INCOME TAX LAW CHAPTER 235, Page 1 (Unofficial Compilation) CHAPTER 235 INCOME TAX LAW Part I. General Provisions Section 235-1 Definitions 235-2 Repealed 235-2.1 Repealed 235-2.2 Repealed 235-2.3 Conformance to the federal Internal Revenue Code; general application 235-2.35 Operation of certain Internal Revenue Code provisions not operative under section 235-2.3 235-2.4 Operation of certain Internal Revenue Code provisions; sections 63 to 530 235-2.45 Operation of certain Internal Revenue Code provisions; sections 641 to 7518 235-2.5 Administration, adoption, and interrelationship of Internal Revenue Code and Public Laws with this chapter 235-3 Legislative intent, how Internal Revenue Code shall apply, in general 235-4 Income taxes by the State; residents, nonresidents, corporations, estates, and trusts 235-4.2 Persons lacking physical presence in the State; nexus presumptions 235-4.3 Repealed 235-4.5 Taxation of trusts, beneficiaries; credit 235-5 Allocation of income of persons not taxable upon entire income 235-5.5 Individual housing accounts 235-5.6 Individual development account contribution tax credit 235-6 Foreign manufacturing corporation; warehousing of products 235-7 Other provisions as to gross income, adjusted gross income, and taxable income 235-7.3 Royalties derived from patents, copyrights, or trade secrets excluded from gross income 235-7.5 Certain unearned income of minor children taxed as if parent’s income 235-8 Repealed 235-9 Exemptions; generally 235-9.5 Stock options from qualified high technology businesses excluded from taxation 235-10, 11 Repealed 235-12 Repealed 235-12.2 Repealed 235-12.5 Renewable energy technologies; income tax credit 235-13 Sales of residential land to lessees; involuntary conversion 235-15 Tax credits to promote the purchase of child passenger restraint systems 235-16 Repealed 235-16.5 Cesspool upgrade, conversion, or connection; income tax credit 235-17 Motion picture, digital media, and film production income tax credit 235-17.5 Repealed 235-18 Deposit beverage container deposit exemption 235-19 Exceptional trees; tax deduction 235-20 Comfort letters; authority to assess fees; established 235-20.5 Tax administration special fund; established 235- Tax credit for flood victims (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- Itemized deductions; limitations (temporary uncodified section) Part II. Uniform Division of Income for Tax Purposes 235-21 Definitions 235-22 Taxpayers affected
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CHAPTER 235 INCOME TAX LAW · INCOME TAX LAW §235-1. CHAPTER 235, Page 5 (Unofficial Compilation) “Computer program” means an ordered set of computer data representing coded
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§235-1 Definitions.“Biotechnology”means fundamental knowledge regarding the function of biological systems from the macro
level to themolecularandsubatomiclevels thathasapplicationtodevelopment includingthedevelopmentofnovelproducts,services,technologies,andsubtechnologiesfrominsightsgainedfromresearchadvancesthataddtothatbodyoffundamentalknowledge.
meanstobeintheStateforotherthanatemporaryortransitorypurpose.EveryindividualwhoisintheStatemorethantwohundreddaysofthetaxableyearintheaggregateshallbepresumedtobearesidentoftheState.Thispresumptionmaybeovercomebyevidencesatisfactorytothedepartmentoftaxationthat the individualmaintainsapermanentplaceofabodeoutsideof theStateand is in theState foratemporaryor transitorypurpose.Nopersonshallbedeemedtohavegainedorlostaresidencesimplybecauseoftheperson’spresenceorabsenceincompliancewithmilitaryornavalordersoftheUnitedStates,orwhileengagedinaviationornavigation,orwhileastudentatanyinstitutionoflearning.
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
§235-2.3 Conformance to the federal Internal Revenue Code; general application. (a)Forall taxableyearsbeginningafterDecember31,2018,asusedinthischapter,exceptasprovidedinsection235-2.35,“InternalRevenueCode”meanssubtitleA,chapter1,ofthefederalInternalRevenueCodeof1986,asamendedasofDecember31,2018,asitappliestothedeterminationofgrossincome,adjustedgrossincome,ordinaryincomeandloss,andtaxableincome,except thoseprovisionsof theInternalRevenueCodeandfederalpublic lawswhich,pursuant to thischapter,donotapplyorareotherwiselimitedinapplicationandexceptfortheprovisionsofPublicLaw109-001,whichapplytoSection170oftheInternalRevenueCode.TheprovisionsofPublicLaw109-001toacceleratethedeductionforcharitablecashcontributionsforthereliefofvictimsofthe2004IndianOceantsunamiareapplicableforthecalendaryearthatendedDecember31,2004,andthecalendaryearendingDecember31,2005.
(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;
corporations);(5) Section103(withrespecttointerestonstateandlocalbonds).Fortreatment,seesection235-7(b);(6) Section114(withrespect toextraterritorial income).For treatment,any transactionasspecified in the
the United States), except Sections 985 to 989 (with respect to foreign currency transactions). Fortreatment,seesections235-4,235-5,235-7(b),and235-55;
(36)Section1042(g) (with respect to salesof stock in agricultural refiners andprocessors to eligible farmcooperatives);
(37)Section1055(withrespecttoredeemablegroundrents);(38)Section1057(withrespecttoelectiontotreattransfertoforeigntrust,etc.,astaxableexchange);(39)Sections1291to1298(withrespecttotreatmentofpassiveforeigninvestmentcompanies);(40)SubchapterQ (sections1311 to1351) (with respect to readjustmentof taxbetweenyears and special
limitations);(41)SubchapterR (sections 1352 to 1359) (with respect to election to determine corporate tax on certain
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”
Tax InformationReleaseNo.97-4,“Applicationof theBusinessEntityClassificationRulesUnder the ‘Check-the-box’Regulations to theHawaiiIncomeTaxandOtherTaxes”
§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;
§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)(relatingtothe
§235-2.4 INCOME TAX LAW
CHAPTER235,Page10(UnofficialCompilation)
motorvehiclesalestaxdeduction,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
(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);(B) $3,212inthecaseofaheadofhousehold(asdefinedinSection2(b)oftheInternalRevenueCode);(C) $2,200inthecaseofanindividualwhoisnotmarriedandwhoisnotasurvivingspouseorheadof
(o) Section 179 (with respect to the election to expense certain depreciable business assets) of the InternalRevenueCodeshallbeoperativeforpurposesofthischapter,exceptasprovidedinthissubsection:
(p) Section 198A (with respect to the expensing of qualified disaster assistances expenses) of the InternalRevenueCodeshallnotbeoperativeforpurposesofthischapter.
(r) Section219 (with respect to retirement savings)of the InternalRevenueCode shallbeoperative for thepurposeofthischapter.Forthepurposeofcomputingthelimitationonthedeductionforactiveparticipantsincertainpensionplansforstateincometaxpurposes,adjustedgrossincomeasusedinsection219asoperativeforthischaptermeansfederaladjustedgrossincome.
(s) Section220 (with respect tomedical savings accounts) of the InternalRevenueCode shall be operativeforthepurposeofthischapter,butonlywithrespecttomedicalservicesaccountsthathavebeenapprovedbytheSecretaryoftheTreasuryoftheUnitedStates.
(v) Section 280E (with respect to expenditures in connectionwith the illegal sale of drugs) of the InternalRevenueCodeshallbeoperativeforthepurposesofthischapter,exceptthatsection280Eshallnotbeoperativewithrespecttotheproductionandsaleofmedicalcannabisandmanufacturedcannabisproductsbydispensarieslicensedunderchapter329Dandtheirsubcontractors,asdefinedinsection329D-1.
(bb)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.
imposedbysection235-51or235-71shallbeimposedupontheperson’sunrelatedbusinesstaxableincome.(ff) Section 521 (with respect to cooperatives) and subchapter T (sections 1381 to 1388, with respect to
(gg)Sections 527 (with respect to political organizations) and 528 (with respect to certain homeownersassociations)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthetaxesimposedineachsectionareherebyimposedbythischapterattheratesdeterminedundersection235-71.
(ii) Section529A(withrespecttoqualifiedABLEprograms)shallbeoperativeforthepurposesofthischapter,exceptthatsection529A(c)(3)(withrespecttoadditionaltaxfordistributionsnotusedfordisabilityexpenses)shallnotbeoperative.
(jj) Section530(withrespecttoCoverdelleducationsavingsaccounts)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapter.Forthepurposeofdeterminingthemaximumamountthatacontributorcouldmake to an education individual retirement account for state income taxpurposes,modifiedadjustedgrossincomeasusedinsection530asoperativeforthischaptermeansfederalmodifiedadjustedgrossincomeasdefinedinsection530.[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;amL2018,c27,§3;amL2019,c69,§3,andc111,§6]
§235-2.45 Operation of certain Internal Revenue Code provisions; sections 641 to 7518. (a)Section641(withrespecttoimpositionoftax)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischaptersubjecttothefollowing:
(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)shall
(e) Section1202(withrespecttopartialexclusionforgainfromcertainsmallbusinessstock)oftheInternalRevenueCode shallbeoperative forpurposesof this chapter, except that section1202(a)(3) and (4) shallnotbeoperativeforpurposesofthischapter.
(g) Section1221(withrespecttothedefinitionofcapitalassets)isoperative;providedthattheprovisionsofsection301ofPublicLaw110-343,whichprovide thatgainor loss from the saleor exchangeof anyapplicablepreferredstockbyanyapplicablefinancial institution(such termsbeingdefinedbyPublicLaw110-343)shallbetreatedasordinaryincomeorloss,shallnotbeoperative.Asaleorexchangeofanyapplicablepreferredstockbyanyapplicablefinancialinstitution(asthosetermsaredefinedbysection301ofPublicLaw110-343)shallbetreatedasasaleofacapitalassetandtaxedaccordingly.
(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.
(k) Subchapter Z (sections 1400Z-1 to 1400Z-2) (with respect to opportunity zones) shall be operative forpurposesofthischapter;exceptthatforpurposesofthischapter,subchapterZshallonlyapplytoqualifiedopportunityzones,asdefinedinsection1400Z-1,thataredesignatedassuchbythechiefexecutiveofficerofthisState.
(q) Section 6511(h) (with respect to running of periods of limitation suspendedwhile taxpayer is unable tomanagefinancialaffairsduetodisability)oftheInternalRevenueCodeshallbeoperativeforpurposesofthischapter,withdueregardtosection235-111relatingtothelimitationperiodforassessment,levy,collection,orcredit.
(r) Section 7518 (with respect to capital construction fund for commercial fishers) of the Internal RevenueCodeshallbeoperativeforthepurposesofthischapter.Qualifiedwithdrawalsfortheacquisition,construction,orreconstructionofanyqualifiedassetthatisattributabletodepositsmadebeforetheeffectivedateofthissectionshall
§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);
(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
(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.
§235-4 Income taxes by the State; residents, nonresidents, corporations, estates, and trusts. (a)Residents.Thetaximposedbythischapterappliestotheentireincomeofaresident,computedwithoutregardtosourceintheState.
(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 shallbeconclusivelypresumedtohavebeenreceivedorderivedoutofeachclassofincomeoftheestateortrust,andthebeneficiaryorpersonshallbetaxeduponsuchpartofitaswouldbetaxableifreceiveddirectlybythebeneficiaryorperson.
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
[§235-4.2] Persons lacking physical presence in the State; nexus presumptions. Aperson that lacksphysicalpresenceintheStateispresumedtobesystematicallyandregularlyengaginginbusinessintheStateandtaxableunderthischapterif,duringthecurrentorprecedingcalendaryear:
§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.
§235-5 Allocation of income of persons not taxable upon entire income. (a)ThissectionappliestoincomenotsubjecttopartIIofthischapter,includingnonbusinessincomeandcertainsection235-22income.
Deductions by individual taxpayers fromgross income for alimony and separatemaintenance payments undersection215oftheInternalRevenueCodeshallbeallowedonlytotheextentoftheratioofgrossincomeattributedtothisStatetotheentiregrossincomecomputedwithoutregardtosourceinthisState;providedthatasusedinthissentence“grossincome”meansgrossincomeasdefinedintheInternalRevenueCode,minusthedeductionsallowedbysection62oftheInternalRevenueCode,otherthanthedeductionsforalimonyandseparatemaintenancepaymentsundersection215oftheInternalRevenueCode.
(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.
(e) If a distribution from an individual housing account to an individual forwhose benefit the accountwasestablishedismadeandnotusedinconnectionwiththepurchaseofthefirstprincipalresidenceinHawaiifortheindividual,thetaxliabilityoftheindividualunderthischapterforthetaxableyearinwhichthedistributionisreceivedshallbeincreasedbyanamountequal totenpercentof theamountof thedistributionwhichis includableintheindividual’sgrossincomeforthetaxableyear.
(f) If theindividualforwhosebenefittheindividualhousingaccountwasestablishedpurchasesaresidentialpropertyinHawaiiwiththedistributionfromtheindividualhousingaccount:
(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.
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.
(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:
(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
(13)[Subsection effective until December 31, 2017.] Onehundredpercentofthegainrealizedbyafeesimpleownerfromthesaleofaleasedfeeinterestinunitswithinacondominiumproject,cooperativeproject,orplannedunitdevelopmenttotheassociationofownersunderchapter514Aor514B,or theresidentialcooperativecorporationoftheleaseholdunits.
(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:
(3) Upon the shares of stockof another corporation, if at leastfifteenper cent of the latter corporation’sbusiness,forthetaxableyearofthelattercorporationprecedingthepaymentofthedividend,hasbeenattributedtothisState.
(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
(6) Thefive-yearcarrybackperiodfornetoperatinglossesforanytaxableyearendingduring2001and2002in section 172(b)(1)(H) of the InternalRevenueCode as it read onDecember 31, 2008, shall not beoperativeforpurposesofthischapter;and
§235-7.3 Royalties derived from patents, copyrights, or trade secrets excluded from gross income. (a) Inadditiontotheexclusionsinsection235-7,thereshallbeexcludedfromgrossincome,adjustedgrossincome,andtaxableincome,amountsreceivedbyanindividualoraqualifiedhightechnologybusinessasroyaltiesandotherincomederivedfromanypatents,copyrights,andtradesecrets:
(b) Withrespecttoperformingartsproducts,thisexclusionshallextendto:(1) Theauthorsofperformingartsproducts,oranyparts thereof,without regard to theapplicationof the
work-for-hiredoctrineunderUnitedStatescopyrightlaw;(2) The authors of performing arts products, or anyparts thereof, under thework-for-hire doctrineunder
§235-7.5 Certain unearned income of minor children taxed as if parent’s income. (a)Inthecaseofanychildtowhomthissectionapplies,thetaximposedbythischaptershallbeequaltothegreaterof:
ratio to the total allocable parental tax as the child’s net unearned income bears to the aggregate netunearnedincomeofallchildrenofsuchparenttowhomthissectionapplies.
§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.
AppliestotaxableyearsbeginningafterDecember31,1999. L1999,c178,§31(2).Applicabilityof2000amendment. L2000,c297,§§10,35(1). [It is the intentionof the legislature inmakingamendments in thisPart to
made 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.
§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
(e) The director of taxation shall prepare any forms thatmay be necessary to claim a tax credit under thissection,includingformsidentifyingthetechnologytypeofeachtaxcreditclaimedunderthissection,whetherforsolarorwind.Thedirectormayalsorequirethetaxpayertofurnishreasonableinformationtoascertainthevalidityoftheclaimforcreditmadeunderthissectionandmayadoptrulesnecessarytoeffectuatethepurposesofthissectionpursuanttochapter91.
(i) Notaxpayershallbeallowedacreditunderthissectionfortheportionoftherenewableenergytechnologysystemrequiredbysection196-6.5 that is installedandplaced in serviceonanynewlyconstructedsingle-familyresidentialpropertyauthorizedbyabuildingpermitissuedonorafterJanuary1,2010.
TaxCredit,HRS§235-12.5”Tax Information Release 2010-03, “Further technical clarification regarding the term “system” for purposes of the Renewable Energy
[§235-13] Sales of residential land to lessees; involuntary conversion. (a)Asalebyanorganizationexemptundersection501(c)(3),ortreatedasanestateortrustunderSubchapterJoftheInternalRevenueCodetoalesseeoftheentireinterestinthelandofthelessororganization,estate,ortrustshallbeaninvoluntaryconversionofpropertyusedintradeorbusinessoracapitalassetofthelessororganization,estate,ortrustandshallnotbeasaleofpropertyheldbythelessororganization,estateortrustintheordinarycourseofatradeorbusiness,irrespectiveofthenumberofsuchsalesinanytaxableyear,if:
[§235-15] Tax credits to promote the purchase of child passenger restraint systems. (a)AnytaxpayerwhofilesanindividualincometaxreturnforataxableyearmayclaimanincometaxcreditunderthissectionagainsttheHawaiistateindividualnetincometax.
§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.
(g) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaims for the tax credit under this section, including amended claims, shall befiledonor before the endof thetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
“Cesspool”meansanindividualwastewatersystemconsistingofanexcavationinthegroundwhosedepthisgreaterthanitswidestsurfacedimension,whichreceivesuntreatedwastewater,andretainsorisdesignedtoretaintheorganicmatterandsolidsdischarged into it,butpermits the liquid to seep through itsbottomor sides togainaccess to theundergroundgeographicformation.
fieldwherethereisnaturalbiologicaldecontaminationaswastewaterdischargedintothesystemisfilteredthroughsoil.“Sewer system”means a systemof piping,with appurtenances, for collecting and conveyingwastewater from
§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:
(c) If the taxcreditunder this sectionexceeds the taxpayer’s income tax liability, theexcessofcreditsoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.Allclaims,includinganyamendedclaims,fortaxcreditsunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(f) Toreceivethetaxcredit,thetaxpayershallfirstprequalifytheproductionforthecreditbyregisteringwiththe department of business, economic development, and tourism during the development or preproduction stage.Failuretocomplywiththisprovisionmayconstituteawaiveroftherighttoclaimthecredit.
This information may be reported from the department of business, economic development, and tourism to thelegislatureinredactedformpursuanttosubsection(i)(4).
Uponeachdeterminationrequiredunderthissubsection,thedepartmentofbusiness,economicdevelopment,andtourismshallissuealettertothetaxpayer,regardingthequalifiedproduction,specifyingthequalifiedproductioncostsand the taxcreditamountqualified for ineach taxableyeara taxcredit isclaimed.The taxpayer foreachqualifiedproductionshallfiletheletterwiththetaxpayer’staxreturnforthequalifiedproductiontothedepartmentoftaxation.Notwithstandingtheauthorityofthedepartmentofbusiness,economicdevelopment,andtourismunderthissection,thedirectoroftaxationmayauditandadjustthetaxcreditamounttoconformtotheinformationfiledbythetaxpayer.
“Digitalmedia”meansproductionmethods andplatformsdirectly related to the creationof cinematic imageryandcontent,specificallyusingdigitalmeans,includingbutnotlimitedtodigitalcameras,digitalsoundequipment,andcomputers,tobedeliveredviafilm,videotape,interactivegameplatform,orotherdigitaldistributionmedia.
§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:
(c) If the taxcreditunder this sectionexceeds the taxpayer’s income tax liability, theexcessofcreditsoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.Allclaims,includinganyamendedclaims,fortaxcreditsunderthissectionshallbefiledonorbeforetheendofthetwelfthmonthfollowingthecloseofthetaxableyearforwhichthecreditmaybeclaimed.Failuretocomplywiththeforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
(h) Everytaxpayerclaimingataxcreditunderthissectionforaqualifiedproductionshall,nolaterthanninetydaysfollowingtheendofeachtaxableyear inwhichqualifiedproductioncostswereexpended,submitawritten,sworn statement to the department of business, economic development, and tourism, togetherwith a verificationreviewbyaqualifiedcertifiedpublicaccountantusingproceduresprescribedbythedepartmentofbusiness,economicdevelopment,andtourism,identifying:
This information may be reported from the department of business, economic development, and tourism to thelegislatureinredactedformpursuanttosubsection(i)(4).
and 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 $50,000,000;
however, if the totalamountofcreditsapplied for inanyparticularyearexceeds theaggregateamountofcreditsallowedforsuchyearunderthissection,theexcessshallbetreatedashavingbeenappliedforinthesubsequentyearandshallbeclaimedinsuchyear;providedthatnoexcessshallbeallowedtobeclaimedafterDecember31,2025.
“Digitalmedia”meansproductionmethods andplatformsdirectly related to the creationof cinematic imageryandcontent,specificallyusingdigitalmeans,includingbutnotlimitedtodigitalcameras,digitalsoundequipment,andcomputers,tobedeliveredviafilm,videotape,interactivegameplatform,orotherdigitaldistributionmedia.
(b) Nodeduction shall be allowed to exceed the amountof expendituresdeemed reasonablynecessaryby acertifiedarborist.Nodeductionshallbeallowedinmorethanonetaxableyearoutofeverythreeconsecutivetaxableyears.
[§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-timenonrefundablefloodvictimtaxcredit,exceptasotherwiseprovidedinthisAct.Thetaxcreditshallbedeductiblefromthetaxpayer’snetincometaxliabilityimposedbychapter235.
(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:
(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.
(j) Every claim, including amended claims, for the tax credit under this section shall be filed on or beforeDecember31,2007.Failuretomeetthefilingrequirementsofthissubsectionshallconstituteawaiveroftherighttoclaimthetaxcredit.
[§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.
(d) There shall be allowed to every (1) unmarried individual (other than a surviving spouse, or the head ofhousehold)and(2)marriedindividualfilingaseparatetaxreturnaone-timegeneralincometaxcreditinaccordancewiththefollowingtable:
individual income tax liability for the taxableyear2007. If the taxcreditclaimedbya resident taxpayerexceedstheamountofincometaxpaymentduefromtheresidenttaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtotheresidenttaxpayer;providedthatataxcreditproperlyclaimedbyaresidentindividualwhohasnoincometaxliabilityshallbepaidtotheresidentindividual.
[§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.
[§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.
§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:
(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
royaltiesbyafraction,thenumeratorofwhichisthenumberofdaysofphysicallocationofthepropertyinthestateduringtherentalorroyaltyperiodinthetaxableyearandthedenominatorofwhichisthenumberofdaysofphysicallocationofthepropertyeverywhereduringallrentalorroyaltyperiodsinthetaxableyear.Ifthephysicallocationofthepropertyduringtherentalorroyaltyperiodisunknownorunascertainablebythetaxpayer,tangiblepersonalproperty isutilized in thestate inwhich thepropertywas locatedat the time the rentalor royaltypayerobtainedpossession.[L1967,c33,ptof§1;HRS§235-25]
§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:
§235-29 Apportionment of business income; percentage. AllbusinessincomeshallbeapportionedtothisStatebymultiplyingtheincomebyafraction,thenumeratorofwhichisthepropertyfactorplusthepayrollfactorplusthesalesfactor,andthedenominatorofwhichisthree.[L1967,c33,ptof§1;HRS§235-29]
§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]
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18-235-30
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§235-33 INCOME TAX LAW
CHAPTER235,Page44(UnofficialCompilation)
§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
§235-38 Equitable adjustment of formula. If theallocationandapportionmentprovisionsof thispartdonotfairlyrepresenttheextentofthetaxpayer’sbusinessactivityinthisState,thetaxpayermaypetitionfororthedirectoroftaxationmayrequire,inrespecttoalloranypartofthetaxpayer’sbusinessactivity,ifreasonable:
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.
§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)]
(3) Authoritytoprescribetablesfortaxpayerswhoitemizedeductions.Thedirectormayprovidethat thissection shall apply also for any taxable year to individualswho itemize their deductions.Any tablesprescribedundertheprecedingsentenceshallbeonthebasisoftaxableincome.
§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-fiveyearsofageorolderwithinthe
(2) Shallnotoperatetoreducethetaxpayableunderthischaptertoanamountlessthanthatwhichwouldhavebeenpayable had the taxpayer been taxable only on the income fromproperty owned, personalservicesperformed,tradeorbusinesscarriedon,andothersourcesintheState.
(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
(1) Maintaininghousehold.Anindividualshallbetreatedasmaintainingahouseholdforanyperiodonlyifoverhalfthecostofmaintainingthehouseholdfortheperiodisfurnishedbytheindividual(or, if theindividualismarriedduringtheperiod,isfurnishedbytheindividualandtheindividual’sspouse).
(4) Certainmarriedindividualslivingapart.If:(A) Anindividualwhoismarriedandwhofilesaseparatereturn: (i)Maintainsastheindividual’shomeahouseholdthatconstitutesformorethanone-halfof the
(9) Identifying information required with respect to service provider. No credit shall be allowed undersubsection(a)foranyamountpaidtoanypersonunless:(A) Thename,address,taxpayeridentificationnumber,andgeneralexcisetaxlicensenumberoftheperson
(e) The tax credits claimed by a taxpayer pursuant to this section shall be deductible from the taxpayer’sindividualincometaxliability,ifany,forthetaxyearinwhichtheyareproperlyclaimed.Ifthetaxcreditsclaimedbyataxpayerexceedtheamountofincometaxpaymentduefromthetaxpayer,theexcessofcreditsoverpaymentsdueshallberefundedtothetaxpayer;providedthattaxcreditsproperlyclaimedbyaindividualwhohasnoincometaxliabilityshallbepaidtotheindividual;andprovidedfurtherthatnorefundsorpaymentonaccountofthetaxcreditsallowedbythissectionshallbemadeforamountslessthan$1.
§235-55.91 Credit for employment of vocational rehabilitation referrals. (a) There shall be allowed to eachtaxpayersubjecttothetaximposedbythischapter,acreditforemploymentofvocationalrehabilitationreferralswhichshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.
“Vocational rehabilitation referral”means any individualwho is certifiedby thedepartmentof human servicesvocationalrehabilitationandservicesfortheblinddivisioninconsultationwiththeHawaiistateemploymentserviceofthedepartmentoflaborandindustrialrelationsas:
(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
(3) If theprincipalplaceofemployment isataplantorfacility,andthereisastrikeor lockout involvingvocationalrehabilitationreferralsattheplantorfacility,amountspaidorincurredbytheemployertothevocational rehabilitation referral for serviceswhich are the same as, or substantially similar to, thoseservicesperformedbyemployeesparticipatingin,oraffectedby,thestrikeorlockoutduringtheperiodofstrikeorlockout.
(A) Has received a certification from the department of human services vocational rehabilitation andservicesfortheblinddivisionthattheindividualisaqualifiedvocationalrehabilitationreferral;or
(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(B) Hascompletedatleastonehundred-twentyhoursofservicesperformedfortheemployer.
(f) In the case of a successor employer referred to in section3306(b)(1) of the InternalRevenueCode, thedeterminationoftheamountofthetaxcreditallowableunderthissectionwithrespecttowagespaidbythesuccessoremployershallbemadeinthesamemannerasifthewageswerepaidbythepredecessoremployerreferredtointhesection.
(g) Nocreditshallbedeterminedunderthissectionwithrespecttowagespaidbyanemployertoavocationalrehabilitation referral for services performed by the individual for another person unless the amount reasonablyexpectedtobereceivedbytheemployerfortheservicesfromtheotherpersonexceedsthewagespaidbytheemployertotheindividualforsuchservices.
§235-61 Withholding of tax on wages. (a)Asusedinthissection:“Employee”includesanofficerorelectedofficial,oranyotheremployee.“Employer”means:(1) Thepersonorgovernmentforwhomanindividualperformsorperformedanyservice,ofwhatevernature,
(c) For eachwithholdingperiod (whetherweekly,biweekly,monthly, orotherwise) the amountof tax tobewithheldunderthissectionshallbeataratethat,forthetaxableyear,willyieldthetaximposedbysection235-51uponeachemployee’sannualwage,asestimatedfromtheemployee’scurrentwageinanywithholdingperiod,butforthepurposesofthissubsectionoftheratesprovidedbysection235-51themaximumtobetakenintoconsiderationshallbeeightpercent.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
(e) The department, by rule, may require the deduction and withholding of tax from any remuneration orcompensationpaidfororattributabletoservicesthatarenotsubjecttothegeneralexcisetaximposedbychapter237,whetherornotsuchwithholdingisprovidedforhereinabove.Everypersonsorequiredtodeductandwithholdtax,orfromwhomtaxisrequiredtobedeductedandwithheld,shallbesubjecttosections235-61to235-67,andeverypersonsorequiredtodeductandwithholdtaxshallbedeemedanemployerforthepurposesofthischapter.
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.
(B) Limitation. In the case of employeeswhose estimatedwages are at levels at which the amountsdeductedandwithheldunderthischaptergenerallyareinsufficient(takingintoaccountareasonableallowancefordeductionsandexceptions)tooffsettheliabilityfortaxunderthischapterwithrespecttothewagesfromwhichtheamountsaredeductedandwithheld,thedirectormaybyrulereducethewithholdingallowancestowhichthoseemployeeswould,butforthissubparagraph,beentitledunderthissubsection;
§235-62 Return and payment of withheld taxes. (a)Everyemployerrequiredbythischaptertowithholdtaxesonwagespaidinanyquarterofthecalendaryearshallmakeareturnofsuchwagestothedepartmentoftaxationonorbeforethefifteenthdayofthecalendarmonthfollowingthecloseofeachsuchquarterforwhichthetaxeshavebeenwithheld.
(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.
(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,
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.
[§235-64.2] Withholdings by partnerships, estates, and trusts. Partnerships, estates, and trusts shall withholdanamountequaltothehighestmarginaltaxrateapplicabletoanonresidenttaxpayermultipliedbytheamountofthetaxpayer’sdistributiveshareofincomeattributabletotheStatereflectedonthepartnership’s,estate’s,andtrust’sreturnforthetaxableperiod.Allamountswithheldshallbepaidtothedepartmentoftaxationinamannerthatthedepartmentmayprescribe.Withholdingshallnotberequiredtobesubmittedbyapubliclytradedpartnership,asdefinedbysection7704(b)oftheInternalRevenueCode,otherwiseincompliancewiththissection.Apubliclytradedpartnershipshallfileanannualinformationreturnreportingthename,address,taxpayeridentificationnumber,andotherinformationrequestedbythedepartmentoftaxationofeachunitholderwithincomesourcedtotheState.[L2019,c232,§1]
§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.
§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:
(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:
(f) Nopersonshallberequiredtodeductandwithholdanyamountundersubsection(b)ifoneormoreindividualtransferors furnishes to the transferee an affidavit by the transferor stating the transferor’s taxpayer identificationnumber,thatfortheyearprecedingthedateofthetransferthepropertyhasbeenusedbythetransferorasaprincipalresidence,andthattheamountrealizedforthepropertydoesnotexceed$300,000.
[§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.
(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.
§235-71.5 Alternative tax for corporations. Section1201(withrespecttoalternativetaxforcorporations)oftheInternalRevenueCodeof1986,asamendedasofDecember31,1996,shallbeoperativeforthepurposesofthischapterandshallbeappliedassetforthinthissection.Ifforanytaxableyearacorporation,regulatedinvestmentcompany,orrealestateinvestmenttrusthasanetcapitalgain,then,inlieuofthetaximposedbysection235-71,thereisherebyimposedatax(ifsuchtaxislessthanthetaximposedundersection235-71)whichshallconsistofthesumof:
§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 credits; ordering of credit claims. Notwithstandinganyotherlawtothecontraryprovidingfortheuseofanincometaxcreditunderthischapter,intheoffsettingofataxpayer’sincometaxliability,taxcreditsthatmayberefundedorpaidtothetaxpayerwhohasnoincometaxliabilityshallbeusedfirst,followedbynonrefundabletaxcreditsthatmaybeusedascreditagainsttaxesinsubsequentyearsuntilexhausted.[L2010,c21,§2]
§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.
of twoormorejointfiduciariesshallbesufficientcompliancewiththerequirementof thissection.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]
§235-96 Returns by persons making payments. Bydulypromulgatedregulationsthedepartmentoftaxationmayrequirethatanyindividual,partnership,corporation,jointstockcompany,association,insurancecompany,orotherperson,beingaresidentorhavingaplaceofbusinessinthisState,inwhatevercapacityacting,includinglesseesormortgagorsof
[§235-96.5] Returns relating to unemployment. (a) The state department of labor and industrial relations shallsubmitareturntothedepartmentoftaxationaccordingtotheformsorrulesprescribedbythedirectoroftaxationsettingforththeaggregateamountsofpaymentsofunemploymentcompensationandthenameandaddressoftheindividualtowhompaidunderchapters383to385.
§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.
(d) Apersonwho,undertheregulationsofthedepartmentadoptedpursuanttosubsection(a)(4),isrelievedoffilinganestimate,shalliftheregulationsceasetoapplybyreasonofachangeofcircumstancesduringthetaxableyear,filetherequiredestimateonthefirstquarterlypaymentdateprescribedforpaymentofestimatedtaxes,followingsuch change of circumstances, and pay the estimated tax in equal installments computedby allocating the entireamountshownbytheestimateforthecurrenttaxableyeartotheremainingquarterlypaymentdates.
(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
(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.
§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.
§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]
[§235-100.5] Abatement of income taxes of members of armed forces on death. [SectionretroactivetoAugust2,1990.]Section692(withrespecttoincometaxesofmembersofarmedforcesondeath)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterandthedepartmentshallhavetheauthoritytoabateincometaxesasprovidedinsection692.
§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:
(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]
§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]
§235-102.5 Income check-off authorized. (a)Anyindividualwhosestateincometaxliabilityforanytaxableyearis$3ormoremaydesignate$3oftheliabilitytobepaidovertotheHawaiielectioncampaignfund,anyotherlawtothecontrarynotwithstanding,whensubmittingastateincometaxreturntothedepartment.Inthecaseofajointreturnofahusbandandwifehavingastateincometaxliabilityof$6ormore,eachspousemaydesignatethat$3bepaidtothefund.Thedirectoroftaxationshallrevisetheindividualstateincometaxformtoallowthedesignationofcontributionstothefundonthefaceofthetaxreturnandimmediatelyabovethesignaturelines.Anexplanationshallbeincludedwhichclearlystatesthatthecheck-offdoesnotconstituteanadditionaltaxliability.Ifnodesignationwasmadeontheoriginaltaxreturnwhenfiled,adesignationmaybemadebytheindividualonanamendedreturnfiledwithintwentymonthsandtendaysaftertheduedatefortheoriginalreturnforsuchtaxableyear.Adesignationoncemadewhetherbyanoriginaloramendedreturnmaynotberevoked.
§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]
§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’swagesisaninstallmentoftaxespaidbythetaxpayer.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.
§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.
thatthetaxpayerdoesnotowetheStateanydelinquenttaxes,penalties,orinterest.The taxpayer shallfile the certificate from thedepartment of educationwith the taxpayer’s tax returnwith the
Uponeachdetermination,thepreceptorcreditassurancecommitteeshallissueacertificatetothetaxpayerverifyingthenumberofvolunteer-basedsupervisedclinical trainingrotationssupervisedby the taxpayer, thecreditamountcertifiedforthetaxpayerforeachtaxableyear,andthecumulativeamountoftaxcreditscertified.Thetaxpayershallfilethecertificatewiththetaxpayer’staxreturnwiththedepartment.
(e) If in any taxable year the annual amount of certified credits for all taxpayers reaches $1,500,000 in theaggregate,thepreceptorcreditassurancecommitteeshallimmediatelydiscontinuecertifyingcreditsandnotifythedepartmentoftaxation.Innoinstanceshallthepreceptorcreditassurancecommitteecertifyatotalamountofcreditsexceeding$1,500,000per taxableyear.To complywith this restriction, thepreceptor credit assurance committeeshallcertifyordenycreditsintheordersubmittedforcertification;providedthatcreditsshallnotbesubmittedforcertificationpriortothesupervisedclinicaltrainingrotationbeingperformed.
(f) Ifthetaxcreditunderthissectionexceedsthetaxpayer’sincometaxliability,theexcessofthecreditoverliabilitymaybeusedasacreditagainstthetaxpayer’sincometaxliabilityinsubsequentyearsuntilexhausted.Allclaimsforthetaxcreditunderthissection,includingamendedclaims,shallbefiledonorbeforetheendofthetwelfthmonth following the close of the taxable year forwhich the creditsmaybe claimed.Failure to complywith theforegoingprovisionshallconstituteawaiveroftherighttoclaimthecredit.
“Nationally accredited” means holding an institutional accreditation by name to offer post-secondary medicalprimary care education.Accreditation for medical students shall be offered by the Liaison Committee on MedicalEducationorAmericanOsteopathicAssociationCommissiononOsteopathicCollegeAccreditation.Accreditation foradvancedpracticeregisterednursestudentsshallbeofferedbytheCommissiononCollegiateNursingEducation.
“Preceptor”means a physicianor osteopathicphysician, licensedpursuant to chapter 453, an advancedpracticeregisterednurse,licensedpursuanttochapter457,orapharmacist,licensedpursuanttochapter461,whoisaresidentofHawaiiandwhomaintainsaprofessionalprimarycarepracticeinthisState.
“Volunteer-based supervised clinical training rotation” means an uncompensated period of supervised clinicaltrainingofaneligiblestudentthattotalsatleasteightyhoursofsupervisorytimeannually,inwhichapreceptorprovidespersonalizedinstruction,training,andsupervisiontoaneligiblestudenttoenabletheeligiblestudenttoobtainaneligibleprofessionaldegreeortrainingcertificate.”[L2018,c43,§2]
Uponeachdetermination,thedepartmentofbusiness,economicdevelopment,andtourismshallissueacertificatetothetaxpayerverifyingtheamountofrenewablefuelsproducedandsold,thecreditamountcertifiedforeachtaxableyear,andthecumulativeamountofthetaxcreditduringthecreditperiod.Thetaxpayershallfilethecertificatewiththetaxpayer’stax returnwith thedepartment of taxation.Notwithstanding thedepartment of business, economicdevelopment, and
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.
(e) The taxpayer shallfile the certificate issuedunder subsection (d)with the taxpayer’s tax returnwith thedepartmentoftaxation.Thedirectoroftaxationmayauditandadjustthecertificationtoconformtothefacts.
(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:
(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
technology-enabledinfrastructureequipmenttoprovideacommercialbuildingwithtechnology-enabledinfrastructure.“Technology-enabledinfrastructure”means:(1) High speed telecommunications systems that provide Internet access, direct satellite communications
Aqualifiedentityshallbecomeeligible toclaimacreditunder this sectiononlyafterconstructionof thefloatingdrydockhasbeencompletedandthefloatingdrydockhasbeenplacedintoservice.
(b) If thecapitalgoodsexcise taxcreditallowedundersubsection(a)exceeds the taxpayer’snet incometaxliability,theexcessofcreditoverliabilityshallberefundedtothetaxpayer;providedthatnorefundsorpaymentonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
(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.
§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.
(e) Forthepurposesofthissection,thedeterminationof:(1) Qualifiedbasisandqualifiedlow-incomebuildingshallbemadeundersection42(c);(2) Eligiblebasisshallbemadeundersection42(d);(3) Qualifiedlow-incomehousingprojectshallbemadeundersection42(g);(4) Recaptureofcreditshallbemadeundersection42(j),except that the taxfor thetaxableyearshallbe
(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.
§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.
(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;
(4) Recaptureofcreditshallbemadeundersection42(j),except that the taxfor thetaxableyearshallbeincreasedundersection42(j)(1)onlywithrespecttocreditsthatwereusedtoreducestateincometaxes;and
(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.
§235-110.9 High technology business investment tax credit. (a)Thereshallbeallowedtoeachtaxpayersubjecttothetaxesimposedbythischapterahightechnologybusinessinvestmenttaxcreditthatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichtheinvestmentwasmadeandthefollowingfouryearsprovidedthecreditisproperlyclaimed.Thetaxcreditshallbeasfollows:
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.
(2) More than seventy-five per cent of its gross income is derived fromqualified research; and providedfurtherthatthisincomeisreceivedfrom:(A) Productssoldfrom,manufacturedin,orproducedinthisState;or(B) ServicesperformedinthisState.
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.]
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.
§235-110.91 Tax credit for research activities. [Section repealed December 31, 2024. L 2019, c 261 §5] (a)Section41(withrespecttothecreditforincreasingresearchactivities)andsection280C(c)(withrespecttocertainexpensesforwhichthecreditforincreasingresearchactivitiesareallowable)oftheInternalRevenueCodeshallbeoperativeforthepurposesofthischapterasprovidedinthissection;providedthatthefederaltaxprovisionsinsection41oftheInternalRevenueCode,asthatsectionwasenactedonDecember31,2011,irrespectiveofanysubsequentchangestosection41oftheInternalRevenueCode,shallremainineffectforpurposesofdeterminingthestateincometaxcreditunderthissection;providedfurtherthatthefederaltaxprovisionsinsection41oftheInternalRevenueCode,asenactedonDecember31,2011,irrespectiveofanysubsequentamendmentstosection41oftheInternalRevenueCode,shallapplyonlytoexpensesincurredforqualifiedresearchactivitiesafterDecember31,2012.
Upon eachdeterminationmadeunder this subsection, the department of business, economicdevelopment, andtourismshallissueacertificatetothetaxpayerverifyinginformationsubmittedtothedepartmentofbusiness,economicdevelopment,andtourism,includingthequalifyingcostsorexpenditureamounts,thecreditamountcertifiedforeachtaxableyear,andthecumulativeamountofthetaxcreditduringthecreditperiod.Thetaxpayershallfilethecertificatewith the taxpayer’s tax returnwith the department of taxation.Notwithstanding the authority of the department ofbusiness,economicdevelopment,andtourismunderthissection,thedirectoroftaxationmayauditandadjustthetaxcreditamounttoconformtothefacts.
(f) If in any taxable year the annual amount of certified credits reaches $5,000,000 in the aggregate, thedepartment of business, economicdevelopment, and tourism shall immediately discontinue certifying credits andnotifythedepartmentoftaxation.Innoinstanceshallthedepartmentofbusiness,economicdevelopment,andtourismcertifyatotalamountofcreditsexceeding$5,000,000pertaxableyear.Tocomplywiththisrestriction,thedepartmentofbusiness,economicdevelopment,andtourismshallcertifycreditsonafirstcome,firstservedbasis.
(g) If thetaxcreditforqualifiedresearchactivitiesclaimedbyataxpayerexceedstheamountof incometaxpaymentduefromthe taxpayer, theexcessof the taxcreditoverpaymentsdueshallberefundedto the taxpayer;providedthatnorefundonaccountofthetaxcreditallowedbythissectionshallbemadeforamountslessthan$1.
(2) Totalexpendituresandthequalifiedexpenditures,ifany,expendedintheprevioustaxableyear;(3) Revenueandexpensedata, includingabreakdownof any licensing royaltyorother formsof income
newjobs,temporarypositions,externalservicesprocuredbythebusiness,andpayrolltaxes;(5) Filed intellectual property, including invention disclosures, provisional patents, and patents issued or
bythequalifiedhightechnologybusiness.The department of business, economic development, and tourism shall request information in each of these
categories sufficient to measure the effectiveness of the tax credit under this section. The department of business,economicdevelopment,andtourismmayrequestanyadditionalinformationnecessarytomeasuretheeffectivenessofthetaxcredit,suchasinformationrelatedtopatents.Inpreparingthesurveyandrequestinganyadditionalinformation,
(k) The department of business, economic development, and tourism shall use information collected underthissectionandthroughitsotherreportingrequirementstopreparesummarydescriptivestatisticsbycategory.Theinformationshallbereportedattheaggregateleveltopreventcompromisingidentitiesofqualifiedhightechnologybusinessinvestorsorotherconfidentialinformation.Thedepartmentofbusiness,economicdevelopment,andtourismshallalsoidentifyeachqualifiedhightechnologybusinessthatappliesfororisthebeneficiaryoftaxcreditsclaimedunder this section.The department of business, economic development, and tourism shall report the informationrequiredunderthissubsectiontothelegislaturebySeptember1ofeachyear.
(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:
§235-110.93 Important agricultural land qualified agricultural cost tax credit. (a)Thereshallbeallowedtoeachtaxpayeranimportantagriculturallandqualifiedagriculturalcosttaxcreditthatmaybeclaimedintaxableyearsbeginningafterthetaxableyearduringwhichthetaxcreditundersection235-110.46isrepealed,exhausted,orexpired.Thecreditshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthecreditisproperlyclaimed.Thetaxcreditamountshallbedeterminedasfollows:
(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.
Upon each determination, the department of agriculture shall issue a certificate to the taxpayer verifying thequalifyingagriculturalcostsandthecreditamountcertifiedforeachtaxableyear.Forataxableyear,thedepartmentofagriculturemaycertifyacreditforataxpayerwhocouldhaveclaimedthecreditinaprevioustaxableyear,butchosenottobecausethemaximumannualcreditamountundersubsection(h)wasreachedinthattaxableyear.
(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.
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 includebut not be limited tofindings andrecommendationstoimprovetheeffectivenessofthetaxcredittofurtherencouragethedevelopmentofagriculturalbusinesses.
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.
(C) Waterwells,reservoirs,dams,waterstoragefacilities,waterpipelines,ditches,orirrigationsystemsin theState,primarily for agriculturalpurposes,providingwater for lands, themajorityofwhich,excludinglandsclassifiedasconservationlands,areimportantagriculturallands;and
[§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.
(d) The total amount of tax credits allowed under this section shall not exceed $2,000,000 for all qualifiedtaxpayersinanytaxableyear;providedthatanytaxpayerwhoisnoteligibletoclaimthecreditinataxableyearduetothe$2,000,000caphavingbeenexceededforthattaxableyearshallbeeligibletoclaimthecreditinthesubsequenttaxableyear.
(1) Qualifiedexpensesincurredintheprevioustaxableyear;and(2) Theamountof the taxcredit claimedby the taxpayerpursuant to this section, if any, in theprevious
[§235-110.97] Historic preservation income tax credit. [Section repealed December 31, 2024. L 2019, c 267, §3.] (a)Notwithstandinganylawtothecontrary,thereshallbeallowedtoeachtaxpayersubjecttothetaximposedbythischapterahistoricpreservationincometaxcreditforsubstantialrehabilitationofacertifiedhistoricstructurethatshallbedeductiblefromthetaxpayer’snetincometaxliability,ifany,imposedbythischapterforthetaxableyearinwhichthetaxcreditisproperlyclaimed.
(c) The amount of a historic preservation income tax credit that is certified by qualified staff of the statehistoricpreservationdivisionofthedepartmentoflandandnaturalresourcesshallbethirtypercentofthequalifiedrehabilitationexpenditures.
(d) The taxcreditallowedunder thissectionshallbeavailable in the taxableyear inwhich thesubstantiallyrehabilitatedcertifiedhistoricstructureisplacedintoservice. Inthecaseofprojectscompletedinphases,thetaxcreditshallbeproratedtothesubstantiallyrehabilitatedidentifiableportionofthecertifiedhistoricstructureplacedintoserviceduringthattaxableyear.
(2) Qualified staffof the state historic preservation division shall review the rehabilitation andverify therehabilitationproject’scompliancewiththerehabilitationplan;
(3) Uponeachdeterminationmadeunderthissubsection,thestatehistoricpreservationdivisionshallissueacertificate to the taxpayer verifying that the rehabilitationhasbeen completed in accordancewith theapprovedrehabilitationplan;and
(l) The state historic preservation division, in consultationwith the department of taxation, shall determinetheinformationnecessarytoenableaquantitativeandqualitativeassessmentoftheoutcomesofthetaxcreditandsubmitareporttothelegislatureevaluatingtheeffectivenessofthetaxcreditnolaterthantwentydayspriortotheconveningofeachregularlegislativesession.Thereportshallincludefindingsandrecommendationstoimprovetheeffectivenessofthetaxcreditinordertofurtherencouragetherehabilitationofhistoricproperties.
“Qualified rehabilitation expenditures”means any costs incurred for the physical rehabilitation, renovation, orconstructionofacertifiedhistoricstructurepursuanttoarehabilitationplan;providedthatthetermshallnotincludethetaxpayer’spersonallabor.
“Qualifiedstaff”meansa staffpersonmeeting theSecretaryof the Interior’sHistoricPreservationProfessionalQualificationStandardsforanarchitecturalhistorianorhistoricarchitect.
“Substantial rehabilitation”means that the qualified rehabilitation expenditures on a certified historic structureexceedtwenty-fivepercentoftheassessedvalueofthestructure.[L2019,c267,§1]
§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.
(1) If the claimwas filed by the taxpayer during the three-year period prescribed in this subsection, theamountofthecreditorrefundshallnotexceedtheportionofthetaxpaidwithintheperiod,immediatelyprecedingthefilingoftheclaim,equaltothreeyearsplustheperiodofanyextensionoftimeforfilingthereturn.
(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.
§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.
(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.
§235-112 Time for assessment of deficiency attributable to gain upon conversion. (a)Ifataxpayerhasmadetheelectionprovidedinsection1033(a)(2)(A)oftheInternalRevenueCode,therulesstatedinthissectionapply.
§235-113 Time for assessment of deficiency attributable to gain upon sale of a residence. (a)IfafterDecember31,1957,ataxpayerduringataxableyearsellsatagainpropertyusedbythetaxpayerasthetaxpayer’sprincipalresidence,therulesstatedinthissectionapply.
(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.
§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]
“Taxableperiod”meansanytaxableyearorportionofataxableyearduringwhichacorporationisanScorporation.(c) Exceptasotherwiseexpresslyprovidedorclearlyappearingfromthecontext,any termused in thispart
(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.
[§235-123] Modification and characterization of income. (a)TheproratashareofeachresidentandnonresidentshareholderintheincomeattributabletotheStateofanScorporation,forthepurposesofsection235-122(c),shallbesubjecttothemodificationstocorporateincomeprovidedbythischapter.
[§235-124] Basis and adjustments. (a)TheinitialbasisofaresidentshareholderinthestockofanScorporationandinanyindebtednessofthecorporationowedtotheshareholdershallbedeterminedinthemannerprovidedundertheInternalRevenueCode.Theinitialbasisshallbedeterminedasofthelasttooccurofthedate(whichmaybebeforetaxableyearsbeginningafterDecember31,1989)onwhich:
(b) TheinitialbasisofaresidentshareholderinthestockandindebtednessofanScorporationshallbeadjustedafter thedate specified in subsection (a) in themannerand to theextent requiredby section1011of the InternalRevenueCodeexceptthat,withrespecttoanytaxableperiodduringwhichtheshareholderwasaresidentofthisState:
(2) Anyadjustmentsmadepursuanttosection1367oftheInternalRevenueCodeforataxableperiodduringwhich this State did notmeasure S corporation shareholder income by reference to the corporation’sincomeshallnotbetakenintoaccount.
(d) The initialbasisof anonresident shareholder in the stockand indebtednessof anScorporation shallbeadjustedafter thedatespecified insubsection(c) in themannerprovided insection1367of theInternalRevenue
18-235-122
INCOME TAX LAW [§235-127]
CHAPTER235,Page97(UnofficialCompilation)
Code,exceptthatadjustmentstobasisshallbelimitedtotheincomeattributabletotheStatetakenintoaccountbythe shareholderpursuant to section235-122(c). Incomputing incomeattributable to theState forpurposesof theprecedingsentence,anymodificationmadeforincomeexemptfromfederalorthisState’staxationshallnotbetakenintoaccount.
[§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.
(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.
(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]
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).
If thecorporationfails totimelyfiletheagreementsrequiredbyparagraphs(1)and(2)onbehalfofeachofitsnonresidentshareholders,thenthecorporation,atthetimessetforthinsubsection(d),shallpaytothisStateonbehalfofeachnonresidentshareholderinrespectofwhomanagreementhasnotbeentimelyfiledanamountequaltothehighestmarginaltaxrateineffectundersection235-51multipliedbytheamountoftheshareholder’sproratashareoftheincomeattributabletotheStatereflectedonthecorporation’sreturnforthetaxableperiod.AnScorporationshallbeentitledtorecoverapaymentmadepursuanttotheprecedingsentencefromtheshareholderonwhosebehalfthepaymentwasmade.
(1) Any increase in the tax imposedby section235-71by reasonof the inclusionof theLIFO recaptureamountinitsincomeshallbepayableinfourequalinstallments;