HOUSE OF REPRESENTATIVES	H.B. NO.	1969
THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII

A BILL FOR AN ACT

relating to the corporate dividends received deduction.

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

SECTION 1. The purpose of this Act is to correct the net income tax law to eliminate unconstitutional provisions as recognized by the department of taxation in Announcement 98-5 and Tax Information Release No. 99-2, and thereby to conform the statutory language to the law as administered by the department of taxation.

SECTION 2. Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The deductions of or based on dividends paid or received, allowed to a corporation under chapter 1, subchapter B, part VIII of the Internal Revenue Code, shall not be allowed. In lieu thereof there shall be allowed as a deduction the entire amount of dividends received by any corporation upon [the]:

(1) The shares of stock of a national banking association[, qualifying];

(2) Qualifying dividends, as defined in section 243(b) of the Internal Revenue Code, received by members of an affiliated group, [or dividends]; provided that "includible corporation" as used therein shall include foreign, non-United States corporations; or

(3) Dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (Public Law 85-699) [upon shares of stock qualifying under paragraph (3), seventy]; and

seventy per cent of the amount received by any corporation as dividends[:

(1) Upon the shares of stock of another corporation, if at the date of payment of the dividend at least ninety-five per cent of the other corporation's capital stock is owned by one or more corporations doing business in this State and if the other corporation is subjected to an income tax in another jurisdiction (but subjection to federal tax does not constitute subjection to income tax in another jurisdiction); and

(2) Upon the shares of stock of a bank or insurance company organized and doing business under the laws of the State;

(3) Upon the shares of stock of another corporation, if at least fifteen per cent of the latter corporation's business, for the taxable year of the latter corporation preceding the payment of the dividend, has been attributed to this State.

However, except for national bank dividends, the deductions under this subsection are not allowed when they would not have been allowed under section 243 of the Internal Revenue Code, as amended by Public Law 85-866, by reason of subsections (b) and (c) of section 246 of the Internal Revenue Code. For the purposes of this subsection fifteen per cent of a corporation's business shall be deemed to have been attributed to this State if fifteen per cent or more of the entire gross income of the corporation as defined in this chapter (which for the purposes of this subsection shall be computed without regard to source in the State and shall include income not taxable by reason of the fact that it is from property not owned in the State or from a trade or business not carried on in the State in whole or in part), under section 235-5 and the other provisions of this chapter, shall have been attributed to the State and subjected to assessment of the taxable income therefrom (including the determination of the resulting net loss, if any).] upon the shares of stock of another corporation, if otherwise allowed under section 243 of the Internal Revenue Code."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2019.

INTRODUCED BY:

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Report Title:

Corporate Dividends Received Deduction; Housekeeping

Description:

Amends the corporate dividends received deduction to conform to the department of taxation's practice of administering the deduction in compliance with federal law.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.