Bill Text: HI HB2394 | 2018 | Regular Session | Amended
Bill Title: Relating To Conformity To The Internal Revenue Code.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-02-08 - The committee(s) on FIN recommend(s) that the measure be deferred. [HB2394 Detail]
Download: Hawaii-2018-HB2394-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2394 |
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TWENTY-NINTH LEGISLATURE, 2018 |
H.D. 1 |
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STATE OF HAWAII |
PROPOSED |
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A BILL FOR AN ACT
relating to conformity to the internal revenue code.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to conform Hawaii income and estate and generation-skipping transfer tax laws to the Internal Revenue Code.
SECTION 2. Section 235-2.3, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.3 Conformance to the federal
Internal Revenue Code; general application. (a) For all taxable years
beginning after December 31, [2016,] 2017, as used in this
chapter, except as provided in section 235-2.35, "Internal Revenue
Code" means subtitle A, chapter 1, of the federal Internal Revenue Code of
1986, as amended as of December 31, [2016,] 2017, as it applies
to the determination of gross income, adjusted gross income, ordinary income
and loss, and taxable income, except those provisions of the Internal Revenue
Code and federal public laws which, pursuant to this chapter, do not apply or
are otherwise limited in application and except for the provisions of Public
Law 109-001 which apply to section 170 of the Internal Revenue Code. The
provisions of Public Law 109-001 to accelerate the deduction for charitable
cash contributions for the relief of victims of the 2004 Indian Ocean tsunami
are applicable for the calendar year that ended December 31, 2004, and the
calendar year ending December 31, 2005.
Prior law shall continue to be used to determine:
(1) The basis of property, if a taxpayer first determined the basis of property in a taxable year to which prior law applies; and
(2) Gross income, adjusted gross income, ordinary income and loss, and taxable income for a taxable year to which prior law applies.
(b) The following Internal Revenue Code subchapters, parts of subchapters, sections, subsections, and parts of subsections shall not be operative for the purposes of this chapter, unless otherwise provided:
(1) Subchapter A (sections 1 to 59A) (with respect to determination of tax liability), except section 1(h)(2) (relating to net capital gain reduced by the amount taken into account as investment income), except sections 2(a), 2(b), and 2(c) (with respect to the definition of "surviving spouse" and "head of household"), except section 41 (with respect to the credit for increasing research activities), except section 42 (with respect to low-income housing credit), except sections 47 and 48, as amended, as of December 31, 1984 (with respect to certain depreciable tangible personal property), and except section 48(d)(3), as amended, as of February 17, 2009 (with respect to the treatment of United States Department of Treasury grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009). For treatment, see sections 235-110.91, 235-110.7, and 235-110.8;
(2) Section 78 (with respect to dividends received from certain foreign corporations by domestic corporations choosing foreign tax credit);
(3) Section 86 (with respect to social security and tier 1 railroad retirement benefits);
(4) Section 91 (with respect to certain foreign branch losses);
[(4)] (5) Section 103 (with respect to
interest on state and local bonds). For treatment, see section 235-7(b);
[(5)] (6) Section 114 (with respect to
extraterritorial income). For treatment, any transaction as specified in the
transitional rule for 2005 and 2006 as specified in the American Jobs Creation
Act of 2004 section 101(d) and any transaction that has occurred pursuant to a
binding contract as specified in the American Jobs Creation Act of 2004 section
101(f) are inoperative;
[(6)] (7) Section 120 (with respect to
amounts received under qualified group legal services plans). For treatment,
see section 235-7(a)(9) to (11);
[(7)] (8) Section 122 (with respect to
certain reduced uniformed services retirement pay). For treatment, see section
235-7(a)(3);
[(8)] (9) Section 135 (with respect to
income from United States savings bonds used to pay higher education tuition
and fees). For treatment, see section 235-7(a)(1);
[(9)] (10) Section 139C (with respect to
COBRA premium assistance);
[(10)] (11) Subchapter B (sections 141 to
150) (with respect to tax exemption requirements for state and local bonds);
[(11)] (12) Section 151 (with respect to
allowance of deductions for personal exemptions). For treatment, see section
235-54;
[(12)] (13) Section 179B (with respect to
expensing of capital costs incurred in complying with Environmental Protection
Agency sulphur regulations);
[(13)] (14) Section 181 (with respect to
special rules for certain film and television productions);
[(14)] (15) Section 196 (with respect to
deduction for certain unused investment credits);
[(15)] (16) Section 199 (with respect to
the U.S. production activities deduction);
(17) Section 199A (with respect to the deduction for qualified business income);
[(16)] (18) Section 222 (with respect to
qualified tuition and related expenses);
[(17)] (19) Sections 241 to 247 (with
respect to special deductions for corporations). For treatment, see section
235-7(c);
(20) Section 250 (with respect to foreign-derived intangible income and global intangible low-taxed income);
(21) Section 267A (with respect to certain related party amounts paid or accrued in hybrid transactions or with hybrid entities);
[(18)] (22) Section 280C (with respect to
certain expenses for which credits are allowable). For treatment, see section
235-110.91;
[(19)] (23) Section 291 (with respect to
special rules relating to corporate preference items);
[(20)] (24) Section 367 (with respect to
foreign corporations);
[(21)] (25) Section 501(c)(12), (15), (16)
(with respect to exempt organizations); except that section 501(c)(12) shall be
operative for companies that provide potable water to residential communities
that lack any access to public utility water services;
[(22)] (26) Section 515 (with respect to
taxes of foreign countries and possessions of the United States);
[(23)] (27) Subchapter G (sections 531 to
565) (with respect to corporations used to avoid income tax on shareholders);
[(24)] (28) Subchapter H (sections 581 to
597) (with respect to banking institutions), except section 584 (with respect
to common trust funds). For treatment, see chapter 241;
[(25)] (29) Section 642(a) and (b) (with
respect to special rules for credits and deductions applicable to trusts). For
treatment, see sections 235-54(b) and 235-55;
[(26)] (30) Section 646 (with respect to
tax treatment of electing Alaska Native settlement trusts);
[(27)] (31) Section 668 (with respect to
interest charge on accumulation distributions from foreign trusts);
[(28)] (32) Subchapter L (sections 801 to
848) (with respect to insurance companies). For treatment, see sections 431:7-202
and 431:7-204;
[(29)] (33) Section 853 (with respect to
foreign tax credit allowed to shareholders). For treatment, see section
235-55;
[(30)] (34) Section 853A (with respect to
credits from tax credit bonds allowed to shareholders);
[(31)] (35) Subchapter N (sections 861 to
999) (with respect to tax based on income from sources within or without the
United States), except sections 985 to 989 (with respect to foreign currency
transactions). For treatment, see sections 235-4, 235-5, and 235-7(b), and
235-55;
[(32)] (36) Section 1042(g) (with respect
to sales of stock in agricultural refiners and processors to eligible farm
cooperatives);
[(33)] (37) Section 1055 (with respect to
redeemable ground rents);
[(34)] (38) Section 1057 (with respect to election
to treat transfer to foreign trust, etc., as taxable exchange);
[(35)] (39) Sections 1291 to 1298 (with
respect to treatment of passive foreign investment companies);
[(36)] (40) Subchapter Q (sections 1311 to
1351) (with respect to readjustment of tax between years and special
limitations);
[(37)] (41) Subchapter R (sections 1352 to
1359) (with respect to election to determine corporate tax on certain
international shipping activities using per ton rate);
[(38)] (42) Subchapter U (sections 1391 to
1397F) (with respect to designation and treatment of empowerment zones,
enterprise communities, and rural development investment areas). For
treatment, see chapter 209E;
[(39)] (43) Subchapter W (sections 1400 to
1400C) (with respect to District of Columbia enterprise zone);
[(40)] (44) Section 1400O (with respect to
education tax benefits);
[(41)] (45) Section 1400P (with respect to
housing tax benefits);
[(42)] (46) Section 1400R (with respect to
employment relief);
[(43)] (47) Section 1400T (with respect to
special rules for mortgage revenue bonds);
[(44)] (48) Section 1400U-1 (with respect
to allocation of recovery zone bonds);
[(45)] (49) Section 1400U-2 (with respect
to recovery zone economic development bonds); [and
(46)] (50) Section 1400U-3 (with respect
to recovery zone facility bonds)[.]; and
(51) Section 1400Z (with respect to qualified opportunity zones)."
SECTION 3. Section 235-2.4, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.4 Operation of certain Internal Revenue Code provisions; sections 63 to 530. (a) Section 63 (with respect to taxable income defined) of the Internal Revenue Code shall be operative for the purposes of this chapter, subject to the following:
(1) Section 63(c)(1)(B) (relating to the additional standard deduction), 63(c)(1)(C) (relating to the real property tax deduction), 63(c)(1)(D) (relating to the disaster loss deduction), 63(c)(1)(E) (relating to the motor vehicle sales tax deduction), 63(c)(4) (relating to inflation adjustments), 63(c)(7) (defining the real property tax deduction), 63(c)(8) (defining the disaster loss deduction), 63(c)(9) (defining the motor vehicle sales tax deduction), and 63(f) (relating to additional amounts for the aged or blind) of the Internal Revenue Code shall not be operative for purposes of this chapter;
(2) Section 63(c)(2) (relating to the basic standard deduction) of the Internal Revenue Code shall be operative, except that the standard deduction amounts provided therein shall instead mean:
(A) $4,400 in the case of:
(i) A joint return as provided by section 235‑93; or
(ii) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(B) $3,212 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(C) $2,200 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(D) $2,200 in the case of a married individual filing a separate return;
(3) Section 63(c)(5) (limiting the basic standard deduction in the case of certain dependents) of the Internal Revenue Code shall be operative, except that the limitation shall be the greater of $500 or the individual's earned income; and
(4) The standard deduction amount for nonresidents shall be calculated pursuant to section 235-5.
(b) Section 67 (with respect to the two per cent floor on miscellaneous itemized deductions) of the Internal Revenue Code shall be operative for purposes of this chapter except that the suspension in section 67(g) shall not be operative for purposes of this chapter.
[(b)] (c) Section 68 (with
respect to the overall limitation on itemized deductions) of the Internal
Revenue Code shall be operative; provided that the thresholds shall be those
that were operative for federal tax year 2009[.]; and provided
further that the suspension in section 68(f) shall not be operative for
purposes of this chapter.
[(c)] (d) Section 72 (with
respect to annuities; certain proceeds of endowment and life insurance
contracts) of the Internal Revenue Code shall be operative for purposes of this
chapter and be interpreted with due regard to section 235-7(a), except that the
ten per cent additional tax on early distributions from retirement plans in
section 72(t) shall not be operative for purposes of this chapter.
[(d)] (e) Section 85 (with
respect to unemployment compensation) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that section 85(c) shall not be
operative for purposes of this chapter.
[(e)] (f) Section 108 (with
respect to income from discharge of indebtedness) of the Internal Revenue Code
shall be operative for purposes of this chapter, except that section 108(i)
(relating to deferral and ratable inclusion of income arising from business
indebtedness discharged by the reacquisition of a debt instrument) shall not be
operative for purposes of this chapter.
[(f)] (g) Section 121 (with
respect to exclusion of gain from sale of principal residence) of the Internal
Revenue Code shall be operative for purposes of this chapter, except that for
the election under section 121(f), a reference to section 1034 treatment means
a reference to section 235-2.4(s) in effect for taxable year 1997.
[(g)] (h) Section 132 (with
respect to certain fringe benefits) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that [the provision in
section 132(f)(2) that equalizes the dollar amounts for section 132(f)(2)(A)
and (B) shall not be operative and except that section]:
(1) The suspension in section 132(f)(8) shall not be operative for purposes of this chapter;
(2) The suspension in section 132(g)(2) shall not be operative for purposes of this chapter; and
(3) Section 132(n) shall not apply to United States Department of Defense Homeowners Assistance Program payments authorized by the American Recovery and Reinvestment Act of 2009.
[(h)] (i) Section 163 (with
respect to interest) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that [provisions in section] the
following provisions shall not be operative for the purposes of this chapter:
(1) Section
163(d)(4)(B) (defining net investment income to exclude dividends)[, section];
(2) Section
163(e)(5)(F) (suspension of applicable high-yield discount obligation (AHYDO)
rules)[and section];
(3) Section
163(i)(1) as it applies to debt instruments issued after January 1, 2010,
(defining AHYDO) [shall not be operative for the purposes of this chapter.];
and
(4) Section 163(h)(3)(F) (limiting mortgage interest).
[(i)] (j) Section 164 (with
respect to taxes) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that:
(1) Section [164(a)(6) and (b)(6)] 164(b)(6)(B)
(limiting the deduction for state and local taxes) shall not be operative
for the purposes of this chapter;
(2) The deductions under section 164(a)(3) and (b)(5) shall not be operative for corporate taxpayers and shall be operative only for the following individual taxpayers:
(A) A taxpayer filing a single return or a married person filing separately with a federal adjusted gross income of less than $100,000;
(B) A taxpayer filing as a head of household with a federal adjusted gross income of less than $150,000; and
(C) A taxpayer filing a joint return or as a surviving spouse with a federal adjusted gross income of less than $200,000; and
(3) Section 164(a)(3) shall not be operative for any amounts for which the credit under section 235-55 has been claimed.
[(j)] (k) Section 165 (with
respect to losses) of the Internal Revenue Code shall be operative for purposes
of this chapter, except that [the]:
(1) The
amount prescribed by sections 165(h)(1) (relating to the limitation per
casualty) of the Internal Revenue Code shall be a $100 limitation per casualty[,
and section];
(2) Section
165(h)(3)(A) and (B) (both of which relate to special rules for personal
casualty gains and losses in federally declared disasters) of the Internal
Revenue Code shall not be operative for the purposes of this chapter[.];
(3) Section 165(h)(5) (relating to the limitation to federally declared disasters) shall not be operative for purposes of this chapter; and
(4) Section 165 as operative for this chapter shall also apply to losses sustained from the sale of stocks or other interests issued through the exercise of the stock options or warrants granted by a qualified high technology business as defined in section 235-7.3.
[(k)] (l) Section 168 (with
respect to the accelerated cost recovery system) of the Internal Revenue Code
shall be operative for purposes of this chapter, except that sections 168(j)
(relating to property on Indian reservations), 168(k) (relating to the special
allowance for certain property acquired during the period specified therein),
168(m) (relating to the special allowance for certain reuse and recycling
property), and 168(n) (relating to the special allowance for qualified disaster
assistance property) of the Internal Revenue Code shall not be operative for
purposes of this chapter.
[(l)] (m) Section 172 (with
respect to net operating loss deductions) of the Internal Revenue Code shall be
operative for purposes of this chapter, as further provided in section 235‑7(d),
except that section 172(b)(1)(J) and (j) (both of which relate to qualified disaster
losses) of the Internal Revenue Code shall not be operative for purposes of
this chapter.
[(m)] (n) Section 179 (with
respect to the election to expense certain depreciable business assets) of the
Internal Revenue Code shall be operative for purposes of this chapter, except
as provided in this subsection:
(1) The aggregate cost provided in section 179(b)(1), which may be taken into account under section 179(a) for any taxable year, shall not exceed $25,000;
(2) The amount at which the reduction in limitation provided in section 179(b)(2) begins shall exceed $200,000 for any taxable year; and
(3) The following shall not be operative for purposes of this chapter:
(A) Defining section 179 property to include computer software in section 179(d)(1);
(B) Inflation adjustments in section 179(b)(5);
(C) Irrevocable election in section 179(c)(2); and
(D) Special rules for qualified disaster assistance property in section 179(e).
[(n)] (o) Section 198A (with
respect to the expensing of qualified disaster assistances expenses) of the
Internal Revenue Code shall not be operative for purposes of this chapter.
(p) Section 217 (with respect to moving expenses) of the Internal Revenue Code shall be operative for the purposes of this chapter except that the suspension in section 217(k) shall not be operative for purposes of this chapter.
[(o)] (q) Section 219 (with
respect to retirement savings) of the Internal Revenue Code shall be operative
for the purpose of this chapter. For the purpose of computing the limitation
on the deduction for active participants in certain pension plans for state
income tax purposes, adjusted gross income as used in section 219 as operative
for this chapter means federal adjusted gross income.
[(p)] (r) Section 220 (with
respect to medical savings accounts) of the Internal Revenue Code shall be
operative for the purpose of this chapter, but only with respect to medical
services accounts that have been approved by the Secretary of the Treasury of
the United States.
[(q)] (s) Section 265 (with
respect to expenses and interest relating to tax-exempt income) of the Internal
Revenue Code shall be operative for purposes of this chapter; except that
section 265(b)(3)(G) and (7) shall not be operative and section 265 shall not apply
to expenses for royalties and other income derived from any patents,
copyrights, and trade secrets by an individual or a qualified high technology
business as defined in section 235-7.3. These expenses shall be deductible.
(t) Section 274 (with respect to the disallowance of certain expenses) of the Internal Revenue Code shall be operative for this chapter in the form that it existed as of December 21, 2017.
[(r)] (u) Section 280E (with
respect to expenditures in connection with the illegal sale of drugs) of the
Internal Revenue Code shall be operative for the purposes of this chapter,
except that section 280E shall not be operative with respect to the production
and sale of medical cannabis and manufactured cannabis products by dispensaries
licensed under chapter 329D and their subcontractors, as defined in section
329D-1.
[(s)] (v) Section 382 (with
respect to limitation on net operating loss carryforwards and certain built-in
losses following ownership change) of the Internal Revenue Code shall be
operative for the purposes of this chapter, except that section 382(n) shall
not be operative for purposes of this chapter.
[(t)] (w) Section 408A (with
respect to Roth Individual Retirement Accounts) of the Internal Revenue Code
shall be operative for the purposes of this chapter, except that section
408A(d)(3)(A)(iii) shall not be operative for purposes of this chapter. For
the purposes of determining the aggregate amount of contributions to a Roth
Individual Retirement Account or qualified rollover contribution to a Roth
Individual Retirement Account from an individual retirement plan other than a
Roth Individual Retirement Account, adjusted gross income as used in section
408A as operative for this chapter means federal adjusted gross income.
[(u)] (x) In administering the
provisions of sections 410 to 417 (with respect to special rules relating to
pensions, profit sharing, stock bonus plans, etc.), sections 418 to 418E (with
respect to special rules for multiemployer plans), and sections 419 and 419A
(with respect to treatment of welfare benefit funds) of the Internal Revenue
Code, the department of taxation shall adopt rules under chapter 91 relating to
the specific requirements under those sections and to other administrative
requirements under those sections as may be necessary for the efficient
administration of sections 410 to 419A.
In administering sections 401 to 419A (with respect to deferred compensation) of the Internal Revenue Code, Public Law 93-406, section 1017(i), shall be operative for the purposes of this chapter.
In administering section 402 (with respect to the taxability of beneficiary of employees' trust) of the Internal Revenue Code, the tax imposed on lump sum distributions by section 402(e) of the Internal Revenue Code shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at the rate determined under this chapter.
[(v)] (y) In administering
section 403 (with respect to taxation of employee annuities) of the Internal
Revenue Code, any funds that represent pre-tax employee deferrals or
contributions that are distributed from the annuity and used solely to obtain
retirement credits under the state employees' retirement system shall not be
treated as a rollover for purposes of section 403(b)(8)(A) of the Internal
Revenue Code, and those funds shall be subject to income tax under this
chapter.
[(w)] (z) Section 451 (which
provides general rules for taxable year of inclusion) of the Internal Revenue
Code shall be operative, except that section 451(i)(3) and (6), as it relates
to a qualified electric utility, shall not be operative for purposes of this
chapter.
[(x)] (aa) In administering
section 457 (with respect to compensation plans of state and local governments
and tax-exempt organizations) of the Internal Revenue Code, any funds that
represent pre-tax employee deferrals or contributions that are distributed from
the deferred compensation plan and used solely to obtain retirement credits
under the state employees' retirement system shall not be treated as a rollover
for purposes of section 457(e)(16)(A) of the Internal Revenue Code and those
funds shall be subject to income tax under this chapter.
[(y)] (bb) Section 468B (with
respect to special rules for designated settlement funds) of the Internal
Revenue Code shall be operative for the purposes of this chapter and the tax
imposed therein is hereby imposed by this chapter at a rate equal to the
maximum rate in effect for the taxable year imposed on estates and trusts under
section 235-51.
[(z)] (cc) Section 469 (with
respect to passive activities and credits limited) of the Internal Revenue Code
shall be operative for the purposes of this chapter. For the purpose of
computing the offset for rental real estate activities for state income tax
purposes, adjusted gross income as used in section 469 as operative for this
chapter means federal adjusted gross income.
[(aa)] (dd) Sections 512 to 514
(with respect to taxation of business income of certain exempt organizations)
of the Internal Revenue Code shall be operative for the purposes of this
chapter as provided in this subsection.
"Unrelated business taxable income" means the same as in the Internal Revenue Code, except that in the computation thereof sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall apply, and in the determination of the net operating loss deduction there shall not be taken into account any amount of income or deduction that is excluded in computing the unrelated business taxable income. Unrelated business taxable income shall not include any income from a legal service plan.
For a person described in section 401 or 501 of the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by section 235-51 or 235-71 shall be imposed upon the person's unrelated business taxable income.
[(bb)] (ee) Section 521 (with
respect to cooperatives) and subchapter T (sections 1381 to 1388, with respect
to cooperatives and their patrons) of the Internal Revenue Code shall be operative
for the purposes of this chapter as to any cooperative fully meeting the
requirements of section 421-23, except that Internal Revenue Code section 521
cooperatives need not be organized in Hawaii.
[(cc)] (ff) Sections 527 (with
respect to political organizations) and 528 (with respect to certain homeowners
associations) of the Internal Revenue Code shall be operative for the purposes
of this chapter and the taxes imposed in each section are hereby imposed by
this chapter at the rates determined under section 235-71.
[(dd)] (gg) Section 529 (with
respect to qualified tuition programs) shall be operative for the purposes of
this chapter, except that sections 529(c)(6) and 529(e)(3)(A)(iii) shall not be
operative.
[(ee)] (hh) Section 529A (with
respect to qualified ABLE programs) shall be operative for the purposes of this
chapter, except that section 529A(c)(3) (with respect to additional tax for
distributions not used for disability expenses) shall not be operative.
[(ff)] (ii) Section 530 (with respect
to Coverdell education savings accounts) of
the Internal Revenue Code shall be operative for the purposes of this chapter.
For the purpose of determining the maximum amount that a contributor could make
to an education individual retirement account for state income tax purposes,
modified adjusted gross income as used in section 530 as operative for this
chapter means federal modified adjusted gross income as defined in section 530."
SECTION 4. Section 235-2.45, Hawaii Revised Statutes, is amended to read as follows:
"235-2.45 Operation of certain Internal Revenue Code provisions; sections 641 to 7518. (a) Section 641 (with respect to imposition of tax) of the Internal Revenue Code shall be operative for the purposes of this chapter subject to the following:
(1) The deduction for exemptions shall be allowed as provided in section 235-54(b);
(2) The deduction for contributions and gifts in determining taxable income shall be limited to the amount allowed in the case of an individual, unless the contributions and gifts are to be used exclusively in the State; and
(3) The tax imposed by section 1(e) of the Internal Revenue Code as applied by section 641 of the Internal Revenue Code is hereby imposed by this chapter at the rate and amount as determined under section 235- 51 on estates and trusts.
(b) Section 667 (with respect to treatment of amounts deemed distributed by trusts in preceding years) of the Internal Revenue Code shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at the rate determined under this chapter; except that the reference to tax-exempt interest to which section 103 of the Internal Revenue Code applies in section 667(a) of the Internal Revenue Code shall instead be a reference to tax-exempt interest to which section 235-7(b) applies.
(c) Section 685 (with respect to treatment of qualified funeral trusts) of the Internal Revenue Code shall be operative for purposes of this chapter, except that the tax imposed under this chapter shall be computed at the tax rates provided under section 235-51, and no deduction for the exemption amount provided in section 235-54(b) shall be allowed. The cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code shall be operative for the purpose of applying section 685(c)(3) under this chapter.
(d) Section 704 of the Internal Revenue Code (with respect to a partner’s distributive share) shall be operative for purposes of this chapter; except that section 704(b)(2) shall not apply to:
(1) Allocations of the high technology business investment tax credit allowed by section 235-110.9 for investments made before May 1, 2009;
(2) Allocations of net operating loss pursuant to section 235-111.5;
(3) Allocations of the attractions and educational facilities tax credit allowed by section 235-110.46; or
(4) Allocations of low-income housing tax credits among partners under section 235-110.8.
(e) Section 1202 (with respect to partial exclusion for gain from certain small business stock) of the Internal Revenue Code shall be operative for purposes of this chapter, except that section 1202(a)(3) and (4) shall not be operative for purposes of this chapter.
(f) Section 1212 (with respect to capital loss carrybacks and carryforwards) of the Internal Revenue Code shall be operative for the purposes of this chapter; except that for the purposes of this chapter the capital loss carryback provisions of section 1212 shall not be operative and the capital loss carryforward allowed by section 1212(a) shall be limited to five years; except for a qualified high technology business as defined in section 235-7.3, which shall be limited to fifteen years.
(g) Section 1221 (with respect to the definition of capital assets) is operative; provided that the provisions of section 301 of Public Law 110-343, which provide that gain or loss from the sale or exchange of any applicable preferred stock by any applicable financial institution (such terms being defined by Public Law 110-343) shall be treated as ordinary income or loss, shall not be operative. A sale or exchange of any applicable preferred stock by any applicable financial institution (as those terms are defined by section 301 of Public Law 110-343) shall be treated as a sale of a capital asset and taxed accordingly.
(h) Subchapter S
(sections 1361 to 1379) (with respect to tax treatment of S corporations and
their shareholders) of Chapter 1 of the Internal Revenue Code shall be
operative for the purposes of this chapter as provided in part VII[; except
that section 1374(d)(7)(B), (C), and (D) shall not be operative for purposes of
this chapter].
(i) Section 1400N (with respect to tax benefits for Gulf Opportunity Zone) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that sections 1400N(a) (with respect to tax-exempt bond financing); 1400N(b) (with respect to advance refundings of certain tax-exempt bonds); 1400N(c)(with respect to the low income housing credit); 1400N(d) (with respect to special allowance for certain property acquired on or after August 28, 2005); 1400N(e) (with respect to increase in expensing under section 179); 1400N(h) (with respect to increase in rehabilitation credit); 1400N(l) (with respect to credit to holders of Gulf tax credit bonds); 1400N(m) (with respect to application of new markets tax credit to investments in community development entities serving Gulf Opportunity Zone); 1400N(n) (with respect to treatment of representations regarding income eligibility for purposes of qualified residential rental project requirements) shall not be operative for purposes of this chapter.
(j) Section 1400S (with respect to additional tax relief provisions) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that section 1400S(d) (with respect to the special rule for determining earned income) shall not be operative for the purposes of this chapter.
(k) Section 6015 (with respect to relief from joint and several liability on joint return) of the Internal Revenue Code is operative for purposes of this chapter.
(l) Sections 6103(i)(3)(C) and 6103(i)(7) (with respect to disclosures of information to the United States Justice Department or appropriate federal or state law enforcement agency for purposes of investigating terrorist incidents, threats, or activities, and for analyzing intelligence concerning investigating terrorist incidents, threats, or activities) of the Internal Revenue Code shall be operative for the purposes of this chapter.
(m) Sections
6221, 6222, [and 6231] 6223, 6225, and 6226 (with respect to [tax
treatment of partnership items] partnership audits) of subchapter C
of chapter 63 of the Internal Revenue Code shall be operative for the purposes
of this chapter; provided that if a taxpayer makes the election under
section 6221(b) for federal income tax purposes, that taxpayer must make the
same election for Hawaii income tax purposes.
(n) [Subchapter
D (sections 6240 to 6255) (with respect to simplified audit procedures for
electing large partnerships)] Section 6241 of the Internal Revenue
Code shall be operative for the purposes of this chapter[, with due regard
to Chapter 232 relating to tax appeals.]; except that subsections (1),
(3), and (5) shall not be operative for purposes of this chapter.
(o) Section 6501(e) (with respect to limitation on assessment and collection where there is a substantial omission of items) of the Internal Revenue Code shall be operative for purposes of this chapter.
(p) Section 6511(h) (with respect to running of periods of limitation suspended while taxpayer is unable to manage financial affairs due to disability) of the Internal Revenue Code shall be operative for purposes of this chapter, with due regard to section 235-111 relating to the limitation period for assessment, levy, collection, or credit.
(q) Section 7518 (with respect to capital construction fund for commercial fishers) of the Internal Revenue Code shall be operative for the purposes of this chapter. Qualified withdrawals for the acquisition, construction, or reconstruction of any qualified asset that is attributable to deposits made before the effective date of this section shall not reduce the basis of the asset when withdrawn. Qualified withdrawals shall be treated on a first-in-first-out basis."
SECTION 5. Section 236E-3, Hawaii Revised Statutes, is amended to read as follows:
"§236E-3
Conformance to the Internal Revenue Code; general application. For all
decedents dying after December 31, [2016,] 2017, as used in this
chapter, "Internal Revenue Code" means subtitle B of the federal
Internal Revenue Code of 1986, as amended as of December 31, [2016,] 2017,
as it applies to the determination of gross estate, adjusted gross estate,
federal taxable estate, and generation-skipping transfers, except those
provisions of the Internal Revenue Code and federal public laws that, pursuant
to this chapter, do not apply or are otherwise limited in application."
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect upon its approval; provided that:
(1) Section 2 shall apply to taxable years beginning after December 31, 2017; and
(2) Section 3 shall apply to decedents dying or taxable transfers occurring after December 31, 2017.
Report Title:
Conformity to the Internal Revenue Code for 2017; Income Tax; Estate and Generation-skipping Transfer Tax
Description:
Conforms Hawaii income and estate and generation-skipping transfer tax laws to the Internal Revenue Code of 1986, as amended as of December 31, 2017. (HB2394 HD1 PROPOSED)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
