HB1804

Report Title:

Net Income Tax Credit

Description:

Establishes a refundable tax credit for food, medical services, and non-prescription drugs for individuals at one-hundred twenty per cent of the federal poverty level.

HOUSE OF REPRESENTATIVES	H.B. NO.	1804
TWENTY-THIRD LEGISLATURE, 2006
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO A NET INCOME TAX CREDIT FOR FOOD, MEDICAL SERVICES, AND NON-PRESCRIPTION DRUGS.

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

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

"§235- Excise tax credit for purchases of food, medical services, and non-prescription drugs. (a) Each qualifying individual may claim a refundable tax credit for excise taxes paid on purchases of food, medical services, and non-prescription drugs against the taxpayer's individual income tax liability for the taxable year for which the individual income tax return is being filed.

(b) The tax credit shall be:

(1) For taxable years beginning after December 31, 2005, and before January 1, 2007, $27 multiplied by the number of qualified exemptions to which the taxpayer is entitled; and

(2) For taxable years beginning after December 31, 2006, $55 multiplied by the number of qualified exemptions to which the taxpayer is entitled;

provided that no additional tax credit shall be claimed because of age; and provided further 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.

(c) The tax credit 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 it is properly claimed. If the tax credit claimed by a resident taxpayer exceeds the amount of income tax payment due from the resident taxpayer, the excess of credit over payment due shall be refunded to the resident taxpayer; provided that a tax credit properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.

(d) All claims for a tax credit 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 credit may be claimed. Failure to comply with the foregoing provisions shall constitute a waiver of the right to claim the 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;

(3) Shall alert eligible taxpayers of the tax credit using appropriate and available means;

(4) Shall prepare an annual report to the governor and legislature containing:

(A) The number of credits granted for the prior calendar year;

(B) The total amount of the credits granted; and

(C) The average value of the credits granted to taxpayers based on the different numbers of qualified exemptions claimed;

and

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

(f) As used in this section:

"Dependent" includes a minor child receiving government support such as support from the department of human services or Social Security survivor's benefits.

"Qualified exemption" includes those exemptions permitted under this chapter; provided that no additional exemption as allowed under section 235-54 for a taxpayer who is sixty-five years of age or older may be claimed; and provided further that each dependent for whom an exemption is claimed was physically present in the state for more than nine months during the taxable year.

"Qualifying individual" means an individual resident who:

(1) Files an individual income tax return for a taxable year with an adjusted gross income that is not more than one-hundred twenty per cent of the federal poverty level for federal income tax purposes; and includes those individuals who have no income or no income taxable under this chapter; and

(2) 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.

Qualifying individual does not include:

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

(2) Any person who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or

(3) Any person convicted of a misdemeanor who has been committed to jail and has been physically confined for the full taxable year."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval, and shall apply to taxable years beginning after December 31, 2005.

INTRODUCED BY:	_____________________________