REPORT TITLE:
Tax; Earned Income Credit


DESCRIPTION:
Authorizes an earned income tax credit.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2058
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO INCOME TAX CREDITS.



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

 1      SECTION 1.  Section 235-2.3, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (b) to read as follows:
 
 3      "(b)  The following Internal Revenue Code subchapters, parts
 
 4 of subchapters, sections, subsections, and parts of subsections
 
 5 shall not be operative for the purposes of this chapter, unless
 
 6 otherwise provided:
 
 7      (1)  Subchapter A (sections 1 to 59A) (with respect to
 
 8           determination of tax liability), except section 1(h)(3)
 
 9           (relating to net capital gain reduced by the amount
 
10           taken into account as investment income), except
 
11           section 32 (with respect to the earned income credit),
 
12           except section 41 (with respect to the credit for
 
13           increasing research activities), except section 42
 
14           (with respect to low-income housing credit), and except
 
15           sections 47 and 48, as amended, as of December 31, 1984
 
16           (with respect to certain depreciable tangible personal
 
17           property).  For treatment, see sections 235-110.91,
 
18           235-110.7, and 235-110.8;
 
19      (2)  Section 78 (with respect to dividends received from
 

 
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 1           certain foreign corporations by domestic corporations
 
 2           choosing foreign tax credit);
 
 3      (3)  Section 86 (with respect to social security and tier 1
 
 4           railroad retirement benefits);
 
 5      (4)  Section 103 (with respect to interest on state and
 
 6           local bonds).  For treatment, see section 235-7(b);
 
 7      (5)  Section 120 (with respect to amounts received under
 
 8           qualified group legal services plans).  For treatment,
 
 9           see section 235-7(a)(9) to (11);
 
10      (6)  Section 122 (with respect to certain reduced uniformed
 
11           services retirement pay).  For treatment, see section
 
12           235-7(a)(3);
 
13      (7)  Section 135 (with respect to income from United States
 
14           savings bonds used to pay higher education tuition and
 
15           fees).  For treatment, see section 235-7(a)(1);
 
16      (8)  Subchapter B (sections 141 to 150) (with respect to tax
 
17           exemption requirements for state and local bonds);
 
18      (9)  Section 151 (with respect to allowance of deductions
 
19           for personal exemptions).  For treatment, see section
 
20           235-54;
 
21     (10)  Section 196 (with respect to deduction for certain
 
22           unused investment credits);
 
23     (11)  Sections 241 to 247 (with respect to special deductions
 

 
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 1           for corporations).  For treatment, see section
 
 2           235-7(c);
 
 3     (12)  Section 280C (with respect to certain expenses for
 
 4           which credits are allowable).  For treatment, see,
 
 5           section 235-110.91;
 
 6     (13)  Section 291 (with respect to special rules relating to
 
 7           corporate preference items);
 
 8     (14)  Section 367 (with respect to foreign corporations);
 
 9     (15)  Section 501(c)(12), (15), (16) (with respect to exempt
 
10           organizations);
 
11     (16)  Section 515 (with respect to taxes of foreign countries
 
12           and possessions of the United States);
 
13     (17)  Subchapter G (sections 531 to 565) (with respect to
 
14           corporations used to avoid income tax on shareholders);
 
15     (18)  Subchapter H (sections 581 to 597) (with respect to
 
16           banking institutions), except section 584 (with respect
 
17           to common trust funds).  For treatment, see chapter
 
18           241;
 
19     (19)  Section 642(a) and (b) (with respect to special rules
 
20           for credits and deductions applicable to trusts).  For
 
21           treatment, see sections 235-54(b) and 235-55;
 
22     (20)  Section 668 (with respect to interest charge on
 
23           accumulation distributions from foreign trusts);
 

 
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 1     (21)  Subchapter L (sections 801 to 848) (with respect to
 
 2           insurance companies).  For treatment, see sections
 
 3           431:7-202 and 431:7-204;
 
 4     (22)  Section 853 (with respect to foreign tax credit allowed
 
 5           to shareholders).  For treatment, see section 235-55;
 
 6     (23)  Subchapter N (sections 861 to 999) (with respect to tax
 
 7           based on income from sources within or without the
 
 8           United States), except sections 985 to 989 (with
 
 9           respect to foreign currency transactions).  For
 
10           treatment, see sections 235-4, 235-5, [and] 235-7(b),
 
11           and 235-55;
 
12     (24)  Section 1042(g) (with respect to sales of stock in
 
13           agricultural refiners and processors to eligible farm
 
14           cooperatives);
 
15     (25)  Section 1055 (with respect to redeemable ground rents);
 
16     (26)  Section 1057 (with respect to election to treat
 
17           transfer to foreign trust, etc., as taxable exchange);
 
18     (27)  Sections 1291 to 1298 (with respect to treatment of
 
19           passive foreign investment companies);
 
20     (28)  Subchapter Q (sections 1311 to 1351) (with respect to
 
21           readjustment of tax between years and special
 
22           limitations); and
 
23     (29)  Subchapter U (sections 1391 to 1397F) (with respect to
 

 
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 1           designation and treatment of empowerment zones,
 
 2           enterprise communities, and rural development
 
 3           investment areas).  For treatment, see chapter 209E."
 
 4      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
 
 5 to read as follows:
 
 6      "§235-    Earned income tax credit.  (a)  Each individual or
 
 7 resident taxpayer, who files an individual net income tax return
 
 8 for a taxable year, and who is not claimed or is not otherwise
 
 9 eligible to be claimed as a dependent by another taxpayer for
 
10 income tax purposes, may claim an earned income tax credit
 
11 pursuant to section 235-2.3(b); provided that the tax rate is
 
12 equal to:
 
13      (1)  Ten per cent of the taxpayer's tax liability for the
 
14           taxable years beginning after December 31, 1999, and
 
15           ending before January 1, 2001; and
 
16      (2)  Fifteen per cent of the taxpayer's tax liability for
 
17           taxable years beginning after December 31, 2001.
 
18      (b)  If the tax credit under this section exceeds the
 
19 taxpayer's income tax liability, the excess of credits over
 
20 liability shall be refunded to the taxpayer; provided that no
 
21 refunds or payment on account of the tax credits allowed by this
 
22 section shall be made for amounts less than $1.  All claims,
 
23 including any amended claims, for tax credits under this section
 

 
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 1 shall be filed on or before the end of the twelfth month
 
 2 following the close of the taxable year for which the credit may
 
 3 be claimed.  Failure to comply with the foregoing provision shall
 
 4 constitute a waiver of the right to claim the credit.
 
 5      (c)  The director of taxation shall prepare such forms as
 
 6 may be necessary to claim a tax credit under this section.  The
 
 7 director may also require the taxpayer to furnish reasonable
 
 8 information in order that the director may ascertain the validity
 
 9 of the claim for credit made under this section and the director
 
10 may adopt rules pursuant to chapter 91 to effectuate the purposes
 
11 of this section."
 
12      SECTION 3.  Statutory material to be repealed is bracketed.
 
13 New statutory material is underscored.
 
14      SECTION 4.  This Act, upon its approval, shall apply to
 
15 taxable years beginning after December 31, 1999.
 
16 
 
17                           INTRODUCED BY:  _______________________