Report Title:

Taxation; Earned Income Tax Credit

Description:

Provides a refundable state earned income tax credit.

HOUSE OF REPRESENTATIVES	H.B. NO.	470
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

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

     SECTION 1.  The purpose of this Act is to establish a refundable state earned income tax credit to further encourage work and to counterbalance regressive state and local taxes.  This refundable state earned income tax credit shall be equal to twenty per cent of the federal earned income tax credit.

     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 individual taxpayer who:

(1) Files an individual income tax return for a taxable year; and

(2) Is not claimed or is not 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 twenty per cent of the federal earned income tax credit allowed under section 32 (with respect to earned income) 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) 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 individual taxpayer shall use the same filing status (i.e., "married filing jointly", "head of household", "surviving spouse", or "single") on the taxpayer's Hawaii tax return as used on the taxpayer's federal tax return for the taxable year.  In the case of a husband and wife filing separately, the credit allowed may be applied against the tax of either or divided between them, as they elect.

(d)  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 this subsection shall constitute a waiver of the right to claim the tax credit.

(e)  The director of taxation:

(1) Shall prepare any forms that 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 data;

(4) Shall prepare an annual report containing the:

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

(B) Total amount of the credits granted; and

(C) Average value of the credits granted to taxpayers whose earned income falls within various income ranges; and

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

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2007.

INTRODUCED BY:

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