifthetaxpayerisacorporation,ofanindividualdescribedinsubparagraph(A),or,ifthetaxpayerisanestateortrust,ofagrantor,beneficiary,orfiduciaryoftheestateortrust.
(2) Nowages shall be taken into account under this sectionwith respect to any vocational rehabilitationreferralif,priortothehiringdateoftheindividual,theindividualhadbeenemployedbytheemployeratanytimeduringwhichtheindividualwasnotavocationalrehabilitationreferral.
(3) Nowages shall be taken into account under this sectionwith respect to any vocational rehabilitationreferralunlesssuchindividualeither:(A) Isemployedbytheemployeratleastninetydays;or
INCOME TAX LAW §235-61
CHAPTER235,Page59(UnofficialCompilation)
(B) Hascompletedatleastonehundred-twentyhoursofservicesperformedfortheemployer.(f) In the case of a successor employer referred to in section3306(b)(1) of the InternalRevenueCode, the
determinationoftheamountofthetaxcreditallowableunderthissectionwithrespecttowagespaidbythesuccessoremployershallbemadeinthesamemannerasifthewageswerepaidbythepredecessoremployerreferredtointhesection.
(g) Nocreditshallbedeterminedunderthissectionwithrespecttowagespaidbyanemployertoavocationalrehabilitation referral for services performed by the individual for another person unless the amount reasonablyexpectedtobereceivedbytheemployerfortheservicesfromtheotherpersonexceedsthewagespaidbytheemployertotheindividualforsuchservices.
(h) Thecreditallowedunderthissectionshallbeclaimedagainstnetincometaxliabilityforthetaxableyear.Ataxcreditunderthissectionwhichexceedsthetaxpayer’sincometaxliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.
(i) Allclaimsfortaxcreditsunderthissection,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(j) Nodeductionshallbeallowedforthatportionofthewagesorsalariespaidorincurredforthetaxableyearthatisequaltotheamountofthecreditdeterminedunderthissection.
(k) Thedirectoroftaxationmayadoptanyrulesunderchapter91andformsnecessarytocarryoutthissection.[L1990,c289,§1;amL1991,c137,§1;amL2008,c93,§5;amL2015,c53,§1]
Note
The2008amendmentappliestotaxableyearsbeginningafterDecember31,2007;providedthattheretroactiveandprospectiveeffectivedatescontainedinthecongressionalactsrelatingtotheInternalRevenueCodeandenactedduring2007shallbeoperativeforchapter235.L2008,c93,§7.
§§235-56, 56.5, and 57 REPEALED. L1974,c221,§§1(2),(3),and(4).
§§235-58, 58.1, and 58.2 REPEALED. L1978,c173,§2(11).
§235-59 Decedents. Inrespectofadecedent,thedeterminationoftheincomeofthetaxableperiodinwhichfallsthedateofthedecedent’sdeath,andthedeterminationoftheincomeoftheestateandofthepersonswhoacquirerightsfromthedecedentorbyreasonofthedecedent’sdeath,shallbegovernedbytheInternalRevenueCode.[LSp1957,c1,ptof§2;Supp,§121-14;HRS§235-59;amimpL1984,c90,§1;gench1985]
§235-60 REPEALED. L1978,c173,§2(12).
WITHHOLDING AND COLLECTION OF TAX AT SOURCE
§235-61 Withholding of tax on wages. (a)Asusedinthissection:“Employee”includesanofficerorelectedofficial,oranyotheremployee.“Employer”means:(1) Thepersonorgovernmentforwhomanindividualperformsorperformedanyservice,ofwhatevernature,
astheemployeeofthatpersonorgovernment;(2) Thepersonhavingcontrolofthepaymentofthewagesiftheemployerasheretoforedefineddoesnothave
controlthereof;and(3) AnypersonsubjecttothejurisdictionoftheStateandpayingwagesonbehalfofanemployerasheretofore
definediftheemployerisnotsubjecttothejurisdictionoftheState;providedthatthetermemployershallnotincludeanygovernmentthatisnotsubjecttothelawsoftheStateexcept
as,andtotheextentthat,itconsentstotheapplicationofsections235-61to235-67toit.“Wages”meanswages,commissions,fees,salaries,bonuses,andeveryandallotherkindsofremunerationfor,or
compensationattributableto,servicesperformedbyanemployeeorfortheemployee’semployer,includingthecashvalueofallremunerationpaidinanymediumotherthancashandthecost-of-livingallowancesandotherpaymentsincludedingrossincomebysection235-7(b),butexcludingincomeexcludedfromgrossincomebysection235-7orotherprovisionsofthischapter.
(b) Everyemployer,asdefinedherein,makingpaymentofwages,ashereindefined,toemployees,shalldeductandwithholdfromsuchwagesanamountoftaxdeterminedasprovidedinthissection.
(c) For eachwithholdingperiod (whetherweekly,biweekly,monthly, orotherwise) the amountof tax tobewithheldunderthissectionshallbeataratethat,forthetaxableyear,willyieldthetaximposedbysection235-51uponeachemployee’sannualwage,asestimatedfromtheemployee’scurrentwageinanywithholdingperiod,butfor
18-235-61
§235-61 INCOME TAX LAW
CHAPTER235,Page60(UnofficialCompilation)
thepurposesofthissubsectionoftheratesprovidedbysection235-51themaximumtobetakenintoconsiderationshallbeeightpercent.Thetaxforthetaxableyearshallbecalculateduponthefollowingassumptions:
(1) That the employee’s annualwage, as estimated from the employee’s currentwage in thewithholdingperiod,willbetheemployee’ssoleincomeforthetaxableyear;
(2) Thattherewillbenodeductionstherefromindeterminingadjustedgrossincome;(3) That indetermining taxable income there shall be a standarddeduction allowance,which shall be an
amountequaltooneexemption(ormorethanoneexemptionifsoprescribedbythedirector)unlessthetaxpayer:(A) Ismarriedandthetaxpayer’sspouseisanemployeereceivingwagessubjecttowithholding;or(B) Haswithholdingexemptioncertificatesineffectwithrespecttomorethanoneemployer.
Forthepurposesofthissection,anystandarddeductionallowanceunderthisparagraphshallbetreatedasifitweredenominatedawithholdingexemption;
(4) Thatindeterminingtaxableincometherealsowillbedeductedtheamountofexemptionsandwithholdingallowancesgrantedtotheemployeeinthecomputationoftaxableincome,asshownbyacertificatetobefiledwiththeemployerasprovidedbysubsection(f);and
(5) Ifitappearsfromthecertificatefiledpursuanttosubsection(f)thattheemployee,undersection235-93,isentitledtomakeajointreturn,thattheemployeeandtheemployee’sspousewillsoelect.
(d) Alternatively,attheelectionoftheemployer,theemployermaydeductandwithholdfromeachemployeeanamountoftaxdeterminedonthebasisoftablestobepreparedandfurnishedbythedepartmentoftaxation,whichamountoftaxshallbesubstantiallyequivalenttotheamountoftaxprovidedbysubsection(c)hereof.
(e) The department, by rule, may require the deduction and withholding of tax from any remuneration orcompensationpaidfororattributabletoservicesthatarenotsubjecttothegeneralexcisetaximposedbychapter237,whetherornotsuchwithholdingisprovidedforhereinabove.Everypersonsorequiredtodeductandwithholdtax,orfromwhomtaxisrequiredtobedeductedandwithheld,shallbesubjecttosections235-61to235-67,andeverypersonsorequiredtodeductandwithholdtaxshallbedeemedanemployerforthepurposesofthischapter.
Thedepartment,byrule,mayexemptanyemployerfromtherequirementofdeductionandwithholdingoftaxes,eventhoughtherequirementisimposedbythissection,ifandtotheextentthatthedepartmentfindstherequirementundulyonerousorimpracticableofenforcement.
(f) Onorbeforethedateofthecommencementofemploymentwithanemployer,theemployeeshallfurnishtheemployerwithasignedcertificaterelatingtothenumberofexemptionswhichtheemployeeclaims,whichshallinnoeventexceedthenumbertowhichtheemployeeisentitledonthebasisoftheexistingfacts,andalsoshowingwhethertheemployeeismarriedandis,undersection235-93,entitledtomakeajointreturn.Thecertificateshallbeinsuchformandcontainsuchinformationasmaybeprescribedbythedepartment.
If,onanydayduringthecalendaryear,thereisachangeintheemployee’smaritalstatusandtheemployeenolongerisentitledtomakeajointreturn,orthenumberofexemptionstowhichtheemployeeisentitledislessthanthenumberofexemptionsclaimedbytheemployeeonthecertificatethenineffectwithrespecttotheemployee,theemployeeshallwithintendaysthereafterfurnishtheemployerwithanewcertificateshowingtheemployee’spresentmaritalstatus,orrelatingtothenumberofexemptionswhichtheemployeethenclaims,whichshallinnoeventexceedthenumbertowhichtheemployeeisentitledonthebasisoftheexistingfacts.If,onanydayduringthecalendaryear,thereisachangeintheemployee’smaritalstatusandthoughpreviouslynotentitledtomakeajointreturntheemployeenowissoentitled,orthenumberofexemptionstowhichtheemployeeisentitledisgreaterthanthenumberofexemptionsclaimed,theemployeemayfurnishtheemployerwithanewcertificateshowingtheemployee’spresentmaritalstatus,orrelatingtothenumberofexemptionswhichtheemployeethenclaims,whichshallinnoeventexceedthenumbertowhichtheemployeeisentitledonthebasisoftheexistingfacts.
SuchcertificateshalltakeeffectatthetimessetforthintheInternalRevenueCode.(g) In determining the deduction allowed by subsection (c)(4) an employee shall be entitled towithholding
allowancesoradditionalreductionsinwithholdingunder thissubsection.Indeterminingthenumberofadditionalwithholdingallowancesortheamountofadditionalreductionsinwithholdingunderthissubsection,theemployeemay take intoaccount (to theextentand in themannerprovidedby rules)estimated itemizeddeductionsand taxcreditsallowableunderthischapter;andsuchadditionaldeductionsandotheritemsasmaybespecifiedbythedirectorinrules.Forthepurposesofthissubsectionafractionalnumbershallnotbetakenintoaccountunlessitamountstoone-halformore,inwhichcaseitshallbeincreasedtothenextwholenumber.
(1) Asusedinthissubsection,unlessthecontextotherwiserequires:(A) “Estimateditemizeddeductions”meanstheaggregateamountwhichtheemployeereasonablyexpects
willbeallowedasdeductionsundersections235-2.3,235-2.4,235-2.45and235-7,other thanthedeductionsreferredtoinInternalRevenueCodesection151andthosedeductionsrequiredtobetakenintoaccountindeterminingadjustedgrossincomeunderInternalRevenueCodesection62(a)(withtheexceptionofparagraph10thereof)fortheestimationyear.Innocaseshalltheaggregateamountbegreaterthanthesumof:
(i)Theamountofthedeductionsreflectedintheemployee’snetincometaxreturnforthetaxable
18-235-61-03
18-235-61-09
INCOME TAX LAW §235-62
CHAPTER235,Page61(UnofficialCompilation)
yearprecedingtheestimationyearof(ifareturnhasnotbeenfiledfortheprecedingtaxableyearatthetimethewithholdingexemptioncertificateisfurnishedtheemployer)thesecondtaxableyearprecedingtheestimationyear;or
(ii)Theamountofestimateditemizeddeductionsandtaxcreditsallowableunderthischapterandanyadditionaldeductionstowhichentitled;and
(iii)Theamountoftheemployee’sdeterminableadditionaldeductionsfortheestimationyear.(B) “Estimatedwages”meanstheaggregateamountwhichtheemployeereasonablyexpectswillconstitute
wagesfortheestimationyear;(C) “Determinableadditionaldeductions”meansthoseestimateditemizeddeductionswhich: (i)Areinexcessofthedeductionsreferredtoinsubparagraph(A)reflectedontheemployee’snet
incometaxreturnforthetaxableyearprecedingtheestimationyear;and (ii)Aredemonstrablyattributabletoanidentifiableeventduringtheestimationyearorthepreceding
taxable year which can reasonably be expected to cause an increase in the amount of suchdeductionsonthenetincometaxreturnfortheestimationyear.
(D) “Estimationyear”,inthecaseofanemployeewhofilestheemployee’sreturnonthebasisofacalendaryear,meansthecalendaryearinwhichthewagesarepaid;providedthatinthecaseofanemployeewhofilestheemployee’sreturnonabasisotherthanthecalendaryear,theemployee’sestimationyear,andtheamountsdeductedandwithheldtobegovernedbytheestimationyear,shallbedeterminedunderrulesprescribedbythedirectoroftaxation.
(2) Underthissubsection,thefollowingspecialrulesshallapply:(A) Marriedindividuals.Thenumberofwithholdingallowancestowhichahusbandandwifeareentitled
underthissubsectionshallbedeterminedonthebasisoftheircombinedwagesanddeductions.Thissubparagraphshallnotapplytoahusbandandwifewhofiledseparatereturnsforthetaxableyearprecedingtheestimationyearandwhoreasonablyexpecttofileseparatereturnsfortheestimationyear;
(B) Limitation. In the case of employeeswhose estimatedwages are at levels at which the amountsdeductedandwithheldunderthischaptergenerallyareinsufficient(takingintoaccountareasonableallowancefordeductionsandexceptions)tooffsettheliabilityfortaxunderthischapterwithrespecttothewagesfromwhichtheamountsaredeductedandwithheld,thedirectormaybyrulereducethewithholdingallowancestowhichthoseemployeeswould,butforthissubparagraph,beentitledunderthissubsection;
(C) Treatmentofallowances.Forpurposesofthischapter,anywithholdingallowanceunderthissubsectionshallbetreatedasifitweredenominatedawithholdingexemption.
(3) Thedirectormayprescribetablesbyruleunderchapter91pursuanttowhichemployeesshalldeterminethenumberofwithholdingallowancestowhichtheyareentitledunderthissubsection.
(h) Thedirectoroftaxationmayadoptbyruleunderchapter91therulesandregulationspromulgatedbytheUnitedStatesSecretaryofTreasuryoradelegateoftheSecretaryrelatingtotheprovisionsofsubtitleC,chapter24oftheInternalRevenueCodeoperativeinthissection.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;amL1965,c155,§31(d);Supp,§121-16;HRS§235-61;amL1981,c138,§1;amL1982,c23,§1;amL1983,c206,§2;amimpL1984,c90,§1;gench1985;amL1987,c239,§1(17),(18);amL1993,c73,§4;amL1995,c92,§7;amL1996,c187,§6;amL2001,c199,§5;amL2017,c12,§44]
Cross Reference
TaxInformationReleaseNo.33-71,“WithholdingofHawaiiIncomeTaxes”TaxInformationReleaseNo.82-3,“StateIncomeTaxWithholdingonSickPayIncludingTemporaryDisabilityInsurance”TaxInformationReleaseNo.95-4,“EmployeeWithholdingCertificates”Tax InformationReleaseNo.2007-03,“ImpositionofHawaiiState IncomeTaxon IncomeEarnedbyNonresidentMerchantSeamenand
WithholdingObligationsofEmployersofNonresidentMerchantSeamen”TaxInformationReleaseNo.2010-01,“MilitarySpousesResidencyReliefAct(“MSRRA”)”
Case Notes
Statutedidnot apply,wheredefendantsUnitedStates, directorof taxation, anddirectorof labor and industrial relations sought taxes thatprincipal(subcontractor)failedtoremitatthetimeitcontrolleditsfundsandpaymentofwages;becauseunpaidtaxesaccruedwhenprincipalhadcontroloveritspaymentofwages,plaintiffsurety(whichissuedsubcontractor’sperformanceandpaymentbond)maynotbeheldliableforthesefunds.67F.Supp.2d1183.
§235-62 Return and payment of withheld taxes. (a)Everyemployerrequiredbythischaptertowithholdtaxesonwagespaidinanyquarterofthecalendaryearshallmakeareturnofsuchwagestothedepartmentoftaxationonorbeforethefifteenthdayofthecalendarmonthfollowingthecloseofeachsuchquarterforwhichthetaxeshavebeenwithheld.
(b) Thereturnshallbeinsuchform,includingcomputerprintoutsorotherelectronicformats,andcontainsuchinformationasmaybeprescribedbythedirectoroftaxation.ThereturnshallbefiledwiththedirectoratthefirsttaxationdistrictinHonolulu.
§235-63 INCOME TAX LAW
CHAPTER235,Page62(UnofficialCompilation)
(c) Everyreturnrequiredunderthissectionshallbeaccompaniedbyaremissionofthecompleteamountoftaxwithheld,asreportedinthereturn;providedthateachemployerwhoseliabilityfortaxeswithheldexceeds$40,000annually shall remit the complete amountof taxwithheldon a semi-weekly schedule; provided further that eachemployerwhoseliabilityfortaxeswithheldexceeeds$5,000butdoesnotexceed$40,000annuallyshallremitthecompleteamountoftaxwithheldonamonthlyschedule.Notwithstandingthetaxliabilitythresholdinthissubsection,thedirectoroftaxationisauthorizedtorequireanyemployerwhoisrequiredtoremitanywithheldtaxestothefederalgovernmentonasemi-weeklyschedule,toremitthecompleteamountoftaxwithheldtothedepartmentonasemi-weeklyschedule.Thedirectoroftaxationmaygrantanexemptiontotherequirementtoremitthecompleteamountoftaxwithheldonasemi-weeklyscheduleforgoodcause.
(d) Ifthedirectorbelievescollectionofthetaxmaybeinjeopardy,thedirectormayrequireanypersonrequiredtomakeareturnunderthissectiontomakesuchreturnandpaysuchtaxatanytime.
(e) Thedirector, forgoodcause,mayextend the time formaking returnsandpayments,butnotbeyond thefifteenthdayofthesecondmonthfollowingtheregularduedateofthereturn.Withrespecttowagespaidoutofpublicmoneys,thedirector,inthedirector’sdiscretion,mayprescribespecialformsfor,anddifferentproceduresandtimesforthefilingof,thereturnsbyemployerspayingthewages,ormaywaivethefilingofanyreturnsupontheconditionsandsubjecttorulesthedirectormayprescribe.
(f) Forpurposesofthissection,“semi-weeklyschedule”means:(1) Onorbefore the followingWednesday ifwageswerepaidon the immediatelyprecedingWednesday,
Thursday,orFriday;or(2) OnorbeforethefollowingFridayifwageswerepaidontheimmediatelyprecedingSaturday,Sunday,
Monday,orTuesday.Inadditiontotheallowancesprovidedundersection231-21,eachemployershallhaveatleastthreebankingdays
followingthecloseofthesemi-weeklyperiodbywhichtoremitthetaxeswithheldasprovidedforinsection6302oftheInternalRevenueCode.
(g) Forthepurposesofthissection,“monthlyschedule”meansonorbeferethefifteenthdayofthecalendarmonthfollowingthemonthforwhichthetaxeshavebeenwithheld.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;amL1964,c24,§2;Supp,§121-17;amL1966,c19,§3;amL1967,c26,§2andc37,§1;HRS§235-62;amL1970,c37,§2;amL1980,c211,§2;amL1981,c138,§2;amimpL1984,c90,§1;gench1985;amL1992,c38,§1;amLSp20013d,c8,§2;amL2004,c113,§3;amL2005,c27,§2;amL2009,c196,§3;amL2017,c7,§2]
Note
The2009amendmentappliestoreturnsandpaymentsdueafterMay31,2009.L2009,c196,§8.
Cross Reference
TaxInformationReleaseNo.2001-1,“TheApplicationofCertainHawaiiTaxestoQualifiedSubchapterSSubsidiaryCorporations,QualifiedSubchapterSTrusts,andElectingSmallBusinessTrusts”
TaxInformationReleaseNo.2004-1,“Act113,SessionLawsofHawaii2004,RelatingtoIncomeTaxWithholding”TaxAnnouncement 2005-01, “Instructions on Filing Federal Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule
Depositors,forHawaiiWithholdingTaxPurposes”
§235-63 Statements to employees. Everyemployerrequiredtodeductandwithholdanytaxonthewagesofanyemployeeshallfurnishtoeachemployeeinrespectoftheemployee’semploymentduringthecalendaryear,onorbeforeJanuary31ofthesucceedingyear,oriftheemployee’semploymentisterminatedbeforethecloseofacalendaryear,withinthirtydaysafterthedateofreceiptofawrittenrequestfromtheemployeeifsuchthirty-dayperiodendsbeforeJanuary31,awrittenstatement,showingtheperiodcoveredbythestatement, thewagespaidbytheemployertotheemployeeduringsuchperiod,andtheamountofthetaxdeductedandwithheldorpaidinrespectofsuchwages.EachsuchemployershallfileonorbeforethelastdayofFebruaryfollowingthecloseofthecalendaryearaduplicatecopyofeachsuchstatement.Thedepartmentoftaxationmaygranttoanyemployerareasonableextensionoftime,notinexcessofsixtydays,withrespecttoanystatementrequiredbythissectiontobefurnishedtoanemployeeorfiled,andmaybyregulationprovideforthefurnishingorfilingofstatementsatsuchothertimesandcontainingsuchotherinformationasmayberequiredfortheadministrationofthischapter.Thedepartmentshallprescribetheformofthestatementrequiredbythissectionandmayadoptanyfederalformappropriateforthepurpose.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-18;HRS§235-63;amL1980,c236,§1;amL1983,c88,§3;amimpL1984,c90,§1;gench1985]
§235-64 Taxes withheld by employer held in trust; employer’s liability. (a)Alltaxeswithheldbyanyemployerundersection235-61shallbeheldintrustbytheemployerfortheStateandforthepaymentofthesametothecollectorinthemannerandatthetimerequiredbythischapter.Ifanyemployerfails,neglects,orrefusestodeductandwithholdfromthewagespaidtoanemployee,ortopayover,theamountoftaxrequired,theemployershallbeliabletopaytotheStatetheamountofthetax.Anemployermayrecoverfromanemployeeanyamountwhichtheemployershouldhavewithheldbutdidnotwithholdfromtheemployee’swages,iftheemployerhasbeenrequiredtopayandhaspaidtheamounttotheStateoutoftheemployer’sownfundspursuanttothissection.
INCOME TAX LAW §235-68
CHAPTER235,Page63(UnofficialCompilation)
(b) Inadditionto theliability imposedbysubsection(a) ifanyemployerfails,neglects,orrefuses todeductandwithholdfromthewagespaidtoanyemployee,ortopayover,theamountoftaxrequired,anypersonexcludingthosewhohaveonlyministerialduties,whoisunderadutytodeductandwithholdortopayover,theamountoftaxrequired,andwhowilfullyfailstoperformsuchduty,shallbeliabletotheStatefortheamountofthetax.Theliabilitymaybeassessedandcollectedinthesamemannerastheliabilityimposedbysubsection(a);providedthattwoormorepersonsmaybeassessedunderthissubsectionjointlyorinthealternative,butthetaxshallbecollectedonlyoncewithrespecttothesamewages.Thevoluntaryorinvoluntarydissolutionoftheemployer,orthewithdrawalandsurrenderofitsrighttoengageinbusinesswithinthisStateshallnotdischargetheliabilityherebyimposed.[LSp1957,c1,ptof§2;amL1959,c277,§11;Supp,§121-19;HRS§235-64;amL1974,c11,§1;amimpL1984,c90,§1;gench1985;amL1990,c82,§1;amL2002,c153,§4]
Note
The2002amendmentappliestowithholdingrequirementsforpayrollperiodsbeginningonorafterJuly1,2002. L2002,c153,§7(2).
§235-65 REPEALED.L1995,c92,§22.
§235-66 Further withholdings at source; crediting of withheld taxes. (a) The department of taxation byregulation,may require the deduction andwithholding of tax from any gross incomeor adjusted gross incomeof anonresident,inordertocollectthetaximposedbythischapteronthenonresident.
(b) Incomeuponwhich any tax has beenwithheld at the source under sections 235-61 to 235-64, or underregulationsadoptedpursuanttosubsection(a),shallbeincludedinthereturnoftherecipientofsuchincome,butanyamountoftaxsowithheldshallbecreditedagainsttheamountofincometaxascomputedinthereturn,andifinexcessofthetaxdueforthetaxableyearshallberefundedasprovidedinsection235-110.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-21;HRS§235-66]
§235-67 Indemnity of withholder. Everypersonrequiredtowithholdataxundersections235-61to235-64,orunderregulationsadoptedpursuanttosection235-66(a),ismadeliableforsuchtaxandisrelievedofliabilityfororupontheclaimordemandofanyotherpersonfortheamountofanypaymentstothedepartmentoftaxationmadeinaccordancewithsuchsections.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-22;HRS§235-67]
§235-68 Withholding of tax on the disposition of real property by nonresident persons. (a)Asusedinthissection:
“Nonresidentperson”meanseverypersonotherthanaresidentperson.“Property”or“realproperty”hasthemeaningasthesametermisdefinedinsection231-1.“Residentperson”meansany:(1) Individualincludedinthedefinitionofresidentinsection235-1;(2) Corporationincorporatedorgrantedacertificateofauthorityunderchapter414,414D,or415A;(3) Partnershipformedorregisteredunderchapter425or425E;(4) Foreignpartnershipqualifiedtotransactbusinesspursuanttochapter425or425E;(5) Limitedliabilitycompanyformedunderchapter428oranyforeignlimitedliabilitycompanyregistered
underchapter428;providedthatifasinglememberlimitedliabilitycompanyhasnotelectedtobetaxedasacorporation,thesinglememberlimitedliabilitycompanyshallbedisregardedforpurposesofthissectionandthissectionshallbeappliedasifthesolememberisthetransferor;
(6) Limitedliabilitypartnershipformedunderchapter425;(7) Foreignlimitedliabilitypartnershipqualifiedtotransactbusinessunderchapter425;(8) Trustincludedinthedefinitionofresidenttrustinsection235-1;or(9) Estateincludedinthedefinitionofresidentestateinsection235-1.
“Transferee”meansanyperson,theStateandthecountiesandtheirrespectivesubdivisions,agencies,authorities,andboards,acquiringrealpropertywhichislocatedinHawaii.
“Transferor”meansanypersondisposingrealpropertythatislocatedinHawaii.(b) Unlessotherwiseprovidedinthissection,everytransfereeshalldeductandwithholdataxequaltofiveper
centoftheamountrealizedonthedispositionofHawaiirealproperty.Everypersonrequiredtowithholdataxunderthissectionismadeliableforthetaxandisrelievedofliabilityfororupontheclaimordemandofanyotherpersonfortheamountofanypaymentstothedepartmentmadeinaccordancewiththissection.
(c) Every transferee requiredby this section towithhold taxunder subsection (b) shallmakea returnof theamountwithheldtothedepartmentoftaxationnotmorethantwentydaysfollowingthetransferdate.
(d) No person shall be required to deduct and withhold any amount under subsection (b), if the transferorfurnishestothetransfereeanaffidavitbythetransferorstatingthetransferor’staxpayeridentificationnumberand:
(1) Thetransferorisaresidentperson;or
18-235-66
[§235-69] INCOME TAX LAW
CHAPTER235,Page64(UnofficialCompilation)
(2) ThatbyreasonofanonrecognitionprovisionoftheInternalRevenueCodeasoperativeunderthischapterortheprovisionsofanyUnitedStatestreaty,thetransferorisnotrequiredtorecognizeanygainorlosswithrespecttothetransfer;
(3) Abriefdescriptionofthetransfer;and(4) Abriefsummaryofthelawandfactssupportingtheclaimthatrecognitionofgainorlossisnotrequired
withrespecttothetransfer.Thissubsectionshallnotapplyifthetransfereehasactualknowledgethattheaffidavitreferredtointhissubsectionisfalse.
(e) Anapplicationforawithholdingcertificatemaybesubmittedby the transferor to thedepartmentsettingforth:
(1) Thename,address,andtaxpayeridentificationnumber,ifany,ofthepartiestothetransactionandthelocationandgeneraldescriptionoftherealpropertytobetransferred;and
(2) Acalculationandwrittenjustificationshowingthatthetransferorwillnotrealizeanygainwithrespecttothetransfer;or
(3) A calculation and written justification showing that there will be insufficient proceeds to pay thewithholdingrequiredundersubsection(b)afterpaymentofallcosts,includingsellingexpensesandtheamountofanymortgageorliensecuredbytheproperty.
Uponreceiptoftheapplication,thedepartmentshalldeterminewhetherthetransferorhasrealizedorwillrealizeanygainwithrespecttothetransfer,orwhethertherewillbeinsufficientproceedstopaythewithholding.Ifthedepartmentissatisfiedthatnogainwillberealizedorthattherewillbeinsufficientproceedstopaythewithholding,itshallissueawithholdingcertificatestatingtheamounttobewithheld,ifany.
Thesubmissionofanapplicationforawithholdingcertificatetothedepartmentdoesnotrelievethetransfereeofitsobligationtowithholdortomakeareturnofthetaxundersubsections(b)and(c).
(f) Nopersonshallberequiredtodeductandwithholdanyamountundersubsection(b)ifoneormoreindividualtransferors furnishes to the transferee an affidavit by the transferor stating the transferor’s taxpayer identificationnumber,thatfortheyearprecedingthedateofthetransferthepropertyhasbeenusedbythetransferorasaprincipalresidence,andthattheamountrealizedforthepropertydoesnotexceed$300,000.
(g) Thedepartmentmayenterintowrittenagreementswithpersonswhoengageinmorethanonerealpropertytransactioninacalendaryearorotherpersonstowhommeetingthewithholdingrequirementsofthissectionarenotpracticable.Thewrittenagreementsmayallowtheuseofawithholdingmethodotherthanthatprescribedbythissectionormaywaivethewithholdingrequirementunderthissection.[L1990,c213,§1;amL1991,c279,§1;amL1995,c92,§8;amL1997,c178,§2;amL2002,c40,§6;amL2003,c210,§3;amL2005,c23,§1]
Note
Chapter415referredtoindefinitionof“residentperson”isrepealed.Forpresentprovisions,seechapter414.EffectiveJuly1,2002,chapter415Breferredtoindefinitionof“residentperson”isrepealed.ForprovisionseffectiveJuly1,2002,seechapter
414D.L2005,c23,§3provides:“SECTION3.ThisActshalltakeeffectuponitsapproval[April22,2005]andapplytotaxableyearsbeginningafterDecember31,2004;
providedthatnothinginthisActshallbeconstruedtocreateanyinferencewithrespecttothepropertaxtreatmentofsinglememberlimitedliabilitycompaniesfortaxableyearspriortothetaxableyearbeginningonJanuary1,2005.”
Cross Reference
TaxInformationReleaseNo.2002-2,“WithholdingofStateIncomeTaxesonDispositionofHawaiiRealProperty” SupersededbyTIRNo.2017-01
TaxInformationReleaseNo.2017-01,“WithholdingofStateIncomeTaxesonDispositionofHawaiiRealProperty”
[§235-69] Voluntary deduction and withholding of state income tax from unemployment compensation. An individualreceivingunemploymentcompensationbenefitsunderchapter383mayelecttohavestateincometaxdeductedandwithheldfromtheindividual’spaymentofunemploymentcompensationattherateoffivepercentinaccordancewithsection383-163.6.[L1996,c157,§1]
PART IV. CORPORATION INCOME TAX
§235-71 Tax on corporations; rates; credit of shareholder of regulated investment company. (a)Ataxattherateshereinprovidedshallbeassessed,levied,collected,andpaidforeachtaxableyearonthetaxableincomeofeverycorporation,includingacorporationcarryingonbusinessinpartnership,exceptthatinthecaseofaregulatedinvestmentcompanythetaxisasprovidedbysubsection(b)andfurtherthatinthecaseofarealestateinvestmenttrustasdefinedinsection856oftheInternalRevenueCodeof1954thetaxisasprovidedinsubsection(d).“Corporation”includesanyprofessionalcorporationincorporatedpursuanttochapter415A.
18-235-71
INCOME TAX LAW §235-72
CHAPTER235,Page65(UnofficialCompilation)
Thetaxonalltaxableincomeshallbeattherateof4.4percentifthetaxableincomeisnotover$25,000,5.4percentifover$25,000butnotover$100,000,andonallover$100,000,6.4percent.
(b) Inthecaseofaregulatedinvestmentcompanythereisimposedonthetaxableincome,computedasprovidedinsections852and855oftheInternalRevenueCodebutwiththechangesandadjustmentsmadebythischapter(withoutprejudicetothegeneralityoftheforegoing,thedeductionfordividendspaidislimitedtosuchamountofdividendsasisattributabletoincometaxableunderthischapter),ataxconsistinginthesumofthefollowing:4.4percentifthetaxableincomeisnotover$25,000,5.4percentifover$25,000butnotover$100,000,andonallover$100,000,6.4percent.
(c) Inthecaseofashareholderofaregulatedinvestmentcompanythereisherebyallowedacreditintheamountofthetaximposedontheamountofcapitalgainswhichbysection852(b)(3)(D)oftheInternalRevenueCodeisrequiredtobeincludedintheshareholder’sreturnandonwhichtherehasbeenpaidtotheStatebytheregulatedinvestmentcompanythetaxattherateimposedbysubsection(b);theamountofthiscreditmaybeappliedorrefundedasprovidedinsection235-110.
(d) Inthecaseofarealestateinvestmenttrustthereisimposedonthetaxableincome,computedasprovidedinsections857and858oftheInternalRevenueCodebutwiththechangesandadjustmentsmadebythischapter(withoutprejudicetothegeneralityoftheforegoing,thedeductionfordividendspaidislimitedtosuchamountofdividendsasisattributabletoincometaxableunderthischapter),ataxconsistinginthesumofthefollowing:4.4percentifthetaxableincomeisnotover$25,000,5.4percentifover$25,000butnotover$100,000,andonallover$100,000,6.4percent.Inadditiontoanyotherpenaltyprovidedbylawanyrealestateinvestmenttrustwhosetaxliabilityforany taxable year is deemed to be increasedpursuant to section859(b)(2)(A)or 860(c)(1)(A) afterDecember31,1978,(relatingtointerestandadditionstotaxdeterminedwithrespecttotheamountofthedeductionfordeficiencydividendsallowed)oftheInternalRevenueCodeshallpayapenaltyinanamountequaltotheamountofinterestforwhichsuchtrustisliablethatisattributablesolelytosuchincrease.Thepenaltypayableunderthissubsectionwithrespecttoanydeterminationshallnotexceedone-halfoftheamountofthedeductionallowedbysection859(a),or860(a)afterDecember31,1978,oftheInternalRevenueCodeforsuchtaxableyear.
(e) AnycorporationactingasabusinessentityinmorethanonestateandwhichisrequiredbythischaptertofileareturnandwhoseonlyactivitiesinthisStateconsistofsalesandwhichdoesnotownorrentrealestateortangiblepersonalpropertyandwhoseannualgrosssalesinorintothisStateduringthetaxyeararenotinexcessof$100,000mayelecttoreportandpayataxof.5percentofsuchannualgrosssales.[LSp1957,c1,ptof§2;amL1965,c155,§§10,11,12andc201,§6;Supp,§121-23;HRS§235-71;amL1969,c226,§5;amL1974,c10,§2;amL1978,c173,§2(13);amL1979,c62,§2(11);amL1983,c167,§18;amL1985,c270,§4;amL1987,c239,§1(19);amL1988,c10,§1(3),(4)]
Cross Reference
Professionalcorporation,seechapter415A.TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETaxInformationReleaseNo.87-4,“CorporationTaxRatesfor1987”
§235-71.5 Alternative tax for corporations. Section1201(withrespecttoalternativetaxforcorporations)oftheInternalRevenueCodeof1986,asamendedasofDecember31,1996,shallbeoperativeforthepurposesofthischapterandshallbeappliedassetforthinthissection.Ifforanytaxableyearacorporation,regulatedinvestmentcompany,orrealestateinvestmenttrusthasanetcapitalgain,then,inlieuofthetaximposedbysection235-71,thereisherebyimposedatax(ifsuchtaxislessthanthetaximposedundersection235-71)whichshallconsistofthesumof:
(1) Ataxcomputedonthetaxableincomereducedbytheamountofthenetcapitalgain,attheratesandinthemannerasifthissectionhadnotbeenenacted,plus
(2) Thesumof:(A) 3.08percentofthelesserof: (i)Thenetcapitalgaindeterminedbyincludingonlythegainorlosswhichisproperlytakeninto
accountfortheportionofthetaxableyearbeforeApril1,1987(i.e.,theamountinparagraph(1)),or
(ii)Thenetcapitalgainforthetaxableyear,plus(B) 4percentoftheexcess(ifany)of: (i)Thenetcapitalgainforthetaxableyear,over (ii)Theamountofthenetcapitalgaintakenintoaccountundersubparagraph(A).[L1988,c10,
§1(1);amL1998,c113,§3]
§235-72 Corporations carrying on business in partnership. CorporationscarryingonbusinessinpartnershipshallbetreatedinthesamemannerbythischapterastheyaretreatedbytheInternalRevenueCode.[LSp1957,c1,ptof§2;Supp,§121-24;HRS§235-72;amL1978,c173,§2(14)]
[§235-91.5] INCOME TAX LAW
CHAPTER235,Page66(UnofficialCompilation)
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETE
PART V. ELECTION BY SMALL BUSINESS CORPORATION
§§235-81 to 89 REPEALED. L1978,c173,§2(15).
PART VI. RETURNS AND PAYMENTS; ADMINISTRATION
§235-91 REPEALED. L1978,c173,§2(16).
[§235-91.5] Income tax credits; ordering of credit claims. Notwithstandinganyotherlawtothecontraryprovidingfortheuseofanincometaxcreditunderthischapter,intheoffsettingofataxpayer’sincometaxliability,taxcreditsthatmayberefundedorpaidtothetaxpayerwhohasnoincometaxliabilityshallbeusedfirst,followedbynonrefundabletaxcreditsthatmaybeusedascreditagainsttaxesinsubsequentyearsuntilexhausted.[L2010,c21,§2]
Note
AppliestotaxableyearsbeginningonorafterJanuary1,2010.L2010,c21,§4.
§235-92 Returns, who shall make. Foreachtaxableyear,returnsshallbemadebythefollowingpersonstothedepartmentoftaxationinsuchformandmannerasitshallprescribe:
(1) EverypersondoingbusinessintheStateduringthetaxableyear,whetherornotthepersonderivesanytaxableincometherefrom.Asusedinthisparagraph“doingbusiness”includesallactivitiesengagedinorcausedtobeengagedinwiththeobjectofgainoreconomicbenefit,directorindirect,exceptpersonalservicesperformedasanemployeeunderthedirectionandcontrolofanemployer.EverypersonreceivingrentsfrompropertyownedintheStateisclassedas“doingbusiness”andshallmakeareturnwhetherornotthepersonderivestaxableincometherefrom.
(2) Everycorporationhavingforthetaxableyeargrossincomesubjecttotaxationunderthischapter;providedthatanaffiliatedgroupofdomesticcorporationsmaymakeandfileaconsolidatedreturnforthetaxableyearinlieuofseparatetaxreturnsinthemannerandtotheextent,sofarasapplicable,setforthinsections1501through1505and1552oftheInternalRevenueCodeof1954,asamended.
(3) Everyindividual,estate,ortrusthavingforthetaxableyeargrossincomesubjecttotaxationunderthischapter,exceptasexemptedfromthefilingofareturnbyregulationsofthedepartment.
Thedepartmentmaybyregulationexcusethefilingofareturnbyanindividual,estate,ortrustincasesnotcomingwithinparagraph (1),where thegross incomeandexemptionsare such thatno tax is expected toaccrueunder thischapter,oraresuchthatsubstantiallyallthetaxwillhavebeencollectedthroughtaxwithholdingsoratthesource.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-26;HRS§235-92;amL1968,c24,§2;amL1978,c173,§2(17);amimpL1984,c90,§1;gench1985]
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETETaxInformationReleaseNo.65-79,“StateTaxationofHomeownersAssociationsforIncome,GeneralExciseandUseTaxes”Tax InformationReleaseNo.97-2,“FilingofaCombinedHawaii IncomeTaxReturnbyaUnitaryBusinessasPartofaUnitaryGroup”
REVISEDTaxInformationReleaseNo.2001-1,“TheApplicationofCertainHawaiiTaxestoQualifiedSubchapterSSubsidiaryCorporations,Qualified
SubchapterSTrusts,andElectingSmallBusinessTrusts”
§235-93 Joint returns. (a)Ahusbandandwife,havingthatstatusforpurposesoftheInternalRevenueCodeandentitledtomakeajointfederalreturnforthetaxableyear,maymakeasinglereturnjointlyoftaxesunderthischapterforthetaxableyear.Inthatcasethetaxshallbecomputedontheiraggregateincomeasprovidedinsection235-52,andtheliabilitywithrespecttothetaxshallbejointandseveral.Forpurposesofthischapter“aggregateincome”meanstheincomeofbothspouseswithoutregardtosourceintheState.
(b) Ifanindividualhasfiledaseparatereturnforataxableyearforwhichajointreturncouldhavebeenmadebythetaxpayerandthetaxpayer’sspouse,anelectionthereaftertomakeajointreturnforthetaxableyearshallbemadeonlyuponcompliancewithrulesofthedepartmentoftaxation,whichmaylimittheelectionandprescribethetermsandprovisionsapplicableinsuchcasesasnearlyasmaybeinconformitywiththeInternalRevenueCode.
(c) Thefilingofajointreturnaftertheindividualhasfiledaseparatereturnwithoutfullpaymentoftheamountshownastaxonthejointreturnmaybeelected;providedallotherrequirementsforthefilingofajointreturnunderthissectionandtherulesofthedepartmentarecompliedwith.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-27;HRS§235-93;amL1974,c9,§2;amL1982,c22,§1(4);amL1997,c297,§4]
18-235-92
18-235-93
INCOME TAX LAW §235-95
CHAPTER235,Page67(UnofficialCompilation)
Cross Reference
TaxInformationReleaseNo.92-3,“IncomeTaxIssuesAffectingNonresidentAliens”TaxInformationReleaseNo.97-1,“DeterminationofResidenceStatus”
Law Journals and Reviews
TaxJusticeandSame-SexDomesticPartnerHealthBenefits:AnAnalysisoftheTaxEquityForHealthPlanBeneficiariesAct.32UHL.Rev.73(2009).
[§235-93.4] Effect of civil union. AllprovisionsoftheInternalRevenueCodereferredtointhischapterthatapplytoahusbandandwife,spouses,orpersoninalegalmaritalrelationshipshallbedeemedtoapplyinthischaptertopartnersinacivilunionwiththesameforceandeffectasiftheywere“husbandandwife”,“spouses”,orothertermsthatdescribepersonsinalegalmaritalrelationship.[L2011,c1,§4]
Note
SectionappliestotaxableyearsbeginningafterDecember31,2011.L2011,c1,§10.
Attorney General Opinions
Civilunionpartnershaveallthesamerights,benefits,protections,andresponsibilitiesunderthelawasmarriedcoupleswhoareoftheoppositegender;civilunionpartnershave thesame taxfilingstatusoptionsasmarriedcoupleswhoareof theoppositegender forHawaii income taxpurposesfortaxableyearsbeginningafterDecember31,2011.Att.Gen.Op.11-2.
Definitionsof“marriage”and“spouse”underthefederalDefenseofMarriageAct,Pub.L.No.104-199,110Stat.2419,mayprecludecivilunionpartnersofthesamegenderundertheState’sCivilUnionActfromfilingjointlyforfederalincometaxpurposes,buttheydonotprecludecivilunionpartnersfromfilingjointtaxreturnsforHawaiiincometaxpurposes.Att.Gen.Op.11-2.
§235-93.5 REPEALED. L1999,c198,§3.
§235-94 Returns by agent, guardian, etc.; liability of fiduciaries. (a)Returnsofdecedents.Ifanindividualisdeceased,thereturnoftheindividualrequiredundersection235-92shallbemadebytheindividual’spersonalrepresentativeorotherpersonchargedwiththecareofpropertyofthedecedent.
(b) Persons under a disability. If an individual is unable tomake a return required under section 235-92 or235-97,thereturnoftheindividualshallbemadebyadulyauthorizedagent,theindividual’scommittee,guardian,fiduciary,orotherpersonchargedwiththecareofthepersonorpropertyoftheindividual.Theprecedingsentenceshallnotapplyinthecaseofareceiverappointedbyauthorityoflawinpossessionofonlyapartofthepropertyofanindividual.
(c) Receivers, trustees, and assignees for corporations. In a casewhere a receiver, trustee in bankruptcy, orassignee,byorderofacourtofcompetentjurisdiction,byoperationoflaw,orotherwise,haspossessionoforholdstitletoallorsubstantiallyallthepropertyorbusinessofacorporation,whetherornotthepropertyorbusinessisbeingoperated,suchreceiver,trustee,orassigneeshallmakethereturnofincomeforthecorporationinthesamemannerandformascorporationsarerequiredtomakesuchreturns.
(d) Returnsofestatesandtrusts.Returnsofanestateoratrustshallbemadebythefiduciarythereof.(e) Jointfiduciaries.Undersuchregulationsasthedepartmentoftaxationmayprescribe,areturnmadebyone
oftwoormorejointfiduciariesshallbesufficientcompliancewiththerequirementofthissection.Areturnmadepursuanttothissubsectionshallcontainastatementthatthefiduciaryhassufficientknowledgeoftheaffairsofthepersonforwhomthereturnismadetoenablethefiduciarytomakethereturn,andthereturnis,tothebestofthefiduciary’sknowledgeandbelief,trueandcorrect.
(f) Liability offiduciaries.A tax imposedupon afiduciary shall be a charge upon the property held by thefiduciaryinthatcapacity.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-28;HRS§235-94;amL1976,c200,ptof§1;amimpL1984,c90,§1;gench1985]
§235-94.5 REPEALED. L1990,c16,§4.
§235-95 Partnership returns. Everypartnershipshallmakeareturnforeachtaxableyearuponformsprescribedbythedepartmentoftaxation,itemizingitsgrossincomeandallowabledeductionsandincludingthenamesandaddressesofthepersonswhowouldbeentitledtoshareintheincomeifdistributedandtheamountofeachdistributiveshare.Thereturnshallbeauthenticatedbythesignatureofanyoneofthepartners,underthepenaltiesprovidedbysection231-36,andthefactthatapartner’snameissignedonthereturnshallbeprimafacieevidencethatsuchpartnerisauthorizedtosignthereturnonbehalfofthepartnership.Allprovisionsofthischapterrelatingtoreturnsshallbeapplicabletopartnershipreturnsexceptasspecificallyotherwisestatedinthissection.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-29;HRS§235-95;amL1995,c92,§9]
18-235-94
18-235-95
§235-96 INCOME TAX LAW
CHAPTER235,Page68(UnofficialCompilation)
Cross Reference
TaxInformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the“Check-the-box”Regulationsto theHawaiiIncomeTaxandOtherTaxes”
TaxInformationReleaseNo.2001-1,“TheApplicationofCertainHawaiiTaxestoQualifiedSubchapterSSubsidiaryCorporations,QualifiedSubchapterSTrusts,andElectingSmallBusinessTrusts”
§235-96 Returns by persons making payments. Bydulypromulgatedregulationsthedepartmentoftaxationmayrequirethatanyindividual,partnership,corporation,jointstockcompany,association,insurancecompany,orotherperson,beingaresidentorhavingaplaceofbusinessinthisState,inwhatevercapacityacting,includinglesseesormortgagorsofrealandpersonalproperty,fiduciaries,employers,andallofficersandemployeesoftheStateorofanypoliticalsubdivisionthereof,havingthecontrol,receipt,custody,disposal,orpaymentofanyannuityorinterestondepositsorfundsheldintrust,includingtaxableincomefromendowmentpolicies,otherinterest(exceptinterestcouponspayabletobearer),dividends,wages,rentals,royalties,premiums,orotheremoluments,gains,profits,andincome,paidorpayableduringanyyeartoanyperson,shall,onsuchdateordatesasthedepartmentshallfromtimetotimedesignate,makeareturntothedepartmentfurnishingtheinformationrequiredbytheregulations.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-30;HRS§235-96]
[§235-96.5] Returns relating to unemployment. (a) The state department of labor and industrial relations shallsubmitareturntothedepartmentoftaxationaccordingtotheformsorrulesprescribedbythedirectoroftaxationsettingforththeaggregateamountsofpaymentsofunemploymentcompensationandthenameandaddressoftheindividualtowhompaidunderchapters383to385.
(b) Thedepartmentoflaborandindustrialrelationsshallfurnishtoeachindividualwhosenameissetforthinsuchreturnawrittenstatementshowing:
(1) Thenameandaddressofthedepartmentoflaborandindustrialrelations;and(2) Theaggregateamountofpaymentstotheindividualasshownonsuchreturn.
ThewrittenstatementrequiredbythissubsectionshallbefurnishedtotheindividualonorbeforeJanuary31oftheyearfollowingthecalendaryearforwhichthereturnundersubsection(a)wasmade.Nostatementshallberequiredtobefurnishedtoanyindividualunderthissubsectioniftheaggregateamountofpaymentstosuchindividualshownonthereturnmadeundersubsection(a)islessthan$10.[L1979,c62,§2(4)]
§235-97 Estimates; tax payments; returns.(a)(1) Individuals, corporations (including S corporations), estates, and trusts, shall annually furnish the
departmentoftaxationwithadeclarationofestimatedtaxforthecurrenttaxableyear.Declarationsofestimated tax,exceptasotherwiseprovidedby rule, shallbegovernedby theprovisionsas to returnscontainedinsections235-94,235-98,235-99,and235-128.Thedeclarationsshallbemadeonestimatedtaxpaymentvoucherforms.Thepaymentvouchershallbefiled,inthecaseoftaxpayersonthecalendaryearbasis,onorbeforeApril20.Inthecaseofahusbandandwifewhoareentitledtosubmitajointpaymentvoucherforfederalpurposes,asinglepaymentvouchermaybesubmittedbythemjointly,inwhichcase the liabilitywithrespect to theestimated taxshallbe jointandseveral; ifa jointpaymentvoucherissubmittedbutajointincometaxreturnisnotmadeforthetaxableyear,theestimatedtaxfortheyearmaybetreatedastheestimatedtaxofeitherthehusbandorthewifeormaybedividedbetweenthem.
(2) Eachtaxpayershalltransmit,withthepaymentvoucher,paymentofone-quarteroftheestimatedtaxforthecurrenttaxableyear.Indeterminingthisquarterlypaymentandallotherinstallments,therefirstshallbedeductedfromthetotalestimatedtaxtheamountofestimatedtaxwithholdingorcollectionatsourceforthetaxableyear.Thereafter,onthetwentiethdayofJuneandSeptember,thetaxpayershalltransmitwiththepaymentvoucher,paymentofone-quarteroftheestimatedtax.Thefourthquarterpaymentoftheestimated tax shall be transmittedwith thepaymentvoucherby January20of theyear following thetaxableyearforwhichtheestimatewasmade.
(3) Taxpayersoperatingonafiscalyearbasisshallmakesimilarestimatesandtaxpayments,onorbeforethetwentiethdayofthefourthmonthofthefiscalyearandperiodicallythereaftersoastoconformtothepaymentsandreturnsrequiredinthecaseofthoseonacalendaryearbasis.
(4) Thedepartmentbyrulemayexcuseindividualsfromfilinganestimateinthosecaseswherethegrossincomeandexemptionsaresuch thatno tax isexpected toaccrueunder thischapter,oraresuch thatsubstantiallyallthetaxwillbecollectedthroughtaxwithholdingoratthesource.
(5) Inthecaseofaforeigncorporation,thedepartmentmayexcusethefilingofanestimateandthepaymentofestimatedtaxifitissatisfiedthatlessthanfifteenpercentofthecorporation’sbusinessforthetaxableyearwillbeattributabletotheState.Forthepurposesofthisparagraph,fifteenpercentofacorporation’sbusinessshallbedeemedattributabletotheStateiffifteenpercentormoreoftheentiregrossincomeofthecorporation(whichforthepurposesofthisparagraphmeansgrossincomecomputedwithoutregard
18-235-96
18-235-97
INCOME TAX LAW §235-97
CHAPTER235,Page69(UnofficialCompilation)
tosourceintheState)isattributabletotheStateundersections235-21to235-39orotherprovisionsofthischapter.
(6) Inthecaseofataxpayerwhosetaxliabilityislessthan$500,thefilingofanestimateandthepaymentofestimatedtaxshallnotberequired.
(b) Netincomereturnsforthetaxableyearshallbefiledwiththedepartmentonorbeforethetwentiethdayofthefourthmonthfollowingthecloseofthetaxableyear,andshallbeaccompaniedbypaymentofthebalanceofthetaxforthetaxableyear,ortheentiretaxforthetaxableyear,asthecasemaybe.Thesereturnsshallbefiledbothbypersonsrequiredtomakedeclarationsofestimatedtaxpursuanttothissectionandbypersonsnotrequiredtomakedeclarationsofestimatedtax.
(c) Attheelectionofthetaxpayer,anyinstallmentoftheestimatedtaxmaybepaidpriortothedateprescribedforitspayment.
(d) Apersonwho,undertheregulationsofthedepartmentadoptedpursuanttosubsection(a)(4),isrelievedoffilinganestimate,shalliftheregulationsceasetoapplybyreasonofachangeofcircumstancesduringthetaxableyear,filetherequiredestimateonthefirstquarterlypaymentdateprescribedforpaymentofestimatedtaxes,followingsuch change of circumstances, and pay the estimated tax in equal installments computedby allocating the entireamountshownbytheestimateforthecurrenttaxableyeartotheremainingquarterlypaymentdates.
(e) Anamendmentofanestimatemaybefiled,underregulationsprescribedbythedepartment.Ifanamendmentisfiled,theremaininginstallments,ifany,shallberatablyincreasedordecreasedtoreflecttheincreaseordecreaseintheestimate.Theamendedestimatemaybeaccompaniedbypaymentoftheamountofunderpayment,ifany,andifsothisshallbeconsideredindeterminingtheperiodoftheunderpaymentasprovidedinsubsection(g).
(f) Inthecaseofanyunderpaymentofestimatedtax,exceptasprovidedbythissubsection,thereshallbeaddedtothetaxforthetaxableyearanamountdeterminedattherateoftwo-thirdsofonepercentamonthorfractionofamonthupontheamountoftheunderpaymentfortheperiodoftheunderpayment.
(1) Theamountoftheunderpaymentshallbetheexcessof:(A) Therequiredinstallment,over(B) Theamount,ifany,oftheinstallmentpaidonorbeforetheduedatefortheinstallment.
(2) The period of the underpayment shall run from the due date for the installment towhichever of thefollowingdatesistheearlier:(A) Thetwentiethdayofthefourthmonthfollowingthecloseofthetaxableyear,or(B) Withrespecttoanyportionoftheunderpayment,thedateonwhichtheportionispaid.Forpurposes
ofthisparagraph,apaymentofestimatedtaxonanyinstallmentdateshallbecreditedagainstunpaidrequiredinstallmentsintheorderinwhichtheinstallmentsarerequiredtobepaid.
(3) Forthepurposesofthissection,theterm“tax”meansthetaximposedunderthischapterreducedbyanycreditsavailabletothetaxpayerotherthanthecreditforamountswithheldfromthetaxpayer’swagesortaxeswithheld at the source, if any, or estimated tax payments or payments remittedwith extensionrequestsforthetaxableyear.
(4) Sections6654(d),(e)(2),(e)(3),(h),(i),(j),(k),and(l),(withrespecttofailurebyanindividualtopayestimated income tax), and 6655(d), (e), (g)(2), (g)(3), (g)(4), and (i) (with respect to failure by acorporationtopayestimatedincometax)oftheInternalRevenueCode,asofthedatesetforthinsection235-2.3(a),shallbeoperativeforthepurposesofthissection;providedthattheduedatescontainedinanyoftheprecedingInternalRevenueCodesectionsshallbedeemedtobethetwentiethdayoftheapplicablemonth;andprovidedfurtherthat,forpurposesofthischapterinapplyingsection6654(d),therequiredannualpaymentshallbethelesserofsixtypercentofthetaxshownonthereturnforthetaxableyear(or,ifnoreturnisfiled,sixtypercentofthetaxforthetaxableyear)oronehundredpercentofthetaxshownonthereturnoftheindividualfortheprecedingtaxableyear.
(g) Theamountsoftaxeswithheldfromwagesorcollectedatsourceshallbedeemedpaymentsofestimatedtax,andanequalpartofanysuchamountshallbedeemedpaidoneachinstallmentdateforthetaxableyear,unlessthetaxpayerestablishesthedatesonwhichallamountswereactuallywithheldorcollected,inwhichcasetheamountssowithheldorcollectedshallbedeemedpaymentsofestimatedtaxonthedatesonwhichsuchamountswereactuallywithheldorcollected.[LSp1957,c1,ptof§2;amL1959,c277,§12;amLSp19592d,c1,§16;Supp,§121-31;amL1967,c134,§4;HRS§235-97;amL1979,c62,§2(12);amimpL1984,c90,§1;gench1985;amL1990,c16,§3;amL1991,c20,§1;amL1993,c73,§§5,6;amL1995,c67,§1;amL1998,c113,§4;amL2002,c190,§1;amL2003,c14,§1]
Revision Note
Insubsection(d),“(a)(4)”substitutedfor“(a)(5)”.
Note
The2003amendmentappliestotaxableyearsbeginningafterDecember31,2002.L2003,c14,§4.
§235-98 INCOME TAX LAW
CHAPTER235,Page70(UnofficialCompilation)
§235-98 Returns; form, verification and authentication, time of filing. Returnsshallbe insuchformas thedepartmentoftaxationmayprescribefromtimetotimeandshallbeverifiedbywrittendeclarationsthatthestatementsthereinmadearesubject tothepenaltiesprescribedinsection231-36.Corporatereturnsshallbeauthenticatedbythesignatureofthepresident,vicepresident,treasurer,assistanttreasurer,chiefaccountingofficer,oranyotherofficerdulyauthorizedsotoact,underthepenaltiesprescribedbysection231-36.Thefactthatanindividual’snameissignedonthecorporationreturnshallbeprimafacieevidencethattheindividualisauthorizedtosignthereturnonbehalfofthecorporation.
Thedepartmentmaygrantareasonableextensionoftimeforfilingreturnsundersuchrulesasitshallprescribe.Exceptasotherwiseprovidedbystatuteforcasesinwhichexceptionalcircumstancesrequireadditionaltime,includingcasesofpersonswhoareoutsidetheUnitedStates,noextensionoftimeforfilingreturnsshallbeformorethansixmonthsinordertoexpeditethetimelydeterminationoftaxliabilityandthetimelyremissionoftaxes.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-32;HRS§235-98;amL1995,c92,§10;amL2003,c14,§2]
Note
The2003amendmentappliestotaxableyearsbeginningafterDecember31,2002.L2003,c14,§4.
Cross Reference
TaxInformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the“Check-the-box”Regulationsto theHawaiiIncomeTaxandOtherTaxes”
§235-99 Same; place for filing. Returnsshallbefiledwiththecollectorforthetaxationdistrictinwhichislocatedthelegalresidenceorprincipalplaceofbusinessofthepersonmakingthereturn,or,ifsuchpersonhasnolegalresidenceorprincipalplaceofbusinessintheState,thenwiththecollectoratHonolulu.[LSp1957,c1,ptof§2;Supp,§121-33;amL1967,c37,§1;HRS§235-99]
§235-100 Persons in military service. Thecollectionfromanypersonin themilitaryserviceofanytaxontheincomeofsuchperson,whetherfallingduepriortoorduringtheperson’speriodofmilitaryservice(whichterm,asusedinthissection,shallhavethesamemeaningasintheSoldiers’andSailors’CivilReliefActof1940,asamended),shallbedeferredforaperiodextendingnotmorethansixmonthsaftertheterminationoftheperson’speriodofmilitaryserviceifsuchperson’sabilitytopaysuchtaxismateriallyimpairedbyreasonofsuchservice.Nointerestonanyamountoftax,collectionofwhichisdeferredforanyperiodunderthissection,andnopenaltyfornonpaymentofsuchamountduringsuchperiod, shallaccrue for suchperiodofdefermentby reasonof suchnonpayment.The runningofanystatuteoflimitationsagainstthecollectionofsuchtaxbydistraintorotherwiseshallbesuspendedfortheperiodofmilitaryserviceofanyindividualthecollectionofwhosetaxisdeferredunderthissection,andforanadditionalperiodofninemonthsbeginningwiththedayfollowingtheperiodofmilitaryservice.[LSp1957,c1,ptof§2;Supp,§121-34;HRS§235-100;amimpL1984,c90,§1;gench1985]
Cross Reference
Civilreliefforstatemilitaryforce,see§657D-43.TaxInformationReleaseNo.2003-2,“ExtensionofDeadlinesandOtherTaxReliefforMembersoftheArmedForces,Reserves,andHawaii
NationalGuard”
[§235-100.5] Abatement of income taxes of members of armed forces on death. [SectionretroactivetoAugust2,1990.]Section692(withrespecttoincometaxesofmembersofarmedforcesondeath)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthedepartmentshallhavetheauthoritytoabateincometaxesasprovidedinsection692.
Forthepurposesofthissection“memberoftheArmedForcesoftheUnitedStates”shallhavethesamemeaningasprovidedbysection7701(a)(15)oftheInternalRevenueCode.[L1991,c208,§3]
Cross Reference
TaxInformationReleaseNo.2003-2,“ExtensionofDeadlinesandOtherTaxReliefforMembersoftheArmedForces,Reserves,andHawaiiNationalGuard”
§235-101 Federal returns and assessments, when copies are required. (a)Inprescribingtheformofreturnthedepartmentoftaxationmayrequirethatapersonwhoisrequiredtofileafederalincometaxreturnincludeintheperson’sreturnareconciliationofthereturnwiththeperson’sfederalreturn,orthatthepersonfurnishwiththereturnandasapartthereofacopyofthefederalreturn.
(b) It shallbe thedutyofeverypersonwho is requiredbysection235-92 tomakea return, to report to thedepartment,astoanytaxableyeargovernedbythischapter,if:
(1) TheamountoftaxableincomeasreturnedtotheUnitedStatesischanged,corrected,oradjustedbyanofficeroftheUnitedStatesorothercompetentauthority;
18-235-98
18-235-99
INCOME TAX LAW §235-102.5
CHAPTER235,Page71(UnofficialCompilation)
(2) AchangeintaxableincomeresultsfromarenegotiationofacontractwiththeUnitedStatesorasubcontractthereunder;
(3) ArecomputationoftheincometaximposedbytheUnitedStatesundertheInternalRevenueCoderesultsfromanycause;or
(4) AnamendedincometaxreturnismadetotheUnitedStates.Thereportshallbemadewithinninetydaysafterthechange,correction,adjustment,orrecomputationisfinally
determinedortheamendedreturnisfiled,asthecasemaybe.Thereportrequiredbythissubsectionshallbemadeintheformofanamendmentoftheperson’sreturnfiledunderthischapter.TheamendedreturnshallbeaccompaniedbyacopyofthedocumentissuedbytheUnitedStatesunderparagraphs(1)to(3).ThestatutoryperiodfortheassessmentofanydeficiencyorthedeterminationofanyrefundattributabletothisreportshallnotexpirebeforetheexpirationofoneyearfromthedatethedepartmentisnotifiedbythetaxpayerortheInternalRevenueService,whicheverisearlier,ofthereportinwriting.Beforetheexpirationofthisone-yearperiod,thedepartmentandthetaxpayermayagreeinwritingtotheextensionofthisperiod.Theperiodsoagreeduponmaybefurtherextendedbysubsequentagreementsinwritingmadebeforetheexpirationoftheperiodpreviouslyagreedupon.
(c) Whenever, in theopinionof thedepartment, it isnecessary toexamineany federal income tax returnofanytaxpayeroranydetermination,assessment,orreportrelatedthereto, thedepartmentmaycompel thetaxpayertoproduceforinspectionacopyofanyfederalreturn,copiesofallstatementsandschedulesinsupportthereof,andcopiesofalldeterminations,assessments,andreportsrelatedthereto.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-35;HRS§235-101;amL1978,c173,§2(18);amimpL1984,c90,§1;gench1985;amL1989,c18,§1;amL1993,c31,§1;amL2017,c12,§45]
Cross Reference
TaxInformationReleaseNo.57-78,“AdoptionofInternalRevenueCode”OBSOLETE
§235-102 Records and special returns. (a)Records.Everypersonliabletoanytaximposedbythischapterorforthecollectionordeductionthereofatsource,shallkeepfull,complete,regular,andaccuratebooksofaccountinwhichalltheperson’stransactionsshallbeenteredinregularorder;providedthatthedirectoroftaxationmay,byregulation,provideforthekeepingofsimpleraccountsincaseswhere,byreasonofthesmallnessoftheincomeorotherwise,unduehardshiporexpensewillbecausedbythekeepingoffullbooksofaccount.Allbooksofaccountrequiredtobekeptbythischaptershallbepreservedforaperiodofthreeyears,exceptthatthedirectormay,inwriting,consenttotheirdestructionwithinsuchperiodormayrequirethattheybekeptlonger.
(b) Specialreturnsandstatements.Wheneveritisnecessary,inthejudgmentofthedirector,thedirectormayrequire any taxpayer, or person liable for the collectionor deductionof tax at source, bynotice servedupon thetaxpayerorotherperson,tomakesuchreturnsorrendersuchsignedstatementsasthedirectordeemssufficienttoshowwhetherornotthetaxpayerorotherpersonisliableunderthischapter.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;amL1963,c45,§4(a);Supp,§121-36;HRS§235-102;amL1969,c274,§1;amimpL1984,c90,§1;gench1985]
Cross Reference
TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;andPaymenttoStateUnderProtest”
Case Notes
Cited:33H.766.
§235-102.5 Income check-off authorized. (a)Anyindividualwhosestateincometaxliabilityforanytaxableyearis$3ormoremaydesignate$3oftheliabilitytobepaidovertotheHawaiielectioncampaignfund,anyotherlawtothecontrarynotwithstanding,whensubmittingastateincometaxreturntothedepartment.Inthecaseofajointreturnofahusbandandwifehavingastateincometaxliabilityof$6ormore,eachspousemaydesignatethat$3bepaidtothefund.Thedirectoroftaxationshallrevisetheindividualstateincometaxformtoallowthedesignationofcontributionstothefundonthefaceofthetaxreturnandimmediatelyabovethesignaturelines.Anexplanationshallbeincludedwhichclearlystatesthatthecheck-offdoesnotconstituteanadditionaltaxliability.Ifnodesignationwasmadeontheoriginaltaxreturnwhenfiled,adesignationmaybemadebytheindividualonanamendedreturnfiledwithintwentymonthsandtendaysaftertheduedatefortheoriginalreturnforsuchtaxableyear.Adesignationoncemadewhetherbyanoriginaloramendedreturnmaynotberevoked.
(b) Notwithstandinganylawtothecontrary,anyindividualwhosestateincometaxrefundforanytaxableyearis$2ormoremaydesignate$2oftherefundtobedepositedintotheschool-levelminorrepairsandmaintenancespecialfundestablishedbysection302A-1504.5,whensubmittingastateincometaxreturntothedepartment.Inthecaseofajointreturnofahusbandandwifehavingastateincometaxrefundof$4ormore,eachspousemaydesignatethat$2bedepositedintothespecialfund.Thedirectoroftaxationshallrevisetheindividualstateincometaxreturnformtoallowthedesignationofcontributionstothespecialfundonthefaceofthetaxreturnandimmediatelyabovethe
18-235-102
[235-102.6] INCOME TAX LAW
CHAPTER235,Page72(UnofficialCompilation)
signaturelines.Ifnodesignationwasmadeontheoriginaltaxreturnwhenfiled,adesignationmaybemadebytheindividualonanamendedreturnfiledwithintwentymonthsandtendaysaftertheduedatefortheoriginalreturnforsuchtaxableyear.Adesignationoncemade,whetherbyanoriginaloramendedreturn,maynotberevoked.
(c) Notwithstandinganylawtothecontrary,anyindividualwhosestateincometaxrefundforanytaxableyearis$2ormoremaydesignate$2oftherefundtobepaidovertothelibrariesspecialfundestablishedbysection312-3.6,whensubmittingastateincometaxreturntothedepartment.Inthecaseofajointreturnofahusbandandwifehavingastateincometaxrefundof$4ormore,eachspousemaydesignatethat$2bedepositedintothespecialfund.Thedirectoroftaxationshallrevisetheindividualstateincometaxformtoallowthedesignationofcontributionstothefundonthefaceofthetaxreturnandimmediatelyabovethesignaturelines.Ifnodesignationwasmadeontheoriginaltaxreturnwhenfiled,adesignationmaybemadebytheindividualonanamendedreturnfiledwithintwentymonthsandtendaysaftertheduedatefortheoriginalreturnforsuchtaxableyear.Adesignationoncemade,whetherbyanoriginaloramendedreturn,maynotberevoked.
(d) Notwithstandinganylawtothecontrary,anyindividualwhosestateincometaxrefundforanytaxableyearis$5ormoremaydesignate$5oftherefundtobepaidoverasfollows:
(1) One-thirdtotheHawaiichildren’strustfundundersection350B-2;and(2) Two-thirdstobedividedequallyamong:
(A) Thedomesticviolencepreventionspecialfundunderthedepartmentofhealthinsection321-1.3;(B) Thespouseandchildabusespecialaccountunderthedepartmentofhumanservicesinsection346-
7.5;and(C) Thespouseandchildabusespecialaccountunderthejudiciaryinsection601-3.6.
Whendesignatedbyataxpayersubmittingastateincometaxreturntothedepartment,thedepartmentofbudgetandfinanceshallallocatethemoneysamongtheseveralfundsasprovidedinthissubsection.Inthecaseofajointreturnofahusbandandwifehavingastateincometaxrefundof$10ormore,eachspousemaydesignatethat$5bepaidoverasprovidedinthissubsection.Thedirectoroftaxationshallrevisetheindividualstateincometaxformtoallowthedesignationofcontributionspursuanttothissubsectiononthefaceofthetaxreturnandimmediatelyabovethesignaturelines.Ifnodesignationwasmadeontheoriginaltaxreturnwhenfiled,adesignationmaybemadebytheindividualonanamendedreturnfiledwithintwentymonthsandtendaysaftertheduedatefortheoriginalreturnforsuchtaxableyear.Adesignationoncemade,whetherbyanoriginaloramendedreturn,maynotberevoked.[L1979,c224,§4;amL1991,c112,§1;amL2001,c311,§3;amL2002,c16,§9;amL2003,c193,§2;amL2004,c228,§1;amL2008,c244,§34]
[235-102.6] Refund splitting. (a)Anyindividualtaxpayerrequiredtomakeareturnunderthischaptershallbeentitledtodirectthedepositofanincometaxrefundintoamaximumofthreecheckingorsavingsaccountsatafinancialinstitution;providedthatataxpayerdesignatingthedirectdepositshallhaveelectronicallyfiledthetaxpayer’sreturnforfederalandstateincometaxesandmadeasimilardirectdepositelectronicdesignationtothesamecheckingorsavingsaccountsontheelectronicreturn.
(b) Thedepartmentoftaxationshallbeauthorizedtomodifyandreviseitsreturnsandcomputersystemstocarryoutthepurposesofthissection.[L2008,c202,§2]
Note
SectionappliestotaxableyearsbeginningafterDecember31,2007.L2008,c202,§5.
§235-103 Distortion of income. Whenataxpayersoconductsbusinessaseitherdirectlyorindirectlytobenefitstockholdersthereof,oranyotherpersoninterestedtherein,bysellingproductsorthegoodsorcommoditiesinwhichthetaxpayerdealsatlessthanthefairpricethatcouldbeobtainedforthem,orwhereacorporation,asubstantialportionofthecapitalstockofwhichisownedeitherdirectlyorindirectlybyanothercorporation,acquiresordisposesoftheproductsofthecorporationsoowningasubstantialportionofitsstockinsuchmannerastocreatealossorimproperincometoeitherofthecorporations,orwhereapartnershiporindividualownsaninterestinanothercorporationorbusinesseitherdirectlyorindirectlyandacquiresanddisposesoftheproductsofsuchotherbusinessinsuchmannerastocreatealossorimproperincometoeitherofthebusinesses,andgenerallyinallcaseswheredifferentformsofbusinessenterpriseareusedinconjunctionwithoneanotherforthepurpose,amongothers,ofdivertingprofitsreasonablyandproperlymadebyonefactoragencyorsegmentofthebusinesstoanother,thedirectoroftaxationmaydeterminetheamountoftaxuponeitherorbothoftheenterprisesforthetaxableyear,havingdueregardtothereasonableprofitswhichbutforsucharrangement,understanding,businessdevice,ororganizationmightorcouldhaveaccruedtoeitherorbothoftheenterprises.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-37;HRS§235-103;amimpL1984,c90,§1;gench1985]
§235-104 Penalties. Penaltiesandinterestshallbeaddedtoandbecomepartofthetax,whenandasprovidedbysections231-39and235-97.Thepenaltiesandinterestprovidedbysection231-39shallapplytoemployersaswellastaxpayers.[LSp1957,c1,ptof§2;Supp,§121-38;HRS§235-104]
INCOME TAX LAW §235-110
CHAPTER235,Page73(UnofficialCompilation)
Case Notes
Whenpenaltyapplied.33H.766.
§235-105 Failure to keep records, render returns, or make reports by responsible persons. The penaltiesprovidedbysections231-34,231-35,and231-36shallapplytoanyperson,whetheractingasprincipal,agent,officer,ordirectorforoneself,itself,oranotherpersonandshallapplytoeachsingleviolation.Thesepenaltiesshallbeinadditiontootherpenaltiesprovidedbylaw.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-39;HRS§235-105;amimpL1984,c90,§1;gench1985;amL1995,c92,§11]
Cross Reference
Classificationofoffenseandauthorizedpunishment,see§§701-107,706-640,663.TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;and
PaymenttoStateUnderProtest”
§235-106 REPEALED.L1995,c92,§23.
§235-107 Procedure upon failure to file return. Ifanytaxpayeroremployerliabletomakeandfileareturnunderthischapter fails,neglects,or refuses tomakeandfilea returnas requiredwithin the timeprescribed,ordeclines toauthenticateareturnifmade,thedepartmentoftaxationshallmakeareturnforthetaxpayeroremployerfromthebestinformationobtainableandshalllevyandassessagainstthetaxpayeroremployerthetaxupontheamountoftaxableincome,orthetaxrequiredtobewithheldfromwagesandpaidover,asshownbysuchreturn,towhichshallbeaddedthepenaltiesandinterestprovidedbysection231-39.Theassessmentshallbepresumedtobecorrectuntilandunless,uponanappealdulytakenasprovidedinthischapter,thecontraryshallbeclearlyprovedbythetaxpayeroremployerandtheburdenofproofuponappealshallbeuponthetaxpayeroremployertodisprovethecorrectnessoftheassessment.Noticeoftheassessmentshallbegiven,andanappealtherefrommaybetaken,inthemannerandwithinthetimeprovidedinsection235-108(b)andsection235-114.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-41;HRS§235-107]
§235-108 Audit of return; procedure; additional taxes. (a)Audit.Thedirectoroftaxationoraresponsiblepersondesignatedbythedirectortoactinthepremisesforthepurposeofverificationorauditofareturnmadebythetaxpayeroremployer,orforthepurposeofmakingareturnwherenonehasbeenmade,isauthorizedandempoweredtoexamineallaccountbooks,bankbooks,bankstatements,records,vouchers,copiesoffederaltaxreturns,andanyandallotherdocumentsandevidenceshavinganyrelevancytothedeterminationoftheincomeorwagesasrequiredtobereturnedunderthischapter,andthedirectormayemploythedirector’spowersundersection231-7forsuchpurposes.
(b) Additional taxes.If thedepartmentof taxationdiscoversfromtheexaminationof thereturnorotherwisethat income,or the liabilityofanemployer in respectofwages,or anyportion thereof,hasnotbeenassessed, itmayassessthesameandgivenoticetothetaxpayeroremployeroftheassessment,andthetaxpayeroremployershallthereuponhaveanopportunitywithinthirtydaystoconferwiththedepartmentastotheproposedassessment.Aftertheexpirationofthirtydaysfromsuchnotificationthedepartmentshallassesstheincomeofthetaxpayer,orthe liabilityof theemployer inrespectofwages,oranyportion thereofwhich itbelieveshasnotheretoforebeenassessed,andshallgivenoticetothetaxpayeroremployeroftheamountofthetaxandinterestandpenaltiesifany,andtheamountthereofshallbepaidwithintwentydaysafterthedatethenoticewasmailed,properlyaddressedtothetaxpayeroremployeratthetaxpayer’soremployer’slastknownaddressorplaceofbusiness.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-42;HRS§235-108;amimpL1984,c90,§1;gench1985]
Case Notes
Assessornotboundtotakereturnastrue.16H.796.Methodofcomputingdeprecationnotreflectiveofincome.18H.530.Reassessmentproperwhenincomeinpreviousyearunreported.28H.261.
§235-109 Jeopardy assessments, security for payment, etc. Section231-24shallapplytothetaxesimposedbythischapter,bothinrespectoftaxpayersandemployers.[LSp1957,c1,ptof§2;Supp,§121-43;HRS§235-109]
§235-109.5 REPEALED. L2017,c3,§5.
§235-110 Credits and refunds. (a) If the taxpayerhaspaid as an installmentof the taxmore than the amountdeterminedtobethecorrectamountofsuchinstallment,theoverpaymentshallbecreditedagainsttheunpaidinstallments,ifany.Iftheamountalreadypaid,whetherornotonthebasisofinstallments,exceedstheamountdeterminedtobethecorrectamountofthetax,theamountofthecreditshallberefundedinthemannerprovidedinsection231-23(c).Withinthemeaningofthissubsection,eachamountoftaxdeductedandwithheldfromataxpayer’swagesisaninstallmentoftaxes
18-235-109
§235-110.2 INCOME TAX LAW
CHAPTER235,Page74(UnofficialCompilation)
paidbythetaxpayer.Arefundorcreditshallbemadetoanemployeronlytotheextentthattheamountofoverpaymentclaimedbytheemployerasacreditorrefundwasnotdeductedandwithheldbytheemployer.
(b) Thissectiondoesnotapply in thecaseofapaymentmadepursuant toanassessmentby thedepartmentof taxationundersection235-107or235-108(b).Norefundoroverpaymentcreditmaybehadunder thissectioninanyeventunlesstheoriginalpaymentofthetaxwasduetothelawhavingbeeninterpretedorappliedinrespectofthetaxpayerconcerneddifferentlythaninrespectofthetaxpayersgenerally.Astoalltaxpaymentsforwhicharefundorcreditisnotauthorizedbythissection(includingwithoutprejudicetothegeneralityoftheforegoingcasesofunconstitutionality)theremediesprovidedbyappealorundersection40-35areexclusive.However,nothinginthissubsectionshallbedeemedapplicabletoacreditorrefundauthorizedbysections235-55,235-66,or235-71,orresultingfromthetaxasreturnedbeinglessthanthetaxasestimated;inanyofthesecasesacreditorrefundisauthorizedeventhoughthetaxforthetaxableyearremainssubjecttodeterminationbythedepartmentandassessmentasprovidedbylaw.
(c) Anyrefundearnedunderthissectionshallbemadeinthemannerprovidedinsection231-23(c).[LSp1957,c1,ptof§2;amL1959,c277,§13;amLSp19592d,c1,§16;amL1963,c45,§§4(b),(c),(d);Supp,§121-44;HRS§235-110]
Revision Note
Insubsections(a)and(c),“231-23(c)”substitutedfor“231-23(d)”.
Cross Reference
TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;andPaymenttoStateUnderProtest”
Attorney General Opinions
LevyonunclaimedwarrantsbyInternalRevenueServicefordelinquentfederaltaxesshouldbehonored.Att.Gen.Op.62-4.
§235-110.2 Credit for school repair and maintenance. (a)Thereshallbeallowedtoeachtaxpayerlicensedunderchapter444,460J,or464,whoissubjecttothetaximposedbythischapter,anddoesnotowetheStatedelinquenttaxes,penalties,orinterest,acreditforcontributionsofin-kindservicesfortherepairandmaintenanceofpublicschoolsprovidedbythelicensedtaxpayerinHawaii.Thecreditshallbedeductiblefromthetaxpayer’snetincometaxliability, ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) Theamountofthecreditdeterminedunderthissectionforthetaxableyearshallbeequaltotenpercentofthevalueofcontributionsofin-kindservicestotheHawaiischoolrepairandmaintenancefundforthattaxableyear;provided that theaggregatevalueof thecontributionsof in-kind servicesclaimedbya taxpayer shallnot exceed$40,000.
(c) Forpurposesofthissection:“Publicschools”hasthesamemeaningasdefinedinsection302A-101.“Valueofcontributionsof in-kindservices”means thefairmarketvalueofuncompensatedservicesor laboras
determinedandcertifiedbythedepartmentofaccountingandgeneralservices.(d) Thecreditallowedunderthissectionshallbeclaimedagainstnetincometaxliabilityforthetaxableyear.
Ataxcreditunderthissectionwhichexceedsthetaxpayer’sincometaxliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.
(e) Allclaimsfortaxcreditsunderthissection,includinganyamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(f) Thedepartmentofeducationshallmaintainrecordsofthenamesoftaxpayerseligibleforthecreditandthetotalvalueofin-kindservicescontributedfortherepairandmaintenanceofpublicschoolsforthetaxableyear.Allcontributionsshallbeverifiedbythedepartmentofeducation.Thedepartmentofeducationshalltotalallcontributionsthatthedepartmentofeducationcertifies.Uponeachdetermination,thedepartmentofeducationshallissueacertificatetothetaxpayercertifying:
(1) Theamountofthecontribution;(2) Thatthetaxpayerislicensedunderchapter444,460J,or464;and(3) Thatthetaxpayerhasobtainedacurrentandvalidcertificatesignedbythedirectoroftaxation,showing
thatthetaxpayerdoesnotowetheStateanydelinquenttaxes,penalties,orinterest.The taxpayer shallfile the certificate from thedepartment of educationwith the taxpayer’s tax returnwith the
departmentoftaxation.Whenthetotalamountofcertifiedcontributionsreaches$2,500,000,thedepartmentofeducationshallimmediatelydiscontinuecertifyingcontributionsandnotifythedepartmentoftaxation.Innoinstanceshallthetotalamountofcertifiedcontributionsexceed$2,500,000foreachtaxableyear.
(g) TheStateshallprovidenotmorethan$250,000intaxcreditsforcontributionsofin-kindservicesinHawaiifortherepairandmaintenanceofpublicschools.
INCOME TAX LAW §235-110.31
CHAPTER235,Page75(UnofficialCompilation)
(h) Thedirectoroftaxationshallprepareanyformsthatmaybenecessarytoallowacredittobeclaimedunderthissection.[L2001,c309,§2;amL2004,c213,§2]
Cross Reference
Hawaii3R’sschoolrepairandmaintenancefund,see§302A-1502.4.Schoolrepairandmaintenancefund(HelpingHandsHawaii),see§302A-1502.5.
§235-110.3 REPEALED. L2016,c202,§3.
§235-110.31 Renewable fuels production tax credit. [Section repealed December 31, 2021. L 2016, c 202 §6.](a)Asusedinthissection:
“Creditperiod”meansamaximumperiodoffiveconsecutiveyears,beginningfromthefirsttaxableyearinwhichataxpayerbeginsrenewablefuelsproductionatalevelofatleastfifteenbillionBritishthermalunitsofrenewablefuelspercalendaryear.
“Netincometaxliability”meansincometaxliabilityreducedbyallothercreditsallowedunderthischapter.“Renewablefeedstocks”means:(1) Biomasscrops;(2) Agriculturalresidues;(3) Oilcrops,includingbutnotlimitedtoalgae,canola,jatropha,palm,soybean,andsunflower;(4) Sugarandstarchcrops,includingbutnotlimitedtosugarcaneandcassava;(5) Otheragriculturalcrops;(6) Greaseandwastecookingoil;(7) Foodwastes;(8) Municipalsolidwastesandindustrialwastes;(9) Water;and(10)Animalresiduesandwastes,
thatcanbeusedtogenerateenergy.“Renewablefuels”meansfuelsproducedfromrenewablefeedstocks,providedthatthefuel:(1) IssoldasafuelinHawaii;and(2) MeetstherelevantASTMInternationalspecificationsorotherindustryspecificationsfortheparticular
fuel,includingbutnotlimitedto:(A) Methanol,ethanol,orotheralcohols;(B) Hydrogen;(C) Biodieselorrenewablediesel;(D) Biogas;(E) Otherbiofuels;or(F) Renewablejetfuelorrenewablegasoline.
(b) Eachyearduringthecreditperiod,thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapter,arenewablefuelsproductiontaxcreditthatshallbeappliedtothetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
Foreachtaxpayerproducingrenewablefuels,theannualdollaramountoftherenewablefuelsproductiontaxcreditduringthefive-yearcreditperiodshallbeequalto20centsperseventy-sixthousandBritishthermalunitsofrenewablefuelsusingthelowerheatingvaluesoldfordistributioninHawaii;providedthatthetaxpayer’sproductionofrenewablefuelsisnotlessthanfifteenbillionBritishthermalunitsofrenewablefuelspercalendaryear;providedfurtherthattheamountofthetaxcreditclaimedunderthissectionbyataxpayershallnotexceed$3,000,000pertaxableyear.Noothertaxcreditmaybeclaimedunderthischapterforthecostsincurredinproducingtherenewablefuelsthatareusedtoproperlyclaimataxcreditunderthissectionforthetaxableyear.
(c) Notlaterthanthirtydaysfollowingthecloseofthecalendaryear,everytaxpayerclaimingacreditunderthissectionshallcompleteandfileanindependent,third-partycertifiedstatement,at·thetaxpayer’ssoleexpense,withthedepartmentofbusiness,economicdevelopment,andtourismintheformprescribedbythedepartmentofbusiness,economicdevelopment,andtourismprovidingthefollowinginformation:
(1) Thetype,quantity,andBritishthermalunitvalue,usingthelowerheatingvalue,ofeachqualifiedfuel,brokendownbythetypeoffuel,producedandsoldduringthepreviouscalendaryear;
(2) Thefeedstockusedforeachtypeofqualifiedfuel;(3) The proposed total amount of credit towhich the taxpayer is entitled for each calendar year and the
cumulativeamountofthetaxcreditthetaxpayerreceivedduringthecreditperiod;(4) Thenumberoffull-timeandnumberofpart-timeemployeesofthefacilityandthoseemployees’statesof
residency,totaledperstate;and(5) ThenumberandlocationofallrenewablefuelproductionfacilitieswithinandoutsideoftheState.
Uponeachdetermination,thedepartmentofbusiness,economicdevelopment,andtourismshallissueacertificatetothe
§235-110.31 INCOME TAX LAW
CHAPTER235,Page76(UnofficialCompilation)
taxpayerverifyingtheamountofrenewablefuelsproducedandsold,thecreditamountcertifiedforeachtaxableyear,andthecumulativeamountofthetaxcreditduringthecreditperiod.Thetaxpayershallfilethecertificatewiththetaxpayer’stax returnwith thedepartment of taxation.Notwithstanding thedepartment of business, economicdevelopment, andtourism’scertificationauthorityunderthissection,thedirectoroftaxationmayauditandadjustthecertificationtoconformtothefacts.
Ifinanyyear,theannualamountofcertifiedcreditsreaches$3,000,000intheaggregate,thedepartmentofbusiness,economic development, and tourism shall immediately discontinue certifying credits and notify the department oftaxation.Innoinstanceshallthetotalamountofcertifiedcreditsexceed$3,000,000peryear.Notwithstandinganyotherlaw to thecontrary, theverificationandcertification informationcompiledby thedepartmentofbusiness,economicdevelopment,andtourismshallbeavailableforpublicinspectionanddisseminationunderchapter92F.
(d) Withinthirtycalendardaysaftertheduedateofthestatementrequiredundersubsection(c),thedepartmentofbusiness,economicdevelopment,andtourismshall:
(1) Acknowledgereceiptofthestatementinwriting;and(2) Issueacertificatetothetaxpayerreportingtheamountofrenewablefuelsproducedandsold,theamount
ofcreditthatthetaxpayerisentitledtoclaimforthepreviouscalendaryear,andthecumulativeamountofthetaxcreditduringthecreditperiod.
(e) The taxpayer shallfile the certificate issuedunder subsection (d)with the taxpayer’s tax returnwith thedepartmentoftaxation.Thedirectoroftaxationmayauditandadjustthecertificationtoconformtothefacts.
(f) Thetotalamountoftaxcreditsallowedunderthissectionshallnotexceed$3,000,000foralleligibletaxpayersinanycalendaryear.Intheeventthatthecreditclaimsunderthissectionexceed$3,000,000foralleligibletaxpayersinanygivencalendaryear,the$3,000,000shallbedividedbetweenalleligibletaxpayersforthatyearinproportiontothetotalamountofrenewablefuelsproducedbyalleligibletaxpayers.Uponreaching$3,000,000intheaggregate,thedepartmentofbusiness,economicdevelopment,andtourismshallimmediatelydiscontinueissuingcertificatesandnotifythedepartmentoftaxation.Innoinstanceshallthetotaldollaramountofcertificatesissuedexceed$3,000,000peryear.
(g) Notwithstandinganyotherlawtothecontrary,theinformationcollectedandcompiledbythedepartmentofbusiness,economicdevelopment,andtourismundersubsections(c)and(d)forthepurposesoftherenewablefuelsproductiontaxcredit,shallbeavailableforpublicinspectionanddisseminationsubjecttochapter92F.
(h) Ifthecreditunderthissectionexceedsthetaxpayer’snetincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’snetincometaxliabilityinsubsequentyearsuntilexhausted.Allclaimsforacreditunderthissectionshallbeproperlyfiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionortoprovidethecertifiedstatementrequiredundersubsection(c)shallconstituteawaiveroftherighttoclaimthecredit.
(i) Priortoproductionofanyrenewablefuelsforthecalendaryear,thetaxpayershallprovidewrittennoticeofthetaxpayer’sintentiontobeginproductionofrenewablefuels.Thewrittennoticeshallbeprovidedtothedepartmentoftaxationandthedepartmentofbusiness,economicdevelopment,andtourism,andshallincludeinformationonthetaxpayer,facilitylocation,facilityproductioncapacity,anticipatedproductionstartdate,andthetaxpayer’scontactinformation.Notwithstandinganyotherlawtothecontrary,thewrittennoticedescribedinthissubsection,includingtaxpayerandfacilityinformation,shallbeavailableforpublicinspectionanddisseminationsubjecttochapter92F.
(j) Thetaxpayershallprovidewrittennoticetothedirectoroftaxationandthedirectorofbusiness,economicdevelopment,andtourismwithinthirtydaysfollowingthestartofproduction.Thenoticeshallincludetheproductionstartdateandexpectedrenewablefuelsproductionforthenexttwelvemonths.Notwithstandinganyotherlawtothecontrary, thewrittennoticedescribed in thissubsectionshallbeavailable forpublic inspectionanddisseminationsubjecttochapter92F.
(k) In the caseof apartnership,S corporation, estate, or trust, distribution and shareof the renewable fuelsproductiontaxcreditshallbedeterminedpursuanttosection704(b)(withrespecttoapartner’sdistributiveshare)oftheInternalRevenueCodeof1986,asamended.Forafiscalyeartaxpayer,thetaxpayershallreportsuchcreditinthetaxableyearinwhichthecalendaryearendisincluded.
(l) Followingeachcalendaryearinwhichacreditunderthissectionhasbeenclaimed,thedirectorofbusiness,economic development, and tourism shall submit a written report to the governor and legislature regarding theproductionandsaleofrenewablefuels.Thereportshallinclude:
(1) ThenumberandlocationofrenewablefuelsproductionfacilitiesintheStateandoutsidetheStatethathaveclaimedacreditunderthissection;
(2) ThetotalnumberofBritishthermalunitsofrenewablefuels,brokendownbytypeoffuelproducedandsoldduringthepreviouscalendaryear;and
(3) TheprojectednumberofBritishthermalunitsofrenewablefuelsproductionforthesucceedingyear.(m)Thedirectoroftaxationshallprepareformsthatmaybenecessarytoclaimacreditunderthissection.The
directoroftaxationmayrequirethetaxpayertofurnishinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.[L2016,c202,§2;amL2017,c142,§2]
INCOME TAX LAW §235-110.6
CHAPTER235,Page77(UnofficialCompilation)
Note
SectionappliestotaxableyearsbeginningafterDecember31,2016.L2016,c202,§6.The2017amendmentappliestotaxableyearsbeginningafterDecember31,2017.L2017,c142,§4.
§§235-110.4, 110.45 REPEALED. L2007,c9,§§23,24.
§235-110.46 REPEALED. L2017,c3,§6.
§235-110.5 REPEALED. L1987,c40,§2.
§235-110.51 Technology infrastructure renovation tax credit. (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapter,anincometaxcreditwhichshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) TheamountofthecreditshallbefourpercentoftherenovationcostsincurredduringthetaxableyearforeachcommercialbuildinglocatedinHawaii.
(c) Inthecaseofapartnership,Scorporation,estate,trust,oranydeveloperofacommercialbuilding,thetaxcreditallowableisforrenovationcostsincurredbytheentityforthetaxableyear.Thecostuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedpursuanttosection235-110.7(a).
(d) Ifadeductionistakenundersection179(withrespecttoelectiontoexpensedepreciablebusinessassets)of theInternalRevenueCode,no taxcreditshallbeallowedfor thatportionof therenovationcost forwhich thedeductionistaken.
(e) Thebasisofeligiblepropertyfordepreciationoracceleratedcostrecoverysystempurposesforstateincometaxesshallbereducedbytheamountofcreditallowableandclaimed.Inthealternative,thetaxpayershalltreattheamountof thecredit allowableandclaimedasa taxable income item for the taxableyear inwhich it isproperlyrecognizedunderthemethodofaccountingusedtocomputetaxableincome.
(f) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.(g) If the tax credit under this section exceeds the taxpayer’s income tax liability, the excess of credit over
liabilitymaybecarriedforwarduntilexhausted.(h) ThetaxcreditallowedunderthissectionshallnotbeavailablefortaxableyearsbeginningafterDecember
31,2010.(i) Asusedinthissection:“Netincometaxliability”meansincometaxliabilityreducedbyallothercreditsallowedunderthischapter.“Renovationcosts”meanscostsincurredafterDecember31,2000,toplan,design,install,construct,andpurchase
technology-enabledinfrastructureequipmenttoprovideacommercialbuildingwithtechnology-enabledinfrastructure.“Technology-enabledinfrastructure”means:(1) High speed telecommunications systems that provide Internet access, direct satellite communications
access,andvideoconferencingfacilities;(2) Physicalsecuritysystemsthatidentifyandverifyvalidentrytosecurespaces,detectinvalidentryorentry
attempts,andmonitoractivityinthesespaces;(3) Environmentalsystemstoincludeheating,ventilation,airconditioning,firedetectionandsuppression,
andotherlifesafetysystems;and(4) Backupandemergencyelectricpowersystems.
(j) Notaxpayerthatclaimsacreditunderthissectionshallclaimanyothercreditunderthischapter.[L2001,c221,§2;amL2004,c215,§7]
§235-110.6 Fuel tax credit for commercial fishers. (a)EachprincipaloperatorofacommercialfishingvesselwhofilesanindividualorcorporatenetincometaxreturnforataxableyearmayclaimanincometaxcreditunderthissectionagainsttheHawaiistateindividualorcorporatenetincometax.
(b) Thetaxcreditshallbeanamountequaltothefueltaxesimposedundersection243-4(a)andpaidbytheprincipaloperatorduringthetaxableyear.
(c) The taxcreditclaimedunder thissectionby theprincipaloperatorshallbedeductible fromtheprincipaloperator’sindividualorcorporateincometaxliability,ifany,forthetaxyearinwhichthecreditisproperlyclaimed;providedthatahusbandandwifefilingseparatereturnsforataxableyearforwhichajointreturncouldhavebeenmadebythemshallclaimonlythetaxcredittowhichtheywouldhavebeenentitledhadajointreturnbeenfiled.Ifthetaxcreditclaimedbytheprincipaloperatorunderthissectionexceedstheamountoftheincometaxpaymentsduefromtheprincipaloperator,theexcessofcreditoverpaymentsdueshallberefundedtotheprincipaloperatorfromthestatehighwayfund;providedthatthetaxcreditproperlyclaimedbyaprincipaloperatorwhohasnoincometaxliabilityshallbepaidtotheprincipaloperatorfromthestatehighwayfund;andprovidedfurthernorefundsorpaymentsonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
18-235-110.6
§235-110.7 INCOME TAX LAW
CHAPTER235,Page78(UnofficialCompilation)
(d) Thedirectoroftaxationshallpreparesuchformsasmaybenecessarytoclaimacreditunderthissection,mayrequireproofoftheclaimforthetaxcredit,andmayadoptrulespursuanttochapter91.
(e) Alloftheprovisionsrelatingtoassessmentsandrefundsunderthischapterandundersection231-23(c)(1)shallapplytothetaxcreditunderthissection.
(f) Claimsforthetaxcreditunderthissection,includinganyamendedclaimsthereof,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthetaxableyearforwhichthecreditmaybeclaimed.
(g) Asusedinthissection:(1) “Commercialfishingvessel”meansanywatervesselwhichisusedtocatchorprocessfishortransport
fishloadedonthehighseas.(2) “Principaloperator”meansanyindividualorcorporateresidenttaxpayerwhoderivesatleastfifty-oneper
centofthetaxpayer’sgrossannualincomefromcommercialfishingoperations.[L1981,c210,§1;amL2010,c192,§27]
Revision Note
Insubsection(e),“231-23(c)(1)”substitutedfor“231-23(d)(1)”.
Cross Reference
TaxInformationReleaseNo.83-2,“TreatmentofTaxCreditsforStateIncomeTaxPurposes”
§235-110.7 Capital goods excise tax credit. (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaximposedbythischapteracapitalgoodsexcisetaxcreditwhichshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
TheamountofthetaxcreditshallbedeterminedbytheapplicationofthefollowingratesagainstthecostoftheeligibledepreciabletangiblepersonalpropertyusedbythetaxpayerinatradeorbusinessandplacedinservicewithinHawaiiafterDecember31,1987.Forcalendaryearsbeginningafter:
(1) December31,1987,theapplicablerateshallbethreepercent;(2) December31,1988,theapplicablerateshallbefourpercent;(3) December31,2008,theapplicablerateshallbezeropercent;and(4) December31,2009,andthereafter,theapplicablerateshallbefourpercent.
Fortaxpayerswithfiscaltaxableyears,theapplicablerateshallbetherateforthecalendaryearinwhichtheeligibledepreciabletangiblepersonalpropertyusedinthetradeorbusinessisplacedinservicewithinHawaii.
Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforeligibledepreciabletangiblepersonalpropertywhich isplaced in serviceby theentity.Thecostuponwhich the taxcredit iscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedbyrules.
Inthecaseofeligibledepreciabletangiblepersonalpropertyforwhichacreditforsalesorusetaxespaidtoanotherstateisallowableundersection238-3(i),theamountofthetaxcreditallowedunderthissectionshallnotexceedtheamountofusetaxactuallypaidunderchapter238relatingtosuchtangiblepersonalproperty.
Ifadeductionistakenundersection179(withrespecttoelectiontoexpensecertaindepreciablebusinessassets)oftheInternalRevenueCodeof1954,asamended,notaxcreditshallbeallowedforthatportionofthecostofpropertyforwhichthedeductionwastaken.
(b) If thecapitalgoodsexcise taxcreditallowedundersubsection(a)exceeds the taxpayer’snet incometaxliability,theexcessofcreditoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
Allclaimsfortaxcreditsunderthissection,includinganyamendedclaims,mustbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(c) Applicationforthecapitalgoodsexcisetaxcreditshallbeuponformsprovidedbythedepartmentoftaxation.(d) Sections47(withrespecttodispositionsofsection38propertyandtherecapturepercentages)oftheInternal
RevenueCodeof1954,asamended,asofDecember31,1984,and280Fasoperativeforthischapter(withrespecttolimitationoninvestmenttaxcreditanddepreciationforluxuryautomobiles;limitationwherecertainpropertyusedforpersonalpurposes)oftheInternalRevenueCodeof1954,asamended,shallbeoperativeforpurposesofthissection.
(e) As used in this section, the definition of section 38 property (with respect to investment in depreciabletangiblepersonalproperty)asdefinedbysection48(a)(1)(A),(a)(1)(B),(a)(3),(a)(4),(a)(7),(a)(8),(a)(10)(A),(b),(c),(f),(l),(m),and(s)oftheInternalRevenueCodeof1954,asamendedasofDecember31,1984,isoperativeforthepurposesofthissectiononly.
Asusedinthissection:“Cost”means(1)theactualinvoicepriceofthetangiblepersonalproperty,or(2)thebasisfromwhichdepreciation
istakenundersection167(withrespecttodepreciation)orfromwhichadeductionmaybetakenundersection168(withrespecttoacceleratedcostrecoverysystem)oftheInternalRevenueCodeof1954,asamended,whicheverisless.
18-235-110.7
INCOME TAX LAW §235-110.8
CHAPTER235,Page79(UnofficialCompilation)
“Eligibledepreciabletangiblepersonalproperty”issection38propertyasdefinedbytheoperativeprovisionsofsection48andhavingadepreciablelifeundersection167orforwhichadeductionmaybetakenundersection168ofthefederalInternalRevenueCodeof1954,asamended.
“Placedinservice”meanstheearliestofthefollowingtaxableyears:(1) Thetaxableyearinwhich,underthe:
(A) Taxpayer’sdepreciationpractice,theperiodfordepreciation;or(B) Accelerated cost recovery system, a claim for recovery allowances;with respect to suchproperty
begins;or(2) Thetaxableyearinwhichthepropertyisplacedinaconditionorstateofreadinessandavailabilityfora
specificallyassignedfunction.“Purchase”meansanacquisitionofproperty.“Tangible personal property”means tangible personal propertywhich is placed in servicewithinHawaii after
December31,1987,andthepurchaseorimportationofwhichresultedinatransactionwhichwassubjecttotheimpositionandpaymentoftaxattherateoffourpercentunderchapter237or238.“Tangiblepersonalproperty”doesnotincludetangiblepersonalpropertywhichisanintegralpartofabuildingorstructureortangiblepersonalpropertyusedinaforeigntradezone,asdefinedunderchapter212.[L1987,c239,§1(2);amL1988,c141,§21;amL1989,c7,§1;amL1990,c184,§§7,8;amL1992,c235,§6;amL2007,c9,§12;amL2009,c178,§3]
Note
The2009amendmentappliestoinvestmentsmade,renovationcostsincurred,oreligibledepreciabletangiblepropertyplacedinserviceonorafterMay1,2009.L2009,c178,§10.
Cross Reference
Transitcapitaldevelopmentfund,seechapter51D.TaxInformationReleaseNo.88-6,“CapitalGoodsExciseTaxCredit”TaxInformationReleaseNo.88-8,“CapitalGoodsExciseTaxCreditRecapture”TaxInformationReleaseNo.89-4,“TheTaxpayerWhoIsEntitledtotheCapitalGoodsExciseTaxCreditWhenthePartiesCharacterizea
TransactionasaLeaseorSale-leaseback”TaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”TaxInformationReleaseNo.2001-4,“TheDefinitionof‘Cost’;ThePaymentofTaxRequirement;andSafeHarborGuidelinesPertainingto
theCapitalGoodsExciseTaxCredit”
Case Notes
Wheretaxpayerfailedtofileatimelyclaimforthecredit“onorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditsmaybeclaimed”asrequiredunderthissection,taxpayerwaiveditsrighttoacapitalgoodsexcisetaxcreditrefund.97H.270(App.),36P.3d814.
§235-110.8 Low-income housing tax credit. [Section effective until December 31, 2016. For section effective January 1, 2017, see below.](a)Section42(withrespecttolow-incomehousingcredit)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinthissection.Ataxpayerowningaqualifiedlow-incomebuildingwhohasbeenawardedasubawardundersection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-5,shallalsobeeligibleforthecreditprovidedinthissection.
(b) Eachtaxpayersubjecttothetaximposedbythischapter,whohasfiledanetincometaxreturnforataxableyearmayclaimalow-incomehousingtaxcreditagainstthetaxpayer’snetincometaxliability.Theamountofthecreditshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimedonatimelybasis.Acreditunderthissectionmaybeclaimedwhetherornotthetaxpayerclaimsafederallow-incomehousingtaxcreditpursuanttosection42oftheInternalRevenueCode.
(c) Theamountofthelow-incomehousingtaxcreditthatmaybeclaimedbyataxpayerasprovidedinsubsection(b)shallbefiftypercentoftheapplicablepercentageofthequalifiedbasisofeachbuildinglocatedinHawaii.Theapplicablepercentageshallbecalculatedasprovidedinsection42(b)oftheInternalRevenueCode.
(d) Ifasubawardundersection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-5,hasbeenissuedforaqualifiedlow-incomebuilding,theamountofthelow-incomehousingtaxcreditsthatmaybeclaimedbyataxpayerasprovidedinsubsection(b)shallbeequaltofiftypercentoftheamountofthefederallow-incomehousingtaxcreditsthatwouldhavebeenallocatedtothequalifiedlow-incomebuildingpursuanttosection42(b)oftheInternalRevenueCodebythecorporationhadasubawardnotbeenawardedwithrespecttothequalifiedlow-incomebuilding.
(e) Forthepurposesofthissection,thedeterminationof:(1) Qualifiedbasisandqualifiedlow-incomebuildingshallbemadeundersection42(c);(2) Eligiblebasisshallbemadeundersection42(d);(3) Qualifiedlow-incomehousingprojectshallbemadeundersection42(g);
§235-110.8 INCOME TAX LAW
CHAPTER235,Page80(UnofficialCompilation)
(4) Recaptureofcreditshallbemadeundersection42(j),except that the taxfor thetaxableyearshallbeincreasedundersection42(j)(1)onlywithrespecttocreditsthatwereusedtoreducestateincometaxes;and
(5) Applicationofat-riskrulesshallbemadeundersection42(k);oftheInternalRevenueCode.
(f) Asprovidedinsection42(e),rehabilitationexpendituresshallbetreatedasaseparatenewbuildingandtheirtreatmentunderthissectionshallbethesameasinsection42(e).Thedefinitionsandspecialrulesrelatingtocreditperiodinsection42(f)andthedefinitionsandspecialrulesinsection42(i)shallbeoperativeforthepurposesofthissection.
(g) Thestatehousingcreditceilingundersection42(h)shallbezeroforthecalendaryearimmediatelyfollowingtheexpirationofthefederallow-incomehousingtaxcreditprogramandforanycalendaryearthereafter,exceptforthecarryoverofanycreditceilingamountforcertainprojectsinprogresswhich,atthetimeofthefederalexpiration,meettherequirementsofsection42.
(h) Thecreditallowedunderthissectionshallbeclaimedagainstnetincometaxliabilityforthetaxableyear.Forthepurposeofdeductingthistaxcredit,netincometaxliabilitymeansnetincometaxliabilityreducedbyallothercreditsallowedthetaxpayerunderthischapter.
Ataxcreditunderthissectionthatexceedsthetaxpayer’sincometaxliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaimsforataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretoproperlyandtimelyclaimthecreditshallconstituteawaiveroftherighttoclaimthecredit.Ataxpayermayclaimacreditunderthissectiononlyif thebuildingorprojectisaqualifiedlow-incomehousingbuildingoraqualifiedlow-incomehousingprojectundersection42oftheInternalRevenueCode.
Section469(withrespecttopassiveactivitylossesandcreditslimited)oftheInternalRevenueCodeshallbeappliedinclaimingthecreditunderthissection.
(i) Inlieuofthecreditawardedunderthissectionforaqualifiedlow-incomebuildingthathasbeenawardedfederalcreditsthataresubjecttothestatehousingcreditceilingundersection42(h)(3)(C)oftheInternalRevenueCode, federalcredits thatareallocatedpursuant to section42(h)(4)of the InternalRevenueCode,ora subawardundersection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-5,thetaxpayerowningthequalifiedlow-incomebuildingmaymakearequesttothecorporationforaloanundersection201H-86.Ifthetaxpayerelectstoreceivetheloanpursuanttosection201H-86,thetaxpayershallnotbeeligibleforthecreditunderthissection.
(j) Thedirectoroftaxationmayadoptanyrulesunderchapter91andformsnecessarytocarryoutthissection.[L1988,c216,§1;amL1989,c13,§6;amL2000,c148,§3;amL2005,c196,§8;amL2011,c158,§3]
§235-110.8 Low-income housing tax credit. [Section effective January 1, 2017. For section effective until December 31, 2016, see above. Repeal and reenactment on December 31, 2021. L 2016, c 129, §4.](a)Asmodifiedherein,section42(withrespecttolow-incomehousingcredit)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinthissection.Ataxpayerowningaqualifiedlow-incomebuildingwhohasbeenawardedasubawardunderSection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-5,shallalsobeeligibleforthecreditprovidedinthissection.
(b) Eachtaxpayersubjecttothetaximposedbythischapter,whohasfiledanetincometaxreturnforataxableyearmayclaimalow-incomehousingtaxcreditagainstthetaxpayer’snetincometaxliability.Theamountofthecreditshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimedonatimelybasis.Acreditunderthissectionmaybeclaimedwhetherornotthetaxpayerclaimsafederallow-incomehousingtaxcreditpursuanttosection42oftheInternalRevenueCode.
(c) Foranyqualifiedlow-incomebuildingthatreceivesanallocationpriortoJanuary1,2017,theamountofthelow-incomehousingtaxcreditthatmaybeclaimedbyataxpayerasprovidedinsubsection(b)shallbefiftypercentoftheapplicablepercentageofthequalifiedbasisofeachbuildinglocatedinHawaii.Theapplicablepercentageshallbecalculatedasprovidedinsection42(b)oftheInternalRevenueCode.
(d) Foranyqualifiedlow-incomebuildingthatreceivesanallocationafterDecember31,2016,theamountofthelow-incomehousingtaxcreditsthatmaybeclaimedbyataxpayerasprovidedinsubsection(b)shallbe:
(1) Forthefirstfiveyears,equaltotheamountofthefederallow-incomehousingtaxcreditsthathavebeenallocatedtothequalifiedlow-incomebuildingpursuanttosection42(b)oftheInternalRevenueCodebythecorporation,providedthat,ifinanyyeartheaggregateamountofcreditsunderthissubsectionwouldbesuchthatitwouldexceedtheamountofstatecreditsallocatedbythecorporationforthequalifiedlow-incomebuilding,thecreditsallowedforthatyearshallbelimitedtosuchamountnecessarytobringthetotal of such state credits (including the current year state credits) to the full amount of state creditsallocatedtothequalifiedlow-incomebuildingbythecorporation;
(2) Forthesixthyear,zero,exceptthat,if,andonlyif,theamountofcreditsallowedforthefirstfiveyearsislessthanthefullamountofstatecreditsallocatedbythecorporationforthequalifiedlow-incomebuilding,
INCOME TAX LAW §235-110.9
CHAPTER235,Page81(UnofficialCompilation)
anamountnecessarytobringtheamountofthestatecreditstothefullamountallocatedbythecorporationforthequalifiedlow-incomebuilding;and
(3) Foranyremainingyears,zero.(e) IfasubawardunderSection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-
5,hasbeenissuedforaqualifiedlow-incomebuilding,theamountofthelow-incomehousingtaxcreditsthatmaybeclaimedbyataxpayerasprovidedinsubsection(b)shallbeequaltofiftypercentoftheamountofthefederallow-incomehousingtaxcreditsthatwouldhavebeenallocatedtothequalifiedlow-incomebuildingpursuanttosection42(b)oftheInternalRevenueCodebythecorporationhadasubawardnotbeenawardedwithrespecttothequalifiedlow-incomebuilding.
(f) Forthepurposesofthissection,thedeterminationof:(1) Qualifiedbasisandqualifiedlow-incomebuildingshallbemadeundersection42(c);(2) Eligiblebasisshallbemadeundersection42(d);(3) Qualifiedlow-incomehousingprojectshallbemadeundersection42(g);(4) Recaptureofcreditshallbemadeundersection42(j),except that the taxfor thetaxableyearshallbe
increasedundersection42(j)(1)onlywithrespecttocreditsthatwereusedtoreducestateincometaxes;and
(5) Applicationofat-riskrulesshallbemadeundersection42(k);oftheInternalRevenueCode.
(g) Asprovidedinsection42(e),rehabilitationexpendituresshallbetreatedasaseparatenewbuildingandtheirtreatmentunderthissectionshallbethesameasinsection42(e).Thedefinitionsandspecialrulesrelatingtocreditperiodinsection42(f)andthedefinitionsandspecialrulesinsection42(i)shallbeoperativeforthepurposesofthissection.
(h) Thestatehousingcreditceilingundersection42(h)shallbezeroforthecalendaryearimmediatelyfollowingtheexpirationofthefederallow-incomehousingtaxcreditprogramandforanycalendaryearthereafter,exceptforthecarryoverofanycreditceilingamountforcertainprojectsinprogresswhich,atthetimeofthefederalexpiration,meettherequirementsofsection42.
(i) Thecreditallowedunderthissectionshallbeclaimedagainstnetincometaxliabilityforthetaxableyear.Forthepurposeofdeductingthistaxcredit,netincometaxliabilitymeansnetincometaxliabilityreducedbyallothercreditsallowedthetaxpayerunderthischapter.
Ataxcreditunderthissectionthatexceedsthetaxpayer’sincometaxliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaimsforataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretoproperlyandtimelyclaimthecreditshallconstituteawaiveroftherighttoclaimthecredit.Ataxpayermayclaimacreditunderthissectiononlyifthebuildingorprojectisaqualifiedlow-incomehousingbuildingoraqualifiedlow-incomehousingprojectundersection42oftheInternalRevenueCode.
Section469(withrespecttopassiveactivitylossesandcreditslimited)oftheInternalRevenueCodeshallbeappliedinclaimingthecreditunderthissection.
(j) Inlieuofthecreditawardedunderthissectionforaqualifiedlow-incomebuildingthathasbeenawardedfederalcreditsthataresubjecttothestatehousingcreditceilingundersection42(h)(3)(C)oftheInternalRevenueCode, federalcredits thatareallocatedpursuant to section42(h)(4)of the InternalRevenueCode,ora subawardunderSection1602oftheAmericanRecoveryandReinvestmentActof2009,PublicLaw111-5,thetaxpayerowningthequalifiedlow-incomebuildingmaymakearequesttothecorporationforaloanundersection201H-86.Ifthetaxpayerelectstoreceivetheloanpursuanttosection201H-86,thetaxpayershallnotbeeligibleforthecreditunderthissection.
(k) Thedirectoroftaxationmayadoptanyrulesunderchapter91andformsnecessarytocarryoutthissection.[L1988,c216,§1;amL1989,c13,§6;amL2000,c148,§3;amL2005,c196,§8;amL2011,c158,§3;amL2016,c129,§1;amL2017,c12,§46]
Note
The2011amendmentappliestoqualifiedlow-incomebuildingsplacedinserviceafterDecember31,2011.L2011,c158,§5.The2016amendmentappliestoqualifiedlow-incomebuildingsawardedcreditsafterDecember31,2016.L2016,c129,§4.The2017amendmentshallbeappliedretroactivelyandshallbeeffectiveonJanuary1,2017.
Cross Reference
TaxInformationReleaseNo.99-3.“TaxpayersSubjecttotheFranchiseTaxMayClaimtheLow-incomeHousingTaxCreditintheTaxableYearforWhichtheImpositionIsMade”
§235-110.9 High technology business investment tax credit. (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapterahightechnologybusinessinvestmenttaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichtheinvestmentwasmadeandthefollowingfouryearsprovidedthecreditisproperlyclaimed.Thetaxcreditshallbeasfollows:
§235-110.9 INCOME TAX LAW
CHAPTER235,Page82(UnofficialCompilation)
(1) Intheyeartheinvestmentwasmade,thirty-fivepercent;(2) Inthefirstyearfollowingtheyearinwhichtheinvestmentwasmade,twenty-fivepercent;(3) Inthesecondyearfollowingtheinvestment,twentypercent;(4) Inthethirdyearfollowingtheinvestment,tenpercent;and(5) Inthefourthyearfollowingtheinvestment,tenpercent;
oftheinvestmentmadebythetaxpayerineachqualifiedhightechnologybusiness,uptoamaximumallowedcreditin theyear the investmentwasmade,$700,000; in thefirstyear following theyear inwhich the investmentwasmade,$500,000;inthesecondyearfollowingtheyearinwhichtheinvestmentwasmade,$400,000;inthethirdyearfollowingtheyearinwhichtheinvestmentwasmade,$200,000;andinthefourthyearfollowingtheyearinwhichtheinvestmentwasmade,$200,000.
(b) Thecreditallowedunderthissectionshallbeclaimedagainstthenetincometaxliabilityforthetaxableyear.Forthepurposeofthissection,“netincometaxliability”meansnetincometaxliabilityreducedbyallothercreditsallowedunderthischapter.
(c) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliabilityforanyofthefiveyearsthatthecreditistaken,theexcessofthetaxcreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Everyclaim,includingamendedclaims,forataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(d) Ifatthecloseofanytaxableyearinthefive-yearperiodinsubsection(a):(1) Thebusinessnolongerqualifiesasaqualifiedhightechnologybusiness;(2) Thebusinessoraninterestinthebusinesshasbeensoldbythetaxpayerinvestinginthequalifiedhigh
technologybusiness;or(3) The taxpayer has withdrawn the taxpayer’s investment wholly or partially from the qualified high
technologybusiness;thecreditclaimedunderthissectionshallberecaptured.Therecaptureshallbeequaltotenpercentoftheamountofthetotaltaxcreditclaimedunderthissectionintheprecedingtwotaxableyears.Theamountofthecreditrecapturedshallapplyonlytotheinvestmentintheparticularqualifiedhightechnologybusinessthatmeetstherequirementsofparagraph(1),(2),or(3).Therecaptureprovisionsofthissubsectionshallnotapplytoataxcreditclaimedforaqualifiedhightechnologybusinessthatdoesnotfallwithintheprovisionsofparagraph(1),(2),or(3).Theamountoftherecapturedtaxcreditdeterminedunderthissubsectionshallbeaddedtothetaxpayer’staxliabilityforthetaxableyearinwhichtherecaptureoccursunderthissubsection.
(e) Everytaxpayer,beforeMarch31ofeachyearinwhichaninvestmentinaqualifiedhightechnologybusinesswasmadeintheprevioustaxableyear,shallsubmitawritten,certifiedstatementtothedirectoroftaxationidentifying:
(1) Qualifiedinvestments,ifany,expendedintheprevioustaxableyear;and(2) Theamountoftaxcreditsclaimedpursuanttothissection,ifany,intheprevioustaxableyear.
(f) Thedepartmentshall:(1) Maintainrecordsofthenamesandaddressesofthetaxpayersclaimingthecreditsunderthissectionand
thetotalamountofthequalifiedinvestmentcostsuponwhichthetaxcreditisbased;(2) Verifythenatureandamountofthequalifyinginvestments;(3) Totalallqualifyingandcumulativeinvestmentsthatthedepartmentcertifies;and(4) Certifytheamountofthetaxcreditforeachtaxableyearandcumulativeamountofthetaxcredit.
Uponeachdeterminationmadeunderthissubsection,thedepartmentshallissueacertificatetothetaxpayerverifyinginformationsubmittedtothedepartment,includingqualifyinginvestmentamounts,thecreditamountcertifiedforeachtaxableyear,andthecumulativeamountofthetaxcreditduringthecreditperiod.Thetaxpayershallfilethecertificatewiththetaxpayer’staxreturnwiththedepartment.
Thedirectoroftaxationmayassessandcollectafeetooffsetthecostsofcertifyingtaxcreditsclaimsunderthissection.Allfeescollectedunderthissectionshallbedepositedintothetaxadministrationspecialfundestablishedundersection235-20.5.
(g) Asusedinthissection:“Investmenttaxcreditallocationratio”means,withrespecttoataxpayerthathasmadeaninvestmentinaqualified
hightechnologybusiness,theratioof:(1) Theamountofthecreditunderthissectionthatis,oristobe,receivedbyorallocatedtothetaxpayerover
thelifeoftheinvestment,asaresultoftheinvestment;to(2) Theamountoftheinvestmentinthequalifiedhightechnologybusiness.
“Qualifiedhightechnologybusiness”meansabusiness,employingorowningcapitalorproperty,ormaintaininganoffice,inthisState;providedthat:
(1) Morethanfiftypercentofitstotalbusinessactivitiesarequalifiedresearch;andprovidedfurtherthatthebusinessconductsmorethanseventy-fivepercentofitsqualifiedresearchinthisState;or
(2) More than seventy-five per cent of its gross income is derived fromqualified research; and providedfurtherthatthisincomeisreceivedfrom:
INCOME TAX LAW §235-110.91
CHAPTER235,Page83(UnofficialCompilation)
(A) Productssoldfrom,manufacturedin,orproducedinthisState;or(B) ServicesperformedinthisState.
“Qualifiedresearch”meansthesameasdefinedinsection235-7.3.(h) Commonlawprinciples,includingthedoctrineofeconomicsubstanceandbusinesspurpose,shallapplyto
anyinvestment.Thereexistsapresumptionthatatransactionsatisfiesthedoctrineofeconomicsubstanceandbusinesspurposetotheextentthatthespecialallocationofthehightechnologybusinesstaxcredithasaninvestmenttaxcreditratioof1.5orlessofcreditforeverydollarinvested.
Transactionsforwhichaninvestmenttaxcreditallocationratiogreaterthan1.5butnotmorethan2.0ofcreditforeverydollarinvestedandclaimedmaybereviewedbythedepartmentforapplicabledoctrinesofeconomicsubstanceandbusinesspurpose.
Businessesclaimingataxcreditfortransactionswithinvestmenttaxcreditallocationratiosgreaterthan2.0ofcreditforeverydollarinvestedshallsubstantiateeconomicmeritandbusinesspurposeconsistentwiththissection.
(i) ForinvestmentsmadeonorafterMay1,2009,notwithstandinganyotherlawtothecontrary,noallocations,specialorotherwise,ofcreditsunderthissectionmayexceedtheamountoftheinvestmentmadebythetaxpayerultimatelyclaimingthiscredit;andinvestmenttaxcreditallocationratiosgreaterthan1.0ofcreditforeverydollarinvestedshallnotbeallowed.Inaddition,thecreditshallbeallowedonlyinaccordancewithsubsection(a).
(j) ThissectionshallnotapplytotaxableyearsbeginningafterDecember31,2010.[L1999,c178,§24;amL2000,c297,§8;amL2001,c221,§9;amL2004,c215,§8;amL2007,c206,§4;amL2009,c178,§4;amL2017,c3,§1]
Note
AppliestotaxableyearsbeginningafterDecember31,1998,forinvestmentsmadepursuanttothissectiononorafterJuly1,1999. L1999,c178,§31(3).
Applicabilityof2000amendment. L2000,c297,§§10,35(1). [It is the intentionof the legislature inmakingamendments in thisPart tosections235-7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,thattheamendmentsbeliberallyconstrued,andinthisregard,thedepartmentoftaxationgivenliberallatitudetointerpretthoseamendmentsinlightofcurrentindustrystandards.TheamendmentsmadeinthisParttosections235-7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,shallnotbeconstruedtodisqualifyanytaxpayerwhohasreceivedafavorablewrittendeterminationfromthedepartmentoftaxationundertheoriginalprovisionsofthosesectionsasenactedbyAct178,SessionLawsofHawaii,1999.]
L2001,c221,§15(2)provides:“(2)Section9[amending§235-110.9]shallapplytotaxableyearsbeginningafterDecember31,2000,butshallnotapplytotaxableyearsafter
December31,2005;providedthatataxpayermaycontinuetoclaimthecreditsifthefive-yearperiodtoclaimthecreditscommencesintaxableyearsbeginningbeforeJanuary1,2006;...”
Applicabilityof2004amendment.L2004,c215,§10.ItistheintentionofthelegislatureinmakingamendmentsinthisParttosections235-7.3,235-9.5,235-110.9,and235-110.91,HawaiiRevisedStatutes,thattheamendmentsbeconstruedinamannerconsistentwiththeintentofthisAct.Thedepartmentoftaxationfurthergivenliberallatitudetointerpretthoseamendmentsinlightofcurrentindustrystandards.Theamendmentsmade in thisPart to sections 235-7.3, 235-9.5, 235-110.9, and235-110.91,HawaiiRevisedStatutes, shall not be construed to disqualify anytaxpayerwhohasreceivedafavorablewrittendeterminationfromthedepartmentoftaxationundertheoriginalprovisionsofthosesectionsasenactedbyAct178,SessionLawsofHawaii,1999.
The2007amendmentappliestoinvestmentsreceivedbyaqualifiedhightechnologybusinessafterJune30,2007.L2007,c206,§8.Annualsurveyfrombusinessesreceivingtaxcredit;reportstolegislature(repealedJanuary1,2011).L2007,c206,§§2,5.The2009amendmentappliestoinvestmentsmade,renovationcostsincurred,oreligibledepreciabletangiblepropertyplacedinserviceonor
afterMay1,2009.L2009,c178,§10.
Cross Reference
TaxInformationReleaseNo.2003-1,“ApplicationofSection235-110.9,HawaiiRevisedStatutes(HRS), relating to theHighTechnologyBusinessInvestmentCredit”
TaxInformationReleaseNo.2007-04,“DepartmentofTaxationPoliciesRelatingtoHighTechnologyInvestmentTaxCreditAllocations”Tax InformationReleaseNo.2007-05,“DepartmentofTaxation’sPositiononQualifiedHighTechnologyBusinessStatus forDisregarded
Entities”
Law Journals and Reviews
SeedCapitalisNotEnough:LessonsfromHawai`i’sAttempttoDevelopaHigh-TechnologySector.30UHL.Rev.401.
Case Notes
Wherethetwelve-monthlimitationperiodsetforthinsubsection(f)(2003)plainlyappliedto“allclaims”forataxcreditunderthissectionandan“amendedclaim”isasubsetof“allclaims”,thetwelve-monthlimitationperiodclearlyandunambiguouslyappliedtoplaintiff’samendedclaim,notwithstandingthelegislature’sfailuretospecificallyprovidethattheterm“allclaims”“includedamendedclaims”.121H.220(App.),216P.3d1243(2009).
§235-110.91 Tax credit for research activities. (a) Section 41 (with respect to the credit for increasing researchactivities)andsection280C(c)(withrespecttocertainexpensesforwhichthecreditforincreasingresearchactivitiesareallowable)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinthissection;providedthatthefederaltaxprovisionsinsection41oftheInternalRevenueCode,asthatsectionwasenactedonDecember31,2011,irrespectiveofanysubsequentchangestosection41oftheInternalRevenueCode,shallremainineffectforpurposesofdeterminingthestateincometaxcreditunderthissection;providedfurtherthatthefederaltaxprovisionsin
§235-110.91 INCOME TAX LAW
CHAPTER235,Page84(UnofficialCompilation)
section41oftheInternalRevenueCode,asenactedonDecember31,2011,irrespectiveofanysubsequentamendmentstosection41oftheInternalRevenueCode,shallapplyonlytoexpensesincurredforqualifiedresearchactivitiesafterDecember31,2012.
(b) AllreferencestoInternalRevenueCodesectionswithinsections41and280C(c)oftheInternalRevenueCodeshallbeoperativeforpurposesofthissection.
(c) Thereshallbeallowedtoeachqualifiedhightechnologybusinesssubjecttothetaximposedbythischapteranincometaxcreditforqualifiedresearchactivitiesequaltothecreditforresearchactivitiesprovidedbysection41oftheInternalRevenueCodeandasmodifiedbythissection;providedthat,inadditiontoanyotherrequirementsestablishedinthissection,inordertoqualifyforthetaxcreditestablishedinthissection,thequalifiedhightechnologybusinessshallalsoclaimafederaltaxcreditforthesamequalifiedresearchactivitiesundersection41oftheInternalRevenueCode,asenactedonDecember31,2011,irrespectiveofanysubsequentamendmentstosection41oftheInternalRevenueCode.Thecreditshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(d) Everyqualifiedhigh technologybusiness,beforeMarch31ofeachyear inwhichqualified researchanddevelopmentactivitywasconductedintheprevioustaxableyear,shallsubmitawritten,certifiedstatement to thedirectoroftaxationidentifying:
(1) Qualifiedexpenditures,ifany,expendedintheprevioustaxableyear;and(2) Theamountoftaxcreditsclaimedpursuanttothissection,ifany,intheprevioustaxableyear.
(e) Thedepartmentshall:(1) Maintainrecordsofthenamesandaddressesofthetaxpayersclaimingthecreditsunderthissectionand
the totalamountof thequalifiedresearchanddevelopmentactivitycostsuponwhich the taxcredit isbased;
(2) Verifythenatureofthequalifyingresearchactivityandtheamountofthequalifyingcostsorexpenditures;(3) Totalallqualifyingandcumulativecostsorexpendituresthatthedepartmentcertifies;and(4) Certifytheamountofthetaxcreditforeachtaxableyearandcumulativeamountofthetaxcredit.
Upon each determination made under this subsection, the department shall issue a certificate to the taxpayerverifying informationsubmitted to thedepartment, including thequalifyingcostsorexpenditureamounts, thecreditamountcertifiedforeachtaxableyear,andthecumulativeamountofthetaxcreditduringthecreditperiod.Thetaxpayershallfilethecertificatewiththetaxpayer’staxreturnwiththedepartment.
Thedirectoroftaxationmayassessandcollectafeetooffsetthecostsofcertifyingtaxcreditclaimsunderthissection.Allfeescollectedunderthissectionshallbedepositedintothetaxadministrationspecialfundestablishedundersection235-20.5.
(f) Asusedinthissection:“Qualifiedhightechnologybusiness”shallhavethesamemeaningasinsection235-7.3(c).“Qualifiedresearch”shallhavethesamemeaningasinsection41(d)oftheInternalRevenueCode.“Qualified research expenses” shall have the samemeaning as in section 41(b) of the InternalRevenueCode;
providedthatitshallnotincluderesearchexpensesincurredoutsideoftheState.(g) If thetaxcreditforqualifiedresearchactivitiesclaimedbyataxpayerexceedstheamountof incometax
paymentduefromthe taxpayer, theexcessof the taxcreditoverpaymentsdueshallberefundedto the taxpayer;providedthatnorefundonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
(h) Allclaimsforataxcreditunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretoproperlyclaimthecreditshallconstituteawaiveroftherighttoclaimthecredit.
(i) Aqualifiedhightechnologybusinessthatclaimsthecreditunderthissectionshallcompleteandfilewiththedepartmentofbusiness,economicdevelopment,andtourism,throughthatdepartment’swebsite,anannualsurveyonelectronicformspreparedandprescribedbythedepartmentofbusiness,economicdevelopment,andtourism.TheannualsurveyshallbefiledbeforeJune30ofeachcalendaryearfollowingthecalendaryearinwhichthecreditmaybeclaimedunderthissection.Thedepartmentofbusiness,economicdevelopment,andtourismmayadjusttheduedateoftheannualsurveybyrulesadoptedpursuanttochapter91.
(j) Theannualsurveyundersubsection(i)shallincludethefollowinginformationforthetimeperiodorperiodsspecifiedbythedepartmentofbusiness,economicdevelopment,andtourism:
(1) Identificationoftheindustrysectororsectorsinwhichthequalifiedhightechnologybusinessconductsbusiness,assetforthinparagraphs(2)to(8)ofthedefinitionof“qualifiedresearch”insection235-7.3(c);
(2) Totalexpendituresandthequalifiedexpenditures,ifany,expendedintheprevioustaxableyear;(3) Revenueandexpensedata, includingabreakdownof any licensing royaltyorother formsof income
generatedfromintellectualproperty;(4) Hawaiiemploymentandwagedata,includingthenumbersoffull-timeandpart-timeemployeesretained,
newjobs,temporarypositions,externalservicesprocuredbythebusiness,andpayrolltaxes;(5) Filed intellectual property, including invention disclosures, provisional patents, and patents issued or
granted;and
INCOME TAX LAW §235-110.93
CHAPTER235,Page85(UnofficialCompilation)
(6) Thenumberofnewcompaniesspunoutorestablishedtocommercializetheintellectualpropertyownedbythequalifiedhightechnologybusiness.
The department of business, economic development, and tourism shall request information in each of thesecategories sufficient tomeasure the effectiveness of the tax credit under this section. The department of business,economicdevelopment,andtourismmayrequestanyadditionalinformationnecessarytomeasuretheeffectivenessofthetaxcredit,suchasinformationrelatedtopatents.Inpreparingthesurveyandrequestinganyadditionalinformation,thedepartmentofbusiness,economicdevelopment,andtourismshallensurethatqualifiedhightechnologybusinessesarenotsubjecttoduplicativereportingrequirements.
(k) The department of business, economic development, and tourism shall use information collected underthissectionandthroughitsotherreportingrequirementstopreparesummarydescriptivestatisticsbycategory.Theinformationshallbereportedattheaggregateleveltopreventcompromisingidentitiesofqualifiedhightechnologybusinessinvestorsorotherconfidentialinformation.Thedepartmentofbusiness,economicdevelopment,andtourismshallalsoidentifyeachqualifiedhightechnologybusiness that is thebeneficiaryof taxcreditsclaimedunder thissection.Thedepartmentofbusiness,economicdevelopment,andtourismshallreporttheinformationrequiredunderthissubsectiontothelegislaturebySeptember1ofeachyear.
(l) The department of business, economic development, and tourism, in collaboration with the departmentof taxation, shalluse the informationcollected to study theeffectivenessof the taxcreditunder this section.Thedepartmentofbusiness,economicdevelopment,andtourismshallsubmitareporttothelegislatureonthefollowing:
(1) Theamountoftaxcreditsclaimedandtotaltaxespaidbyqualifiedhightechnologybusinesses;(2) Thenumberofqualifiedhightechnologybusinessesineachindustrysector;(3) Thenumbersandtypesofjobscreatedbyqualifiedhightechnologybusinesses;(4) Externalservicesandmaterialsprocuredbythebusinesses;(5) Thecompensationlevelsofjobsprovidedbyqualifiedhightechnologybusinesses;(6) Qualifiedresearchactivities;and(7) Anyotherfactorsthedepartmentofbusiness,economicdevelopment,andtourismdeemsrelevant.
Thedepartmentofbusiness,economicdevelopment,andtourismshallsubmitthereporttothelegislaturebySeptember1ofeachyear.
(m)Thedirectoroftaxationmayadoptanyrulesunderchapter91andformsnecessarytocarryoutthissection.(n) ThissectionshallnotapplytotaxableyearsbeginningafterDecember31,2019.[L1999,c178,§25;amL
2000,c174,§4andc297,§9;amL2001,c221,§10;amL2004,c215,§9;amL2013,c270,§2]Note
The2013amendmentappliestotaxableyearsbeginningafterDecember31,2012.L2013,c270,§4.
Cross Reference
TaxInformationReleaseNo.2007-05,“DepartmentofTaxation’sPositiononQualifiedHighTechnologyBusinessStatus forDisregardedEntities”
TaxInformationReleaseNo.2008-04,“CertainPrototypeCostsThatMayBeEligiblefortheHawaiiTaxCreditForResearchActivitiesUnderSection235-110.91,HawaiiRevisedStatutes”
TaxInformationReleaseNo.2013-02,“DepartmentofTaxationPoliciesRelatingtotheHawaiiTaxCreditforResearchActivities”
Case Notes
Assubsection(f)(2003)clearlyandunambiguouslyappliedtoallclaimsforaresearchactivitiestaxcreditforthe2001taxableyear,themorespecifictwelve-monthlimitationperiodforclaiminga taxcreditunder thissection,andnot thegeneral limitationperiodunder§235-111,wasapplicabletoplaintiff’samendedclaim.121H.220(App.),216P.3d1243(2009).
§235-110.92 REPEALED. L2007,c9,§25.
§235-110.93 Important agricultural land qualified agricultural cost tax credit. (a)Thereshallbeallowedtoeachtaxpayeranimportantagriculturallandqualifiedagriculturalcosttaxcreditthatmaybeclaimedintaxableyearsbeginningafterthetaxableyearduringwhichthetaxcreditundersection235-110.46isrepealed,exhausted,orexpired.Thecreditshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.Thetaxcreditamountshallbedeterminedasfollows:
(1) Inthefirstyearinwhichthecreditisclaimed,thelesserofthefollowing:(A) Twenty-fivepercentofthequalifiedagriculturalcostsincurredbythetaxpayerafterJuly1,2008;or(B) $625,000;
(2) Inthesecondyearinwhichthecreditisclaimed,thelesserofthefollowing:(A) FifteenpercentofthequalifiedagriculturalcostsincurredbythetaxpayerafterJuly1,2008;or(B) $250,000;and
(3) Inthethirdyearinwhichthecreditisclaimed,thelesserofthefollowing:(A) TenpercentofthequalifiedagriculturalcostsincurredbythetaxpayerafterJuly1,2008;or(B) $125,000.
§235-110.93 INCOME TAX LAW
CHAPTER235,Page86(UnofficialCompilation)
Thetaxpayermayincurqualifiedagriculturalcostsduringataxableyearinanticipationofclaimingthecreditinfuturetaxableyearsduringwhichthecredit isavailable.Thetaxpayermayclaimthecredit inanytaxableyearafter thetaxableyearduringwhichthetaxpayerincurredthequalifiedagriculturalcostsuponwhichthecreditisclaimed.Thetaxpayeralsomayclaimthecreditinconsecutiveorinconsecutivetaxableyearsuntilexhausted.
(b) Noothercreditmaybeclaimedunderthischapterforqualifiedagriculturalcostsforwhichacreditisclaimedunderthissectionforthetaxableyear.
(c) Theamountofthequalifiedagriculturalcostseligibletobeclaimedunderthissectionshallbereducedbytheamountoffundsreceivedbythetaxpayerduringthetaxableyearfromtheirrigationrepairandmaintenancespecialfundundersection167-24.
(d) The cost uponwhich the tax credit is computed shall bedetermined at the entity level. In the caseof apartnership, S corporation, estate, trust, or other pass through entity, distribution and share of the credit shall bedeterminedpursuanttosection235-110.7(a).
IfadeductionistakenunderSection179(withrespecttoelectiontoexpensedepreciablebusinessassets)oftheInternalRevenueCode,no taxcredit shallbeallowed for thatportionof thequalifiedagricultural cost forwhichadeductionwastaken.
Thebasisofeligiblepropertyfordepreciationoracceleratedcostrecoverysystempurposesforstateincometaxesshall be reducedby the amountof credit allowable and claimed.Nodeduction shall be allowed for that portionofotherwisedeductiblequalifiedagriculturalcostsonwhichacreditisclaimedunderthissection.
(e) Ifthecreditunderthissectionexceedsthetaxpayer’snetincometaxliabilityforthetaxableyear,theexcessofthecreditoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentsonaccountofthecreditsallowedbythissectionshallbemadeforamountslessthan$1.
Allclaimsforataxcreditunderthissection,includingamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditisclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(f) Thedirectoroftaxation:(1) Shallprepareanyformsthatmaybenecessarytoclaimacreditunderthissection;(2) Mayrequirethetaxpayertofurnishinformationtoascertainthevalidityoftheclaimforcreditmadeunder
thissection;and(3) Mayadoptrulespursuanttochapter91toeffectuatethissection.
(g) Thedepartmentofagricultureshall:(1) Maintainrecordsofthetotalamountofqualifiedagriculturalcostsforeachtaxpayerclaimingacredit;(2) Verifytheamountofthequalifiedagriculturalcostsclaimed;(3) Totalallqualifiedagriculturalcostsclaimed;and(4) Certifythetotalamountofthetaxcreditforeachtaxableyear.
Upon each determination, the department of agriculture shall issue a certificate to the taxpayer verifying thequalifyingagriculturalcostsandthecreditamountcertifiedforeachtaxableyear.Forataxableyear,thedepartmentofagriculturemaycertifyacreditforataxpayerwhocouldhaveclaimedthecreditinaprevioustaxableyear,butchosenottobecausethemaximumannualcreditamountundersubsection(h)wasreachedinthattaxableyear.
Thetaxpayershallfilethecertificatewiththetaxpayer’staxreturnwiththedepartmentoftaxation.Notwithstandingthedepartmentofagriculture’scertificationauthorityunderthissection,thedirectoroftaxationmayauditandadjustcertificationtoconformtothefacts.
Notwithstandinganyotherlawtothecontrary,theinformationrequiredbythissubsectionshallbeavailableforpublicinspectionanddisseminationunderchapter92F.
(h) If in any taxable year the annual amount of certified credits reaches $7,500,000 in the aggregate, thedepartmentofagricultureshallimmediatelydiscontinuecertifyingcreditsandnotifythedepartmentoftaxation.Innoinstanceshallthedepartmentofagriculturecertifyatotalamountofcreditsexceeding$7,500,000pertaxableyear.Tocomplywiththisrestriction,thedepartmentofagricultureshallcertifycreditsonafirstcome,firstservedbasis.
Thedepartmentof taxation shallnot allow theaggregateamountof credits claimed toexceed that amountpertaxableyear.
(i) Thedepartmentofagriculture,inconsultationwiththedepartmentoftaxation,shallannuallydeterminetheinformationnecessarytoprovideaquantitativeandqualitativeassessmentoftheoutcomesofthetaxcredit.
Everytaxpayer,nolaterthanthelastdayofthetaxableyearfollowingthecloseofthetaxpayer’staxableyearinwhichthecreditisclaimed,shallsubmitacertifiedwrittenstatementtothedepartmentofagriculture.Failuretoprovidetheinformationshallresultinineligibilityandarecaptureofanycreditalreadyclaimedforthattaxableyear.Theamountoftherecapturedtaxcreditshallbeaddedtothetaxpayer’staxliabilityforthetaxableyearinwhichtherecaptureoccurs.
Notwithstandinganylawtothecontrary,astatementsubmittedunderthissubsectionshallbeapublicdocument.(j) The department of agriculture, in consultation with the department of taxation, shall annually submit
a report evaluating the effectivenessof the tax credit.The report shall includebutnotbe limited tofindings andrecommendationstoimprovetheeffectivenessofthetaxcredittofurtherencouragethedevelopmentofagriculturalbusinesses.
INCOME TAX LAW [§235-110.94]
CHAPTER235,Page87(UnofficialCompilation)
(k) Asusedinthissection:“Agriculturalbusiness”meansanypersonwithacommercialagricultural,silvicultural,oraquaculturalfacilityor
operation,including:(1) Thecareandproductionoflivestockandlivestockproducts,poultryandpoultryproducts,apiaryproducts,
andplantandanimalproductionfornonfooduses;(2) Theplanting,cultivating,harvesting,andprocessingofcrops;and(3) The farming or ranching of any plant or animal species in a controlled salt, brackish, or freshwater
environment;providedthattheprincipalplaceoftheagriculturalbusinessismaintainedintheStateandmorethanfiftypercentof the land the agricultural business owns or leases, excluding land classified as conservation land, is importantagriculturalland.
“Importantagriculturallands”meanslandsidentifiedanddesignatedasimportantagriculturallandspursuanttopartIIIofchapter205.
“Netincometaxliability”meansincometaxliabilityreducedbyallothercreditsallowedunderthischapter.“Qualifiedagriculturalcosts”meansexpendituresfor:(1) Theplans,design,engineering,construction,renovation,repair,maintenance,andequipmentfor:
(A) Roadsorutilities,primarilyforagriculturalpurposes,wherethemajorityofthelandsservicedbytheroadsorutilities,excludinglandsclassifiedasconservationlands,areimportantagriculturallands;
(B) AgriculturalprocessingfacilitiesintheState,primarilyforagriculturalpurposes,wherethemajorityofthecropsorlivestockprocessed,harvested,treated,washed,handled,orpackagedarefromagriculturalbusinesses;
(C) Waterwells,reservoirs,dams,waterstoragefacilities,waterpipelines,ditches,orirrigationsystemsin theState,primarily for agriculturalpurposes,providingwater for lands, themajorityofwhich,excludinglandsclassifiedasconservationlands,areimportantagriculturallands;and
(D) AgriculturalhousingintheState,exclusivelyforagriculturalpurposes;providedthat: (i)Thehousingunitsareoccupiedsolelybyfarmersoremployeesforagriculturalbusinessesand
theirimmediatefamilymembers; (ii)Thehousingunitsareownedbytheagriculturalbusiness; (iii)Thehousingunitsareinthegeneralvicinity,asdeterminedbythedepartmentofagriculture,of
agriculturallandsownedorleasedbytheagriculturalbusiness;and (iv)Thehousingunitsconformtoanyotherconditionsthatmayberequiredbythedepartmentof
agriculture;(2) Feasibilitystudies, regulatoryprocessing,and legalandaccountingservicesrelated to the itemsunder
paragraph(1);(3) Equipment,primarilyforagriculturalpurposes,usedtocultivate,grow,harvest,orprocessagricultural
productsbyanagriculturalbusiness;and(4) Regulatoryprocessing,studies,andlegalandotherconsultantservicesrelatedtoobtainingorretaining
sufficientwaterforagriculturalactivitiesandretainingtherighttofarmonlandsidentifiedasimportantagriculturallands.
(l) Thedepartmentofagricultureshallceasecertifyingcreditspursuanttothissectionafterthefourthtaxableyearfollowingthetaxableyearduringwhichthecreditsarefirstclaimed;providedthatataxpayerwithaccumulated,butunclaimed,certifiedcreditsmaycontinueclaimingthecreditsinsubsequenttaxableyearsuntilexhausted.
[(m)]Thedepartmentoftaxation,inconsultationwiththedepartmentofagriculture,shallsubmittothelegislatureanannualreport,nolaterthantwentydayspriortotheconveningofeachregularsession,beginningwiththeregularsessionof2010,regardingthequantitativeandqualitativeassessmentoftheimpactoftheimportantagriculturallandqualifiedagriculturalcosttaxcredit.[L2008,c233,§§4,5;amL2014,c101,§1]
Note
The2014amendmentappliestotaxableyearsbeginningafterJuly1,2008.L2014,c101,§3.Section167-24referredtoinsubsection(c)isrepealed.
[§235-110.94] Organic foods production tax credit. [Section repealed December 31, 2021. L 2016, c 258, §5.] (a)Thereshallbeallowedtoeachqualifiedtaxpayersubjecttothetaximposedunderthischapter,anincometaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
(b) The amount of the tax credit shall be equal to the qualified expenses of the qualified taxpayer, up to amaximumof$50,000.
(c) Inthecaseofapartnership,Scorporation,estate,ortrust,thetaxcreditallowableisforqualifiedexpensesincurredbytheentityforthetaxableyear.Theexpensesuponwhichthetaxcreditiscomputedshallbedeterminedattheentitylevel.Distributionandshareofcreditshallbedeterminedbyrule.
[§235-110.94] INCOME TAX LAW
CHAPTER235,Page88(UnofficialCompilation)
(d) The total amount of tax credits allowed under this section shall not exceed $2,000,000 for all qualifiedtaxpayersinanytaxableyear;providedthatanytaxpayerwhoisnoteligibletoclaimthecreditinataxableyearduetothe$2,000,000caphavingbeenexceededforthattaxableyearshallbeeligibletoclaimthecreditinthesubsequenttaxableyear.
(e) Everyqualifiedtaxpayer,beforeMarch31ofeachyearinwhichqualifiedexpenseswereincurredbythetaxpayerintheprevioustaxableyear,shallsubmitawritten,certifiedstatementtothechairpersonoftheboardofagricultureidentifying:
(1) Qualifiedexpensesincurredintheprevioustaxableyear;and(2) Theamountof the taxcredit claimedby the taxpayerpursuant to this section, if any, in theprevious
taxableyear.(f) Thedepartmentofagricultureshall:
(1) Maintainrecordsofthenamesandaddressesofthequalifiedtaxpayersclaimingthecreditsunderthissectionandthetotalamountofthequalifiedexpensesuponwhichthetaxcreditsarebased;
(2) Verifythenatureandamountofthequalifiedexpenses;(3) Totalallqualifiedandcumulativeexpensesthatthedepartmentcertifies;and(4) Certifytheamountofthetaxcreditforeachtaxpayerforeachtaxableyearandthecumulativeamountof
thetaxcredit.Uponeachdeterminationmadeunderthissubsection,thedepartmentofagricultureshallissueacertificatetothe
taxpayerverifyinginformationsubmittedtothedepartmentofagriculture,includingamountsofqualifiedexpenses,thecreditamountcertifiedforthetaxpayerforeachtaxableyear,andthecumulativeamountoftaxcreditscertified.Thetaxpayershallfilethecertificatewiththetaxpayer’staxreturnwiththedepartmentoftaxation.
Theboardofagriculturemayassessandcollectafeetooffsetthecostsofcertifyingtaxcreditclaimsunderthissection.
(g) Thedirectoroftaxation:(1) Shallprepareanyformsthatmaybenecessarytoclaimataxcreditunderthissection;(2) Mayrequirethetaxpayertofurnishreasonableinformationtoascertainthevalidityoftheclaimforthetax
creditmadeunderthissection;and(3) Mayadoptrulesunderchapter91necessarytoeffectuatethepurposesofthissection.
(h) Ifthetaxcreditunderthissectionexceedsthetaxpayer‘snetincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’snetincometaxliabilityinsubsequentyearsuntilexhausted.Allclaimsforthetaxcreditunderthissection,includingamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(i) Asusedinthissection:“Netincometaxliability”meansincometaxliabilityreducedbyallothercreditsallowedunderthischapter.“OrganicFoodsProductionAct”meansthefederalOrganicFoodsProductionActof1990,asamended(7United
StatesCodesection6501etseq.).“Organicsystemplan”hasthesamemeaningasprovidedin7CodeofFederalRegulationssection205.2.“Qualifiedexpenses”meansexpensesincurredbyaqualifiedtaxpayertoproduceorganicallyproducedagricultural
products,includingexpensesincurredtoobtainorganiccertificationfromtheUnitedStatesDepartmentofAgriculture,pursuanttotheOrganicFoodsProductionAct.“Qualifiedexpenses”include:
(1) Applicationfees;(2) Inspectioncosts;(3) Fees related to equivalency agreement/arrangement requirements, travel/per diem for inspectors, user
fees,salesassessments,andpostage;and(4) Costs for any equipment, materials, or supplies necessary for organic certification or production of
agriculturalproducts, inaccordancewith thequalified taxpayer’sorganicsystemplanand theorganicproductionandhandlingrequirementsoftheNationalOrganicProgram,codifiedat7CodeofFederalRegulationspart205,subpartC,includingbutnotlimitedtocertifiedorganicseed,covercrops,oranimalfeed.
“Qualifiedexpenses”shallnotincludeanyamountrefundedortoberefundedtothetaxpayerbytheUnitedStatesDepartmentofAgriculture’sorganiccertificationcost-shareprogramoranyothersimilarfinancialassistanceprogram.
“Qualifiedtaxpayer”meansaproducer,handler,orhandlingoperation,asthosetermsaredefinedintitle7UnitedStatesCodesection6502:
(1) That sells agricultural products in adherence to the standards and requirements of theOrganicFoodsProductionAct;
(2) That has applied for organic certification, in accordancewith the requirements of theOrganic FoodsProductionAct;and
(3) Whosegross incomefromthesaleoforganicallyproducedagriculturalproductsfor themostrecentlyreportedfiscalyeartotalsnomorethan$500,000.[L2016,c258,§2]
INCOME TAX LAW §235-111
CHAPTER235,Page89(UnofficialCompilation)
Note
SectionappliestotaxableyearsbeginningafterDecember31,2016.L2016,c258,§5.
§235-111 Limitation period for assessment, levy, collection, or credit; net operating loss carrybacks. (a)Generalrule.Theamountofincometaxesimposedbythischapter(alsotheamountofincometaxesimposedbyanyprecedinglawoftheState)andtheliabilityofanyemployerinrespectofwages,shallbeassessedorleviedandtheoverpayment,ifany,shallbecreditedwithinthreeyearsafterfilingofthereturnforthetaxableyear,orwithinthreeyearsoftheduedateprescribedforthefilingofthereturn,whicheverislater.Noproceedingincourtwithoutassessmentforthecollectionofthetaxesortheenforcementoftheliabilityshallbebegunaftertheexpirationoftheperiod.Wheretheassessmentofthetaximposedbythischapterhasbeenmadewithintheperiodoflimitationapplicablethereto,thetaxmaybecollectedbylevyorbyaproceedingincourtunderchapter231;providedthatthelevyismadeortheproceedingwasbegunwithinfifteenyearsaftertheassessmentofthetax.ForanytaxthathasbeenassessedpriortoJuly1,2009,thelevyorproceedingshallbebarredafterJune30,2024.
Notwithstandinganyotherprovisiontothecontraryinthissection,thelimitationoncollectionafterassessmentinthissectionshallbesuspendedfortheperiod:
(1) Thetaxpayeragreestosuspendtheperiod;(2) Theassetsofthetaxpayerareincontrolorcustodyofacourtinanyproceedingbeforeanycourtofthe
UnitedStatesoranystate,andforsixmonthsthereafter;(3) Anofferincompromiseundersection231-3(10)ispending;and(4) DuringwhichthetaxpayerisoutsidetheStateforacontinuousperiodofatleastsixmonths;providedthat
ifatthetimeofthetaxpayer’sreturntotheStatetheperiodoflimitationsoncollectionafterassessmentwouldexpirebeforetheexpirationofsixmonthsfromthedateofthetaxpayer’sreturn,theperiodshallnotexpirebeforetheexpirationofthesixmonths.
(b) Limitationsoncreditorrefund.Claimforcreditorrefundofanoverpaymentofanytaximposedbythischaptershallbefiledbythetaxpayeroremployerwithinthreeyearsfromthetimethereturnwasfiledorfromtheduedateprescribedforthefilingofthereturn,orwithintwoyearsfromthetimethetaxwaspaid,whicheverislater.Forthepurposesofthissection,taxespaidbeforetheduedateofthereturnshallbedeemedtohavebeenpaidontheduedateofthereturndeterminedwithoutregardtoanyextensions.
(1) If the claimwas filed by the taxpayer during the three-year period prescribed in this subsection, theamountofthecreditorrefundshallnotexceedtheportionofthetaxpaidwithintheperiod,immediatelyprecedingthefilingoftheclaim,equaltothreeyearsplustheperiodofanyextensionoftimeforfilingthereturn.
(2) Iftheclaimwasnotfiledwithinthethree-yearperiod,theamountofthecreditorrefundshallnotexceedtheportionofthetaxpaidduringthetwoyearsimmediatelyprecedingthefilingoftheclaim.
(3) Ifnoclaimwasfiled,thecreditorrefundshallnotexceedtheamountwhichwouldbeallowableunderparagraph(1)or(2),asthecasemaybe,iftheclaimwasfiledonthedatethecreditorrefundisallowed.
(c) Exceptions;fraudulentreturnornoreturn.Inthecaseofafalseorfraudulentreturnwithintenttoevadetaxorliability,orofafailuretofilereturn,thetaxorliabilitymaybeassessedorleviedatanytime;providedthattheburdenofproofwithrespecttotheissuesoffalsityorfraudandintenttoevadetaxshallbeupontheState.
(d) Extension by agreement. Where, before the expiration of the time prescribed in subsection (a) for theassessment,levy,andcollectionofthetaxorliability,orinsubsection(b)forthecreditorrefundofanoverpayment,boththedepartmentandthetaxpayeroremployerhaveconsentedinwritingtoitsassessmentorlevyafterthatdate,the taxor liabilitymaybeassessedor leviedor theoverpayment, ifany,maybecreditedatanytimeprior to theexpirationof theperiodpreviouslyagreedupon. Theperiodsoagreeduponmaybeextendedby thesubsequentagreementsinwritingmadebeforetheexpirationoftheperiodpreviouslyagreedupon.
(e) Overpaymentofcarrybacks.Ifanoverpaymentresultsfromanetoperatinglosscarryback, thestatuteoflimitationsinsubsections(a)and(b)shallnotapply.Theoverpaymentshallbecreditedwithinthreeyearsoftheduedateprescribedforfilingthereturn(includingextensionsthereof)forthetaxableyearofthenetoperatingloss,ortheperiodagreedtoundersubsection(d)withrespecttothetaxableyear,whicheverexpireslater.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-45;HRS§235-111;amL1969,c274,§2;amL1971,c9,§1;gench1985;amL1991,c22,§1;amL1993,c257,§1;amL1994,c18,§1;amL2009,c166,§6]
Note
Applicabilityof2009amendment.L2009,c166,§27.
Cross Reference
Suspensionoflimitationperiodduringbankruptcyproceedings,see§231-3.5.TaxInformationReleaseNo.99-4.“ApplicationoftheFranchiseTax,GeneralExciseTax,andIncomeTaxtoMortgageLoanCompanies,
IncludingMortgageLoanCompaniesOrganizedasPassthroughEntitiesandSoleProprietorships”TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;and
PaymenttoStateUnderProtest”
18-235-111
§235-111.5 INCOME TAX LAW
CHAPTER235,Page90(UnofficialCompilation)
Case Notes
Applicablelimitationsperiodforrefundclaimforpublicservicecompanytaxes;whenperiodstartstorun.68H.391,716P.2d1128.As§235-110.91(f)(2003)clearlyandunambiguouslyappliedtoallclaimsforaresearchactivitiestaxcreditforthe2001taxableyear,themore
specifictwelve-monthlimitationperiodforclaimingataxcreditunder§235-110.91(f),andnotthegenerallimitationperiodunderthissection,wasapplicabletoplaintiff’samendedclaim.121H.220(App.),216P.3d1243(2009).
§235-111.5 High technology; sale of unused net operating loss carryover. (a)Aqualifiedhightechnologybusinessasdefinedinsection235-7.3mayapplytothedepartmenttosellitsunusednetoperatinglosscarryovertoanothertaxpayer.Ifapprovedbythedepartment,aqualifiedhightechnologybusinessmaysellitsunusednetoperatinglosscarryovertoanothertaxpayerinanamountequaltoatleastseventy-fivepercentoftheamountofthesurrenderedtaxbenefit,computedatthecorporateratepursuanttosection235-71;providedthatthequalifiedhightechnologybusinessmaysellnomorethan$500,000ofitsunusednetoperatinglosscarryovertoanothertaxpayerperyear.Inthecaseofpartnerships,limitedliabilitypartnerships,limitedliabilitycompaniesclassifiedaspartnerships,andScorporations,eachpartner,member,orshareholdermaysellitsshareoftheentity’stotalnetoperatingloss.Thetaxbenefitpurchasedbythebuyershallbeclaimedintheyearforwhichthesaleisapprovedbythedepartment.Anyuseofthepurchasednetoperatinglosscarryoverfortaxcarrybackorcarryforwardpurposesshallcomplywithapplicablelaw.Theincomefromthesaleofthenetoperatinglosscarryoverreceivedbythesellershallbereportedonitstaxreturninthetaxableyearreceivedbutshallnotbeconsideredtaxableincome.
(b) Noapplicationforthesaleofunusednetoperatinglossesshallbeapprovedifthesellerisaqualifiedhightechnologybusinessthat:
(1) Hasdemonstratedpositivenetincomeineitherofthetwopreviousfullyearsofongoingoperationsasdeterminedonitsfinancialstatements;
(2) Hasdemonstratedaratioofonehundredtenpercentorgreaterofoperatingrevenuesdividedbyoperatingexpensesineitherofthetwopreviousfullyearsofoperationsasdeterminedonitsfinancialstatements;or
(3) Is directly or indirectly at least fifty per cent owned or controlled by another corporation that hasdemonstrated positive net income in either of the two previous full years of ongoing operations asdeterminedonitsfinancialstatementsorispartofaconsolidatedgroupofaffiliatecorporations,asfiledforfederalincometaxpurposes,thatintheaggregatehasdemonstratedpositivenetincomeineitherofthetwopreviousfullyearsofongoingoperationsasdeterminedonitscombinedfinancialstatements.
Inthecaseofpartnerships,limitedliabilitypartnerships,limitedliabilitycompaniesclassifiedaspartnerships,andScorporations,theapplicationforthesaleofunusednetoperatinglossesshallonlybeapprovedtotheextentthatallpartners,members,orshareholderscertifythattheyhavenotreceivedataxbenefitfromthelosses.
(c) Asusedinthissection:“Netoperatingloss”meansanetoperatinglossforincometaxpurposesoccurringinthetwotaxableyearspreceding
theyearinwhichthesaleofnetoperatinglosscarryoveroccurs.“Surrenderedtaxbenefit”meansthetaxliabilitysavedifthenetoperatinglosscarryforwardcouldhavebeenused
bythequalifiedhightechnologybusiness.(d) ThissectionshallonlyapplytosalesofnetoperatinglosscarryoversafterDecember31,2000,andbefore
January1,2004.[L2000,c297,§3;amL2001,c221,§11]
§235-112 Time for assessment of deficiency attributable to gain upon conversion. (a)Ifataxpayerhasmadetheelectionprovidedinsection1033(a)(2)(A)oftheInternalRevenueCode,therulesstatedinthissectionapply.
(b) Thestatutoryperiodfortheassessmentofanydeficiency,foranytaxableyearinwhichisrealizedanypartofthegainontheconversionwhichisthesubjectoftheelectionreferredtoinsubsection(a)ofthissection,attributabletosuchgain,shallnotexpirepriortotheexpirationofthreeyearsfromthedatethedepartmentoftaxationisnotifiedbythetaxpayer(insuchmannerasthedepartmenthasprescribedormayprescribe)ofthereplacementoftheconvertedpropertyorofanintentionnottoreplace,andsuchdeficiencymaybeassessedatanytimebeforetheexpirationofthisthree-yearperiodnotwithstandinganyotherprovisionwhichwouldotherwisepreventsuchassessment.
(c) Ifthepropertyorstockpurchasedasareplacementforconvertedpropertywaspurchasedbeforethebeginningofthelasttaxableyearinwhichanypartofthegainuponsuchconversionisrealized,anydeficiency,totheextentresultingfromtheelectionreferredtoinsubsection(a)ofthissection,foranytaxableyearendingbeforesuchlasttaxableyearmaybeassessed,notwithstandinganyotherprovisionwhichwouldotherwisepreventsuchassessment,atanytimebeforetheexpirationoftheperiodwithinwhichadeficiencyforsuchlasttaxableyearmaybeassessed.[L1959,c277,ptof§14;amLSp19592d,c1,§16;Supp,§121-45.1;HRS§235-112;amL1979,c62,§2(13)]
§235-113 Time for assessment of deficiency attributable to gain upon sale of a residence. (a)IfafterDecember31,1957,ataxpayerduringataxableyearsellsatagainpropertyusedbythetaxpayerasthetaxpayer’sprincipalresidence,therulesstatedinthissectionapply.
(b) Thestatutoryperiodfortheassessmentofanydeficiencyattributabletoanypartofthegainreferredtoinsubsection(a)of thissectionshallnotexpirebefore theexpirationof threeyearsfromthedate thedepartmentof
18-235-112
18-235-113
INCOME TAX LAW §235-114
CHAPTER235,Page91(UnofficialCompilation)
taxationisnotifiedbythetaxpayer(insuchmannerasthedepartmenthasprescribedormayprescribe)ofthematterssetoutinsubsection(c)ofthissection,andsuchdeficiencymaybeassessedatanytimebeforetheexpirationofthethree-yearperiodnotwithstandinganyotherprovisionwhichwouldotherwisepreventsuchassessment.
(c) Thenoticereferredtoinsubsection(b)ofthissectionshallinformthedepartmentof:(1) Thetaxpayer’scostofpurchasingthenewresidencewhichthetaxpayerclaimsresultsinnonrecognition
ofanypartofthegainreferredtoinsubsection(a)ofthissection,or(2) Thetaxpayer’sintentionnottopurchaseanewresidencewithintheperiodspecifiedinsection1034(a)of
theInternalRevenueCode,or(3) Afailuretomakesuchpurchasewithinsuchperiod.[L1959,c277,ptof§14;amLSp19592d,c1,§16;
Supp,§121-45.2;HRS§235-113;amimpL1984,c90,§1;gench1985]
APPEAL
§235-114 Appeals. (a)Anypersonaggrievedbyanyassessmentofthetaxorliabilityimposedbythischaptermayappealfromtheassessmentinthemannerandwithinthetimehereinaftersetforth.Appealmaybemadeeithertothedistrictboardofreviewortothetaxappealcourt.Thefirstappealtoeitherthedistrictboardofreviewortothetaxappealcourtmaybemadewithoutpaymentofthetaxsoassessed.Eitherthetaxpayerortheassessormayappealtothetaxappealcourtfromadecisionbytheboardortotheintermediateappellatecourtfromadecisionbythetaxappealcourt;providedthatifthedecisionbytheboardorthetaxappealcourtisappealedbythetaxpayer,orthedecisionbytheboardinfavorofthedepartmentisnotappealed,thetaxpayershallpaythetaxsoassessedplusinterestasprovidedinsection231-39(b)(4).
(b) Iftheappealisfirstmadetotheboard,theappealshalleitherbeheardbytheboardorbetransferredtothetaxappealcourtforhearingattheelectionofthetaxpayeroremployer.Ifheardbytheboard,anappealshallliefromthedecisionthereoftothetaxappealcourtandtotheintermediateappellatecourt,subjecttochapter602,inthemannerandwiththecostsprovidedbychapter232.Thesupremecourtshallprescribeformstobeusedintheappeals.Theformsshallshow:
(1) Theamountoftaxesorliabilityuponthebasisofthetaxpayer’scomputationofthetaxpayer’staxableincomeortheemployer’scomputationoftheemployer’sliability;
(2) Theamountuponthebasisoftheassessor’scomputation;(3) Theamountuponthebasisofthedecisionsoftheboardofreviewandtaxappealcourt,ifany;and(4) Theamountindispute.
Iforwhentheappealisfiledwithortransferredtothetaxappealcourt,thecourtshallproceedtohearanddeterminetheappeal,subjecttoappealtotheintermediateappellatecourtasisprovidedinchapter232.
(c) Anytaxpayeroremployerappealingfromanyassessmentofincometaxesorliabilityshalllodgewiththeassessororassistantassessoranoticeof theappeal inwriting,stating thegroundof the taxpayer’soremployer’sobjection to the additional assessment or any part thereof.The taxpayer or employer also shall file the notice ofappealwiththeboardorthetaxappealcourtatanytimewithinthirtydayssubsequenttothedatewhenthenoticeofassessmentwasmailed,properlyaddressedtothetaxpayeroremployeratthetaxpayer’soremployer’slastknownresidenceorplaceofbusiness.Exceptasotherwiseprovided,themanneroftakingtheappeal,thecostsapplicablethereto,andthehearinganddispositionthereof,includingthedistributionofcostsandoftaxespaidbythetaxpayerpendingtheappeal,shallbeasprovidedinchapter232.
Thetaxappealcourtmayallowanindividualtaxpayertofileasubsequentappealwithoutpaymentofthenetincometaxincaseswherethetotaltaxliabilitydoesnotexceed$50,000intheaggregateforalltaxyears,uponproofthatthetaxpayerwouldbeirreparablyinjuredbypaymentofthetax.[LSp1957,c1,ptof§2;Supp,§121-46;amL1967,c37,§1;HRS§235-114;amL1973,c51,§3;amimpL1984,c90,§1;gench1985;amL1992,c147,§3;amL2000,c199,§2;amL2004,c123,§1andc202,§25;amL2006,c91,§2andc94,§1;amL2010,c109,§1]
Note
The2000amendmentdoesnotaffectrightsanddutiesthatmatured,penaltiesthatwereincurred,andproceedingsthatwerebegunbeforeJune8,2000.L2000,c199,§§11and13.
The2004amendmentappliestotaxappealsfiledonorafterJuly1,2004.L2004,c123,§14.L2004,c202,§82provides:“SECTION82.AppealspendinginthesupremecourtasoftheeffectivedateofthisAct[July1,2006]maybetransferredtotheintermediate
appellatecourtorretainedatthesupremecourtasthechiefjustice,inthechiefjustice’ssolediscretion,directs.”
Cross Reference
TaxInformationReleaseNo.2002-1,“AuditofNetIncome,GeneralExcise,andUseTaxReturns;AppealRights;ClaimsforRefund;andPaymenttoStateUnderProtest”
Rules of Court
SeeTaxAppealCourtRules.
§235-115 INCOME TAX LAW
CHAPTER235,Page92(UnofficialCompilation)
Case Notes
Providesavenueforafullandfairconsiderationoftaxpayer’schallengetogrossreceiptstax.742F.2d546.Taxpayer’s42U.S.C.§1983claimagainstvalidityofHawaii’sgeneralexcisetaxbarred,wherestateremediesavailabletotaxpayerwere“plain,
adequate,andcomplete”.940F.Supp.260.Mandamustocompelissuanceofcertificateofappeal.18H.362.Wheretaxpayerfailedtopaytheassessedtaxasrequiredbythissection,thetaxappealcourtlackedjurisdictionfortaxpayer’sappealand
properlydismissedappeal.108H.69(App.),116P.3d711(2005).
GENERAL PROVISIONS
§235-115 Assessments, etc., prima facie proof. Theeffectofthenoticesofassessmentsandrecordspreparedbyorundertheauthorityofthedepartmentoftaxationshallbeassetforthinsections231-20and235-107.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-47;HRS§235-115]
§235-116 Disclosure of returns unlawful; penalty. Alltaxreturnsandreturninformationrequiredtobefiledunderthischaptershallbeconfidential,includinganycopyofanyportionofafederalreturnthatmaybeattachedtoastatetaxreturn,oranyinformationreflectedinthecopyofthefederalreturn.Itshallbeunlawfulforanyperson,oranyofficeroremployeeoftheState,includingtheauditorortheauditor’sagentwithregardtotaxreturninformationobtainedpursuanttosection23-5(a),tomakeknownintentionallyinformationimpartedbyanyincometaxreturnorestimatemadeundersections235-92,235-94,235-95,and235-97orwilfullytopermitanyincometaxreturnorestimatesomadeorcopythereoftobeseenorexaminedbyanypersonotherthanthetaxpayerorthetaxpayer’sauthorizedagent,personsdulyauthorizedbytheStateinconnectionwiththeirofficialduties,theMultistateTaxCommissionortheauthorizedrepresentativethereof,exceptasotherwiseprovidedbylaw.AnyoffenseagainsttheforegoingprovisionsshallbepunishableasaclassCfelony.[LSp1957,c1,ptof§2;Supp,§121-48;HRS§235-116;amL1974,c139,§3;amL1978,c172,§1;amimpL1984,c90,§1;gench1985;amL2014,c136,§4]
Cross Reference
TaxInformationReleaseNo.82-7,“ConfidentialityofTaxReturnsandInformationImpartedTherein—NetIncomeTaxandGeneralExciseTax”
Case Notes
Cited:103F.3d742.
§235-117 Reciprocal supplying of tax information. Notwithstandingsection235-116,thedepartmentmaypermittheSecretaryoftheTreasuryoftheUnitedStates,theCommissionerofInternalRevenue,theMultistateTaxCommission,ortheproperofficerofanystateorterritoryimposinganincometaxuponincomesofpersonstaxableunderthischapter,oranycountyofthisState,ortheauthorizedrepresentativesthereoftoinspecttheincometaxreturnsandestimatesofanysuchpersonfortaxpurposesonly.Thedepartmentmayalsofurnishtotheseauthorizedpersonsanabstractofanincometaxreturnorestimateorsupplythesepersonswithinformationconcerninganyitemofincomecontainedinareturnordisclosedbythereportofaninvestigationoftheincomeorreturnofataxpayer.TheMultistateTaxCommissionmaymaketheinformationavailabletoadulyaccreditedtaxofficialoftheUnitedStates,anystateorterritory,ortheauthorizedrepresentativethereof,fortaxpurposesonly.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-49;HRS§235-117;amL1974,c139,§4;amLSp2005,c9,§4]
§235-118 Rules and regulations. Exceptasotherwiseprovided in thischapter, thedepartmentof taxationshallprescribe and have printed all needful rules and regulations for the enforcement of this chapter and such rules andregulationssomadeshallhavetheforceandeffectoflawiftheybenotinconflictwiththeexpressstatutoryprovisionstowhichthesameareapplicable.[LSp1957,c1,ptof§2;amLSp19592d,c1,§16;Supp,§121-50;HRS§235-118]
Cross Reference
Rulemakingprocedure,seechapter91.
§235-119 Taxes, state realizations. AllincometaxesshallbefortheuseoftheStateandshallbepaidintothestatetreasuryatsuchtimesasthedirectoroffinanceshalldirect.[LSp1957,c1,ptof§2;amLSp19592d,c1,§14;amL1963,c114,§1;Supp,§121-52;HRS§235-119]
PART VII. HAWAII S CORPORATION INCOME TAX ACT
Cross Reference
TaxInformationReleaseNo.90-6,“Act16,SessionLawsofHawaii1990,RelatingtoSCorporations”
INCOME TAX LAW [§235-124]
CHAPTER235,Page93(UnofficialCompilation)
[§235-121] Title; definitions; federal conformity; construction. (a)The title of this part shall be theHawaii Scorporationincometaxact.
(b) Forpurposesofthispart,thefollowingtermsshallhavethefollowingmeanings:“Ccorporation”meansacorporationwhichisnotanScorporation.“IncomeattributabletotheState”meansitemsofincome,loss,deduction,orcreditoftheScorporationapportioned
tothisStatepursuanttopartIIofthischapterorallocatedtothisStatepursuanttosection235-5.“IncomenotattributabletotheState”meansallitemsofincome,loss,deduction,orcreditoftheScorporationother
thanincomeattributabletotheState.“InternalRevenueCode”hasthemeaningsetforthinsection235-2.3andasitappliestothetaxableperiod;section
referencesoftheInternalRevenueCodeshallbedeemedtorefertocorrespondingprovisionsofpriorandsubsequentfederaltaxlaws.
“Post-terminationtransitionperiod”meansthatperioddefinedinsection1377(b)(1)oftheInternalRevenueCode.“Proratashare”meansthesharedeterminedwithrespecttoanScorporationshareholderforataxableperiodinthe
mannerprovidedinsection1377(a)(1)or(2)or1362(e)(2)or(3)or(6)(D),asthecasemaybe,oftheInternalRevenueCode.
“Scorporation”meansacorporationforwhichavalidelectionundersection1362(a)oftheInternalRevenueCodeisineffect.
“Taxableperiod”meansanytaxableyearorportionofataxableyearduringwhichacorporationisanScorporation.(c) Exceptasotherwiseexpresslyprovidedorclearlyappearingfromthecontext,any termused in thispart
shallhavethesamemeaningaswhenusedinacomparablecontextintheInternalRevenueCode,orinanystatuterelatingtofederalincometaxes,ineffectforthetaxableperiod.DueconsiderationshallbegivenintheinterpretationofthisparttoapplicablesectionsoftheInternalRevenueCodeineffectfromtimetotimeandtofederalrulingsandregulationsinterpretingthosesections,providedtheInternalRevenueCoderulingsandregulationsdonotconflictwiththispartorotherprovisionsofthischapter.
(d) This part shall be applied and construed to effectuate its general purpose tomakeuniform the lawwithrespecttothesubjectmatterofthispartamongstatesenactingit.[L1990,c16,ptof§1]
§235-122 Taxation of an S corporation and its shareholders. (a)Anelectionundersection1361(b)(3)and(e),or1362(a)oftheInternalRevenueCodeshallbeeffectiveforthepurposesofthischapter.Evidenceofavalidelectionforfederalpurposesshallbesubmittedtothedepartmentinsuchformandatsuchtimethedepartmentmayprescribe.
(b) Exceptasprovidedinthefollowingsentence,anScorporationshallnotbesubjecttothetaximposedbysection235-71.IfincomeofanScorporationissubjecttofederalincometax,thensuchincomeasmodifiedbysection235-123,totheextentitconstitutesincomeattributabletotheState,shallbetaxedatthehighestmarginalrateoftaximposedonthenetincomeofcorporations.IfanScorporationisrequiredtopayataxtothisStatebyreasonoftheprecedingsentence,thentheincomeattributabletotheStateoftheScorporationshallbereducedbytheamountofthetax.
(c) Eachshareholder’sproratashareofincomeattributabletotheStateandeachresidentshareholder’sproratashareofincomenotattributabletotheState,totheextentmodifiedpursuanttosection235-123,shallbetakenintoaccountbytheshareholderinthemannerprovidedinsection1366oftheInternalRevenueCodeforthepurposesofsection235-4andshallbetaxableundersection235-51.[L1990,c16,ptof§1;amL1997,c297,§5]
Cross Reference
TaxInformationReleaseNo.2001-1,“TheApplicationofCertainHawaiiTaxestoQualifiedSubchapterSSubsidiaryCorporations,QualifiedSubchapterSTrusts,andElectingSmallBusinessTrusts”
[§235-123] Modification and characterization of income. (a)TheproratashareofeachresidentandnonresidentshareholderintheincomeattributabletotheStateofanScorporation,forthepurposesofsection235-122(c),shallbesubjecttothemodificationstocorporateincomeprovidedbythischapter.
(b) TheproratashareofeachresidentshareholderintheincomenotattributabletotheStateofanScorporation,forthepurposesofsection235-122(c),shallbesubjecttothemodificationstoindividualincomeprovidedbythischapter.
(c) Scorporationitemstakenintoaccountbyashareholderpursuanttosection235-122(c)shallbecharacterizedasthoughreceivedorincurredbythecorporationandnotitsshareholder.[L1990,c16,ptof§1]
[§235-124] Basis and adjustments. (a)TheinitialbasisofaresidentshareholderinthestockofanScorporationandinanyindebtednessofthecorporationowedtotheshareholdershallbedeterminedinthemannerprovidedundertheInternalRevenueCode.Theinitialbasisshallbedeterminedasofthelasttooccurofthedate(whichmaybebeforetaxableyearsbeginningafterDecember31,1989)onwhich:
(1) TheshareholderlastbecamearesidentofthisState;
18-235-122
[§235-125] INCOME TAX LAW
CHAPTER235,Page94(UnofficialCompilation)
(2) Theshareholderacquiredthestockortheindebtednessofthecorporation;or(3) ThecorporationbecameanScorporation.
(b) TheinitialbasisofaresidentshareholderinthestockandindebtednessofanScorporationshallbeadjustedafter thedate specified in subsection (a) in themannerand to theextent requiredby section1011of the InternalRevenueCodeexceptthat,withrespecttoanytaxableperiodduringwhichtheshareholderwasaresidentofthisState:
(1) Anymodificationmade(otherthanforincomeexemptfromfederalorthisState’staxation)pursuanttosection235-123shallbetakenintoaccount;and
(2) Anyadjustmentsmadepursuanttosection1367oftheInternalRevenueCodeforataxableperiodduringwhich this State did notmeasure S corporation shareholder income by reference to the corporation’sincomeshallnotbetakenintoaccount.
(c) TheinitialbasisofanonresidentshareholderinthestockofanScorporationandinanyindebtednessofthecorporationtotheshareholdershallbezero.Theinitialbasisshallbedeterminedasofthelasttooccurofthedate(whichmaybebeforetaxableyearsbeginningafterDecember31,1989)onwhich:
(1) Theshareholderacquiredthestockortheindebtednessofthecorporation;(2) ThecorporationbecameanScorporation;or(3) TheshareholderlastbecameanonresidentofthisState.
(d) The initialbasisof anonresident shareholder in the stockand indebtednessof anScorporation shallbeadjustedafter thedatespecified insubsection(c) in themannerprovided insection1367of theInternalRevenueCode,exceptthatadjustmentstobasisshallbelimitedtotheincomeattributabletotheStatetakenintoaccountbythe shareholderpursuant to section235-122(c). Incomputing incomeattributable to theState forpurposesof theprecedingsentence,anymodificationmadeforincomeexemptfromfederalorthisState’staxationshallnotbetakenintoaccount.
(e) Thebasisofaresidentshareholderinthestockofacorporationshallbereducedbytheamountallowedasalossordeductionpursuanttosection235-125(d).
(f) Thebasisofaresidentshareholderinthestockofacorporationshallbereducedbytheamountofanycashdistributionwhichisnottaxabletotheshareholderasaresultoftheapplicationofsection235-127(b).
(g) Forpurposesofthissection,ashareholdershallbeconsideredtohaveacquiredstockorindebtednessreceivedbygiftatthetimethedonoracquiredthestockorindebtedness,ifthedonorwasaresidentofthisStateatthetimeofthegift.[L1990,c16,ptof§1]
Revision Note
“TaxableyearsbeginningafterDecember31,1989”substitutedforotheroriginallanguage.
[§235-125] Carryforwards and carrybacks; loss limitation. (a)CarryforwardsandcarrybackstoandfromtaxableperiodsofanScorporationshallberestrictedinthemannerprovidedinsection1371(b)oftheInternalRevenueCode.
(b) The aggregate amount of losses or deductions of an S corporation taken into account by a shareholderpursuanttosection235-122(c)shallnotexceedthecombinedadjustedbases,determinedinaccordancewithsection235-124,oftheshareholderinthestockandindebtednessoftheScorporation.
(c) Anylossordeductionwhichisdisallowedforataxableperiodpursuanttosubsection(b)shallbetreatedasincurredbythecorporationinthesucceedingtaxableperiodwithrespecttotheshareholder.
(d)(1) Anylossordeductionwhichisdisallowedpursuanttosubsection(b)forthecorporation’slasttaxableperiod as an S corporation shall be treated as incurred by a shareholder on the last day of any post-terminationtransitionperiod.
(2) Theaggregateamountoflossesanddeductionstakenintoaccountbyashareholderpursuanttoparagraph(1)shallnotexceedtheadjustedbasisoftheshareholderinthestockofthecorporation(determinedinaccordancewithsection235-124atthecloseofthelastdayofanypost-terminationtransitionperiodandwithoutregardtothissubsection).[L1990,c16,ptof§1]
[§235-125.5] Transition rule. (a)AcorporationforwhichanSelectionwasineffectforfederalpurposesbutnotforHawaiipurposesforthetaxableperiodimmediatelyprecedingthetaxableperiodbeginningafterDecember31,1989,mayelectbeforeDecember31,1992,nottohavesection235-125(a)applytocarryforwardsfromtaxableperiodsprecedingthetaxableperiodbeginningafterDecember31,1989,forwhichaHawaiiSelectionwasnotineffect.Anelectionpursuanttothissectionshallbeapplicabletoallsuchcarryforwarditems.
(b) AnetoperatinglosscarryforwardsubjecttoanelectionunderthissectionshallbeallowedasadeductionincomputingScorporationtaxableincomeafterallotheritemsofincomeanddeductionshavebeentakenintoaccountinaccordancewiththispartandshallnotreduceScorporationtaxableincomebelowzero.
(c) Acarryforward,otherthananetoperatinglosscarryforward,subjecttoanelectionunderthissectionshallbetakenintoaccountbythecorporationincomputingtaxableincomeasthoughanSelectionwerenotineffectfortheyear.Incomputingtaxableincomeunderthissubsection,theallowanceofadeductionforanetoperatinglosscarryforwardshallbedeterminedinaccordancewithsubsection(b).
INCOME TAX LAW [§235-128]
CHAPTER235,Page95(UnofficialCompilation)
(d) NocarryforwardssubjecttotheelectionunderthissectionmaybecarriedforwardtoaCcorporationyearwithinthemeaningofInternalRevenueCodesection1371(b).
(e) An election pursuant to this section shall bemade on a timelyfiled (including extension)S corporationincometaxreturnforthefirsttaxableperiodbeginningafterDecember31,1989,oranamendedreturnfiledbeforeDecember31,1992.AcopyoftheelectionshallbeattachedtotheScorporationtaxreturnforeachyeartowhichthecarryforwardiscarried.[L1991,c24,§1]
[§235-126] Part-year residence. Forpurposesof thispart if a shareholderofanScorporation isbotha residentandnonresidentofthisStateduringanytaxableperiod,theshareholder’sproratashareoftheScorporation’sincomeattributabletotheStateandincomenotattributabletotheStateforthetaxableperiodshallbefurtherproratedbetweentheshareholder’speriodsofresidenceandnonresidence,inaccordancewiththenumberofdaysineachperiod.[L1990,c16,ptof§1]
[§235-127] Distributions. (a)Subjecttosubsection(c),adistributionmadebyanScorporationwithrespecttoitsstocktoaresidentshareholdershallbetakenintoaccountbytheshareholderforpurposesofsection235-4andshallbetaxableundersection235-51totheextentthatthedistributionistreatedasadividendorasgainfromthesaleorexchangeofpropertypursuanttosection1368oftheInternalRevenueCode.
(b) Subjecttosubsection(c),adistributionofmoneymadebyacorporationwithrespecttoitsstocktoaresidentshareholderduringapost-terminationtransitionperiodshallnotbetakenintoaccountbytheshareholderforpurposesofsection235-4totheextent thedistributionisappliedagainstandreducestheadjustedbasisof thestockof theshareholderinaccordancewithsection1371(e)oftheInternalRevenueCode.
(c) In applying sections 1368 and 1371(e) of the Internal Revenue Code to any distribution referred to insubsection(a)or(b):
(1) Theterm“adjustedbasisofthestock”meanstheadjustedbasisoftheshareholder’sstockasdeterminedundersection235-124;and
(2) TheaccumulatedadjustmentsaccountforthisStateshallbeequalto,andshallbeadjustedinthesamemanneras,theScorporation’saccumulatedadjustmentsaccountdefinedinsection1368(e)(1)(A)oftheInternalRevenueCode,exceptthattheaccountshallalsobeadjustedbyanymodificationsrequiredtobemadepursuanttosection235-123(a).[L1990,c16,ptof§1]
[§235-128] Returns; shareholder agreements; mandatory payments. (a)An S corporation which engages inactivitiesinthisStatewhichwouldsubjectaCcorporationtotherequirementtofileareturnundersection235-92shallfilewiththedepartmentanannualreturn,intheformprescribedbythedepartment,onorbeforetheduedateprescribedforthefilingofCcorporationreturnsbysection235-97.
EveryScorporationshallmakeareturnforeachtaxableyear,statingspecificallytheitemsofitsgrossincomeandthedeductionsallowablebythischapter,thename,address,andsocialsecurityorfederalidentificationnumberofeachpersonowningstockinthecorporationatanytimeduringthetaxableyear,thenumberofsharesofstockownedbyeachshareholderatalltimesduringthetaxableyear,theincomeattributabletotheStateandincomenotattributabletotheStatewithrespecttoeachshareholderasdeterminedunderthispart,themodificationsrequiredbysection235-123,theamountofmoneyandotherpropertydistributedbythecorporationduringthetaxableyeartoeachshareholder,thedateofeachsuchdistribution,andsuchotherinformationasthedepartmentmaybyformorruleprescribe.
TheScorporation,onorbefore thedayonwhich such return isfiled, shall furnish toeachpersonwhowasashareholder during theyear a copyof the information shownon the return as thedepartmentmayby formor ruleprescribe.Anyreturnfiledpursuanttothissection,forpurposesofsections235-111and235-112,shallbetreatedasareturnfiledbythecorporationundersection235-92.TheScorporationshallalsomaintaintheaccumulatedadjustmentsaccountdescribedinsection235-127(c)(2).
(b) ThedepartmentshallpermitScorporationstofilecompositereturnsandtomakecompositepaymentsoftaxonbehalfofsomeorallofitsnonresidentshareholders.Thedepartmentmaypermitcompositereturnsandpaymentstobemadeonbehalfofresidentshareholders.
(c) AnScorporationshallfilewiththedepartment,intheformprescribedbythedepartment,theagreementofeachnonresidentshareholderofthecorporation:
(1) TofileareturnandmaketimelypaymentofalltaxesimposedbythisStateontheshareholderwithrespecttotheincomeoftheScorporation;and
(2) TobesubjecttopersonaljurisdictioninthisStateforpurposesofthecollectionofunpaidincometax,togetherwithrelatedinterestandpenalties.
If thecorporationfails totimelyfiletheagreementsrequiredbyparagraphs(1)and(2)onbehalfofeachofitsnonresidentshareholders,thenthecorporation,atthetimessetforthinsubsection(d),shallpaytothisStateonbehalfofeachnonresidentshareholderinrespectofwhomanagreementhasnotbeentimelyfiledanamountequaltothehighestmarginaltaxrateineffectundersection235-51multipliedbytheamountoftheshareholder’sproratashareoftheincomeattributabletotheStatereflectedonthecorporation’sreturnforthetaxableperiod.AnScorporationshallbeentitled
§235-129 INCOME TAX LAW
CHAPTER235,Page96(UnofficialCompilation)
torecoverapaymentmadepursuanttotheprecedingsentencefromtheshareholderonwhosebehalfthepaymentwasmade.
(d) Theagreementsrequiredtobefiledpursuanttosubsection(c)shallbefiledatthefollowingtimes:(1) AtthetimetheannualreturnisrequiredtobefiledforthefirsttaxableperiodforwhichtheScorporation
becamesubjecttothispart,and(2) Atthetimetheannualreturnisrequiredtobefiledforanytaxableperiodinwhichthecorporationhada
nonresidentshareholderonwhosebehalfsuchanagreementhasnotbeenpreviouslyfiled.(e) AnyamountpaidbythecorporationtothisStatepursuanttosubsection(b)or(c)shallbeconsideredtobea
paymentbytheshareholderonaccountoftheincometaximposedontheshareholderforthetaxableperiod.(f) AnyofficerofanyScorporationwhowilfullyfailstoprovideanyinformation,fileanyreturnoragreement,
makeanypayment,ormaintainanyaccountasrequiredbythissectionorbysection231-15.6shallbeguiltyofamisdemeanor.[L1990,c16,ptof§1]
§235-129 Tax credits. (a)Forpurposesofsection235-55,eachresidentshareholdershallbeconsideredtohavepaidataximposedontheshareholderinanamountequaltotheshareholder’sproratashareofanynetincometaxpaidbytheScorporationtoastatethatdoesnotmeasuretheincomeofScorporationshareholdersbytheincomeoftheScorporation.Forpurposesoftheprecedingsentence,theterm“netincometax”meansanytaximposedonormeasuredbyacorporation’snetincome.
(b) EachshareholderofanScorporationshallbeallowedacreditagainstthetaximposedbysection235-51inanamountequaltotheshareholder’sproratashareofthetaxcreditearnedbytheSCorporationinthisState.[L1990,c16,ptof§1;amL1992,c105,§1;amL2007,c151,§2]
Note
The2007amendmentappliestotaxableyearsbeginningafterDecember31,2006.L2007,c151,§4.
[§235-130] LIFO recapture. IfanScorporationissubjecttolastinfirstout(LIFO)recapturepursuanttosection1363oftheInternalRevenueCode,then:
(1) Any increase in the tax imposedby section235-71by reasonof the inclusionof theLIFO recaptureamountinitsincomeshallbepayableinfourequalinstallments;
(2) Thefirstinstallmentshallbepaidonorbeforetheduedate(determinedwithoutregardtoextensions)forfilingthereturnforthefirsttaxableyearforwhichthecorporationwassubjecttotheLIFOrecapture;
(3) Thethreesucceedinginstallmentsshallbepaidonorbeforetheduedate(determinedwithoutregardtoextensions)forfilingthecorporation’sreturnforthethreesucceedingtaxableyears;and
(4) Forpurposesofcomputinginterestonunderpayments,thelastthreeinstallmentsshallnotbeconsideredunderpaymentsuntilafterthepaymentduedatespecifiedabove.[L1990,c16,ptof§1]