Report Title:

Taxation; Food Tax Credit; Earned Income Tax Credit; Increase Standard Deduction

 

Description:

Establishes a food tax credit of up to $70 per qualified exemption. Provides a state earned income tax credit. Increases standard income tax deductions. (SB751 HD2)

THE SENATE

S.B. NO.

751

TWENTY-FIRST LEGISLATURE, 2001

S.D. 1

STATE OF HAWAII

H.D. 2

 

A BILL FOR AN ACT

 

relating to taxation.

 

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

PART I

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Food tax credit. (a) Each resident individual taxpayer who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes, may claim a refundable food tax credit against the resident taxpayer's individual income tax liability for the taxable year for which the individual income tax return is being filed; provided that a resident individual who has no income or no income taxable under this chapter and who is not claimed or is not otherwise eligible to be claimed as a dependent by a taxpayer for federal or Hawaii state individual income tax purposes may claim this credit.

(b) Each resident individual taxpayer may claim a food tax credit multiplied by the number of qualified exemptions to which the taxpayer is entitled in accordance with the table below; provided that a husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled had a joint return been filed.

Adjusted Gross Income Tax Credit

Under $4,000 $70

$4,000 under $8,000 60

$8,000 under $12,000 50

$12,000 under $16,000 40

$16,000 under $20,000 30

$20,000 under $30,000 20

$30,000 and over 0

(c) For the purposes of this section, "qualified exemption" means those exemptions permitted under this chapter; provided that:

(1) No additional exemption may be claimed by a taxpayer who is sixty-five years of age or older;

(2) A person for whom an exemption is claimed has physically resided in the State for more than nine months during the taxable year; and

(3) Multiple exemptions shall not be granted because of deficiencies in vision, hearing, or other disability.

For purposes of claiming the credit only, a minor child receiving support from the department of human services, social security survivor's benefits, and the like, may be considered a dependent and a qualified exemption of the parent or guardian.

(d) The tax credit under this section shall not be available to:

(1) Any person who has been convicted of a felony and who has been imprisoned and has been physically confined for the full taxable year;

(2) Any person who would otherwise be eligible to be claimed as a dependent but who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or

(3) Any misdemeanant who has been imprisoned and has been physically confined for the full taxable year.

(e) The tax credits claimed by a resident taxpayer pursuant to this section shall be deductible from the resident taxpayer's individual income tax liability, if any, for the tax year in which they are properly claimed. If the tax credits claimed by a resident taxpayer exceed the amount of income tax payment due from the resident taxpayer, the excess of credits over payments due shall be refunded to the resident taxpayer; provided that:

(1) Tax credits properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and

(2) No refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1.

(f) All claims for tax credits under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit."

PART II

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235— Earned income tax credit. (a) Each resident individual taxpayer who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for income tax purposes, may claim a refundable earned income tax credit. The tax credit, for the appropriate taxable year, shall be equal to:

(1) For taxable years beginning after December 31, 2000, and ending before January 1, 2002, ten per cent of the federal earned income tax credit; and

(2) For taxable years beginning after December 31, 2001, fifteen per cent of the federal earned income tax credit,

determined under section 32 of the Internal Revenue Code and reported as such on the resident individual’s federal income tax return.

(b) In the case of a part—year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a)(1) or (2) multiplied by the ratio of adjusted gross income attributed to this State to the entire adjusted gross income computed without regard to source in the State pursuant to section 235—5.

(c) For purposes of claiming the tax credit allowed by this section, a resident individual taxpayer shall use the same filing status (i.e., "married filing jointly", "head of household", "qualifying widow(er)", or "single") on their Hawaii tax return as used on the taxpayer’s federal return for the taxable year.

(d) If the tax credit under this section exceeds the taxpayer’s income tax liability, the excess of tax credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1. All claims including any amended claims for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the preceding sentence shall constitute a waiver of the right to claim the tax credit.

(e) The director of taxation:

(1) Shall prepare such forms as may be necessary to claim a tax credit under this section;

(2) May require proof of the claim for the tax credit; and

(3) May adopt rules pursuant to chapter 91 to effectuate this section."

PART III

SECTION 3. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Section 63 (with respect to taxable income defined) of the Internal Revenue Code shall be operative for the purpose of this chapter, except that the standard deduction amount in section 63(c) of the Internal Revenue Code shall instead mean:

(1) For taxable years before January 1, 2001:

[(1)] (A) $1,900 in the case of:

[(A)] (i) A joint return as provided by section 235-93; or

[(B)] (ii) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);

[(2)] (B) $1,650 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);

[(3)] (C) $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)] (D) $950 in the case of a married individual filing a separate return[.]; and

(2) For the taxable year beginning after December 31, 2000, and ending before January 1, 2002:

(A) $2,400 in the case of:

(i) A joint return as provided by section 235-93; or

(ii) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);

(B) $2,100 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);

(C) $1,900 in the case of an individual who is not married and who is not a surviving spouse or head of household; or

(D) $1,200 in the case of a married individual filing a separate return; and

(3) For taxable years beginning after December 31, 2001:
    1. $3,000 in the case of:

      2. (i) A joint return as provided by section 235-93; or

      (ii) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);

    2. $2,500 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
    3. $2,100 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
    4. $1,500 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."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2000.