REPORT TITLE:
Income Tax; Pension


DESCRIPTION:
Repeals exclusion of pension income from taxable income beginning
1/1/2008.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.742        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE TAXATION OF PENSION INCOME.



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

 1      SECTION 1.  The legislature finds that the number of people
 
 2 of retirement age is increasing and will continue to increase in
 
 3 Hawaii, given the longevity of Hawaii's residents and the aging
 
 4 of "baby boomers", the first of whom will begin turning sixty-
 
 5 five years of age around the year 2011.  In addition, many
 
 6 retirees from other states continue to move to Hawaii to take
 
 7 advantage of Hawaii's favorable laws on pension income -- under
 
 8 current law, pension income is excluded from gross income,
 
 9 adjusted gross income, and taxable income in Hawaii.  The
 
10 legislature finds, however, that as the number of retirees in
 
11 this State increases, the strain on the State's health,
 
12 transportation, and other services and resources will also
 
13 increase unless an additional source of funding becomes available
 
14 to fund these services.  The purpose of this Act is therefore to
 
15 repeal the income tax exemption for pension income for taxable
 
16 years beginning after 2007.
 
17      SECTION 2.  Section 88-91, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "§88-91  [Exemption] Income taxation; exemption from
 

 


 

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 1 taxation and execution.  (a)  The right of a person to a pension,
 
 2 an annuity or a retirement allowance, to the return of
 
 3 contributions, the pension, annuity or retirement allowance
 
 4 itself, any optional benefit or death benefit, any other right
 
 5 accrued or accruing to any person under this part and the moneys
 
 6 in the various funds created under this part are exempted from
 
 7 any tax of the State and, except as in section 88-92 provided,
 
 8 shall not be subject to execution, garnishment or any other
 
 9 process and shall be unassignable except as in this part
 
10 specifically provided.
 
11      (b)  For all taxable years beginning after December 31,
 
12 2007, the rights benefits, and other income exempted from
 
13 taxation by subsection (a) shall be taxable under chapter 235 to
 
14 the extent the amounts, if any, have the same meaning as "gross
 
15 income", "adjusted gross income", and "taxable income" as those
 
16 terms are defined in section 235-1."
 
17      SECTION 3.  Section 235-7, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 
19      "(a)  There shall be excluded from gross income, adjusted
 
20 gross income, and taxable income:
 
21      (1)  Income not subject to taxation by the State under the
 
22           Constitution and laws of the United States;
 

 
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 1     [(2)  Rights, benefits, and other income exempted from
 
 2           taxation by section 88-91, having to do with the state
 
 3           retirement system, and the rights, benefits, and other
 
 4           income, comparable to the rights, benefits, and other
 
 5           income exempted by section 88-91, under any other
 
 6           public retirement system;
 
 7      (3)  Any compensation received in the form of a pension for
 
 8           past services;
 
 9      (4)] (2)  Compensation paid to a patient affected with
 
10           Hansen's disease employed by the State or the United
 
11           States in any hospital, settlement, or place for the
 
12           treatment of Hansen's disease;
 
13     [(5)] (3)  Except as otherwise expressly provided, payments
 
14           made by the United States or this State, under an act
 
15           of Congress or a law of this State, which by express
 
16           provision or administrative regulation or
 
17           interpretation are exempt from both the normal and
 
18           surtaxes of the United States, even though not so
 
19           exempted by the Internal Revenue Code itself;
 
20     [(6)] (4)  Any income expressly exempted or excluded from the
 
21           measure of the tax imposed by this chapter by any other
 
22           law of the State, it being the intent of this chapter
 

 
 
 
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 1           not to repeal or supersede any such express exemption
 
 2           or exclusion;
 
 3     [(7)] (5)  The first $1,750 received by each member of the
 
 4           reserve components of the Army, Navy, Air Force, Marine
 
 5           Corps, or Coast Guard of the United States of America,
 
 6           and the Hawaii national guard as compensation for
 
 7           performance of duty;
 
 8     [(8)] (6)  Income derived from the operation of ships or
 
 9           aircraft if the income is exempt under the Internal
 
10           Revenue Code pursuant to the provisions of an income
 
11           tax treaty or agreement entered into by and between the
 
12           United States and a foreign country, provided that the
 
13           tax laws of the local governments of that country
 
14           reciprocally exempt from the application of all of
 
15           their net income taxes, the income derived from the
 
16           operation of ships or aircraft which are documented or
 
17           registered under the laws of the United States;
 
18     [(9)] (7)  The value of legal services provided by a prepaid
 
19           legal service plan to a taxpayer, the taxpayer's
 
20           spouse, and the taxpayer's dependents;
 
21    [(10)] (8)  Amounts paid, directly or indirectly, by a prepaid
 
22           legal service plan to a taxpayer as payment or
 

 
 
 
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 1           reimbursement for the provision of legal services to
 
 2           the taxpayer, the taxpayer's spouse, and the taxpayer's
 
 3           dependents;
 
 4    [(11)] (9)  Contributions by an employer to a prepaid legal
 
 5           service plan for compensation (through insurance or
 
 6           otherwise) to the employer's employees for the costs of
 
 7           legal services incurred by the employer's employees,
 
 8           their spouses, and their dependents; and
 
 9    [(12)] (10)  Amounts received in the form of a monthly
 
10           surcharge by a utility acting on behalf of an affected
 
11           utility under section 269-16.3 shall not be gross
 
12           income, adjusted gross income, or taxable income for
 
13           the acting utility under this chapter.  Any amounts
 
14           retained by the acting utility for collection or other
 
15           costs shall not be included in this exemption."
 
16      SECTION 4.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 5.  This Act shall take effect on January 1, 2008,
 
19 and shall apply to taxable years beginning after December 31,
 
20 2007.
 
21 
 
22 
 
23                           INTRODUCED BY: ________________________
 

 
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