REPORT TITLE:
Education; Tax Deduction


DESCRIPTION:
Allows a double tax deduction for state income tax purposes for
charitable contributions made by individual or corporate
taxpayers to the department of education or the University of
Hawaii.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO EDUCATION.
 


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

 1      SECTION 1.  The legislature finds that, in the twenty-first
 
 2 century, a good education will increasingly determine success in
 
 3 the workplace.  Young people who do not possess the knowledge and
 
 4 educational foundation required to find and hold a good job will
 
 5 pay a high price throughout their working lives.
 
 6      Tragically, our public institutions charged with providing
 
 7 quality education, have been severely hampered by a shortage of
 
 8 funds due in large part to the State's stagnant economic climate.
 
 9      In response to this situation, and to encourage voluntary
 
10 contributions to our public schools, this Act provides a double
 
11 tax deduction for state income tax purposes for contributions
 
12 made to the department of education or the University of Hawaii.
 
13 This double tax deduction will serve as an incentive for
 
14 charitable contributions to the department of education and the
 
15 University of Hawaii.  These contributions will augment current
 
16 funding and improve the quality and delivery of educational
 
17 services in the State.
 
18      SECTION 2.  Section 235-2.4, Hawaii Revised Statutes, is
 

 
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 1 amended to read as follows:
 
 2      "§235-2.4  Operation of certain Internal Revenue Code
 
 3 provisions.(a)  Section 63 (with respect to taxable income
 
 4 defined) of the Internal Revenue Code shall be operative for the
 
 5 purposes of this chapter, except that the standard deduction
 
 6 amount in section 63(c) of the Internal Revenue Code shall
 
 7 instead mean:
 
 8      (1)  $1,900 in the case of:
 
 9           (A)  A joint return as provided by section 235-93; or
 
10           (B)  A surviving spouse (as defined in section 2(a) of
 
11                the Internal Revenue Code);
 
12      (2)  $1,650 in the case of a head of household (as defined
 
13           in section 2(b) of the Internal Revenue Code);
 
14      (3)  $1,500 in the case of an individual who is not married
 
15           and who is not a surviving spouse or head of household;
 
16           or
 
17      (4)  $950 in the case of a married individual filing a
 
18           separate return. 
 
19 Section 63(c)(4) shall not be operative in this State.  Section
 
20 63(c)(5) shall be operative, except that the limitation on basic
 
21 standard deduction in the case of certain dependents shall be the
 
22 greater of $500 or such individual's earned income.  Section
 

 
 
 
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 1 63(f) shall not be operative in this State.
 
 2      The standard deduction amount for nonresidents shall be
 
 3 calculated pursuant to section 235-5.
 
 4      (b)  Section 72 (with respect to annuities; certain proceeds
 
 5 of endowment and life insurance contracts) of the Internal
 
 6 Revenue Code shall be operative for purposes of this chapter and
 
 7 be interpreted with due regard to section 235-7(a), except that
 
 8 the ten per cent additional tax on early distributions from
 
 9 retirement plans in section 72(t) shall not be operative for
 
10 purposes of this chapter.
 
11      (c)  Section 121 (with respect to exclusion of gain from
 
12 sale of principal residence) of the Internal Revenue Code shall
 
13 be operative for purposes of this chapter, except that for the
 
14 election under section 121(f), a reference to section 1034
 
15 treatment means a reference to section 235-2.4(n) in effect for
 
16 taxable year 1997.
 
17      (d)  Section 170 (with respect to charitable contributions
 
18 and gifts) of the Internal Revenue Code shall be operative for
 
19 the purpose of this chapter; provided that notwithstanding the
 
20 limitations on the amount of allowable deduction under section
 
21 170(b)(2), there shall be allowed a deduction from gross income
 
22 by an individual or corporate taxpayer of two times the amount of
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 the actual contribution for charitable contributions made to the
 
 2 department of education or the University of Hawaii.
 
 3      No deduction shall be allowed for a contribution of an
 
 4 interest in property that consists of less than the taxpayer's
 
 5 entire interest in the property.
 
 6      All contributions shall be verified by the department of
 
 7 education or the University of Hawaii.  The department or the
 
 8 university shall certify that the total amount of all
 
 9 contributions/deductions do not exceed $        .  Upon a
 
10 favorable determination, the department or the university, as the
 
11 case may be, shall issue a certificate to the taxpayer.  The
 
12 taxpayer shall file the certificate with the taxpayer's tax
 
13 return to the department of taxation.
 
14      The department of taxation shall adopt rules pursuant to
 
15 chapter 91 to effectuate this subsection.
 
16      [(d)] (e)  Section 219 (with respect to retirement savings)
 
17 of the Internal Revenue Code shall be operative for the purpose
 
18 of this chapter.  For the purpose of computing the limitation on
 
19 the deduction for active participants in certain pension plans
 
20 for state income tax purposes, adjusted gross income as used in
 
21 section 219 as operative for this chapter means federal adjusted
 
22 gross income.
 

 
 
 
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 1      [(e)] (f)  Section 220 (with respect to medical savings
 
 2 accounts) of the Internal Revenue Code shall be operative for the
 
 3 purpose of this chapter, but only with respect to medical
 
 4 services accounts that have been approved by the [secretary]
 
 5 Secretary of the Treasury of the United States.
 
 6      [(f)] (g)  Section 408A (with respect to Roth Individual
 
 7 Retirement Accounts) of the Internal Revenue Code shall be
 
 8 operative for the purposes of this chapter.  For the purposes of
 
 9 determining the aggregate amount of contributions to a Roth
 
10 Individual Retirement Account or qualified rollover contribution
 
11 to a Roth Individual Retirement Account from an individual
 
12 retirement plan other than a Roth Individual Retirement Account,
 
13 adjusted gross income as used in section 408A as operative for
 
14 this chapter means federal adjusted gross income.
 
15      [(g)] (h)  In administering the provisions of sections 410
 
16 to 417 (with respect to special rules relating to pensions,
 
17 profit sharing, stock bonus plans, etc.), sections 418 to 418E
 
18 (with respect to special rules for multiemployer plans), and
 
19 sections 419 and 419A (with respect to treatment of welfare
 
20 benefit funds) of the Internal Revenue Code, the department of
 
21 taxation shall adopt rules under chapter 91 relating to the
 
22 specific requirements under such sections and to such other
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 administrative requirements under those sections as may be
 
 2 necessary for the efficient administration of sections 410 to
 
 3 419A.
 
 4      In administering sections 401 to 419A (with respect to
 
 5 deferred compensation) of the Internal Revenue Code, Public Law
 
 6 93-406, section 1017(i), shall be operative for the purposes of
 
 7 this chapter.
 
 8      In administering section 402 (with respect to the taxability
 
 9 of beneficiary of employees' trust) of the Internal Revenue Code,
 
10 the tax imposed on lump sum distributions by section 402(e) of
 
11 the Internal Revenue Code shall be operative for the purposes of
 
12 this chapter and the tax imposed therein is hereby imposed by
 
13 this chapter at the rate determined under this chapter.
 
14      [(h)] (i)  Section 468B (with respect to special rules for
 
15 designated settlement funds) of the Internal Revenue Code shall
 
16 be operative for the purposes of this chapter and the tax imposed
 
17 therein is hereby imposed by this chapter at a rate equal to the
 
18 maximum rate in effect for the taxable year imposed on estates
 
19 and trusts under section 235-51.
 
20      [(i)] (j)  Section 469 (with respect to passive activities
 
21 and credits limited) of the Internal Revenue Code shall be
 
22 operative for the purposes of this chapter.  For the purpose of
 

 
 
 
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 1 computing the offset for rental real estate activities for state
 
 2 income tax purposes, adjusted gross income as used in section 469
 
 3 as operative for this chapter means federal adjusted gross
 
 4 income.
 
 5      [(j)] (k)  Sections 512 to 514 (with respect to taxation of
 
 6 business income of certain exempt organizations) of the Internal
 
 7 Revenue Code shall be operative for the purposes of this chapter
 
 8 as provided in this subsection.
 
 9      "Unrelated business taxable income" means the same as in the
 
10 Internal Revenue Code, except that in the computation thereof
 
11 sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall
 
12 apply, and in the determination of the net operating loss
 
13 deduction there shall not be taken into account any amount of
 
14 income or deduction which is excluded in computing the unrelated
 
15 business taxable income.  Unrelated business taxable income shall
 
16 not include any income from a prepaid legal service plan.
 
17      For a person described in section 401 or 501 of the Internal
 
18 Revenue Code, as modified by section 235-2.3, the tax imposed by
 
19 section 235-51 or 235-71 shall be imposed upon the person's
 
20 unrelated business taxable income.
 
21      [(k)] (l)  Section 521 (with respect to cooperatives) and
 
22 subchapter T (sections 1381 to 1388, with respect to cooperatives
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 and their patrons) of the Internal Revenue Code shall be
 
 2 operative for the purposes of this chapter as to any cooperative
 
 3 fully meeting the requirements of section 421-23, except that
 
 4 Internal Revenue Code section 521 cooperatives need not be
 
 5 organized in Hawaii.
 
 6      [(l)] (m)  Sections 527 (with respect to political
 
 7 organizations) and 528 (with respect to certain homeowners
 
 8 associations) of the Internal Revenue Code shall be operative for
 
 9 the purposes of this chapter and the taxes imposed in each such
 
10 section are hereby imposed by this chapter at the rates
 
11 determined under section 235-71.
 
12      [(m)] (n)  Section 530 (with respect to education individual
 
13 retirement accounts) of the Internal Revenue Code shall be
 
14 operative for the purposes of this chapter.  For the purpose of
 
15 determining the maximum amount that a contributor could make to
 
16 an education individual retirement account for state income tax
 
17 purposes, modified adjusted gross income as used in section 530
 
18 for this chapter means federal modified adjusted gross income as
 
19 defined in section 530.
 
20      [(n)] (o)  Section 641 (with respect to imposition of tax)
 
21 of the Internal Revenue Code shall be operative for the purposes
 
22 of this chapter subject to the following:
 

 
 
 
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 1      (1)  The deduction for exemptions shall be allowed as
 
 2           provided in section 235-54(b).
 
 3      (2)  The deduction for contributions and gifts in
 
 4           determining taxable income shall be limited to the
 
 5           amount allowed in the case of an individual, unless the
 
 6           contributions and gifts are to be used exclusively in
 
 7           the State.
 
 8      (3)  The tax imposed by section 1(e) of the Internal Revenue
 
 9           Code as applied by section 641 of the Internal Revenue
 
10           Code is hereby imposed by this chapter at the rate and
 
11           amount as determined under section 235-51 on estates
 
12           and trusts.
 
13      [(o)] (p)  Section 644 (with respect to special rule for
 
14 gain on property transferred to trust at less than fair market
 
15 value) of the Internal Revenue Code shall be operative for the
 
16 purposes of this chapter and the tax imposed therein is hereby
 
17 imposed by this chapter at the rate determined under this
 
18 chapter; except that the determination of the interest rate
 
19 established under section 6621 of the Internal Revenue Code
 
20 referred to in section 644(a)(2) of the Internal Revenue Code
 
21 shall instead be the interest rate established under section 231-
 
22 39(b)(4).
 

 
 
 
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 1      [(p)] (q)  Section 667 (with respect to treatment of amounts
 
 2 deemed distributed by trusts in preceding years) of the Internal
 
 3 Revenue Code shall be operative for the purposes of this chapter
 
 4 and the tax imposed therein is hereby imposed by this chapter at
 
 5 the rate determined under this chapter; except that the reference
 
 6 to tax-exempt interest to which section 103 of the Internal
 
 7 Revenue Code applies in section 667(a) of the Internal Revenue
 
 8 Code shall instead be a reference to tax-exempt interest to which
 
 9 section 235-7(b) applies.
 
10      [(q)] (r)  Section 685 (with respect to treatment of
 
11 qualified funeral trusts) of the Internal Revenue Code shall be
 
12 operative for purposes of this chapter, except that the tax
 
13 imposed under this chapter shall be computed at the tax rates
 
14 provided under section 235-51, and no deduction for the exemption
 
15 amount provided in section 235-54(b) shall be allowed.  The cost-
 
16 of-living adjustment determined under section 1(f)(3) of the
 
17 Internal Revenue Code shall be operative for the purpose of
 
18 applying section 685(c)(3) under this chapter.
 
19      [(r)] (s)  Section 1212 (with respect to capital loss
 
20 carrybacks and carryforwards) of the Internal Revenue Code shall
 
21 be operative for the purposes of this chapter; except that for
 
22 the purposes of this chapter the capital loss carryback
 

 
 
 
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 1 provisions of section 1212 shall not be operative and the capital
 
 2 loss carryforward allowed by section 1212(a) shall be limited to
 
 3 five years.
 
 4      [(s)] (t)  Subchapter S (sections 1361 to 1379) (with
 
 5 respect to tax treatment of S corporations and their
 
 6 shareholders) of chapter 1 of the Internal Revenue Code shall be
 
 7 operative for the purposes of this chapter as provided in part
 
 8 VII.
 
 9      [(t)] (u)  Section 6015 (with respect to relief from joint
 
10 and several liability on joint return) of the Internal Revenue
 
11 Code is operative for purposes of this chapter.
 
12      [(u)] (v)  Subchapter C (sections 6221 to 6233) (with
 
13 respect to tax treatment of partnership items) of chapter 63 of
 
14 the Internal Revenue Code shall be operative for the purposes of
 
15 this chapter.
 
16      [(v)] (w)  Subchapter D (sections 6240 to 6255) (with
 
17 respect to simplified audit procedures for electing large
 
18 partnerships) of the Internal Revenue Code shall be operative for
 
19 the purposes of this chapter, with due regard to chapter 232
 
20 relating to tax appeals.
 
21      [(w)] (x)  Section 6511(h) (with respect to running of
 
22 periods of limitation suspended while taxpayer is unable to
 

 
 
 
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 1 manage financial affairs due to disability) of the Internal
 
 2 Revenue Code shall be operative for purposes of this chapter,
 
 3 with due regard to section 235-111 relating to the limitation
 
 4 period for assessment, levy, collection, or credit.
 
 5      [(x)] (y)  Section 7518 (with respect to capital
 
 6 construction fund for commercial fishers) of the Internal Revenue
 
 7 Code shall be operative for the purposes of this chapter.
 
 8 Qualified withdrawals for the acquisition, construction, or
 
 9 reconstruction of any qualified asset which is attributable to
 
10 deposits made before the effective date of this section shall not
 
11 reduce the basis of the asset when withdrawn.  Qualified
 
12 withdrawals shall be treated on a first-in-first-out basis."
 
13      SECTION 3.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 4.  This Act, upon its approval, shall apply to
 
16 taxable years beginning after December 31, 2000.
 
17 
 
18                           INTRODUCED BY:_________________________