Report Title:
Income Tax Simplification
Description:
Establishes income tax rate as ______ of the federal tax liability. Conforms standard deduction and personal exemption to Internal Revenue Code and repeals certain exceptions to conformity. Retains all state deductions and credits.
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
927 |
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TWENTY-FIRST LEGISLATURE, 2001 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO INCOME TAX SIMPLIFICATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 235-2.3, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.3 Conformance to the federal Internal Revenue Code; general application. (a) For all taxable years beginning after December 31, [1996,] 2001, as used in this chapter "Internal Revenue Code" means subtitle A, chapter 1 of the federal Internal Revenue Code of 1986, as amended as of December 31, [1996,] 2001, as it applies to the determination of gross income, adjusted gross income, ordinary income and loss, and taxable income except those provisions of the Internal Revenue Code and federal public laws which pursuant to this chapter do not apply or are otherwise limited in application.
Sections 235-2, 235-2.1, and 235-2.2 shall continue to be used to determine:
(1) The basis of property, if a taxpayer first determined the basis of property in a taxable year to which such sections apply, and if such determination was made before January 1, 1978; and
(2) Gross income, adjusted gross income, ordinary income and loss, and taxable income for a taxable year to which such sections apply where such taxable year begins before January 1, 1978.
(b) The following Internal Revenue Code subchapters, parts of subchapters, sections, subsections, and parts of subsections shall not be operative for the purposes of this chapter, unless otherwise provided:
(1) [Subchapter A (sections 1 to 59A)] Sections 1 to 15 (with respect to determination of tax liability)[, except section];
(2) Section 42 (with respect to the low-income housing credit) and [except] sections 47 and 48, as amended, as of December 31, 1984 (with respect to certain depreciable tangible personal property). For treatment, see sections 235-110.7 and 235-110.8;
[(2) Section 78 (with respect to dividends received from certain foreign corporations by domestic corporations choosing foreign tax credit).
(3) Section 86 (with respect to social security and tier 1 railroad retirement benefits).
(4)] (3) Section 103 (with respect to interest on state and local bonds). For treatment, see section 235-7(b);
[(5)](4) Section 120 (with respect to amounts received under qualified group legal service plans). For treatment, see section 235-7(a)(9) to (11);
[(6)](5) Section 122 (with respect to certain reduced uniformed services retirement pay). For treatment, see section 235-7(a)(3);
[(7)](6) Section 135 (with respect to income from United States savings bonds used to pay higher education tuition and fees). For treatment, see section 235-7(a)(1);
[(8)](7) Subchapter B (sections 141 to 150) (with respect to tax exemption requirements for state and local bonds);
[(9) Section 151 (with respect to allowance of deductions for personal exemptions). For treatment, see section 235-54.
(10) Section 196 (with respect to deduction for certain unused investment credits).
(11)](8) Sections 241 to 247 (with respect to special deductions for corporations). For treatment, see section 235-7(c);
[(12) Section 280C (with respect to certain expenses for which credits are allowable);
(13) Section 291 (with respect to special rules relating to corporate preference items);
(14) Section 367 (with respect to foreign corporations);
(15) Section 501(c)(12), (15), (16) (with respect to exempt organizations);
(16) Section 515 (with respect to taxes of foreign countries and possessions of the United States);
(17) Subchapter G (sections 531 to 565) (with respect to corporations used to avoid income tax on shareholders);
(18)](9) Subchapter H (sections 581 to 597) (with respect to banking institutions), except section 584 (with respect to common trust funds). For treatment, see chapter 241;
[(19)](10) Section 642(a) and (b) (with respect to special rules for credits and deductions applicable to trusts). For treatment, see [sections 235-54(b) and] section 235-55;
[(20) Section 668 (with respect to interest charge on accumulation distributions from foreign trusts);
(21)](11) Subchapter L (sections 801 to 848) (with respect to insurance companies). For treatment, see sections 431:7-202 and 431:7-204;
[(22)](12) Section 853 (with respect to foreign tax credit allowed to shareholders). For treatment, see section 235-55;
[(23)](13) Subchapter N (sections 861 to 999) (with respect to tax based on income from sources within or without the United States), except sections 985 to 989 (with respect to foreign currency transactions). For treatment, see sections 235-4, 235-5, 235-7(b), and 235-55;
[(24) Section 1055 (with respect to redeemable ground rents);
(25) Section 1057 (with respect to election to treat transfer to foreign trust, etc., as taxable exchange);
(26) Sections 1291 to 1297 (with respect to treatment of passive foreign investment companies);
(27) Subchapter Q (sections 1311 to 1351) (with respect to readjustment of tax between years and special limitations);
(28)](14) Subchapter U (sections 1391 to 1397F) (with respect to designation and treatment of empowerment zones, enterprise communities, and rural development investment areas). For treatment, see chapter 209E."
SECTION 2. Section 235-2.4, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.4 Operation of certain Internal Revenue Code provisions. (a) [Section 63 (with respect to taxable income defined) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that the standard deduction amount in section 63(c) of the Internal Revenue Code shall instead mean:
(1) $1,900 in the case of:
(A) A joint return as provided by section 235-93; or
(B) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(2) $1,650 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(3) $1,500 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(4) $950 in the case of a married individual filing a separate return.
Section 63(c)(4) shall not be operative in this State. Section 63(c)(5) shall be operative, except that the limitation on basic standard deduction in the case of certain dependents shall be the greater of $500 or such individual's earned income. Section 63(f) shall not be operative in this State.
The standard deduction amount for nonresidents shall be calculated pursuant to section 235-5.
(b) Section 72 (with respect to annuities; certain proceeds of endowment and life insurance contracts) of the Internal Revenue Code shall be operative for purposes of this chapter and be interpreted with due regard to section 235-7(a), except that the ten per cent additional tax on early distributions from retirement plans in section 72(t) shall not be operative for purposes of this chapter.
(c) Section 121 (with respect to exclusion of gain from sale of principal residence) of the Internal Revenue Code shall be operative for the purpose of this chapter. For the purpose of computing the limitation on the deduction for active participants in certain pension plans for state income tax purposes, adjusted gross income as used in section 219 as operative for this chapter means federal adjusted gross income.
(d)] Section 219 (with respect to retirement savings) of the Internal Revenue Code shall be operative for the purpose of this chapter. For the purpose of computing the limitation on the deduction for active participants in certain pension plans for state income tax purposes, adjusted gross income as used in section 219 as operative for this chapter means federal adjusted gross income.
[(e) Section 220 (with respect to medical savings accounts) shall be operative for the purposes of this chapter, but only with respect to medical services accounts that have been approved by the secretary of the Treasury of the United States.
(f)] (b) In administering the provisions of sections 410 to 417 (with respect to special rules relating to pensions, profit sharing, stock bonus plans, etc.), sections 418 to 418E (with respect to special rules for multiemployer plans), and sections 419 and 419A (with respect to treatment of welfare benefit funds) of the Internal Revenue Code, the department of taxation shall adopt rules under chapter 91 relating to the specific requirements under such sections and to such other administrative requirements under those sections as may be necessary for the efficient administration of sections 410 to 419A.
In administering sections 401 to 419A (with respect to deferred compensation) of the Internal Revenue Code, Public Law 93-406, section 1017(i), shall be operative for the purposes of this chapter.
In administering section 402 (with respect to the taxability of beneficiary of employees' trust) of the Internal Revenue Code, the tax imposed on lump sum distributions by section 402(e) of the Internal Revenue Code shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at the rate determined under this chapter.
[(h) Section 468B (with respect to special rules for designated settlement funds) shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at a rate equal to the maximum rate in effect for the taxable year imposed on estates and trusts under section 235-51.
(i)] (c) Section 469 (with respect to passive activities and credits limited) shall be operative for the purposes of this chapter. For the purpose of computing the offset for rental real estate activities for state income tax purposes, adjusted gross income as used in section 469 as operative for this chapter means federal adjusted gross income.
[(j)] (d) Sections 512 to 514 (with respect to taxation of business income of certain exempt organizations) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this subsection.
"Unrelated business taxable income" means the same as in the Internal Revenue Code, except that in the computation thereof sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall apply, and in the determination of the net operating loss deduction there shall not be taken into account any amount of income or deduction which is excluded in computing the unrelated business taxable income. Unrelated business taxable income shall not include any income from a prepaid legal service plan.
For a person described in section 401 or 501 of the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by section 235-51 or 235-71 shall be imposed upon the person's unrelated business taxable income.
[(k)] (e) Section 521 (with respect to cooperatives) and subchapter T (sections 1381 to 1388, with respect to cooperatives and their patrons) shall be operative for the purposes of this chapter as to any cooperative fully meeting the requirements of section 421-23, except that Internal Revenue Code section 521 cooperatives need not be organized in Hawaii.
[(l)] (f) Sections 527 (with respect to political organizations) and 528 (with respect to certain homeowners associations) shall be operative for the purposes of this chapter and the taxes imposed in each such section are hereby imposed by this chapter at the rates determined under section 235-71.
[(m)] (g) Section 530 (with respect to education individual retirement accounts) of the Internal Revenue Code shall be operative for the purposes of this chapter. For the purpose of determining the maximum amount that a contributor could make to an education individual retirement account for state income tax purposes, modified adjusted gross income as used in section 530 as operative for this chapter means federal modified adjusted gross income as defined in section 530."
SECTION 3. Section 235-2.45, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.45 Operation of certain Internal Revenue Code provisions; sections 641-7525. (a) Section 641 (with respect to imposition of tax) of the Internal Revenue Code shall be operative for the purposes of this chapter subject to the following:
[(1) The deduction for exemptions shall be allowed as provided in section 235-54(b);
(2)] (1) The deduction for contributions and gifts in determining taxable income shall be limited to the amount allowed in the case of an individual, unless the contributions and gifts are to be used exclusively in the State;
[(3)](2) The tax imposed by section 1(e) of the Internal Revenue Code as applied by section 641 of the Internal Revenue Code is hereby imposed by this chapter at the rate and amount as determined under section 235-51 on estates and trusts.
(b) Section 667 (with respect to treatment of amounts deemed distributed by trusts in preceding years) of the Internal Revenue Code shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at the rate determined under this chapter; except that the reference to tax-exempt interest to which section 103 of the Internal Revenue Code applies in section 667(a) of the Internal Revenue Code shall instead be a reference to tax-exempt interest to which section 235-7(b) applies.
(c) Section 685 (with respect to treatment of qualified funeral trusts) of the Internal Revenue Code shall be operative for purposes of this chapter, except that the tax imposed under this chapter shall be computed at the tax rates provided in section 235-54(b) shall be allowed. The cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code shall be operative for the purpose of applying section 685(c)(3) under this chapter.
(d) Section 704 of the Internal Revenue Code (with respect to a partner's distributive share) shall be operative for purposes of this chapter; except that, section 704(b)(2) shall not apply to allocations of low-income housing tax credits among partners under section 235-110.8.
(e) Section 704 of the Internal Revenue Code (with respect to a partner's distributive share) shall be operative for purposes of this chapter; except that [section 704(b)(2)] shall not apply to allocations of the high technology business investment tax credit allowed by section 235-110.9.
[(f) Section 1212 (with respect to capital loss carrybacks and carryforwards) of the Internal Revenue Code shall be operative for the purposes of this chapter; except that for the purposes of this chapter the capital loss carryback provisions of section 1212 shall not be operative and the capital loss carryforward allowed by section 1212(a), shall be limited to five years.]
(g) Subchapter S (sections 1361 to 1379) (with respect to tax treatment of S corporations and their shareholders) of chapter 1 of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in part VII.
(h) Section 6015 (with respect to relief from joint and several liability on joint return) of the Internal Revenue Code is operative for purposes of this chapter.
(i) Subchapter C (sections 6221 to 6233) (with respect to tax treatment of partnership items) of chapter 63 of the Internal Revenue Code shall be operative for the purposes of this chapter.
(j) Subchapter D (sections 6240 to 6255) (with respect to simplified audit procedures for electing large partnerships) of chapter 63 of the Internal Revenue Code shall be operative for the purposes of this chapter, with due regard to chapter 232 relating to tax appeals.
(k) Section 6511(h) (with respect to running of periods of limitation suspended while taxpayer is unable to manage financial affairs due to disability) of the Internal Revenue Code shall be operative for purposes of this chapter, with due regard to section 235-111 relating to the limitation period for assessment, levy, collection, or credit.
(l) Section 7518 (with respect to capital construction fund for commercial fishers) of the Internal Revenue Code shall be operative for the purposes of this chapter. Qualified withdrawals for the acquisition, construction, or reconstruction of any qualified asset which is attributable to deposits made before the effective date of this section shall not reduce the basis of the asset when withdrawn. Qualified withdrawals shall be treated on a first-in-first-out basis.
(m) Section 7525 (with respect to confidentiality privileges relating to taxpayer communications) of the Internal Revenue Code shall be operative for the purposes of this chapter. All references to the Internal Revenue Code sections within section 7525 of the Internal Revenue Code shall be operative for purposes of this section. The term "Internal Revenue Service" as used in section 7525(a)(2)(A) of the Internal Revenue Code means the department; the term "federal court" as used in section 7525(a)(2)(B) means state court; and the term "United States" as used in section 7525(a)(2)(B) means State."
SECTION 3. Section 235-3, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The Internal Revenue Code, so far as made operative by this chapter, is a statute adopted and incorporated by reference. The Internal Revenue Code shall be applied using changes in nomenclature and other language, including the omission of inapplicable language, where necessary to effectuate the intent of this section. In the Internal Revenue Code, references to terms such as:
(1) "Secretary or his delegate" shall refer to the director of taxation and the director's duly authorized subordinates;
(2) "Estate taxes" shall refer to the estate and transfer tax imposed by chapter 236D;
[(3) "The highest rate of tax imposed upon individuals" or "39.6 per cent" shall refer to the highest rate imposed upon individuals under section 235-51;
(4)] (3) "The highest rate of tax imposed upon corporations" shall refer to the highest rate imposed upon corporations under section 235-71; and
[(5)](4) "Interest at the underpayment rate" or "interest at the overpayment rate" shall refer to the interest rate set forth in section 231-39(b)(4) or section 231-23(d)(1), as the case may be."
SECTION 4. Section 235-4, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
"(c) Change of status. Except where a joint return is filed, when the status of a taxpayer changes during the taxable year from resident to nonresident, or from nonresident to resident, the tax imposed by this chapter applies to the entire income earned during the period of residence in the manner provided in subsection (a) of this section and during the period of nonresidence the tax shall apply upon the income received or derived as a nonresident in the manner provided in subsection (b) of this section; provided that if it cannot be determined whether income was received or derived during the period of residence or during the period of nonresidence, there shall be attributed to the State such portion of the income as is determined by applying to such income for the whole taxable year the ratio which the period of residence in the State bears to the whole taxable year, unless the taxpayer shows to the satisfaction of the department of taxation that the result is to attribute to the state income, dependent upon residence, received or derived during the period of nonresidence, in which event the amount of income as to which such showing is made shall be excluded.
The apportionment of income provided by this subsection shall not apply where one spouse is a resident of this State and a joint return is filed with the nonresident spouse in which event the tax shall be computed on their aggregate income [in the manner provided in section 235-52] without regard to source in the State. Where, however, both spouses change their status from resident to nonresident or from nonresident to resident, their income shall be apportioned in the manner provided in this subsection."
SECTION 5. Section 235-51, Hawaii Revised Statutes, is amended to read as follows:
"§235-51 Tax imposed on individuals; rates. (a) There is hereby imposed on the taxable income of every:
(1) [every taxpayer] Taxpayer who files a joint return under section 235-93; [and]
(2) [every surviving] Surviving spouse [a tax determined in accordance with the following table:
In the case of any taxable year beginning after December 31, 1988:
If the taxable income is: The tax shall be:
Not over $4,000 1.60% of taxable income
Over $4,000 but $64.00 plus 3.90% of excess
not over $8,000 over $4,000
Over $8,000 but $220.00 plus 6.80% of excess
not over $16,000 over $8,000
Over $16,000 but $764.00 plus 7.20% of excess
not over $24,000 over $16,000
Over $24,000 but $1,340.00 plus 7.50% of
not over $32,000 excess over $24,000
Over $32,000 but $1,940.00 plus 7.80% of
not over $40,000 excess over $32,000
Over $40,000 but $2,564.00 plus 8.20% of
not over $60,000 excess over $60,000
Over $60,000 but $4,204.00 plus 8.50% of
Not over $80,000 excess over $60,000
Over $80,000 $5,904.00 plus 8.75% of
excess over $80,000
In the case of any taxable year beginning after December 31, 2000:
If the taxable income is: The tax shall be:
Not over $4,000 1.50% of taxable income
Over $4,000 but $60.00 plus 3.70% of excess
not over $8,000 over $4,000
Over $8,000 but $208.00 plus 6.40% of excess
not over $16,000 over $8,000
Over $16,000 but $720.00 plus 6.90% of excess
not over $24,000 over $16,000
Over $24,000 but $1,272.00 plus 7.30% of
not over $32,000 excess over $24,000
Over $32,000 but $1,856.00 plus 7.60% of
not over $40,000 excess over $32,000
Over $40,000 but $2,464.00 plus 7.90% of
not over $60,000 excess over $40,000
Over $60,000 but $4,044.00 plus 8.20% of
Not over $80,000 excess over $60,000
Over $80,000 $5,684.00 plus 8.50% of
excess over $80,000
In the case of any taxable year beginning after December 31, 2001:
If the taxable income is: The tax shall be:
Not over $4,000 1.40% of taxable income
Over $4,000 but $56.00 plus 3.20% of excess
not over $8,000 over $4,000
Over $8,000 but $184.00 plus 5.50% of excess
not over $16,000 over $8,000
Over $16,000 but $624.00 plus 6.40% of excess
not over $24,000 over $16,000
Over $24,000 but $1,136.00 plus 6.80% of
not over $32,000 excess over $24,000
Over $32,000 but $1,680.00 plus 7.20% of
not over $40,000 excess over $32,000
Over $40,000 but $2,256.00 plus 7.60% of
not over $60,000 excess over $40,000
Over $60,000 but $3,776.00 plus 7.90% of
Not over $80,000 excess over $60,000
Over $80,000 $5,356.00 plus 8.25% of
excess over $80,000
(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:
In the case of any taxable year beginning after December 31, 1988:
If the taxable income is: The tax shall be:
Not over $3,000 1.60% of taxable income
Over $3,000 but $48.00 plus 3.9% of excess
not over $6,000 over $3,000
Over $6,000 but $165.00 plus 6.8% of excess
not over $12,000 over $6,000
Over $12,000 but $573.00 plus 7.2% of excess
not over $18,000 over $12,000
Over $18,000 but $1,005.00 plus 7.50% of
not over $24,000 excess over $18,000
Over $24,000 but $1,455.00 plus 7.80% of
not over $30,000 excess over $24,000
Over $30,000 but $1,923.00 plus 8.20% of
not over $45,000 excess over $30,000
Over $45,000 but $3,153.00 plus 8.50% of
Not over $60,000 excess over $60,000
Over $60,000 $4,428.00 plus 8.75% of
Excess over $60,000
In the case of any taxable year beginning after December 31, 2000:
If the taxable income is: The tax shall be:
Not over $3,000 1.50% of taxable income
Over $3,000 but $45.00 plus 3.70% of excess
not over $6,000 over $3,000
Over $6,000 but $156.00 plus 6.40% of excess
not over $12,000 over $6,000
Over $12,000 but $540.00 plus 6.90% of excess
not over $18,000 over $12,000
Over $18,000 but $954.00 plus 7.30% of
not over $24,000 excess over $18,000
Over $24,000 but $1,392.00 plus 7.60% of
not over $30,000 excess over $24,000
Over $30,000 but $1,848.00 plus 7.90% of
not over $45,000 excess over $30,000
Over $45,000 but $3,033.00 plus 8.20% of
Not over $60,000 excess over $60,000
Over $60,000 $4,263.00 plus 8.50% of
Excess over $60,000
In the case of any taxable year beginning after December 31, 2001:
If the taxable income is: The tax shall be:
Not over $3,000 1.40% of taxable income
Over $3,000 but $42.00 plus 3.20% of excess
not over $6,000 over $3,000
Over $6,000 but $138.00 plus 5.50% of excess
not over $12,000 over $6,000
Over $12,000 but $468.00 plus 6.40% of excess
not over $18,000 over $12,000
Over $18,000 but $852.00 plus 6.80% of
not over $24,000 excess over $18,000
Over $24,000 but $1,260.00 plus 7.20% of
not over $30,000 excess over $24,000
Over $30,000 but $1,692.00 plus 7.60% of
not over $45,000 excess over $30,000
Over $45,000 but $2,832.00 plus 7.90% of
Not over $60,000 excess over $60,000
Over $60,000 $4,017.00 plus 8.25% of
Excess over $60,000
(c) There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:
In the case of any taxable year beginning after December 31, 1988:
If the taxable income is: The tax shall be:
Not over $2,000 1.60% of taxable income
Over $2,000 but $32.00 plus 3.90% of excess
not over $4,000 over $2,000
Over $4,000 but $110.00 plus 6.80% of excess
not over $8,000 over $4,000
Over $8,000 but $382.00 plus 7.20% of excess
not over $12,000 over $8,000
Over $12,000 but $670.00 plus 7.50% of excess
not over $16,000 over $12,000
Over $16,000 but $970.00 plus 7.80% of excess
not over $20,000 over $16,000
Over $20,000 but $1,282.00 plus 8.20% of
not over $30,000 excess over $20,000
Over $30,000 but $2,102.00 plus 8.50% of
not over $40,000 excess over $30,000
Over $40,000 $2,952.00 plus 8.75% of
excess over $40,000
In the case of any taxable year beginning after December 31, 2000:
If the taxable income is: The tax shall be:
Not over $2,000 1.50% of taxable income
Over $2,000 but $30.00 plus 3.70% of excess
not over $4,000 over $2,000
Over $4,000 but $104.00 plus 6.40% of excess
not over $8,000 over $4,000
Over $8,000 but $360.00 plus 6.90% of excess
not over $12,000 over $8,000
Over $12,000 but $636.00 plus 7.30% of excess
not over $16,000 over $12,000
Over $16,000 but $928.00 plus 7.60% of excess
not over $20,000 over $16,000
Over $20,000 but $1,232.00 plus 7.90% of
not over $30,000 excess over $20,000
Over $30,000 but $2,022.00 plus 8.20% of
not over $40,000 excess over $30,000
Over $40,000 $2,842.00 plus 8.50% of
excess over $40,000
In the case of any taxable year beginning after December 31, 2001:
If the taxable income is: The tax shall be:
Not over $2,000 1.40% of taxable income
Over $2,000 but $28.00 plus 3.20% of excess
not over $4,000 over $2,000
Over $4,000 but $92.00 plus 5.50% of excess
not over $8,000 over $4,000
Over $8,000 but $312.00 plus 6.40% of excess
not over $12,000 over $8,000
Over $12,000 but $568.00 plus 6.80% of excess
not over $16,000 over $12,000
Over $16,000 but $840.00 plus 7.20% of excess
not over $20,000 over $16,000
Over $20,000 but $1,128.00 plus 7.60% of
not over $30,000 excess over $20,000
Over $30,000 but $1,888.00 plus 7.90% of
not over $40,000 excess over $20,500
Over $40,000 $2,678.00 plus 8.25% of
excess over $40,000];
(3) Head of a household;
(4) Unmarried individual (other than a surviving spouse, or the head of a household); or
(5) Married individual who does not make a single return jointly with the individual's spouse under section 235-93;
for the taxable year, a tax equal to of the federal income tax liability of twenty-eight per cent or below, plus per cent of the federal taxable income taxed at the federal rate of thirty-one per cent or higher.
[(d)] (b) The tax imposed by section 235-2.4 on estates and trusts shall be determined in accordance with the following table:
In the case of any taxable year beginning after December 31, 1988:
If the taxable income is: The tax shall be:
Not over $2,000 1.60% of taxable income
Over $2,000 but $32.00 plus 3.90% of excess
not over $4,000 over $2,000
Over $4,000 but $110.00 plus 6.80% of excess
not over $8,000 over $4,000
Over $8,000 but $382.00 plus 7.20% of excess
not over $12,000 over $8,000
Over $12,000 but $670.00 plus 7.50% of excess
not over $16,000 over $12,000
Over $16,000 but $970.00 plus 7.80% of excess
not over $20,000 over $16,000
Over $20,000 but $1,282.00 plus 8.20% of
not over $30,000 excess over $20,000
Over $30,000 but $2,102.00 plus 8.50% of
not over $40,000 excess over $30,000
Over $40,000 $2,952.00 plus 8.75% of
excess over $40,000
In the case of any taxable year beginning after December 31, 2000:
If the taxable income is: The tax shall be:
Not over $2,000 1.50% of taxable income
Over $2,000 but $30.00 plus 3.70% of excess
not over $4,000 over $2,000
Over $4,000 but $104.00 plus 6.40% of excess
not over $8,000 over $4,000
Over $8,000 but $360.00 plus 6.90% of excess
not over $12,000 over $8,000
Over $12,000 but $636.00 plus 7.30% of excess
not over $16,000 over $12,000
Over $16,000 but $928.00 plus 7.60% of excess
not over $20,000 over $16,000
Over $20,000 but $1,232.00 plus 7.90% of
not over $30,000 excess over $20,000
Over $30,000 but $2,022.00 plus 8.20% of
not over $40,000 excess over $30,000
Over $40,000 $2,842.00 plus 8.50% of
excess over $40,000
In the case of any taxable year beginning after December 31, 2001:
If the taxable income is: The tax shall be:
Not over $2,000 1.40% of taxable income
Over $2,000 but $28.00 plus 3.20% of excess
not over $4,000 over $2,000
Over $4,000 but $92.00 plus 5.50% of excess
not over $8,000 over $4,000
Over $8,000 but $312.00 plus 6.40% of excess
not over $12,000 over $8,000
Over $12,000 but $568.00 plus 6.80% of excess
not over $16,000 over $12,000
Over $16,000 but $840.00 plus 7.20% of excess
not over $20,000 over $16,000
Over $20,000 but $1,128.00 plus 7.60% of
not over $30,000 excess over $20,000
Over $30,000 but $1,888.00 plus 7.90% of
not over $40,000 excess over $20,500
Over $40,000 $2,678.00 plus 8.25% of
excess over $40,000
[(e) Any taxpayer, other than a corporation, acting as a business entity in more than one state who is required by this chapter to file a return may elect to report and pay a tax of .5 per cent of its annual gross sales (1) where the taxpayer's only activities in this State consist of sales; and (2) who does not own or rent real estate or tangible personal property; and (3) whose annual gross sales in or into this State during the tax year is not in excess of $100,000.
(f) If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:
(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:
(A) The taxable income reduced by the amount of net capital gain, or
(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus
(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).
This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986.]"
SECTION 6. Section 235-93, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) A husband and wife, having that status for purposes of the Internal Revenue Code and entitled to make a joint federal return for the taxable year, may make a single return jointly of taxes under this chapter for the taxable year. In that case the tax shall be computed on their aggregate income [as provided in section 235-52,] and the liability with respect to the tax shall be joint and several. For purposes of this chapter "aggregate income" means the income of both spouses without regard to source in the State."
SECTION 7. Section 235-52, Hawaii Revised Statutes, is repealed.
"[§235-52 Tax in case of joint return or return of surviving spouse. In the case of a joint return of a husband and wife under section 235-93, the tax imposed, as near as may be, by this chapter shall be twice the tax which would be imposed if the taxable income were cut in half. For purposes of this section and section 235-53, a return of a surviving spouse, as defined in the Internal Revenue Code, shall be treated as a joint return of a husband and wife under section 235-93.]"
SECTION 8. Section 235-53, Hawaii Revised Statutes, is repealed.
"[§235-53 Tax tables for individuals. (a) Imposition of tax table tax:
(1) In general. In lieu of the tax imposed by section 235-51, there is hereby imposed for each taxable year on the taxable income of every individual:
(A) Who does not itemize the individual's deductions for the taxable year; and
(B) Whose taxable income for such taxable year does not exceed the ceiling amount,
a tax determined under tables, applicable to such taxable year, which shall be prescribed by the director. In the tables so prescribed, the amounts of tax shall be computed on the basis of the rates prescribed by section 235-51.
(2) Ceiling amount defined. For purposes of paragraph (1), the term "ceiling amount" means, with respect to any taxpayer, the amount (not less than $20,000) determined by the director for the tax rate category in which such taxpayer falls.
(3) Authority to prescribe tables for taxpayers who itemize deductions. The director may provide that this section shall apply also for any taxable year to individuals who itemize their deductions. Any tables prescribed under the preceding sentence shall be on the basis of taxable income.
(b) Section inapplicable to certain individuals. This section shall not apply to:
(1) An individual making a return for a period of less than twelve months on account of a change in annual accounting period, and
(2) An estate or trust.
(c) Tax treated as imposed by section 235-51. For purposes of this chapter, the tax imposed by this section shall be treated as tax imposed by section 235-51.
(d) Taxable income. Whenever it is necessary to determine the taxable income of an individual to whom this section applies, the taxable income shall be determined under section 235-2.4(a).]"
SECTION 9. Section 235-54, Hawaii Revised Statutes, is repealed.
"[§235-54 Exemptions. (a) In computing the taxable income of any individual, there shall be deducted, in lieu of the personal exemptions allowed by the Internal Revenue Code, personal exemptions computed as follows: Ascertain the number of exemptions which the individual can lawfully claim under the Internal Revenue Code, add an additional exemption for the taxpayer or the taxpayer's spouse who is sixty-five years of age or older within the taxable year, and multiply that number by $1,040, for taxable years beginning after December 31, 1984. A nonresident shall prorate the personal exemptions on account of income from sources outside the State as provided in section 235-5. In the case of an individual with respect to whom an exemption under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the personal exemption amount applicable to such individual under this subsection for such individual's taxable year shall be zero.
(b) In computing the taxable income of an estate or trust there shall be allowed, in lieu of the deductions allowed under subsection (a), the following:
(1) An estate shall be allowed a deduction of $400.
(2) A trust which, under its governing instrument, is required to distribute all of its income currently shall be allowed a deduction of $200.
(3) All other trusts shall be allowed a deduction of $80.
(c) A blind person, a deaf person and any person totally disabled, in lieu of the personal exemptions allowed by the Internal Revenue Code, shall be allowed, and there shall be deducted in computing the taxable income of a blind person, a deaf person, or a totally disabled person, instead of the exemptions provided by subsection (a), the amount of $7,000.]"
SECTION 10. Statutory material to be repealed is bracketed. New statutory material is underscored.
SECTION 11. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2001.
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