Report Title:

Appropriation; Income Tax Exemption; Tax Credit; Department of Defense; Hawaii State Veterans Cemetery

Description:

Appropriates funds for casket liners and to address the soil problems at the Hawaii State Veterans Cemetery. Appropriates funds for a temporary position to coordinate joint venture in education forum activities. Provides a tax credit for national guard and reserve members with dependents. Provides an income tax exemption to active military personnel based in Hawaii but assigned to out-of-state locations. Quantifies the income tax exemption received by members of the national guard and reserves. (SD2)

HOUSE OF REPRESENTATIVES

H.B. NO.

115

TWENTY-THIRD LEGISLATURE, 2005

H.D. 1

STATE OF HAWAII

S.D. 2

 

A BILL FOR AN ACT

 

RELATING TO MILITARY AFFAIRS.

 

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

PART I.

SECTION 1. The purpose of this Act is to recognize and honor the members of the armed forces by assisting them as follows:

(1) Providing a tax credit to members of the Hawaii national guard and reserves with qualifying dependents;

(2) Providing an income tax exemption for active military personnel based in Hawaii and assigned to an out-of-state location;

(3) Quantifying the income tax exemption received by members of the national guard and reserves;

(4) Providing an appropriation for casket liners and to address the soil problems at the Hawaii state veterans cemetery; and

(5) Providing an appropriation for a temporary position to coordinate joint venture in education forum activities.

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-   Military dependent tax credit. (a) There shall be allowed to each eligible taxpayer 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, who files a net income tax return for a taxable year, a military dependent tax credit that shall be deductible from the taxpayer's net income tax liability imposed by this chapter for the taxable year in which the tax credit is properly claimed.

(b) The amount of the tax credit shall be $     per eligible taxpayer; provided that a husband and wife filing separate returns for a taxable year for which a joint return could have been filed shall claim only the tax credits to which they would have been entitled had a joint return been filed; provided further that no refund or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

(c) To qualify for the income tax credit, the taxpayer shall be in compliance with all applicable federal and state statutes, rules, and regulations.

(d) If the tax credit under this section exceeds the taxpayer's net income tax liability under this chapter, any excess of the tax credit may be used as a credit against the taxpayer's income tax liability in subsequent taxable years until exhausted; provided that a taxpayer who has no income or no income taxable under this chapter may also claim the tax credit under this section.

(e) Every claim, including amended claims, for the tax credit 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 meet the filing requirements of this subsection shall constitute a waiver of the right to claim the tax credit.

(f) The director of taxation shall prepare forms as may be necessary to claim a tax credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91 to effectuate the purposes of this section.

(g) The department of taxation shall report to the legislature annually, no later than twenty days prior to the convening of every regular session, on the number of taxpayers claiming the tax credit and the total cost of the tax credit to the State during the past year.

(h) For the purposes of this section:

"Adopted child" means a child who is placed with the taxpayer by an authorized placement agency (as determined by the department of taxation) for legal adoption and is an adopted child even if the adoption is not final.

"Eligible foster child" means any child who is cared for by the taxpayer as the taxpayer's own and is placed with the taxpayer by an authorized placement agency (as determined by the department of taxation).

"Eligible taxpayer" means a person who qualifies for the tax deduction under paragraph 235-7(a)(7) and claims a qualifying dependent.

"Qualifying dependent" means a child who:

(1) Is under age eighteen at the end of the year that the tax credit is claimed;

(2) Has resided with the taxpayer for the entire year the tax credit is claimed;

(3) Is a citizen or resident alien of the United States;

(4) Is claimed as a dependent by the taxpayer and is related to the taxpayer as a:

(A) Son, daughter, stepson, stepdaughter, or adopted child, or a descendant of a son, daughter, stepson, stepdaughter, or adopted child, who is cared for by the taxpayer as if the child was the taxpayer's own child;

(B) Brother, sister, stepbrother, or stepsister, or the child or grandchild of a brother, sister, stepbrother, or stepsister who is cared for by the taxpayer as if the child was the taxpayer's own child; or

(C) Eligible foster child;

provided that any qualifying dependent who was born or died in the year the tax credit is claimed is considered to have lived with the taxpayer for all of the claimed year if the taxpayer's home was the qualifying dependent's home for the entire time the qualifying dependent was alive during the claimed year."

PART III.

SECTION 3. Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There shall be excluded from gross income, adjusted gross income, and taxable income:

(1) Income not subject to taxation by the State under the Constitution and laws of the United States;

(2) Rights, benefits, and other income exempted from taxation by section 88-91, having to do with the state retirement system, and the rights, benefits, and other income, comparable to the rights, benefits, and other income exempted by section 88-91, under any other public retirement system;

(3) Any compensation received in the form of a pension for past services;

(4) Compensation paid to a patient affected with Hansen's disease employed by the State or the United States in any hospital, settlement, or place for the treatment of Hansen's disease;

(5) Except as otherwise expressly provided, payments made by the United States or this State, under an act of Congress or a law of this State, which by express provision or administrative regulation or interpretation are exempt from both the normal and surtaxes of the United States, even though not so exempted by the Internal Revenue Code itself;

(6) Any income expressly exempted or excluded from the measure of the tax imposed by this chapter by any other law of the State, it being the intent of this chapter not to repeal or supersede any such express exemption or exclusion;

(7) Income received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii national guard as compensation for performance of duty[, equivalent to pay received for forty-eight drills (equivalent of twelve weekends) and fifteen days of annual duty, at an:] in the amount of:

(A) [E-1 pay grade after eight years of service;] $     ; provided that this subparagraph shall apply to taxable years beginning after December 31, 2004;

(B) [E-2 pay grade after eight years of service;] $     ; provided that this subparagraph shall apply to taxable years beginning after December 31, 2005;

(C) [E-3 pay grade after eight years of service;] $     ; provided that this subparagraph shall apply to taxable years beginning after December 31, 2006;

(D) [E-4 pay grade after eight years of service;] $     ; provided that this subparagraph shall apply to taxable years beginning after December 31, 2007; and

(E) The basic pay for the E-5 pay grade after eight years of service[;] as published in the military basic pay tables prepared by the defense finance and accounting service for the taxable year for which the exclusion is being claimed; provided that this subparagraph shall apply to taxable years beginning after December 31, 2008;

(8) Income received by each member of the armed forces and the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii national guard during the time the member is assigned by military orders outside of Hawaii. For purposes of this paragraph, "income" means basic pay;

[(8)] (9) Income derived from the operation of ships or aircraft if the income is exempt under the Internal Revenue Code pursuant to the provisions of an income tax treaty or agreement entered into by and between the United States and a foreign country, provided that the tax laws of the local governments of that country reciprocally exempt from the application of all of their net income taxes, the income derived from the operation of ships or aircraft that are documented or registered under the laws of the United States;

[(9)] (10) The value of legal services provided by a prepaid legal service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

[(10)] (11) Amounts paid, directly or indirectly, by a prepaid legal service plan to a taxpayer as payment or reimbursement for the provision of legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

[(11)] (12) Contributions by an employer to a prepaid legal service plan for compensation (through insurance or otherwise) to the employer's employees for the costs of legal services incurred by the employer's employees, their spouses, and their dependents; and

[(12)] (13) Amounts received in the form of a monthly surcharge by a utility acting on behalf of an affected utility under section 269-16.3 shall not be gross income, adjusted gross income, or taxable income for the acting utility under this chapter. Any amounts retained by the acting utility for collection or other costs shall not be included in this exemption."

PART IV.

SECTION 4. The legislature finds that the Hawaii state veterans cemetery in Kaneohe opened in 1991 as the National Memorial Cemetery of the Pacific was reaching full capacity. The Kaneohe cemetery is Hawaii's only state run facility that serves veterans and their family members. The cemetery is a place of peace and tranquillity where comrades-in-arms and friends can visit the final resting-place of departed veterans.

Unfortunately, this peace and tranquillity has been disturbed by soil problems in the area. A recent study has found that the cemetery's soil is not suitable for re-use as back-fill in graves due to its composition and moisture content. Consequently, the substandard soil cannot provide the necessary support for graves and headstones, causing them to sink in unsightly holes that mar the landscape and desecrate the sanctity of the cemetery. In order to remedy the soil problem, appropriate soil and casket liners are necessary.

The purpose of this part is to provide funds to remedy the soil problem and for purchase of casket liners at the Hawaii state veterans cemetery to ultimately provide a decent burial site for Hawaii's veterans.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $       , or so much thereof as may be necessary for fiscal year 2005-2006, and $          , or so much thereof as may be necessary for fiscal year 2006-2007, to address the soil problems at the Hawaii state veterans cemetery; provided that a portion of the appropriated amount for fiscal year 2005-2006 shall be used for casket liners.

SECTION 6. The sums appropriated in this part shall be expended by the department of defense for the purposes of this Act.

PART V.

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2005-2006, for one temporary position to coordinate joint venture in education forum activities, including participation in the Hawaii 3Rs program.

SECTION 8. The sum appropriated under this part shall be expended by the department of defense for the purposes of this Act.

PART VI.

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect upon its approval; provided that parts III, IV, and V shall take effect on July 1, 2005; and provided further that parts II and III shall apply to taxable years beginning after December 31, 2004.