1208
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE INCOME TAXATION OF NONRESIDENTS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 235-2.4, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  Section 63 (with respect to taxable income defined) of
 
 4 the Internal Revenue Code shall be operative for the purposes of
 
 5 this chapter, except that the standard deduction amount in
 
 6 section 63(c) of the Internal Revenue Code shall instead mean:
 
 7      (1)  $1,900 in the case of:
 
 8           (A)  A joint return as provided by section 235-93, or
 
 9           (B)  A surviving spouse (as defined in section 2(a) of
 
10                the Internal Revenue Code),
 
11      (2)  $1,650 in the case of a head of household (as defined
 
12           in section 2(b) of the Internal Revenue Code),
 
13      (3)  $1,500 in the case of an individual who is not married
 
14           and who is not a surviving spouse or head of household,
 
15           or
 
16      (4)  $950 in the case of a married individual filing a
 
17           separate return.
 
18 Section 63(c)(4) shall not be operative in this State.
 
19 Section 63(c)(5) shall be operative, except that the limitation
 

 
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 1 on basic standard deduction in the case of certain dependents
 
 2 shall be the greater of $500 or such individual's earned income.
 
 3 Section 63(f) shall not be operative in this State.
 
 4      The standard deduction amount for nonresidents shall be
 
 5 calculated pursuant to section 235-5.
 
 6      SECTION 2.  Section 235-5, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "§235-5  Allocation of income of persons not taxable upon
 
 9 entire income.(a)  This section applies to income not subject
 
10 to part II of this chapter, including nonbusiness income and
 
11 certain section 235-22 income.
 
12      (b)  Income (including gains), also losses, from property
 
13 owned in the State and from any other source in the State shall
 
14 be determined by an allocation and separate accounting so far as
 
15 practicable.  Losses from property owned outside the State and
 
16 from other sources outside the State shall not be deducted.
 
17      (c)  Deductions connected with income taxable under this
 
18 chapter shall be allowed, but deductions connected with income
 
19 not taxable under this chapter shall not be allowed.
 
20 Deductions from adjusted gross income that are not connected with
 
21 particular property or income, such as medical expenses, shall be
 
22 allowed only to the extent of the ratio of the adjusted gross
 
23 income attributed to this State to the entire adjusted gross
 

 
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 1 income computed without regard to source in the State.
 
 2      Deductions by individual taxpayers from gross income for
 
 3 alimony and separate maintenance payments under section 215 of
 
 4 the Internal Revenue Code shall be allowed only to the extent of
 
 5 the ratio of gross income attributed to this State to the entire
 
 6 gross income computed without regard to source in this State;
 
 7 provided that as used in this sentence "gross income means gross
 
 8 income as defined in the Internal Revenue Code, minus the
 
 9 deductions allowed by section 62 of the Internal Revenue Code,
 
10 other than the deductions for alimony and separate maintenance
 
11 payments under section 215 of the Internal Revenue Code.
 
12      Deductions by individual taxpayers from gross income for
 
13 pension, profit-sharing, stock bonus plans, and other plans
 
14 qualified under sections 401 to 409 of the Internal Revenue Code,
 
15 as such sections are operative for the purposes of this chapter,
 
16 shall be allowed only to the extent that such deductions are
 
17 attributed to compensation earned in this State.
 
18      (d)  The standard deduction as provided in section 235-2.4
 
19 and personal exemptions as provided in section 235-54 shall be
 
20 allowed only to the extent of the ratio of the adjusted gross
 
21 income attributed to this State to the entire adjusted gross
 
22 income computed without regard to source in the State.
 
23      [(d)] (e)  If in the opinion of the department the
 

 
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 1 allocations hereinabove provided do not clearly and accurately
 
 2 reflect the actual amount of the adjusted gross income and
 
 3 taxable income received or derived from all property owned and
 
 4 any and every other source in the State, or if any person shows
 
 5 that the allocations hereinabove provided result in adjusted
 
 6 gross income or taxable income being attributed to the State in a
 
 7 larger amount than is just and equitable, then the same shall be
 
 8 determined, allocated, and apportioned under such rules,
 
 9 processes, and formulas as the department prescribes as being
 
10 just and equitable.
 
11      SECTION 3.  Section 235-54, Hawaii Revised Statutes, is
 
12 amended by amending subsection (a) to read as follows:
 
13      "(a)  In computing the taxable income of any individual,
 
14 there shall be deducted, in lieu of the personal exemptions
 
15 allowed by the Internal Revenue Code, personal exemptions
 
16 computed as follows:  Ascertain the number of exemptions which
 
17 the individual can lawfully claim under the Internal Revenue
 
18 Code, add an additional exemption for the taxpayer or the
 
19 taxpayer's spouse who is sixty-five years of age or older within
 
20 the taxable year, and multiply that number by $1,040, for taxable
 
21 years beginning after December 31, 1984.  A nonresident shall [be
 
22 entitled to the same personal exemptions as a resident, without
 
23 proration of] prorate the personal exemptions on account of
 

 
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 1 income from sources outside the State[.] as provided in section
 
 2 235-5.  In the case of an individual with respect to whom an
 
 3 exemption under this section is allowable to another taxpayer for
 
 4 a taxable year beginning in the calendar year in which the
 
 5 individual's taxable year begins, the personal exemption amount
 
 6 applicable to such individual under this subsection for such
 
 7 individual's taxable year shall be zero."
 
 8      SECTION 4.  Section 235-4.3, Hawaii Revised Statutes, is
 
 9 repealed.
 
10      ["§235-4.3 Special rules for nonresidents and part-year
 
11 residents.  There shall be imposed for each taxable year upon the
 
12 entire taxable income of every nonresident or party-year resident
 
13 which is derived from sources in this State a tax which shall be
 
14 equal to the tax computed on the basis of the rates prescribed by
 
15 section 235-51 or 235-53, as appropriate, as if the nonresident
 
16 or part-year resident were a resident multiplied by the ratio of
 
17 Hawaii adjusted gross income to total adjusted gross income from
 
18 all sources.]
 
19      SECTION 5.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 6.  This Act, upon its approval, shall take effect
 

 
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 1 and shall apply to taxable periods beginning after December 31,
 
 2 1998.
 
 3 
 
 4                           INTRODUCED BY:  _______________________
 

 
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