Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1225 entitled:

begs leave to report as follows:

The purpose of this measure is to correct an inadvertent error created by Act 190, Session Laws Hawaii 2002, that adversely affected taxpayers with adjusted gross incomes of $50,000 or less.

The bill also conforms Hawaii's tax laws to the Internal Revenue Code by lowering the estimated tax payment requirements to one hundred per cent of the preceding taxable year. Additionally, the bill clarifies the circumstances under which the Department of Taxation may grant an extension of time to file a state tax return.

Your Committee finds that this bill will clarify state tax laws and allow the Department of Taxation to provide better and more efficient service to state taxpayers.

Your Committee notes that the federal Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) amended the federal estate tax. These amendments, among others, reduce the state estate tax credit by one-fourth until 2005 when the states will not receive any portion of the federal estate tax. The result of these amendments means that those states that have a pick-up tax (a share of the federal estate tax), such as Hawaii, will lose their share of the federal estate tax. Numerous states have decoupled from the federal estate tax 2001 amendments so that they will continue to receive a portion of the federal estate tax. Your Committee has amended chapter 236D, Hawaii Revised Statutes, to ensure that Hawaii continues to receive a portion of the federal estate tax. These amendments fix the dates of certain definitions in chapter 236D, Hawaii Revised Statutes, as of December 31, 2001. Your Committee made these amendments applicable to transfers occurring after December 31, 2002.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1225, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1225, S.D. 1, and be placed on the calendar for Third Reading.