Hawaii-2014-SB2206-Introduced

PART I

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"§235- Earned income tax credit. (a) Each resident individual taxpayer who:

(1) Files an individual income tax return for a taxable year; and

(2) Is not claimed or is not eligible to be claimed as a dependent by another taxpayer for income tax purposes,

may claim a refundable earned income tax credit. The tax credit, for the appropriate taxable year, shall be equal to ten per cent of the federal earned income tax credit allowed under section 32 of the Internal Revenue Code, as amended, and reported as such on the individual's federal income tax return. If the tax credits claimed by a resident individual exceed the amount of income tax payment due from the resident individual, the excess of credit over payment due shall be refunded to the resident individual; provided that a tax credit properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refund or payment on account of the tax credit allowed by this section shall be made for an amount less than $1.

(b) In the case of a non-resident individual taxpayer, the tax credit shall equal the amount of the tax credit calculated in subsection (a) multiplied by the ratio of adjusted gross income attributed to this State to the entire adjusted gross income computed without regard to source in the State pursuant to section 235-5.

(c) To claim the tax credit allowed under this section, an individual taxpayer shall use the same filing status on the taxpayer's Hawaii income tax return as used on the taxpayer's federal income tax return for the taxable year.

(d) Any claim, including any amended claim, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with this subsection shall constitute a waiver of the right to claim the tax credit.

(e) No credit shall be allowed under this section for any taxable year in the disallowance period. For purposes of this subsection, the disallowance period is:

(1) The period of ten taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud; and

(2) The period of two taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to the reckless or intentional disregard of rules and regulations to qualify for the tax credit, but not due to fraud.

(f) Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary of the United States Department of the Treasury by regulations with respect to determining eligibility for, or the amount of, the credit allowable by section 32 of the Internal Revenue Code shall pay a penalty of $100 for each failure.

(g) The director of taxation:

(1) Shall prepare any forms necessary to claim a tax credit under this section;

(2) May require proof of the claim for the tax credit;

(3) Shall alert eligible taxpayers of the tax credit using appropriate and available means;

(4) Shall prepare an annual report to the legislature, the governor, and the public containing the:

(A) Number of credits granted for the prior calendar year;

(B) Total amount of the credits granted; and

(5) May adopt rules pursuant to chapter 91 to effectuate this section."

PART II

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Low-income tax credit; tax liability. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit that reduces the taxpayer's income tax liability by fifty per cent for the taxable year in which the tax credit is properly claimed; provided that:

(1) Any taxpayer with an income tax liability and a federal adjusted gross income at or below the federal poverty guidelines shall receive an income tax credit under this section that eliminates the taxpayer's income tax liability under this chapter; and

(2) The tax credit under this section shall apply to a taxpayer with an income tax liability and a federal adjusted gross income between one hundred per cent and one hundred twenty-five per cent of the federal poverty guidelines.

Taxpayers with a federal adjusted gross income of one hundred twenty-five per cent or more of the federal poverty guidelines and an income tax liability shall be ineligible for the tax credit under this section.

(b) All claims for a tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the tax credit.

(c) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section.

(d) The department of taxation may adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

(e) As used in this section, "federal poverty guidelines" means the guidelines set forth each year by the United States Department of Health and Human Services."

PART III

SECTION 3. Section 235-55.7, Hawaii Revised Statutes, is amended to read as follows:

"§235-55.7 Income tax credit for low-income household renters. (a) As used in this section:

(1) "Adjusted gross income" is defined by section 235-1.

(2) "Consumer price index" means the consumer price index for All Urban Consumers published by the United States Department of Labor.

[~~(2)~~] (3) "Qualified exemption" includes those exemptions permitted under this chapter; provided that a person for whom exemption is claimed has physically resided in the State for more than nine months during the taxable year; and provided that multiple exemption shall not be granted because of deficiencies in vision, hearing, or other disability.

[~~(3)~~] (4) "Rent" means the amount paid in cash in any taxable year for the occupancy of a dwelling place which is used by a resident taxpayer or the resident taxpayer's immediate family as the principal residence in this State. Rent is limited to the amount paid for the occupancy of the dwelling place only, and is exclusive of charges for utilities, parking stalls, storage of goods, yard services, furniture, furnishings, and the like. Rent shall not include any rental claimed as a deduction from gross income or adjusted gross income for income tax purposes, any ground rental paid for use of land only, and any rent allowance or subsidies received.

(b) Each resident taxpayer who occupies and pays rent for real property within the State as the resident taxpayer's residence or the residence of the resident taxpayer's immediate family which is not partially or wholly exempted from real property tax, who is not eligible to be claimed as a dependent for federal or state income taxes by another, and who files an individual net income tax return for a taxable year, may claim a tax credit under this section against the resident taxpayer's Hawaii state individual net income tax.

(c) Each taxpayer with an adjusted gross income of less than [~~$30,000~~] $59,700 who has paid more than $1,000 in rent during the taxable year for which the credit is claimed may claim a tax credit of [~~$50~~] $146 multiplied by the number of qualified exemptions to which the taxpayer is entitled; provided each taxpayer sixty-five years of age or over may claim double the tax credit; and provided that a resident individual who has no income or no income taxable under this chapter may also claim the tax credit as set forth in this section.

(d) For each taxable year beginning after December 31, 2014, each dollar amount contained in subsection (c) shall be increased by an amount equal to such dollar amount, multiplied by the percentage, if any, by which the consumer price index for the preceding calendar year exceeds the consumer price index for the calendar year 2015.

[~~(d)~~] (e) If a rental unit is occupied by two or more individuals, and more than one individual is able to qualify as a claimant, the claim for credit shall be based upon a pro rata share of the rent paid.

[~~(e)~~] (f) The tax credits shall be deductible from the taxpayer's individual net income tax for the tax year in which the credits are properly claimed; provided that a husband and wife filing separate returns for a taxable year for which a joint return could have been made by them shall claim only the tax credits to which they would have been entitled had a joint return been filed. In the event the allowed tax credits exceed the amount of the income tax payments due from the taxpayer, the excess of credits over payments due shall be refunded to the taxpayer; provided that allowed tax credits properly claimed by an individual who has no income tax liability shall be paid to the individual; and provided further that no refunds or payments on account of the tax credits allowed by this section shall be made for amounts less than $1.

[~~(f)~~] (g) The director of taxation shall prepare and prescribe the appropriate form or forms to be used herein, may require proof of the claim for tax credits, and may adopt rules pursuant to chapter 91.

[~~(g)~~] (h) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credits hereunder.

[~~(h)~~] (i) Claims for tax credits under this section, including any amended claims thereof, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed."

PART IV

SECTION 4. Section 235-55.85, Hawaii Revised Statutes, is amended as follows:

1. By amending subsections (b) and (c) to read:

"(b) Each resident individual taxpayer may claim a refundable food/excise tax credit multiplied by the number of qualified exemptions to which the taxpayer is entitled in accordance with the table below; provided that a husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled had a joint return been filed.

Adjusted gross income Credit per exemption

Under [~~$5,000~~] $5,700 [~~$85~~] $96

[~~$5,000~~] $5,700 under [~~$10,000~~] $11,300 [75] $85

[~~$10,000~~] $11,300 under [~~$15,000~~] $17,000 [65] $74

[~~$15,000~~] $17,000 under [~~$20,000~~] $22,700 [55] $62

[~~$20,000~~] $22,700 under [~~$30,000~~] $34,000 [45] $51

[~~$30,000~~] $34,000 under [~~$40,000~~] $45,300 [35] $40

[~~$40,000~~] $45,300 under [~~$50,000~~] $56,500 [25] $28

[~~$50,000~~] $56,500 and over $0

(c) [For the purposes of this section, a qualified exemption is defined to include those exemptions permitted under this chapter; provided that no additional exemption may be claimed by a taxpayer who is sixty-five years of age or older; provided that a person for whom exemption is claimed has physically resided in the State for more than nine months during the taxable year; and provided further that multiple exemptions shall not be granted because of deficiencies in vision or hearing, or other disability. For purposes of claiming this credit only, a minor child receiving support from the department of human services of the State, social security survivor's benefits, and the like, may be considered a dependent and a qualified exemption of the parent or guardian.] For each taxable year beginning after December 31, 2014, each dollar amount contained in subsection (b) shall be increased by an amount equal to such dollar amount multiplied by the percentage, if any, by which the consumer price index for the preceding calendar year exceeds the consumer price index for the calendar year 2015."

2. By amending subsection (g) to read:

"(g) For the purposes of this section[~~, "adjusted~~]:

"Adjusted gross income" means adjusted gross income as defined by the Internal Revenue Code.

"Consumer price index" means the consumer price index for all urban consumers published by the United States Department of Labor.

"Qualified exemption" means those exemptions permitted under this chapter; provided that no additional exemption may be claimed by a taxpayer who is sixty-five years of age or older; provided further that a person who claims such an exemption shall have physically resided in the State for more than nine months during the taxable year; provided further that multiple exemptions shall not be granted because of deficiencies in vision or hearing or other disability. For purposes of claiming this credit only, a minor child receiving support from the department of human services of the State, social security survivor's benefits, and the like, may be considered a dependent and a qualified exemption of the parent or guardian."

PART V

SECTION 5. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

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, and shall apply to taxable years beginning after December 31, 2014.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2206
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII