Report Title:

Taxation; Single Rate

Description:

Replaces all state taxes except alcohol, cigarette and tobacco, and fuel with a comprehensive gross state income tax with a single rate for all taxpayers. Allows deductions only for purchases made by one business from another that pays the tax on the goods or services purchased or traded.

HOUSE OF REPRESENTATIVES

H.B. NO.

2360

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO COMPREHENSIVE STATE TAX REFORM.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

COMPREHENSIVE TAX

PART I. PURPOSE; DEFINITIONS; ADMINISTRATION

§ -1 Purpose. The purpose of the tax imposed by this chapter is to simplify the existing state tax structure so completely that it:

(1) Dramatically reduces both the costs to the State of administrating and collecting taxes, and the costs of operating a business--especially those associated with documenting and calculating tax liability;

(2) Removes all artificial incentives and disincentives which affect behavior as to generate inequity amongst taxpayers, market distortions, and their resulting operating inefficiency, and penalties for work, saving, and investment;

(3) Replaces almost all existing state taxes with those that would be deductible against federal income tax liability;

(4) Promotes the purchase of products and services from businesses in Hawaii;

(5) Eliminates the inflation generated by the pyramiding of wholesale costs inherent in Hawaii's existing general excise and use taxes; and

(6) Allows taxpayers to understand exactly what is being taxed, how the burden of taxation is distributed, and the actual tax revenue implications of any policy decisions affecting the size and functions of state government.

This transforms Hawaii's tax environment into a magnet, competitive with other jurisdictions, for the kind of financial and human capital which can trigger a wide-ranging economic and social renaissance benefiting all the people of Hawaii.

§   -2 Definitions. When used in this chapter, unless otherwise required by the context:

"Comptroller" means the comptroller of the State.

"Corporation" means the same as in the Internal Revenue Code of 1986, as amended. A "domestic corporation" is one organized under the laws of the State. A "foreign corporation" is any other corporation.

"Department" means the department of taxation.

"Director" means the director of taxation.

"Dividend" means any distribution by a corporation to its shareholders or holders on an interest therein which is treated as a dividend by the Internal Revenue Code of 1986, as amended.

"Employee" means the same as in the Internal Revenue Code of 1986, as amended.

"Estimated wages" means the aggregate amount which the employee reasonably expects will constitute wages for the estimation year;

"Estimation year", in the case of an employee who files the employee's return on the basis of a calendar year, means the calendar year in which the wages are paid; provided that in the case of an employee who files the employee's return on a basis other than the calendar year, the employee's estimation year, and the amounts deducted and withheld to be governed by the estimation year, shall be determined under rules prescribed by the director of taxation.

"Fiduciary" means the same as in the Internal Revenue Code of 1986, as amended.

"Fiscal year" means the same as in the Internal Revenue Code of 1986, as amended.

"Gross income" and "taxable income" mean the same as gross income as defined in section    -7.

"Husband and wife" means the same as in the Internal Revenue Code of 1986, as amended.

"Includes" and "including" when used in a definition shall not be deemed to exclude other things otherwise within the meaning of the term defined.

"Individual" means a person other than a trust, estate, partnership, or corporation, as defined.

"Internal Revenue Code of 1954, as amended" includes the Internal Revenue Code of 1986 and the Internal Revenue Code of 1986, as amended.

"Nonresident" means every individual other than a resident.

"Nonresident estate" or "nonresident trust" means one other than resident.

"Paid or incurred, paid or accrued" means the same as in the Internal Revenue Code of 1986, as amended.

"Partnership" means the same as in the Internal Revenue Code.

"Penalty" or "penalties", when used in connection with the additions to the tax imposed for delinquency in payment, includes interest as well.

"Person" or "corporation" includes every individual, partnership, society, unincorporated association, joint adventure, group, hui, joint stock company, corporation, trustee, personal representative, trust estate, decedent's estate, trust, trustee in bankruptcy, or other entity, whether such persons are doing business for themselves or in a fiduciary capacity, or as employees or employers and whether the individuals are residents or nonresidents of the State, and whether the corporation or other association is created or organized under the laws of the State or of another jurisdiction. Any person who has in the person's possession, for sale in the State, the property of a nonresident owner, other than as an employee of such owner, shall be deemed the seller of the property, when sold.

"Resident" means (1) every individual domiciled in the State, and (2) every other individual whether domiciled in the State or not, who resides in the State. To "reside" in the State means to be in the State for other than a temporary or transitory purpose. Every individual who is in the State more than two hundred days of the taxable year in the aggregate shall be presumed to be a resident of the State. This presumption may be overcome by evidence satisfactory to the department of taxation that the individual maintains a permanent place of abode outside of the State and is in the State for a temporary or transitory purpose. No person shall be deemed to have gained or lost a residence simply because of the person's presence or absence in compliance with military or naval orders of the United States, or while engaged in aviation or navigation, or while a student at any institution of learning.

"Resident estate" means an estate of a resident decedent the fiduciary of which was appointed by a court of this State and the administration of which is carried on in this State.

"Resident trust" means a trust of which the fiduciary is a resident of the State or the administration of which is carried on in the State.

"Sale" or "sales" includes the exchange of properties as well as the sale thereof for money.

"Shareholder" means the same as in the Internal Revenue Code of 1986, as amended.

"Stock" means the same as in the Internal Revenue Code of 1986, as amended.

"Taxable year" means the calendar year or the fiscal year ending during such calendar year upon the basis of which income is computed under this chapter. "Taxable year" includes, in the case of a return made for a fractional part of a year under this chapter or under rules prescribed by the department of taxation, the period for which such return is made, and in cases where the department terminates the taxable year in accordance with section 231-24 and levies a jeopardy assessment on income for such portion or period of a year under section    -109, then the period or portion of the year for which the jeopardy assessment is made.

"Taxpayer" means a person subject to the tax imposed by this chapter.

"Trade or business" includes the performance of the functions of a public office.

"Uniformed services of the United States" means the Army, Navy, Air Force, Marine Corps, Coast Guard, Coast and Geodetic Survey, and Public Health Service, and all regular and reserve components thereof, including the national guard. The term "uniformed services of the United States" applies only to persons who are deemed members thereof under the laws of the United States relating to pay and allowances. Services as a member of the uniformed services includes inactive duty training.

"Without regard to source in the State" shall mean income derived or earned from all sources whether from sources located within or from sources located without the State.

§   -3 Administration and enforcement by department. The administration of this chapter is vested in and shall be exercised by the department of taxation, which shall prescribe forms and reasonable rules of procedure in conformity with this chapter for the making of returns and for the ascertainment, assessment, and collection of the taxes imposed hereunder. The forms and rules, when prescribed by the department and printed and published in the manner provided by law shall have the force and effect of law. The enforcement of this chapter in any of the courts of the State is under the exclusive jurisdiction of the department, which shall require the assistance of the attorney general of the State, the respective county attorneys and the prosecuting attorney of the counties where suit is brought; but these attorneys shall receive no fees or compensation for services rendered in enforcing this chapter in addition to the respective salaries paid by law to them.

The department shall have, in addition to all of the duties and powers in this chapter prescribed or granted, all the duties and powers prescribed or granted by the existing or future tax laws of the State so far as the same may be applicable to the administration of this chapter and are not contrary to the express provisions hereof.

§   -4 Income taxes by the State; residents, nonresidents, corporations, estates, and trusts. (a) The tax imposed by this chapter applies to the entire income of a resident, computed without regard to source in the State.

(b) In the case of a nonresident, the tax applies to the income received or derived from property owned, personal services performed, trade, or business carried on, and any and every other source in the State.

In the case of a nonresident spouse filing a joint return with a resident spouse, the tax applies to the entire income of the nonresident spouse computed without regard to source in the State.

(c) Except where a joint return is filed, when the status of a taxpayer changes during the taxable year from resident to nonresident, or from nonresident to resident, the tax imposed by this chapter applies to the entire income earned during the period of residence in the manner provided in subsection (a) and during the period of nonresidence the tax shall apply upon the income received or derived as a nonresident in the manner provided in subsection (b); provided that if it cannot be determined whether income was received or derived during the period of residence or during the period of nonresidence, there shall be attributed to the State such portion of the income as is determined by applying to such income for the whole taxable year the ratio which the period of residence in the State bears to the whole taxable year, unless the taxpayer shows to the satisfaction of the department of taxation that the result is to attribute to the state income, dependent upon residence, received or derived during the period of nonresidence, in which event the amount of income as to which such showing is made shall be excluded.

The apportionment of income provided by this subsection shall not apply where one spouse is a resident of this State and a joint return is filed with the nonresident spouse in which event the tax shall be computed on their aggregate income without regard to source in the State. Where, however, both spouses change their status from resident to nonresident or from nonresident to resident, their income shall be apportioned in the manner provided in this subsection.

(d) A corporation, foreign or domestic, is taxable upon the income received or derived from property owned, trade or business carried on, and any and every other source in the State. In addition thereto a domestic corporation is taxable upon its income from property owned, trade or business carried on, and any and every other source outside the State, unless subjected to income tax thereon in any other jurisdiction. Subjection to federal tax does not constitute subjection to income tax in another jurisdiction. "Corporation" includes any professional corporation incorporated pursuant to chapter 415A or 416.

(e) (1) The income of a resident estate or trust shall be computed without regard to source in the State. The income of a nonresident estate or trust shall be that received or derived from sources in the State.

(2) A beneficiary of an estate or trust, or person treated as the owner of any portion of a trust, who is taxable upon income thereof under the Internal Revenue Code of 1986, as amended, shall be taxed thereon as herein provided, irrespective of the taxability of the estate or trust or whether it is required to make a fiduciary return under this chapter. If all such income consists of income which would be taxable under this chapter if received directly by the beneficiary or person, the beneficiary or person shall be taxed upon all of it. If some of it consists of income which would not be taxable if received directly by the beneficiary or person, then unless the trust instrument provides otherwise the income of each such beneficiary or person shall be conclusively presumed to have been received or derived out of each class of income of the estate or trust, and the beneficiary or person shall be taxed upon such part of it as would be taxable if received directly by the beneficiary or person.

(3) Each estate or trust shall include in its return all of the information necessary to determine the taxability of the income of the estate or trust, regardless of source. Only in the case of a nonresident estate or trust of which all the beneficiaries are nonresidents and no part of which is treated as owned by a resident shall the return be confined to income from sources in the State. This paragraph shall not cause income to be taxed to an estate or trust that otherwise would not have been so taxed.

§   -5 Allocation of income of persons not taxable upon entire income. (a) This section applies to income not subject to part II, including nonbusiness income and certain section    -22 income.

(b) Income (including gains), also losses, from property owned in the State and from any other source in the State shall be determined by an allocation and separate accounting so far as practicable. Losses from property owned outside the State and from other sources outside the State shall not be deducted.

(c) Deductions connected with income taxable under this chapter shall not be allowed, and deductions connected with income not taxable under this chapter shall not be allowed. Deductions from gross income shall not be allowed except if allowed under    -7 and only to the extent of the ratio of the gross income attributed to this State to the entire gross income computed without regard to source in the State.

Deductions by individual taxpayers from gross income shall not be allowed; provided that as used in this sentence "gross income" means gross income as defined in the Internal Revenue Code.

(d) If in the opinion of the department the allocations hereinabove provided do not clearly and accurately reflect the actual amount of the gross income and taxable income received or derived from all property owned and any and every other source in the State, or if any person shows that the allocations hereinabove provided result in adjusted gross income or taxable income being attributed to the State in a larger amount than is just and equitable, then the same shall be determined, allocated, and apportioned under such rules, processes, and formulas as the department prescribes as being just and equitable.

§   -6 Foreign manufacturing corporation; warehousing of products. (a) For the purposes of sections    -21 to    -39, a foreign corporation engaged in the business of manufacturing without the State, having its manufactured products warehoused in this State by another person who is engaged in the business of warehousing in this State and whose compensation for providing the warehousing is included in the measure of the tax imposed by this chapter, shall not be deemed to be carrying on a trade or business in this State if all of the following requirements are met:

(1) Every delivery of sale of such products so warehoused is made at the warehouse to fill an order for such property procured by a representative (as defined in subsection (b)) from a seller subject to the tax under this chapter and purchasing such property for purposes of resale;

(2) Every order so procured was made subject to acceptance and was accepted by the corporation at an office located out of this State;

(3) No collection for the payment of the products delivered as described in paragraph (1) is made in this State by any of its employees or agents or by any representative; and

(4) Except as provided in this section, it is not carrying on a trade or business in this State within the meaning of sections    -21 to    -39.

(b) "Representative" means a salesperson, commission agent, broker, or other person who is authorized or employed as an independent contractor and not as an employee by the foreign manufacturing corporation described in subsection (a) to assist the manufacturer in selling its products in this State, by procuring orders for such sale, and who carries on such activities in this State (it being immaterial whether such activities are regular or intermittent), but whose functions and authority do not include the accepting of orders for, or the making of deliveries of, or the collecting of payment for deliveries of such products.

§   -7 Gross income. (a) There is imposed on every person a comprehensive tax on the total amount of gross income, gross proceeds of the sale of goods or services, and the value of products or services traded. For the purposes of this chapter "gross income, gross proceeds of the sale of goods or services, and the value of goods or services traded" shall include:

(1) The gross receipts, cash or accrued, and the cash value of benefits and bartered goods and services of the taxpayer received for wages, as compensation for personal services, and the gross receipts, including cash, or the equivalent in bartered goods and services of the taxpayer derived from trade, business, commerce, or sales and the value proceeding or accruing from the sale of tangible personal property, or service, or both, and all receipts, actual or accrued as hereinafter provided, by reason of the investment of the capital of the business engaged in or individual investments, including interest, discount, rentals, royalties, fees, or other emoluments however designated and without any deductions on account of the cost of property sold, the cost of materials used, labor cost, taxes, royalties, interest, or discount paid or any other expenses whatsoever; provided that the cost basis of property held for investment or a principal residence shall be deducted from any income generated by the sale of that property or the sale of a principal residence. Every taxpayer shall be presumed to be dealing on a cash basis unless the taxpayer proves to the satisfaction of the department of taxation that the taxpayer is dealing on an accrual basis and the taxpayer's books are so kept, or unless the taxpayer employs or is required to employ the accrual basis for the purposes of the tax imposed by this chapter for any taxable year in which event the taxpayer shall report the taxpayer's gross income for the purposes of this chapter on the accrual basis for the same period.

(2) "Gross proceeds of sale" means the value actually proceeding from the sale of tangible personal property without any deduction on account of the cost of property sold or expenses of any kind.

(b) No adjustments, exemptions or deductions from gross income, gross proceeds of sale or the value of goods and services traded shall be allowed except a taxpayer engaged in business may deduct the amount or value of goods or services purchased from another business; provided that those goods or services are subject to the tax imposed by this chapter under the tax liability of the taxpayer selling those goods and services.

(c) Groups organized for purposes of non-profit activity, and recognized under section 501(c) of the Internal Revenue Code of 1986, as amended, shall be allowed to deduct any income:

(1) Received as a result of an activity from which no profit inures to the benefit of any private stockholder or individual, except for death or other benefits to members of fraternal societies; and

(2) The primary purpose of the activity was not to produce income even if the income is to be used for or in furtherance of the non-profit purpose.

§   -8 Conformity to Constitution, etc. In computing the amounts of any tax imposed under this chapter, there shall be excepted or deducted from the values, gross proceeds of sales, or gross income so much thereof as, under the Constitution and laws of the United States, the State is prohibited from taxing, but only so long as and only to the extent that the State is so prohibited.

PART II. UNIFORM DIVISION OF INCOME

FOR TAX PURPOSES

§   -21 Definitions. As used in this part, unless the context otherwise requires:

"Business income" means income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations.

"Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.

"Compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.

"Nonbusiness income" means all income other than business income.

"Public utility" has the meaning given that term in section 269-1.

"Sales" means all gross receipts of the taxpayer not allocated under sections    -24 to    -28.

"State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

§   -22 Taxpayers affected. Any taxpayer having income from business activity which is taxable both within and without this State, other than activity as a public utility or the rendering of purely personal services by an individual, shall allocate and apportion the taxpayer's net income as provided in this part.

§   -23 Taxable in another state. For purposes of allocation and apportionment of income under this part, a taxpayer is taxable in another state if:

(1) In that state the taxpayer is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or

(2) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.

§   -24 Specified nonbusiness income. Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in sections    -25 to    -27.

§   -25 Rents; royalties. (a) Net rents and royalties from real property located in this State are allocable to this State.

(b) Net rents and royalties from tangible personal property are allocable to this State:

(1) If and to the extent that the property is utilized in this State, or

(2) In their entirety if the taxpayer's commercial domicile is in this State and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized.

(c) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.

§   -26 Allocation of capital gains and losses. (a) Capital gains and losses from sales of real property located in this State are allocable to this State.

(b) Capital gains and losses from sales of tangible personal property are allocable to this State if:

(1) The property had a situs in this State at the time of the sale; or

(2) The taxpayer's commercial domicile is in this State and the taxpayer is not taxable in the state in which the property had a situs.

(c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible personal property are allocable to this State if the taxpayer's commercial domicile is in this State.

(d) Gain or loss from the sale of a partnership interest is allocable to this State in the ratio of the original cost of partnership tangible property in the State to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than fifty per cent of the value of a partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest shall be allocated to this State in accordance with the sales factor of the partnership for its first full tax period immediately preceding its tax period during which the partnership interest was sold.

§   -27 Allocation of interest and dividends. Interest and dividends are allocable to this State if the taxpayer's commercial domicile is in this State.

§   -28 Allocation of patent and copyright royalties. (a) Patent and copyright royalties are allocable to this State:

(1) If and to the extent that the patent or copyright is utilized by the payer in this State, or

(2) If and to the extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in this State.

(b) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer's commercial domicile is located.

(c) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer's commercial domicile is located.

§   -29 Apportionment of business income; percentage. All business income shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three.

§   -30 Apportionment; property factor. The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this State during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period.

§   -31 Apportionment; property factor; owned and used property. Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals.

§   -32 Apportionment; property factor; average value. The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the director of taxation may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property.

§   -33 Apportionment; payroll factor. The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period.

§   -34 Compensation; where paid. Compensation is paid in this State if:

(1) The individual's service is performed entirely within the State; or

(2) The individual's service is performed both within and without the State, but the service performed without the State is incidental to the individual's service within the State; or

(3) Some of the service is performed in the State and (A) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the State, or (B) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this State.

§   -35 Apportionment; sales factor. The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this State during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period.

§   -36 Apportionment; sales factor; tangible personalty. Sales of tangible personal property are in this State if:

(1) The property is delivered or shipped to a purchaser, other than the United States government, within this State regardless of the f.o.b. point or other conditions of the sale; or

(2) The property is shipped from an office, store, warehouse, factory, or other place of storage in this State and (A) the purchaser is the United States government or (B) the taxpayer is not taxable in the state of the purchaser.

§   -37 Apportionment; sales factor; nontangible personalty. Sales, other than sales of tangible personal property, are in this State if:

(1) The income-producing activity is performed in this State; or

(2) The income-producing activity is performed both in and outside this State and a greater proportion of the income-producing activity is performed in this State than in any other state, based on costs of performance.

§   -38 Equitable adjustment of formula. If the allocation and apportionment provisions of this part do not fairly represent the extent of the taxpayer's business activity in this State, the taxpayer may petition for or the director of taxation may require, in respect to all or any part of the taxpayer's business activity, if reasonable:

(1) Separate accounting;

(2) The exclusion of any one or more of the factors in this part;

(3) The inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this State; or

(4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income.

§   -38.5 Application. It is the intent of the legislature that in administering this chapter, this part, and sections 235-4 and 235-5, as those sections existed on December 31, 2001, or as a member of or administering the multistate tax compact under chapter 255, the department of taxation shall not use or allow the use of the worldwide method of unitary taxation upheld in Container Corporation of America v. The Franchise Tax Board, 463 U.S. 159. It is the intent of the legislature that the department of taxation shall continue to apply this chapter, part, sections    -4 and    -5, and chapter 255 as they were applied before the above case was decided.

§   -39 Citation of part. This part may be cited as the "Uniform Division of Income for Tax Purposes Act".

PART III. TAX RATE AND WITHHOLDING

§   -51 Tax imposed; rates. There is hereby imposed on every person a comprehensive tax on the total amount of gross income, gross proceeds of sale, and value of goods or services traded, as defined in    -7, at the rate of         per cent.

§   -52 to §   -60 Reserved.

WITHHOLDING AND COLLECTION OF TAX

AT SOURCE

§   -61 Withholding of tax on wages. (a) As used in this section:

"Employee" includes an officer or elected official, or any other employee.

"Employer" means (A) the person or government for whom an individual performs or performed any service, of whatever nature, as the employee of such person or government, and (B) the person having control of the payment of the wages if the employer as heretofore defined does not have control thereof, and (C) any person subject to the jurisdiction of the State and paying wages on behalf of an employer as heretofore defined if the employer is not subject to the jurisdiction of the State; provided that the term employer shall not include any government that is not subject to the laws of the State except as, and to the extent that, it consents to the application of sections    -61 to    -67 to it.

"Wages" means wages, commissions, fees, salaries, bonuses, and every and all other kinds of remuneration for, or compensation attributable to, services performed by an employee for the employee's employer, including the cash value of all remuneration paid in any medium other than cash and the cost-of-living allowances and other payments included in gross income by section    -7.

(b) Every employer, as defined herein, making payment of wages, as herein defined, to employees, shall deduct and withhold from such wages an amount of tax determined as provided in this section.

(c) For each withholding period (whether weekly, biweekly, monthly, or otherwise) the amount of tax to be withheld under this section shall be at a rate which, for the taxable year, will yield the tax imposed by section    -51 upon each employee's annual wage, as estimated from the employee's current wage in any withholding period, but (for the purposes of this subsection of the rates provided by section    -51 the maximum to be taken into consideration shall be            per cent. The tax for the taxable year shall be calculated upon the following assumptions:

(1) That the employee's annual wage, as estimated from the employee's current wage in the withholding period, will be the employee's sole income for the taxable year;

(2) That there will be no deductions therefrom in determining gross income; and

(3) If it appears from the certificate filed pursuant to subsection (f) that the employee, under section    -93, is entitled to make a joint return, that the employee and the employee's spouse will so elect.

(d) Alternatively, at the election of the employer, the employer may deduct and withhold from each employee an amount of tax determined on the basis of tables to be prepared and furnished by the department of taxation, which amount of tax shall be substantially equivalent to the amount of tax provided by subsection (c) hereof.

(e) The department, by rule, may require the deduction and withholding of tax from any remuneration or compensation paid for or attributable to services, whether or not such withholding is provided for hereinabove. Every person so required to deduct and withhold tax, or from whom tax is required to be deducted and withheld, shall be subject to sections    -61 to    -67, and every person so required to deduct and withhold tax shall be deemed an employer for the purposes of this chapter.

The department, by rule, may exempt any employer from the requirement of deduction and withholding of taxes, even though the requirement is imposed by this section, if and to the extent that the department finds the requirement unduly onerous or impracticable of enforcement.

(f) On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed certificate showing whether the employee is married and is, under section    -93, entitled to make a joint return. The certificate shall be in such form and contain such information as may be prescribed by the department.

If, on any day during the calendar year, there is a change in the employee's marital status and the employee no longer is entitled to make a joint return, the employee shall within ten days thereafter furnish the employer with a new certificate showing the employee's present marital status. If, on any day during the calendar year, there is a change in the employee's marital status and though previously not entitled to make a joint return the employee now is so entitled, the employee may furnish the employer with a new certificate showing the employee's present marital status, to which the employee is entitled on the basis of the existing facts.

Such certificate shall take effect at the times set forth in the Internal Revenue Code of 1986, as amended.

(g) The director of taxation may adopt by rule under chapter 91 the regulations published by the United States Secretary of Treasury or a delegate of the Secretary relating to the provisions of subtitle C, chapter 24 of the Internal Revenue Code of 1986, as amended, operative in this section.

§   -62 Return and payment of withheld taxes. Every employer required by this chapter to withhold taxes on wages paid in any month shall make a return of such wages to the department on or before the fifteenth day of the calendar month following the month for which the taxes have been withheld; provided that each employer required to make a return under this section whose liability for taxes withheld exceeds $100,000 a year, shall make a return of wages and taxes withheld to the department on or before the tenth day of the calendar month following the month for which the taxes have been withheld. The return shall be in such form, including computer printouts and the like, and contain such information as may be prescribed by the director of taxation. The return shall be filed with the collector of the taxation district in which the employer has the employer's principal place of business or with the director at Honolulu if the employer has no place of business in the State. Every return required under this section shall be accompanied by a remission of the complete amount of tax withheld, as reported in the return. If the director believes collection of the tax may be in jeopardy, the director may require any person required to make a return under this section to make such return and pay such tax at any time. The director may grant permission to employers, whose liability to pay over the taxes withheld as provided in this section shall not exceed $1,000 a year, to make returns and payments of the taxes due on a quarterly basis during the calendar year, the returns and payments to be made on or before the fifteenth day of the calendar month after the close of each quarter, to wit, on or before April 15, July 15, October 15, and January 15. The director may grant permission to employers to make monthly payments based on an estimated quarterly liability; provided that the employer files a reconciliation return on or before the fifteenth day of the calendar month after the close of each quarter during the calendar year as provided by this section. The director, for good cause, may extend the time for making returns and payments, but not beyond the fifteenth day of the second month following the regular due date of the return. With respect to wages paid out of public moneys, the director, in the director's discretion, may prescribe special forms for, and different procedures and times for the filing of, the returns by employers paying the wages, or may waive the filing of any returns upon the conditions and subject to rules the director may prescribe.

§   -63 Statements to employees. Every employer required to deduct and withhold any tax on the wages of any employee shall furnish to each employee in respect of the employee's employment during the calendar year, on or before January 31 of the succeeding year, or if the employee's employment is terminated before the close of a calendar year, within thirty days after the date of receipt of a written request from the employee if such thirty-day period ends before January 31, a written statement, showing the period covered by the statement, the wages paid by the employer to the employee during such period, and the amount of the tax deducted and withheld or paid in respect of such wages. Each such employer shall file on or before the last day of February following the close of the calendar year a duplicate copy of each such statement. The department may grant to any employer a reasonable extension of time, not in excess of sixty days, with respect to any statement required by this section to be furnished to an employee or filed, and may by regulation provide for the furnishing or filing of statements at such other times and containing such other information as may be required for the administration of this chapter. The department shall prescribe the form of the statement required by this section and may adopt any federal form appropriate for the purpose.

§   -64 Taxes withheld by employer held in trust; employer's liability. (a) All taxes withheld by any employer under section    -61 shall be held in trust by the employer for the State and for the payment of the same to the collector in the manner and at the time required by this chapter. If any employer fails, neglects, or refuses to deduct and withhold from the wages paid to an employee, or to pay over, the amount of tax required, the employer shall be liable to pay to the State the amount of the tax. An employer may recover from an employee any amount which the employer should have withheld but did not withhold from the employee's wages, if the employer has been required to pay and has paid the amount to the State out of the employer's own funds pursuant to this section.

(b) In addition to the liability imposed by subsection (a) if any employer which is a corporation fails, neglects, or refuses to deduct and withhold from the wages paid to any employee, or to pay over, the amount of tax required, any person or corporate officer excluding those who have only ministerial duties, who is under a duty to the corporation to deduct and withhold or to pay over, the amount of tax required, and who wilfully fails to perform such duty, shall be liable to the State for the amount of the tax. The liability may be assessed and collected in the same manner as the liability imposed by subsection (a); provided that two or more persons may be jointly assessed under this subsection, but the tax shall be collected only once with respect to the same wages. The voluntary or involuntary dissolution of the corporation, or the withdrawal and surrender of its right to engage in business within this State shall not discharge the liability hereby imposed.

§   -65 Reserved.

§   -66 Further withholdings at source; crediting of withheld taxes. (a) The department by rule, may require the deduction and withholding of tax from any gross income or adjusted gross income of a nonresident, in order to collect the tax imposed by this chapter on the nonresident.

(b) Income upon which any tax has been withheld at the source under sections    -61 to    -64, or under rules adopted pursuant to subsection (a), shall be included in the return of the recipient of that income, but any amount of tax so withheld shall be credited against the amount of income tax as computed in the return, and if in excess of the tax due for the taxable year shall be refunded as provided in section    -110.

§   -67 Indemnity of withholder. Every person required to withhold a tax under sections    -61 to    -64, or under rules adopted pursuant to section    -66(a), is made liable for such tax and is relieved of liability for or upon the claim or demand of any other person for the amount of any payments to the department of taxation made in accordance with such sections.

§   -68 Withholding of tax on the disposition of real property by nonresident persons. (a) As used in this section:

"Nonresident person" means every person other than a resident person.

"Property" or "real property" has the meaning as the same term is defined in section 231-1.

"Resident person" means any individual included in the definition of "resident" in section    -2; any corporation incorporated or granted a certificate of authority under chapter 415A, or 415B; any partnership formed or registered under chapter 425 or 425D; any foreign partnership qualified to transact business pursuant to chapter 425 or 425D; or any trust included in the definition of "resident trust" in section    -2; or any estate included in the definition of "resident estate" in section    -2.

"Transferee" means any person, the State and the counties and their respective subdivisions, agencies, authorities, and boards, acquiring real property which is located in Hawaii.

"Transferor" means any person disposing real property which is located in Hawaii.

(b) Unless otherwise provided in this section, every transferee shall deduct and withhold a tax equal to           per cent of the amount realized on the disposition of Hawaii real property. Every person required to withhold a tax under this section is made liable for the tax and is relieved of liability for or upon the claim or demand of any other person for the amount of any payments to the department made in accordance with this section.

(c) Every transferee required by this section to withhold tax under subsection (b) shall make a return of the amount withheld to the department of taxation not more than twenty days following the transfer date.

(d) No person shall be required to deduct and withhold any amount under subsection (b), if the transferor furnishes to the transferee an affidavit by the transferor stating the transferor's taxpayer identification number and the transferor is a resident person. This subsection shall not apply if the transferee has actual knowledge that the affidavit referred to in this subsection is false.

(e) An application for a withholding certificate may be submitted by the transferor to the department setting forth:

(1) The name, address, and taxpayer identification number, if any, of the parties to the transaction and the location and general description of the real property to be transferred; and

(2) A calculation and written justification showing that the transferor will not realize any gain with respect to the transfer; or

(3) A calculation and written justification showing that there will be insufficient proceeds to pay the withholding required under subsection (b) after payment of all costs, including selling expenses and the amount of any mortgage or lien secured by the property.

Upon receipt of the application, the department shall determine whether the transferor has realized or will realize any gain with respect to the transfer, or whether there will be insufficient proceeds to pay the withholding. If the department is satisfied that no gain will be realized or that there will be insufficient proceeds to pay the withholding, it shall issue a withholding certificate stating the amount to be withheld, if any.

The submission of an application for a withholding certificate to the department does not relieve the transferee of its obligation to withhold or to make a return of the tax under subsections (b) and (c).

(f) No person shall be required to deduct and withhold any amount under subsection (b) if one or more individual transferors furnishes to the transferee an affidavit by the transferor stating the transferor's taxpayer identification number, that for the year preceding the date of the transfer the property has been used by the transferor as a principal residence, and that the amount realized for the property does not exceed $300,000.

(g) The department may enter into written agreements with persons who engage in more than one real property transaction in a calendar year or other persons to whom meeting the withholding requirements of this section are not practicable. The written agreements may allow the use of a withholding method other than that prescribed by this section or may waive the withholding requirement under this section.

§§   -71 to    -79 Reserved.

§§   -81 to    -89 Reserved.

PART IV. RETURNS AND PAYMENTS

§   -91 Reserved.

§   -92 Returns, who shall make. For each taxable year, returns shall be made by the following persons to the department of taxation in such form and manner as it shall prescribe:

(1) Every person doing business in the State during the taxable year, whether or not the person derives any taxable income therefrom. As used in this paragraph "doing business" includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, direct or indirect, except personal services performed as an employee under the direction and control of an employer. Every person receiving rents from property owned in the State is classified as "doing business" and shall make a return whether or not the person derives taxable income therefrom.

(2) Every corporation having for the taxable year gross income subject to taxation under this chapter; provided that an affiliated group of domestic corporations may make and file a consolidated return for the taxable year in lieu of separate tax returns in the manner and to the extent, so far as applicable, set forth in sections 1501 through 1505 and 1552 of the Internal Revenue Code of 1986, as amended.

(3) Every individual, estate, or trust having for the taxable year gross income subject to taxation under this chapter, except as exempted from the filing of a return by regulations of the department.

The department by rule may excuse the filing of a return by an individual, estate, or trust in cases not coming within paragraph (1), where the gross income is exempt under section    -7 and no tax is expected to accrue under this chapter, or are such that substantially all the tax will have been collected through tax withholdings or at the source.

§   -93 Joint returns. A husband and wife, having that status for purposes of the Internal Revenue Code of 1986, as amended, and entitled to make a joint federal return for the taxable year, may make a single return jointly of taxes under this chapter for the taxable year. In that case the tax shall be computed on their aggregate income and the liability with respect to the tax shall be joint and several. For purposes of this chapter "aggregate income" means the income of both spouses without regard to source in the State.

If an individual has filed a separate return for a taxable year for which a joint return could have been made by the taxpayer and the taxpayer's spouse, an election thereafter to make a joint return for the taxable year shall be made only upon compliance with rules of the department, which may limit the election and prescribe the terms and provisions applicable in such cases as nearly as may be in conformity with the Internal Revenue Code of 1986, as amended.

§   -94 Returns by agent, guardian, etc.; liability of fiduciaries. (a) Returns of decedents. If an individual is deceased, the return of the individual required under section    -92 shall be made by the individual's personal representative or other person charged with the care of property of the decedent.

(b) Persons under a disability. If an individual is unable to make a return required under section    -92 or    -97, the return of the individual shall be made by a duly authorized agent, the individual's committee, guardian, fiduciary, or other person charged with the care of the person or property of the individual. The preceding sentence shall not apply in the case of a receiver appointed by authority of law in possession of only a part of the property of an individual.

(c) Receivers, trustees, and assignees for corporations. In a case where a receiver, trustee in bankruptcy, or assignee, by order of a court of competent jurisdiction, by operation of law, or otherwise, has possession of or holds title to all or substantially all the property or business of a corporation, whether or not the property or business is being operated, such receiver, trustee, or assignee shall make the return of income for the corporation in the same manner and form as corporations are required to make such returns.

(d) Returns of estates and trusts. Returns of an estate or a trust shall be made by the fiduciary thereof.

(e) Joint fiduciaries. Under such rules as the department may prescribe, a return made by one of two or more joint fiduciaries shall be sufficient to comply with the requirement of this section. A return made pursuant to this subsection shall contain a statement that the fiduciary has sufficient knowledge of the affairs of the person for whom the return is made to enable the fiduciary to make the return, and the return is, to the best of the fiduciary's knowledge and belief, true and correct.

(f) Liability of fiduciaries. A tax imposed upon a fiduciary shall be a charge upon the property held by the fiduciary in that capacity.

§   -95 Partnership returns. Every partnership shall make a return for each taxable year upon forms prescribed by the department of taxation, itemizing its gross income and allowable deductions and including the names and addresses of the persons who would be entitled to share in the income if distributed and the amount of each distributive share. The return shall be authenticated by the signature of any one of the partners, under the penalties provided by section 231-36, and the fact that a partner's name is signed on the return shall be prima facie evidence that such partner is authorized to sign the return on behalf of the partnership. All provisions of this chapter relating to returns shall be applicable to partnership returns except as specifically otherwise stated in this section.

§   -95.5 S corporation returns; shareholder agreements; mandatory payments. (a) An S corporation which engages in activities in this State which would subject a C corporation to the requirement to file a return under section    -92 shall file with the department an annual return, in the form prescribed by the department, on or before the due date prescribed for the filing of C corporation returns by section    -97.

Every S corporation shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowable by this chapter, the name, address, and social security or federal identification number of each person owning stock in the corporation at any time during the taxable year, the number of shares of stock owned by each shareholder at all times during the taxable year, the income attributable to the State and income not attributable to the State with respect to each shareholder as determined under this part, the amount of money and other property distributed by the corporation during the taxable year to each shareholder, the date of each such distribution, and such other information as the department may by form or rule prescribe.

The S corporation, on or before the day on which such return is filed, shall furnish to each person who was a shareholder during the year a copy of the information shown on the return as the department may by form or rule prescribe. Any return filed pursuant to this section, shall be treated as a return filed by the corporation under section    -92. The S corporation shall also maintain the accumulated adjustments account.

(b) The department shall permit S corporations to file composite returns and to make composite payments of tax on behalf of some or all of its nonresident shareholders. The department may permit composite returns and payments to be made on behalf of resident shareholders.

(c) An S corporation shall file with the department, in the form prescribed by the department, the agreement of each nonresident shareholder of the corporation:

(1) To file a return and make timely payment of all taxes imposed by this State on the shareholder with respect to the income of the S corporation; and

(2) To be subject to personal jurisdiction in this State for purposes of the collection of unpaid income tax, together with related interest and penalties.

If the corporation fails to timely file the agreements required by paragraphs (1) and (2) on behalf of each of its nonresident shareholders, then the corporation, at the times set forth in subsection (d), shall pay to this State on behalf of each nonresident shareholder in respect of whom an agreement has not been timely filed an amount equal to the rate in effect under section    -51 multiplied by the amount of the shareholder's pro rata share of the income attributable to the State reflected on the corporation's return for the taxable period. An S corporation shall be entitled to recover a payment made pursuant to the preceding sentence from the shareholder on whose behalf the payment was made.

(d) The agreements required to be filed pursuant to subsection (c) shall be filed at the following times:

(1) At the time the annual return is required to be filed for the first taxable period for which the S corporation became subject to this part, and

(2) At the time the annual return is required to be filed for any taxable period in which the corporation had a nonresident shareholder on whose behalf such an agreement has not been previously filed.

(e) Any amount paid by the corporation to this State pursuant to subsection (b) or (c) shall be considered to be a payment by the shareholder on account of the income tax imposed on the shareholder for the taxable period.

(f) Any officer of any S corporation who wilfully fails to provide any information, file any return or agreement, make any payment, or maintain any account as required by this section or by section 231-15.6 shall be guilty of a misdemeanor.

§   -96 Returns by persons making payments. By duly adopted rules, the department may require that any individual, partnership, corporation, joint stock company, association, insurance company, or other person, being a resident or having a place of business in this State, in whatever capacity acting, including lessees or mortgagors of real and personal property, fiduciaries, employers, and all officers and employees of the State or of any political subdivision thereof, having the control, receipt, custody, disposal, or payment of any annuity or interest on deposits or funds held in trust, including taxable income from endowment policies, other interest (except interest coupons payable to bearer), dividends, wages, rentals, royalties, premiums, or other emoluments, gains, profits, and income, paid or payable during any year to any person, shall, on such date or dates as the department shall from time to time designate, make a return to the department furnishing the information required by the rules.

§   -96.5 Returns relating to unemployment. (a) The state department of labor and industrial relations shall submit a return to the department according to the forms or rules prescribed by the director setting forth the aggregate amounts of payments of unemployment compensation and the name and address of the individual to whom paid under chapters 383 and 385.

(b) The department of labor and industrial relations shall furnish to each individual whose name is set forth in such return a written statement showing:

(1) The name and address of the department of labor and industrial relations; and

(2) The aggregate amount of payments to the individual as shown on such return.

The written statement required by this subsection shall be furnished to the individual on or before January 31 of the year following the calendar year for which the return under subsection (a) was made. No statement shall be required to be furnished to any individual under this subsection if the aggregate amount of payments to such individual shown on the return made under subsection (a) is less than $10.

§   -97 Estimates; tax payments; returns.

(a) (1) Individuals, corporations (including S corporations), estates, and trusts, shall annually furnish the department of taxation with a declaration of estimated tax for the current taxable year. Declarations of estimated tax, except as otherwise provided by rule, shall be governed by the provisions as to returns contained in sections    -94,    -95.5,    -98, and    -99. The declarations shall be made on estimated tax payment voucher forms. The payment voucher shall be filed, in the case of taxpayers on the calendar year basis, on or before April 20. In the case of a husband and wife who are entitled to submit a joint payment voucher for federal purposes, a single payment voucher may be submitted by them jointly, in which case the liability with respect to the estimated tax shall be joint and several; if a joint payment voucher is submitted but a joint income tax return is not made for the taxable year, the estimated tax for the year may be treated as the estimated tax of either the husband or the wife or may be divided between them.

(2) Each taxpayer shall transmit, with the payment voucher, payment of one-quarter of the estimated tax for the current taxable year. In determining this quarterly payment and all other installments, there first shall be deducted from the total estimated tax the amount of estimated tax withholding or collection at source for the taxable year. Thereafter, on the twentieth day of June and September, the taxpayer shall transmit with the payment voucher, payment of one-quarter of the estimated tax. The fourth quarter payment of the estimated tax shall be transmitted with the payment voucher by January 20 of the year following the taxable year for which the estimate was made.

(3) Taxpayers operating on a fiscal year basis shall make similar estimates and tax payments, on or before the twentieth day of the fourth month of the fiscal year and periodically thereafter so as to conform to the payments and returns required in the case of those on a calendar year basis.

(4) The department by rule may excuse individuals from filing an estimate in those cases where the gross income and exemptions are such that no tax is expected to accrue under this chapter, or are such that substantially all the tax will be collected through tax withholding or at the source.

(5) In the case of a foreign corporation, the department may excuse the filing of an estimate and the payment of estimated tax if it is satisfied that less than fifteen per cent of the corporation's business for the taxable year will be attributable to the State. For the purposes of this paragraph, fifteen per cent of a corporation's business shall be deemed attributable to the State if fifteen per cent or more of the entire gross income of the corporation (which for the purposes of this paragraph means gross income computed without regard to source in the State) is attributable to the State under sections    -21 to    -39 or other provisions of this chapter.

(6) In the case of a taxpayer whose tax liability is less than $500, the filing of an estimate and the payment of estimated tax shall not be required.

(b) Net income returns for the taxable year shall be filed with the department on or before the twentieth day of the fourth month following the close of the taxable year, and shall be accompanied by payment of the balance of the tax for the taxable year, or the entire tax for the taxable year, as the case may be. These returns shall be filed both by persons required to make declarations of estimated tax pursuant to this section and by persons not required to make declarations of estimated tax.

(c) At the election of the taxpayer, any installment of the estimated tax may be paid prior to the date prescribed for its payment.

(d) A person who, under the rules of the department adopted pursuant to subsection (a)(4), is relieved of filing an estimate, shall if the rules cease to apply by reason of a change of circumstances during the taxable year, file the required estimate on the first quarterly payment date prescribed for payment of estimated taxes, following such change of circumstances, and pay the estimated tax in equal installments computed by allocating the entire amount shown by the estimate for the current taxable year to the remaining quarterly payment dates.

(e) An amendment of an estimate may be filed, under rules prescribed by the department. If an amendment is filed, the remaining installments, if any, shall be ratably increased or decreased to reflect the increase or decrease in the estimate. The amended estimate may be accompanied by payment of the amount of underpayment, if any, and if so this shall be considered in determining the period of the underpayment as provided in subsection (g).

(f) In the case of any underpayment of estimated tax, except as provided by this subsection, there shall be added to the tax for the taxable year an amount determined at the rate of two-thirds of one per cent a month or fraction of a month upon the amount of the underpayment for the period of the underpayment.

(1) The amount of the underpayment shall be the excess of:

(A) The required installment, over

(B) The amount, if any, of the installment paid on or before the due date for the installment.

(2) The period of the underpayment shall run from the due date for the installment to whichever of the following dates is the earlier:

(A) The twentieth day of the fourth month following the close of the taxable year, or

(B) With respect to any portion of the underpayment, the date on which the portion is paid. For purposes of this paragraph, a payment of estimated tax on any installment date shall be credited against unpaid required installments in the order in which the installments are required to be paid.

(3) For the purposes of this section, the term "tax" means the tax imposed under this chapter reduced by any credits available to the taxpayer other than the credit for amounts withheld from the taxpayer's wages or taxes withheld at the source, if any, for the taxable year.

(4) Sections 6654(d), (e)(2), (e)(3), (h), (i), (j), (k), and (l), (with respect to failure by an individual to pay estimated income tax), and 6655(d), (e), (g)(2), (g)(3), (g)(4), and (i) (with respect to failure by a corporation to pay estimated income tax) of the Internal Revenue Code of 1986, as amended, shall be operative for the purposes of this section; provided that the due dates contained in any of the preceding Internal Revenue Code of 1986, as amended, sections shall be deemed to be the twentieth day of the applicable month.

(g) The amounts of taxes withheld from wages or collected at source shall be deemed payments of estimated tax, and an equal part of any such amount shall be deemed paid on each installment date for the taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld or collected, in which case the amounts so withheld or collected shall be deemed payments of estimated tax on the dates on which such amounts were actually withheld or collected.

§   -98 Returns; form, verification and authentication, time of filing. Returns shall be in such form as the department may prescribe from time to time and shall be verified by written declarations that the statements therein made are subject to the penalties prescribed in section 231-36. Corporate returns shall be authenticated by the signature of the president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other officer duly authorized so to act, under the penalties prescribed by section 231-36. The fact that an individual's name is signed on the corporation return shall be prima facie evidence that the individual is authorized to sign the return on behalf of the corporation.

The department may grant a reasonable extension of time for filing returns under such rules and regulations as it shall prescribe. Except in the case of persons who are outside the United States, no extension shall be for more than six months.

§   -99 Same; place for filing. Returns shall be filed with the collector for the taxation district in which is located the legal residence or principal place of business of the person making the return, or, if such person has no legal residence or principal place of business in the State, then with the collector at Honolulu.

§   -100 Persons in military service. The collection from any person in the military service of any tax on the income of such person, whether falling due prior to or during the person's period of military service (which term, as used in this section, shall have the same meaning as in the Soldiers' and Sailors' Civil Relief Act of 1940, as amended), shall be deferred for a period extending not more than six months after the termination of the person's period of military service if such person's ability to pay such tax is materially impaired by reason of such service. No interest on any amount of tax, collection of which is deferred for any period under this section, and no penalty for nonpayment of such amount during such period, shall accrue for such period of deferment by reason of such nonpayment. The running of any statute of limitations against the collection of such tax by distraint or otherwise shall be suspended for the period of military service of any individual the collection of whose tax is deferred under this section, and for an additional period of nine months beginning with the day following the period of military service.

§   -100.5 Abatement of income taxes of members of armed forces on death. Section 692 (with respect to income taxes of members of armed forces on death) of the Internal Revenue Code of 1986, as amended, shall be operative for the purposes of this chapter and the department shall have the authority to abate income taxes as provided in section 692.

For the purposes of this section "member of the Armed Forces of the United States" shall have the same meaning as provided by section 7701(a)(15) of the Internal Revenue Code of 1986, as amended.

§   -102 Records and special returns. (a) Records. Every person liable to any tax imposed by this chapter or for the collection or deduction thereof at source, shall keep full, complete, regular, and accurate books of account in which all the person's transactions shall be entered in regular order; provided that the director, by rule, may provide for the keeping of simpler accounts in cases where, by reason of the smallness of the income or otherwise, undue hardship or expense will be caused by the keeping of full books of account. All books of account required to be kept by this chapter shall be preserved for a period of three years, except that the director may, in writing, consent to their destruction within such period or may require that they be kept longer.

(b) Special returns and statements. Whenever it is necessary, in the judgment of the director, the director may require any taxpayer, or person liable for the collection or deduction of tax at source, by notice served upon the taxpayer or other person, to make such returns or render such signed statements as the director deems sufficient to show whether or not the taxpayer or other person is liable under this chapter.

§   -102.5 Income check-off authorized. Any other law to the contrary notwithstanding, any individual whose state tax liability for any taxable year is $2 or more may designate $2 of the liability to be paid over to the Hawaii election campaign fund when submitting a state tax return to the department. In the case of a joint return of a husband and wife having a state tax liability of $4 or more, each spouse may designate that $2 be paid to the fund. The director shall revise the individual state tax form to allow the designation of contributions to the fund on the face of the tax return and immediately above the signature lines. An explanation shall be included which clearly states that the check-off does not constitute an additional tax liability. If no designation was made on the original tax return when filed, a designation may be made by the individual on an amended return filed within twenty months and ten days after the due date for the original return for such taxable year. A designation once made whether by an original or amended return may not be revoked.

§   -103 Distortion of income. When a taxpayer so conducts business as either directly or indirectly to benefit stockholders thereof, or any other person interested therein, by selling products or the goods or commodities in which the taxpayer deals at less than the fair price that could be obtained for them, or where a corporation, a substantial portion of the capital stock of which is owned either directly or indirectly by another corporation, acquires or disposes of the products of the corporation so owning a substantial portion of its stock in such manner as to create a loss or improper income to either of the corporations, or where a partnership or individual owns an interest in another corporation or business either directly or indirectly and acquires and disposes of the products of such other business in such manner as to create a loss or improper income to either of the businesses, and generally in all cases where different forms of business enterprise are used in conjunction with one another for the purpose, among others, of diverting profits reasonably and properly made by one factor agency or segment of the business to another, the director may determine the amount of tax upon either or both of the enterprises for the taxable year, having due regard to the reasonable profits which but for such arrangement, understanding, business device, or organization might or could have accrued to either or both of the enterprises.

§   -104 Penalties. Penalties and interest shall be added to and become part of the tax, when and as provided by section 231-39. The penalties and interest provided by section 231-39 shall apply to employers as well as taxpayers.

§   -105 Failure to keep records, render returns, or make reports by responsible persons. The penalties provided by sections 231-34, 231-35, and 231-36 shall apply to any person, whether acting as principal, agent, officer, or director for oneself, itself, or another person and shall apply to each single violation. These penalties shall be in addition to other penalties provided by law.

§   -106 Reserved.

§   -107 Procedure upon failure to file return. If any taxpayer or employer liable to make and file a return under this chapter fails, neglects, or refuses to make and file a return as required within the time prescribed, or declines to authenticate a return if made, the department shall make a return for the taxpayer or employer from the best information obtainable and shall levy and assess against the taxpayer or employer the tax upon the amount of taxable income, or the tax required to be withheld from wages and paid over, as shown by such return, to which shall be added the penalties and interest provided by section 231-39. The assessment shall be presumed to be correct until and unless, upon an appeal duly taken as provided in this chapter, the contrary shall be clearly proved by the taxpayer or employer and the burden of proof upon appeal shall be upon the taxpayer or employer to disprove the correctness of the assessment. Notice of the assessment shall be given, and an appeal therefrom may be taken, in the manner and within the time provided in section    -108(b) and section    -114.

§   -108 Audit of return; procedure; additional taxes. (a) The director or a responsible person designated by the director to act in the premises for the purpose of verification or audit of a return made by the taxpayer or employer, or for the purpose of making a return where none has been made, is authorized and empowered to examine all account books, bank books, bank statements, records, vouchers, copies of federal tax returns, and any and all other documents and evidences having any relevancy to the determination of the income or wages as required to be returned under this chapter, and the director may employ the director's powers under section 231-7 for such purposes.

(b) If the department discovers from the examination of the return or otherwise that income, or the liability of an employer in respect of wages, or any portion thereof, has not been assessed, it may assess the same and give notice to the taxpayer or employer of the assessment, and the taxpayer or employer shall thereupon have an opportunity within thirty days to confer with the department as to the proposed assessment. After the expiration of thirty days from such notification the department shall assess the income of the taxpayer, or the liability of the employer in respect of wages, or any portion thereof which it believes has not heretofore been assessed, and shall give notice to the taxpayer or employer of the amount of the tax and interest and penalties if any, and the amount thereof shall be paid within twenty days after the date the notice was mailed, properly addressed to the taxpayer or employer at the taxpayer's or employer's last known address or place of business.

§   -109 Jeopardy assessments, security for payment, etc. Section 231-24 shall apply to the taxes imposed by this chapter, both in respect of taxpayers and employers.

§   -110 Credits and refunds. (a) If the taxpayer has paid as an installment of the tax more than the amount determined to be the correct amount of such installment, the overpayment shall be credited against the unpaid installments, if any. If the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax, the amount of the credit shall be refunded in the manner provided in section 231-23(c). Within the meaning of this subsection, each amount of tax deducted and withheld from a taxpayer's wages is an installment of taxes paid by the taxpayer. A refund or credit shall be made to an employer only to the extent that the amount of overpayment claimed by the employer as a credit or refund was not deducted and withheld by the employer.

(b) This section does not apply in the case of a payment made pursuant to an assessment by the department under section    -107 or    -108(b). No refund or overpayment credit may be had under this section in any event unless the original payment of the tax was due to the law having been interpreted or applied in respect of the taxpayer concerned differently than in respect of the taxpayers generally. As to all tax payments for which a refund or credit is not authorized by this section (including without prejudice to the generality of the foregoing cases of unconstitutionality) the remedies provided by appeal or under section 40-35 are exclusive. However, nothing in this subsection shall be deemed applicable to a credit or refund authorized by section    -66 or resulting from the tax as returned being less than the tax as estimated; in any of these cases a credit or refund is authorized even though the tax for the taxable year remains subject to determination by the department and assessment as provided by law.

(c) Any refund earned under this section shall be made in the manner provided in section 231-23(c).

APPEAL

§   -114 Appeals. Any person aggrieved by any assessment of the tax or liability imposed by this chapter may appeal from the assessment in the manner and within the time hereinafter set forth; provided the tax so assessed shall have been paid. Appeal may be made either to the district board of review or to the tax appeal court.

If the appeal is first made to the board, the appeal shall either be heard by the board or be transferred to the tax appeal court for hearing at the election of the taxpayer or employer. If heard by the board, an appeal shall lie from the decision thereof to the tax appeal court and to the supreme court in the manner and with the costs provided by chapter 232. The supreme court shall prescribe forms to be used in the appeals. The forms shall show the amount of taxes or liability upon the basis of the taxpayer's computation of the taxpayer's taxable income or the employer's computation of the employer's liability, the amount upon the basis of the assessor's computation, the amount upon the basis of the decisions of the board of review and tax appeal court, if any, and the amount in dispute. If or when the appeal is filed with or transferred to the tax appeal court, the court shall proceed to hear and determine the appeal, subject to appeal to the supreme court as is provided in chapter 232.

Any taxpayer or employer appealing from any assessment of income taxes or liability shall lodge with the assessor or assistant assessor a notice of the appeal in writing, stating the ground of the taxpayer's or employer's objection to the additional assessment or any part thereof. The taxpayer or employer shall also file the notice of appeal with the board or the tax appeal court at any time within thirty days subsequent to the date when the notice of assessment was mailed properly addressed to the taxpayer or employer at the taxpayer's or employer's last known residence or place of business. Except as otherwise provided, the manner of taking the appeal, the costs applicable thereto, and the hearing and disposition thereof, including the distribution of costs and of taxes paid by the taxpayer pending the appeal, shall be as provided in chapter 232.

The board or the tax appeal court may allow an individual taxpayer to file an appeal without payment of the net income tax in cases where the total tax liability does not exceed $50,000 in the aggregate for all tax years, upon proof that the taxpayer would be irreparably injured by payment of the tax.

GENERAL PROVISIONS

§   -115 Assessments, etc., prima facie proof. The effect of the notices of assessments and records prepared by or under the authority of the department of taxation shall be as set forth in sections 231-20 and    -107.

§   -116 Disclosure of returns unlawful; penalty. All tax returns and return information required to be filed under this chapter shall be confidential, including any copy of any portion of a federal return which may be attached to a state tax return, or any information reflected in the copy of such federal return. It shall be unlawful for any person, or any officer or employee of the State to make known intentionally information imparted by any income tax return or estimate made under sections    -92,    -94,    -95, and    -97 or wilfully to permit any tax return or estimate so made or copy thereof to be seen or examined by any person other than the taxpayer or the taxpayer's authorized agent, persons duly authorized by the State in connection with their official duties, the Multistate Tax Commission or the authorized representative thereof, except as provided by law, and any offense against the foregoing provisions shall be punished by a fine not exceeding $500 or by imprisonment not exceeding one year, or both.

§   -117 Reciprocal supplying of tax information. Notwithstanding section    -116, the department of taxation may permit the Secretary of the Treasury of the United States, the Commissioner of Internal Revenue, the Multistate Tax Commission, or the proper officer of any state or territory imposing an income tax upon incomes of persons taxable under this chapter, or the authorized representatives thereof to inspect the income tax returns and estimates of any such person for tax purposes only. The department may also furnish to such authorized persons an abstract of an income tax return or estimate or supply such persons with information concerning any item of income contained in a return or disclosed by the report of an investigation of the income or return of a taxpayer. The Multistate Tax Commission may make such information available to a duly accredited tax official of the United States or to a duly accredited tax official of any state or territory, or the authorized representative thereof, for tax purposes only.

§   -118 Rules. Except as otherwise provided in this chapter, the department of taxation shall adopt under chapter 91 and have printed all needful rules for the enforcement of this chapter and the rules so made shall have the force and effect of law if not in conflict with the express statutory provisions to which the same are applicable.

§   -119 Remittances; state realizations. (a) All remittances shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that the sum from all comprehensive tax revenues realized by the State that represents the difference between $90,000,000 and the proceeds from the sale of any general obligation bonds authorized for that fiscal year for the purposes of the state educational facilities improvement special fund shall be deposited in the state treasury in each fiscal year to the credit of the state educational facilities improvement special fund; provided further that a sum, not to exceed $5,000,000, from all general excise tax revenues realized by the State shall be deposited in the state treasury in each fiscal year to the credit of the compound interest bond reserve fund.

(b) For the fiscal year beginning July 1, 1999, and for each fiscal year thereafter,           per cent of the revenues collected under this chapter shall be distributed as follows:

(1) One-sixth shall be deposited into the convention center capital and operations special fund;

(2) Of the five-sixths remainder of the designated per cent, Kauai county shall receive 14.5 per cent; Hawaii county shall receive 18.6 per cent; city and county of Honolulu shall receive 44.1 per cent; and Maui county shall receive 22.8 per cent.

(c) On or before January or July 1 of each year or after the disposition of any tax appeal with respect to an assessment for periods after December 30, 1998, the state director of finance shall compute and pay the amount due as provided in subsection (b) to the director of finance of each county to become a general realization of the county expendable as such, except as otherwise provided by law."

SECTION 2. Section 11-217, Hawaii Revised Statutes, is amended to read as follows:

"§11-217 Hawaii election campaign fund; creation. The Hawaii election campaign fund is created as a trust fund within the state treasury. The fund shall consist of all moneys collected from persons who have designated a portion of their income tax liability to the fund as provided in section [235-102.5,]    -102.5 any general fund revenues appropriated, as well as all other moneys collected pursuant to this subpart. Payment to each candidate from the fund shall be by the comptroller in the manner prescribed in section 11-222. Moneys from this fund may also be used for the operating expenses of the commission, including staff salaries and fringe benefits."

SECTION 3. Section 36-32, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is created in the treasury of the State the state educational facilities improvement special fund, into which shall be deposited a portion of all [general excise] tax revenues collected by the department of taxation under section [237-31.]    -119. The special fund shall be used solely to plan, design, acquire lands for and to construct public school facilities and to provide equipment and technology infrastructure to improve public schools and other facilities under the jurisdiction of the department of education, except public libraries. In addition, activities of the department of education intended to eliminate the gap between the facility needs of schools and available resources shall be eligible for funding from the special fund. Expenditures from the special fund shall be limited to projects authorized by the legislature and shall be subject to sections 37-31, and 37-33 through 37-40. Appropriations or authorizations from the special fund shall be expended by the comptroller."

SECTION 4. Section 39-151, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is hereby established the Hawaii compound interest bond reserve fund, as a trust fund in the state treasury for the benefit of the State, to be held and administered by the department of budget and finance. The director, from time to time, may transfer a portion of [general excise] tax revenues collected pursuant to section [237-31]    -119 to the credit of the compound interest bond reserve fund, up to but not in excess of $5,000,000 during any fiscal year. Not fewer than thirty days before the convening of each regular session of the legislature, the director shall submit to the legislature a report of all funds transferred to the credit of the compound interest bond reserve fund."

SECTION 5. Section 46-4, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Neither this section nor any other law, county ordinance, or rule shall prohibit group living in facilities with eight or fewer residents and which are licensed by the State as provided for under section 321-15.6 or in an intermediate care facility/mental retardation-community (ICF/MR-C) for persons, including the mentally ill, elders, the handicapped, the developmentally disabled, or totally disabled persons, who are not related to the home operator or facility staff; provided that those group living facilities meet all applicable county requirements, not inconsistent with the intent of this subsection and including building height, setback, maximum lot coverage, parking, and floor area requirements. For purposes of this section:

"Mentally ill person" means a mentally ill person as defined under section 334-1.

"Elder" means an elder as defined under section 201G-1.

"Handicapped person" means an individual with a physical handicap as defined under section 515-2.

"Developmentally disabled person" means a person suffering from developmental disabilities as defined under section 333F-2.

"Totally disabled person" means a person who is totally and permanently disabled [as defined under section 235-1.], either physically or mentally, which results in the person's inability to engage in any substantial gainful business or occupation.

The disability shall be certified to by:

(1) A physician licensed under chapter 453 or 460;

(2) A qualified out-of-state physician who is currently

licensed to practice in the state in which the physician resides; or

(3) A commissioned medical officer in the United States

Army, Navy Marine Corps, or Public Health Service, engaged in the discharge of one's official duty.

Certification shall be on forms prescribed by the department of taxation.

"Intermediate care facility/mental retardation-community (ICF/MR-C)" is defined as an identifiable unit providing residence and care for eight or fewer mentally retarded individuals. Its primary purpose is the provision of health, social, and rehabilitation services to the mentally retarded through an individually designed active treatment program for each resident. No person who is predominately confined to bed shall be admitted as a resident of such a facility."

SECTION 6. Section 46-15.1, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Any law to the contrary notwithstanding, any county shall have and may exercise the same powers, subject to applicable limitations, as those granted the housing and community development corporation of Hawaii pursuant to chapter 201G insofar as such powers may be reasonably construed to be exercisable by a county for the purpose of developing, constructing, and providing low and moderate income housing; provided that no county shall be empowered to cause the State to issue general obligation bonds to finance a project pursuant to this section; [provided further that county projects shall be granted an exemption from general excise or receipts taxes in the same manner as projects of the housing and community development corporation of Hawaii pursuant to section [201G-116]; and] provided further that the provisions of section 201G-15 shall not apply to this section unless federal guidelines specifically provide local governments with that authorization and the authorization does not conflict with any state laws. The powers shall include the power, subject to applicable limitations, to:

(1) Develop and construct dwelling units, alone or in partnership with developers;

(2) Acquire necessary land by lease, purchase, exchange, or eminent domain;

(3) Provide assistance and aid to a public agency or person in developing and constructing new housing and rehabilitating old housing for elders of low and moderate income, other persons of low and moderate income, and persons displaced by any governmental action, by making long-term mortgage or interim construction loans available;

(4) Contract with any eligible bidders to provide for construction of urgently needed housing for persons of low and moderate income;

(5) Guarantee the top twenty-five per cent of the principal balance of real property mortgage loans, plus interest thereon, made to qualified borrowers by qualified lenders;

(6) Enter into mortgage guarantee agreements with appropriate officials of any agency or instrumentality of the United States in order to induce those officials to commit to insure or insure mortgages under the provisions of the National Housing Act, as amended;

(7) Make a direct loan to any qualified buyer for the downpayment required by a private lender to be made by the borrower as a condition of obtaining a loan from the private lender in the purchase of residential property;

(8) Provide funds for a share, not to exceed fifty per cent of the principal amount of a loan made to a qualified borrower by a private lender who is unable otherwise to lend the borrower sufficient funds at reasonable rates in the purchase of residential property; and

(9) Sell or lease completed dwelling units.

For purposes of this section, a limitation is applicable to the extent that it may reasonably be construed to apply to a county."

SECTION 7. Section 46-16.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each county shall notify the director of taxation within ten days after the county has adopted a general excise and use tax surcharge ordinance, and the director of taxation shall levy, assess, collect, and otherwise administer the general excise and use tax surcharge for the taxable year beginning January 1, 1993, and for taxable years thereafter through December 31, 2002, as provided by [chapters 237 and 238.] chapter    ."

SECTION 8. Section 102-14, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) For the purpose of providing blind or visually handicapped persons, as defined in sections [235-1,] 347-1[,] and 347-2 with remunerative employment, enlarging their economic opportunities and stimulating them to greater efforts in striving to make themselves self-supporting, blind or visually handicapped persons registered by the department of human services under section 347-6 and issued permits under subsection (c) shall be authorized to operate vending facilities and machines in any state or county public building for the vending of newspapers, periodicals, confections, tobacco products, foods, beverages, and such other articles or services prepared on or off the premises in accordance with all applicable laws."

SECTION 9. Section 103-53, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Any assignment of a contract shall require the assignee, as a condition precedent to the assignment, to first obtain a [bulk sales certificate if required under section 237-43, and present the certificate, or tax clearance as provided under subsection (a) if a bulk sales certificate is not required,] to the state or county contracting officer or agent."

SECTION 10. Section 111-2, Hawaii Revised Statutes, is amended by amending the definition of "person" to read as follows:

""Person" means (1) any individual, partnership, or corporation or association which is the owner of a business; (2) any owner, part-owner, tenant, or sharecropper operating a farm; (3) the head of a family; (4) an individual not a member of a family; (5) a nonprofit organization exempted from taxation under section [235-9.]    -7."

SECTION 11. Section 145D-1, Hawaii Revised Statutes, is amended by amending the definition of "charitable, religious, or non-profit organization" to read as follows:

""Charitable, religious, or nonprofit organization" means any organization which was organized and is operating in the State for charitable or religious purposes or to promote social welfare, which is exempt from [income] taxation under chapter [235,]    , and which distributes food products at no cost to needy persons."

SECTION 12. Section 182-16, Hawaii Revised Statutes, is amended to read as follows:

"[[]§182-16[]] Levy and assessment of [general excise] tax. Notwithstanding any provision to the contrary, the levy and assessment of the [general excise] comprehensive tax on the gross proceeds from any manner of sale of (1) geothermal resources or (2) electrical energy produced by the geothermal resources producer from such geothermal resources, shall be made [only as a tax on the business of a producer,] at the rate assessed [producers,] under section [237-13(2)(A).]    -51."

SECTION 13. Section 201G-14, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201G-14[]] Administration of low-income housing credit [allowed under section 235-110.8]. (a) The corporation is designated as the state housing credit agency to carry out section 42(h) (with respect to limitation on aggregate credit allowable with respect to a project located in a state) of the Internal Revenue Code of 1986, as amended. As the state housing credit agency, the corporation shall determine the eligibility basis for a qualified low-income building, make the allocation of housing credit dollar amounts within the State, and determine the portion of the State's housing credit ceiling set aside for projects involving qualified nonprofit organizations. The corporation shall file any certifications and annual reports required by section 42 (with respect to low-income housing credit) of the Internal Revenue Code of 1986, as amended.

(b) The state aggregate housing credit dollar amount shall be allocated annually as required by section 42 of the Internal Revenue Code of 1986, as amended by the corporation in an amount equal to $1.25 multiplied by the state population in the calendar year or such greater or lesser amount as provided by section 42(h) of the Internal Revenue Code of 1986, as amended.

(c) The corporation shall adopt rules under chapter 91 necessary to comply with federal and state requirements for determining the amount of the tax credit allowed under section 42 of the Internal Revenue Code of 1986, as amended [and section 235-110.8]. The corporation may establish and collect reasonable fees for administrative expenses incurred in providing the services required by this section, including fees for processing developer applications for the credit. All fees collected for administering these provisions, including developer application fees, shall be deposited into the corporation's housing finance revolving fund to be used to cover the administrative expenses of the corporation.

[(d) All claims for allocation of the low-income housing credit under section 235-110.8 shall be filed with the corporation. The corporation shall determine the amount of the credit allocation, if necessary, and return the claim to the taxpayer. The taxpayer shall file the credit allocation with the taxpayer's tax return with the department of taxation.]"

SECTION 14. Section 201G-351, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In establishing such a program, the corporation shall adopt rules pursuant to chapter 91 relating to establishing a savings program for participants based upon individual analyses of income and family expenses. The rules may also provide for integration of the homebuyers' club program with other governmental programs including but not limited to [individual housing accounts under section 235-5.5,] the state mortgage guarantee program under part III.G, the downpayment loan program established under part III.H, and the rent-to-own program established under part [[]III.K[]]."

SECTION 15. Section 207-12, Hawaii Revised Statutes, is amended to read as follows:

"§207-12 Exemptions and immunities. A foreign lender which (1) does not maintain a place of business in this State, (2) conducts its principal activities outside this State, and (3) complies with this part, does not by engaging in this State in any or all of the activities specified in section 207-13, violate the laws of this State relating to doing business or doing a banking, trust, or insurance business, or become subject to chapter 412, 415, or 431, or become subject to any taxation which would otherwise be imposed for doing business in or doing a banking, trust, or insurance business in, or having gross income or receipts from sources in, property in, or the conduct of any activity in, this State, or become subject to any taxation under chapter [235, 237, or 241,]     and no income or receipts of any foreign lender arising out of any of the activities specified in the following section shall constitute income from sources in, property in, or activities conducted in this State for the purposes of any tax imposed by this State; provided that nothing in this part shall be construed to exempt the real property of a foreign lender from taxation to the same extent, according to its value, as other real property is taxed, or to preclude the inclusion of the dividends or other income from foreign lenders in the income of individuals taxable under chapter [235]     to the same extent as is included dividends and other income from domestic lenders; and provided further that if any such foreign lender shall acquire any property in this State in enforcement of the rights of the foreign lender in the event of a default by any borrower, as permitted by section 207-13(4), then commencing one year after title to such property has vested in the foreign lender, the rents or other receipts received by the foreign lender from, and the proceeds of sale by the foreign lender of, such property shall be subject to taxation under [chapters 235 and 237] chapter     in the same manner and to the same extent as if the rents, other receipts, or proceeds were received by a resident of this State; and provided further that if any such foreign lender shall otherwise acquire any property in this State or engage in any business or activities in this State not specified in section 207-13, then the rents and other receipts received by the foreign lender from such property and the proceeds of sale by the foreign lender of such property and all income and receipts from the foreign lender's business or activities in this State not specified in section 207-13 shall be subject to taxation under [chapters 235 and 237] chapter     in the same manner and to the same extent as if such rents, other receipts, proceeds, and income were received by a resident of this State, but such other activities and business shall not deprive the foreign lender of the immunities and exemptions from taxation hereinabove stated with respect to the activities specified in section 207-13."

SECTION 16. Section 209E-2, Hawaii Revised Statutes, is amended by amending the definition of "qualified business" to read as follows:

""Qualified business" means any corporation, partnership, or sole proprietorship authorized to do business in the State that is qualified under section 209E-9, subject to the state [corporate or individual income] comprehensive tax under chapter [235, and [is]:

(1) Engaged in manufacturing, the wholesale sale of tangible personal property as defined in section 237-4, or a service business as defined in this chapter;

(2) Engaged in producing agricultural products where the business is a producer as defined in section 237-5;

(3) Engaged in research, development, sale, or production of all types of genetically-engineered medical, agricultural, or maritime biotechnology products; or

(4) Engaged in producing electric power from wind energy for sale primarily to a public utility company for resale to the public.]    ."

SECTION 17. Section 209E-2, Hawaii Revised Statutes, is amended by amending the definition of "taxes due the state" to read as follows:

""Taxes due the State" means income taxes due under chapter [235.]    ."

SECTION 18. Section 212-8, Hawaii Revised Statutes, is amended to read as follows:

"§212-8 Exemption from taxes. Notwithstanding any law to the contrary, sales of all products which are categorized as privileged foreign merchandise, nonprivileged foreign merchandise, domestic merchandise, or zone-restricted merchandise, and which are admitted into a foreign-trade zone, as more specifically set forth in the Act of Congress, and any rules and regulations promulgated thereunder, made directly to any common carrier in interstate or foreign commerce, or both, whether ocean-going or air, for consumption out-of-state by the crew or passengers on the shipper's vessels or airplanes, or for use out-of-state by the vessels or airplanes, shall be exempt from those taxes imposed under chapters [237, 238,]    , 243, 244D, and 245."

SECTION 19. Section 231-19.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Written opinions shall be open to public inspection and copying as provided in this section[, notwithstanding sections 235-116, 236D-15, 237-34, and 237D-13] and any other law restricting disclosure of tax returns or tax return information to the contrary. Except as provided in subsection (f), regarding the disclosure of the text of written opinions, chapter 92F shall not apply to tax returns and tax return information.

A written opinion may not be used or cited as precedent unless otherwise provided by department rules."

SECTION 20. Section 231-23, Hawaii Revised Statutes, is amended to read as follows:

"§231-23 Adjustments and refunds. (a) This subsection shall apply to all taxes [except those collected under chapter 247] and those collected under a chapter containing a provision for credit and refund of the amount of tax paid in excess of the tax imposed by such chapter. As to all tax payments for which a refund or credit is not authorized by this subsection (including without prejudice to the generality of the cases of unconstitutionality hereinafter mentioned in (1)(C)) the remedies provided by appeal or under section 40-35 are exclusive.

(1) If the amount already paid exceeds that which should have been paid under the chapter imposing a particular tax, or if the amount already paid results in duplication of payment in whole or in part, the excess so paid shall be refunded in the manner provided in subsection (c) subject however to the following limitations:

(A) No refund shall be made unless an application for the refund shall have been made within five years after the amount to be refunded was paid;

(B) No recourse may be had except under section 40-35 or by appeal for refunds of taxes paid pursuant to an assessment by the director of taxation, provided that if the assessment by the director shall contain clerical errors, transposition of figures, typographical errors, and errors in calculation or if there shall be an illegal or erroneous assessment, the usual refund procedures shall apply; or

(C) No refund or overpayment credit shall be made unless the original payment of the tax was due to the law having been interpreted or applied in respect of the taxpayer concerned differently than in respect of taxpayers generally.

(2) In any case where a taxpayer is entitled to a refund, the taxpayer, at the taxpayer's election, may apply the amount of the refund as an overpayment credit to taxes subsequently accruing under the same chapter as that under which the refundable amount was collected.

[(b) This subsection shall apply to the taxes collected under chapter 247.

There may be refunded in the manner provided in subsection (c) such conveyance tax as has been erroneously or unjustly paid.

(c)] (b) This subsection shall apply to all taxes.

(1) All refunds shall be paid only upon a form to be known as a "refund voucher" prepared by the collector. The refund vouchers shall set forth all the details of each transaction, shall be approved by the director, and shall be forwarded to the comptroller from time to time. The comptroller shall issue a warrant, in the form prescribed by section 40-52, for the payment of any such refund out of the tax reserve fund hereinafter created; provided that if the person entitled to the refund is delinquent in the payment of any tax, the comptroller, upon demand of the collector and after notice to the delinquent taxpayer, shall withhold the amount of the delinquent taxes, together with penalties and interest thereon, from the amount of the refund and pay the same to the collector.

(2) There is hereby appropriated, from the general revenues of the State not otherwise appropriated, the sum of $25,000 which shall be set aside as a special fund to be known as the tax reserve fund. All refunds of taxes collected by the department under chapters of the law under title 14 administered by the department shall be made out of the tax reserve fund. The director of taxation, from time to time, may deposit taxes collected under chapters of the law under title 14 administered by the department in the state treasury to the credit of the tax reserve fund so that there may be maintained at all times a fund not exceeding $25,000. The amounts deposited shall be made from the taxes with respect to which a particular refund is made.

[(d)] (c) This subsection shall apply to a refund for an overpayment of a tax.

(1) If the tax return as filed by a taxpayer shows the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax due, and the taxpayer requests a refund of the overpayment, the amount of overpayment together with interest, if any, shall be refunded in the manner provided in subsection (c). The interest shall be allowed and paid at the rate of two- thirds of one per cent for each month or fraction thereof, beginning with the first calendar day after the due date of the return or, if the return is filed after the prescribed due date, the first month following the month the return is received, and continuing until the date that the director approves the refund voucher. If the director approves the refund voucher within ninety days from the due date or the date the return is received, whichever is later, and the comptroller of the State sends the taxpayer a refund warrant within forty-five days from the date of the director's approval, no interest on the overpayment will be allowed or paid. However, if either the director or the comptroller exceeds the time allowed herein, interest will be computed from the first calendar day after the due date of the return or from the first month following the month the return is received by the director if the return is filed after the prescribed due date, until the date that the comptroller sends the refund warrant to the taxpayer.

(2) If any overpayment of taxes results or arises from (A) the taxpayer filing an amended return, or from (B) a determination made by the director and such overpayment is not shown on the original return as filed by the taxpayer, interest on the overpayment shall be allowed and paid from the first calendar day after the due date of the original return or, if the original return is filed after the prescribed due date, the first month following the month the return is received, to the date that the director signs the refund voucher. If the comptroller does not send the refund warrant to the taxpayer within forty-five days after the director's approval, interest will continue until the date that the comptroller sends the refund warrant to the taxpayer.

(3) For purposes of a net income tax return, if any overpayment of any taxes results from a carryback of a net operating loss, the overpayment shall be deemed to have been made at the close of the taxable year in which the net operating loss arises. To the extent that the carryback of net operating loss results in reducing the amount of underpayment of taxes for prior taxable year or years, interest which would be chargeable because of the underpayment shall not be applicable with respect to that amount or amounts which are carried back.

(4) In the case of credit, interest shall be allowed and paid from the first calendar day after the due date of the return, the first month following the month the return is received by the director, or the date of payment, whichever is later, to the date the credit is taken; provided that the director may make a refund of any credit to a taxpayer where the taxpayer has no underpayment against which to apply the credit."

SECTION 21. Section 231-39, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) There shall be added to and become a part of the tax imposed by such tax or revenue law, and collected as such:

(1) Failure to file tax return. In case of failure to file any tax return required to be filed on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that the failure is due to reasonable cause and not due to neglect, there shall be added to the amount required to be shown as tax on the return five per cent of the amount of the tax if the failure is for not more than one month, with an additional five per cent for each additional month or fraction thereof during which the failure continues, not exceeding twenty-five per cent in the aggregate. For purposes of this paragraph, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return. This paragraph shall not apply to any failure to file a declaration of estimated tax required by section [235-97.]    -97.

(2) Failure to pay tax.

(A) If any part of any underpayment is due to negligence or intentional disregard of rules (but without intent to defraud), there shall be added to the tax an amount up to twenty-five per cent of the underpayment as determined by the director.

(B) If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount up to fifty per cent of the underpayment as determined by the director.

(C) If any penalty is assessed under subparagraph (B) (relating to fraud) for an underpayment of tax which is required to be shown on a return, no penalty under paragraph (1) (relating to failure to file the return) shall be assessed with respect to the same underpayment.

(3) Failure to pay tax after filing timely returns. If a return is filed on or before the date prescribed therefor and the amount shown as tax on the return is not completely paid within sixty days of the prescribed filing date, there shall be added to the unpaid tax an amount up to twenty per cent as determined by the director.

(4) Interest on underpayment or nonpayment of tax.

(A) If any amount of tax is not paid on or before the last date prescribed for payment, interest on such amount at the rate of two-thirds of one per cent a month or fraction of a month shall be paid for the period beginning with the first calendar day after the date prescribed for payment, section 231-21 to the contrary notwithstanding, to the date paid.

(B) If the amount of any tax is reduced by reason of a carryback of a net operating loss allowed under chapter 235, such reduction in tax shall not affect the computation of interest under this paragraph for the period ending with the last day of the taxable year in which the net operating loss arises.

(C) Interest prescribed under this paragraph on any tax shall be paid upon notice and demand, and shall be assessed, collected, and paid in the same manner as taxes.

(D) No interest under this paragraph shall be imposed on interest provided by this paragraph.

(E) If any portion of a tax is satisfied by credit of any overpayment, then no interest shall be imposed under this paragraph on the portion of the tax so satisfied for any period during which, if the credit had not been made, interest would have been allowable with respect to the overpayment.

(F) Interest prescribed under this paragraph on any tax may be assessed and collected at any time during the period within which the tax to which the interest relates may be collected.

(G) This paragraph shall not apply to any failure to pay estimated tax required by section [235-97.]    -97."

SECTION 22. Section 243-14, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) In the case of a false or fraudulent statement with intent to evade tax or liability, or of a failure to file a statement, the tax or liability may be assessed or levied at any time; provided that in the case of a statement claimed to be false or fraudulent with intent to evade tax or liability, the determination as to the claim shall first be made by a judge of the circuit court [as provided in section 235-111(c)] which shall apply to the tax imposed by this chapter."

SECTION 23. Section 243-14.5, Hawaii Revised Statutes, is amended to read as follows:

"§243-14.5 Appeals. Any person aggrieved by any assessment of the tax imposed by this chapter may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of income tax appeals by section [235-114;]    -114; provided that, for appeals other than to the district board of review, the tax so assessed shall have been paid. The hearing and disposition of the appeal, including the distribution of costs and of taxes paid pending the appeal, shall be as provided in chapter 232."

SECTION 24. Section 244D-8, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If it should appear upon such examination or thereafter within five years after the filing of the return, or at any time if no return has been filed, as a result of such examination or as a result of any examination of the records of the taxpayer or of any other inquiry or investigation, that the correct amount of the tax is greater than that shown on the return, or that any tax imposed by the chapter has not been paid, an assessment of such tax may be made in the manner provided in section [235-108(b).]    -108(b). The amount of the tax for the period covered by the assessment shall not be reduced below the amount determined by an assessment so made, except upon appeal or in a proceeding brought pursuant to section 40-35."

SECTION 25. Section 244D-12, Hawaii Revised Statutes, is amended to read as follows:

"§244D-12 Appeals. Any person aggrieved by any assessment of the tax imposed by this chapter may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of [income] tax appeals by section [235-114,]    -114, provided that, for appeals other than to the district board of review, the taxes so assessed shall have been paid. The hearing and disposition of the appeal, including the distribution of costs and of taxes paid pending the appeal, shall be as provided in chapter 232."

SECTION 26. Section 244D-13, Hawaii Revised Statutes, is amended to read as follows:

"§244D-13 Other provisions applicable. All of the provisions of [chapters 235 and 237] chapter     not inconsistent with this chapter and which may appropriately be applied to the taxes, persons, circumstances, and situations involved in this chapter, including (without prejudice to the generality of the foregoing) provisions as to penalties and interest, and provisions granting administrative powers to the director of taxation, and provisions for the assessment, levy, and collection of taxes, shall be applicable to the taxes imposed by this chapter, and to the assessment, levy, and collection thereof, except that returns, return information, or reports under this chapter and relating only to this chapter may be made known to the liquor commission by the department of taxation, if not in conflict with section 231-18."

SECTION 27. Section 245-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the State:

(1) An excise tax equal to 5.00 cents for each cigarette sold, used, or, possessed by a wholesaler or dealer after June 30, 1998, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and

(2) An excise tax equal to forty per cent of the wholesale price of each article or item of tobacco products sold by the wholesaler or dealer, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer.

Where the tax imposed has been paid on cigarettes or tobacco products which thereafter become the subject of a casualty loss deduction allowable under chapter [235,]    , the tax paid shall be refunded or credited to the account of the wholesaler or dealer. The tax shall be applied to cigarettes through the use of stamps."

SECTION 28. Section 245-7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If it should appear upon the examination or within five years after the filing of the return, or at any time if no return has been filed, as a result of the examination, or as a result of any examination of the records of the wholesaler or dealer, or of any other inquiry or investigation, that the correct amount of the taxes is greater than that shown on the return, or that any taxes imposed by this chapter have not been paid, an assessment of the taxes may be made in the manner provided in section [235-108(b).]    -108(b). The amount of the taxes for the period covered by the assessment shall not be reduced below the amount determined by an assessment so made, except upon appeal or in a proceeding brought pursuant to section 40-35."

SECTION 29. Section 245-10, Hawaii Revised Statutes, is amended to read as follows:

"§245-10 Appeals. Any person aggrieved by any assessment of the taxes imposed by this chapter may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of income tax appeals by section [235-114;]    -114; provided that, for appeals other than to the district board of review, the taxes so assessed shall have been paid. The hearing and disposition of the appeal, including the distribution of costs and of taxes paid pending the appeal, shall be as provided in chapter 232."

SECTION 30. Section 245-11, Hawaii Revised Statutes, is amended to read as follows:

"§245-11 Chapter [235 and chapter 237]     applicable. All of the provisions of chapter [235 and chapter 237]     not inconsistent with this chapter and which may appropriately be applied to the taxes, persons, circumstances, and situations involved in this chapter, including (without prejudice to the generality of the foregoing) provisions as to penalties and interest, and provisions granting administrative powers to the department of taxation, and provisions for the assessment, levy, and collection of taxes, shall be applicable to the taxes imposed by this chapter, and to the assessment, levy, and collection thereof."

SECTION 31. Section 248-2.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The costs of assessment, collection, and disposition of county general excise and use tax surcharges shall be withheld from payment to the several counties by the State out of the county general excise and use tax surcharges collected for the current calendar year.

The costs of assessment, collection, and disposition of the county general excise and use tax surcharges shall be borne by each of the several counties in an amount proportional to the total amount of surcharges allocated to that county divided by the total amount of surcharges collected for the entire State for the preceding calendar year.

For the purpose of this section, the costs of assessment, collection, and disposition of the county general excise and use tax surcharges shall include any and all costs, direct or indirect, which are deemed necessary and proper to effectively administer this section [and sections 237-8.5 and 238-2.5. Costs include refunds or reductions of income taxes under section 235-110.7 attributable to the county general excise and use tax surcharge]."

SECTION 32. Section 269-17.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) For purposes of this section "foreign corporation" means a foreign corporation [as defined in section 235-1 or] is a corporation in which a majority of the voting stock is held by a single foreign corporation [as defined in section 235-1]."

SECTION 33. Section 302A-412, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each secondary public school, upon the approval of the principal and the district superintendent, may allow on the premises vending machines operated as a concession; provided that the concession shall be operated only by a blind or visually handicapped person, as defined in sections [235-1,] 347-1[,] and 347-2. The location and operation of the vending machines and the items dispensed shall be approved by the department."

SECTION 34. Section 321-15.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The director shall adopt rules regarding adult residential care homes in accordance with chapter 91 which shall be designed to:

(1) Protect the health, safety, and civil rights of persons residing in facilities regulated;

(2) Provide for the licensing of adult residential care homes; provided that the rules shall allow group living in two categories of adult residential care homes as licensed by the department of health:

(A) Type I allowing group living by five or fewer unrelated persons; and

(B) Type II allowing six or more persons including but not limited to the mentally ill, elders, the handicapped, the developmentally disabled, or totally disabled persons who are not related to the home operator or facility staff.

For purposes of this section:

"Mentally ill person" means a mentally ill person as defined under section 334-1.

"Elder" means an elder as defined under sections 201G-1 and 201G-151.

"Handicapped person" means an individual with a physical handicap as defined under section 515-2.

"Developmentally disabled person" means a person with developmental disabilities as defined under section 333F-1.

"Totally disabled person" means a person who is totally and permanently disabled [as defined under section 235-1;], either physically or mentally, which results in the person's inability to engage in any substantial gainful business or occupation. The disability shall be certified to by:

(i) A physician licensed under chapter 453 or 460;

(ii) A qualified out-of-state physician who is currently licensed to practice in the state in which the physician resides; or

(iii) A commissioned medical officer in the United States Army, Navy, Marine Corps, or Public Health Service, engaged in the discharge of one's official duty. Certification shall be on forms prescribed by the department of taxation.

(3) Comply with applicable federal laws and regulations of Title XVI of the Social Security Act, as amended; and

(4) Provide penalties for the failure to comply with any rule."

SECTION 35. Section 346E-1, Hawaii Revised Statutes, is amended by amending the definition of "nursing facility income" to read as follows:

""Nursing facility income" means the total compensation received for furnishing nursing facility services, including all receipts from "ancillary services" (as defined in 42 Code of Federal Regulations 413.53(b)) to the provision of nursing facility services, and receipts from items supplied in connection with these services. "Nursing facility income" shall not include the following: compensation received from services covered by Title XVIII of the federal Social Security Act (including copayments and deductibles received from beneficiaries of the medicare program); income from an affiliated entity that operates as a prepaid health maintenance organization; settlements from third party payors for services delivered or items supplied prior to the effective date of this Act (such as settlements of cost reports or decisions on rate reconsideration requests); income from services provided by separately licensed units (such as distinct part intermediate care facilities for the mentally retarded); income from the provision of adult day health and adult day care programs; income from the provision of home health agency services; income from the provision of "nursing homes without walls" programs; income from the provision of inpatient hospital services; income from grants, bequests, donations, endowments, or investments; or amounts of taxes imposed by chapter [237 or this chapter]     and passed on, collected, and received from the consumer as part of nursing facility income."

SECTION 36. Section 346E-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) On or before the fifteenth day of February, May, August, and November, or for fiscal year taxpayers on or before the forty-fifth day after the close of the fiscal quarter, every operator taxable under this chapter during the preceding calendar or fiscal quarter shall file a sworn return with the director in such form as the director shall prescribe, together with a remittance for the amount of the tax in the form of cash, bank draft, cashier's check, money order, or certificate of deposit. In lieu of the remittance, the operator may request withholding from payments made to the operator by the department under section 346E-4. Sections [237-30]     and [237-32]     shall apply to returns and penalties made under this chapter to the same extent as if the sections were set forth specifically in this section."

SECTION 37. Section 346E-8, Hawaii Revised Statutes, is amended to read as follows:

"[[]§346E-8[]] Appeals. Any operator aggrieved by any assessment of the tax imposed by this chapter for any quarter or any year, may appeal from the assessment in the manner and within the time and in all other respects, as provided in the case of [income] tax appeals by section [235-114;]    -114; provided the tax so assessed shall have been paid."

SECTION 38. Section 346E-13, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The director shall administer and enforce this chapter. With respect to:

(1) The examinations of books and records, and operators and other persons;

(2) Procedures and powers upon failure or refusal by an operator to make a return or proper return; and

(3) The general administration of this chapter;

the director shall have all rights, powers, and duties conferred by chapters 231 and [237]     with respect to powers and duties or with respect to taxes imposed under chapter [237.]    . Without restriction upon these rights and powers, section [237-8]    -3 and sections [237-36 to 237-41]    -92 to    -110 are made applicable to and with respect to taxes, operators, department officers, and other persons, and the matters and things affected or covered by this chapter, insofar as these sections are not inconsistent with this chapter, in the same manner, as nearly as may be, as in similar cases covered by chapter [237.]    ."

SECTION 39. Section 349-10, Hawaii Revised Statutes, is amended to read as follows:

"§349-10 Annual senior citizen's fair. Each county may hold an annual senior citizen's fair in its respective county. The county shall be responsible for the planning, organizing, and coordinating of the fair in every respect. The state policy advisory board for elder affairs may assist the county in any aspect upon request. [Proceeds earned from this fair are deemed to be proceeds earned from casual sales as defined in chapter 237.] The county shall distribute such proceeds to the various senior citizen organizations and individuals who participate in the fair in accordance with appropriate methods of distribution as determined by the county."

SECTION 40. Section 383-163.6, Hawaii Revised Statutes, is amended by amending its title and subsections (a), (b), and (c) to read as follows:

"[[]§383-163.6[]] Voluntary deduction and withholding of federal and state [income] comprehensive taxes. (a) An individual filing a new claim for unemployment compensation shall, at the time of filing the claim, be advised that:

(1) Unemployment compensation is subject to federal and state [income] comprehensive tax;

(2) Requirements exist pertaining to estimated tax payments;

(3) The individual may elect to have federal income tax deducted and withheld from the individual's payment of unemployment compensation at the amount specified in the federal Internal Revenue Code;

(4) The individual may elect to have state [income] comprehensive tax deducted and withheld from the individual's payment of unemployment compensation at the amount specified in section [235-69;]    -69;

(5) The individual may elect to have state and local income taxes deducted and withheld from the individual's payment of unemployment compensation for other states and localities outside this State at the percentage established by the state or locality, if the department by agreement with the other state or locality is authorized to deduct and withhold income tax; and

(6) The individual shall be permitted to change a previously elected withholding status no more than once during a benefit year.

(b) Amounts deducted and withheld from unemployment compensation shall remain in the unemployment compensation fund until transferred to the federal, state, or local taxing authority as a payment of income or comprehensive tax.

(c) The director shall follow all procedures specified by the United States Department of Labor, the federal Internal Revenue Service, and the state department of taxation, pertaining to the deducting and withholding of income or comprehensive tax."

SECTION 41. Section 412:5-305, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:

"(h) To the extent specified herein, a bank may invest its own assets in limited partnerships formed to invest in residential properties which will qualify for the low income housing tax credit under section 42 of the Internal Revenue Code of 1986, as amended[, and under chapters 235 and 241]; provided that the total amount invested by a bank under this subsection in any one limited partnership shall not, without the prior approval of the commissioner, exceed two per cent of the bank's capital and surplus and the aggregate amount invested under this subsection shall not, without the prior approval of the commissioner, exceed five per cent of the bank's capital and surplus. In no case shall the aggregate amount invested by a bank under this subsection exceed ten per cent of the bank's capital and surplus."

SECTION 42. Section 412:6-306, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:

"(h) To the extent specified herein, a savings bank may invest its own assets in limited partnerships formed to invest in residential properties which will qualify for the low income housing tax credit under section 42 of the Internal Revenue Code of 1986, as amended[, and under chapters 235 and 241]; provided that the total amount invested by a savings bank under this subsection in any one limited partnership shall not, without the prior approval of the commissioner, exceed two per cent of the savings bank's capital and surplus and the aggregate amount invested under this subsection shall not, without the prior approval of the commissioner, exceed five per cent of the savings bank's capital and surplus. In no case shall the aggregate amount invested by a savings bank under this subsection exceed ten per cent of the savings bank's capital and surplus."

SECTION 43. Section 412:7-306, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:

"(h) To the extent specified herein, a savings and loan association may invest its own assets in limited partnerships formed to invest in residential properties which will qualify for the low income housing tax credit under section 42 of the Internal Revenue Code of 1986, as amended[, and under chapters 235 and 241]; provided that the total amount invested by a savings and loan association under this subsection in any one limited partnership shall not, without the prior approval of the commissioner, exceed two per cent of the savings and loan association's capital and surplus and the aggregate amount invested under this subsection shall not, without the prior approval of the commissioner, exceed five per cent of the savings and loan association's capital and surplus. In no case shall the aggregate amount invested by a savings and loan association under this subsection exceed ten per cent of the savings and loan association's capital and surplus."

SECTION 44. Section 412:9-409, Hawaii Revised Statutes, is amended by amending subsection (i) to read as follows:

"(i) To the extent specified herein, a depository financial services loan company may invest its own assets in limited partnerships formed to invest in residential properties which will qualify for the low income housing tax credit under section 42 of the Internal Revenue Code of 1986, as amended[, and under chapters 235 and 241]; provided that the total amount invested by a depository financial services loan company under this subsection in any one limited partnership shall not, without the prior approval of the commissioner, exceed two per cent of the depository financial services loan company's capital and surplus and the aggregate amount invested under this subsection shall not, without the prior approval of the commissioner, exceed five per cent of the depository financial services loan company's capital and surplus. In no case shall the aggregate amount invested by a depository financial services loan company under this subsection exceed ten per cent of the depository financial services loan company's capital and surplus."

SECTION 45. Section 421-23, Hawaii Revised Statutes, is amended to read as follows:

"§421-23 Taxation. Domestic associations organized under this chapter shall pay an annual license fee of $10 to the director of commerce and consumer affairs [(and] which shall be a general realization of the State[) which shall be in lieu of all other corporation, franchise, and income taxes, and taxes and charges upon reserves held by the association for distribution to members, including without limitation upon the generality of the foregoing any taxes imposed under chapter 235.

To obtain the exemptions from taxation granted by this section or any other law, the]. The association annually shall file with the director of taxation a copy of its report made under section 421-22, and in addition thereto, within ninety days after the close of its fiscal year, shall file with the tax assessor of each district in which there are persons doing business to whom it has paid, during the preceding fiscal year, any proceeds of goods marketed, a report showing the name of each person to whom the proceeds were paid, the total proceeds of sales for which such person is taxable under chapter [237]     for the fiscal year[, and the rate or rates of such tax applicable thereto or to the several amounts thereof, as the case may be]."

SECTION 46. Section 421H-4, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The membership shares and cooperative fees are interests in real property for purposes [of:

(1) Cooperative] cooperative housing corporations under section 216 of the federal Internal Revenue Code of [1954,] 1986, as amended[; and

(2) Exemption from state general excise tax under section 237-24(16)]."

SECTION 47. Section 431:7-201, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each authorized insurer shall file with the commissioner and the director of taxation annually, on or before March 1 in each year, a statement signed by a duly authorized person on its behalf, setting forth the total business transacted, and the amount of gross premiums received by the insurer during the year ending on the preceding December 31, from all risks or property resident, situated, or located within this State, together with such other information as may be required by the commissioner in order to determine the taxability of premiums. The term gross premiums as used in this part shall not include consideration paid for annuities."

SECTION 48. Section 431:7-202, Hawaii Revised Statutes, is amended to read as follows:

"§431:7-202 Taxation. [(a)] Each authorized insurer[, except with respect to all life insurance contracts, ocean marine insurance contracts, and real property title insurance contracts,] shall pay to the director of [finance through the commissioner a tax of 4.265 per cent] taxation pursuant to any tax due on the gross premiums received from all risks or property resident, situated, or located within this State, during the year ending on the preceding December 31[, less return premiums (but not including dividends paid or credited to policyholders), and less any reinsurance accepted (the tax upon such business being payable by the direct writing insurer)].

All premiums written, procured, or received in the State shall be presumed to have been from risks or property resident, situated, or located within the State. This presumption may be rebutted as to any premium:

(1) By showing that it has been properly allocated or apportioned and reported as a taxable premium of another state or other appropriate taxing authority; or

(2) By facts as to the residence, situation, or location of the risks or property, conclusively showing the nontaxability of the premium.

[(b) Each authorized insurer, with respect to life insurance contracts, shall pay to the director of finance through the commissioner a tax of 2.75 per cent on the gross premiums received from all risks resident within this State, during the year ending on the preceding December 31, less return premiums, dividends paid or credited to policyholders, and reinsurance accepted (the tax upon such business being payable by the direct writing insurer).

The tax also shall apply to premiums for insurance written on individuals residing outside the State unless the direct writing insurer shall show the payment of a comparable tax to another appropriate taxing authority. Such showing may be required as to any premium written, procured, or received in the State.

(c) Each authorized insurer shall, with respect to all ocean marine insurance contracts written within the State, during the year ending on the preceding December 31, pay to the director of finance through the commissioner a tax of .8775 per cent on its gross underwriting profit. The gross underwriting profit shall be ascertained by deducting from the net premiums (i.e., gross premiums less all return premiums and premiums for reinsurance ceded) on such ocean marine insurance contracts, the net losses paid (i.e., gross losses paid less salvage and recoveries on reinsurance ceded) during such year under such contracts. In the case of an insurer issuing participating contracts, the gross underwriting profit shall not include, for computation of the tax prescribed by this subsection, the amount refunded, or paid as participation dividends, by such insurer to the holders of such contracts.

(d) Each authorized insurer, with respect to real property title insurance contracts written on real property situated within this State during the year ending on the preceding December 31, shall pay to the director of finance through the commissioner a tax of 4.265 per cent of the amount of the risk premium actually received by the authorized insurer for the provision of such insurance. The amount of the risk premium received by the authorized insurer for the provision of real property title insurance shall be an amount equal to the amount actually received by the authorized insurer solely for the provision of real property title insurance coverage in accordance with the underwriting agreement or contract between the authorized insurer and the underwritten title company.

(e) No return premium shall be deductible unless the original gross premium, or an adjustment thereof, in an amount equal to or in excess of the return premium, has been concurrently or previously reported as taxable under this section or a prior similar law of the State.

(f) The taxes imposed by subsections (a), (b), (c), and (d) shall be paid quarterly. The quarterly tax shall be due and payable on or before the last day of the calendar month following the quarter in which it accrues, coinciding with the filing of the statement provided for in section 431:7-201.

In addition to the quarterly tax and quarterly tax statement, the annual tax shall be due and payable on or before March 1 coinciding with the filing of the statement provided for in section 431:7-201.

All amounts paid under this subsection, other than fines, shall be allowed as a credit on the annual tax imposed by subsections (a), (b), (c), and (d).

If the total amount of installment payments for any calendar year exceeds the amount of annual tax for that year, the excess shall be treated as an overpayment of the annual tax and be allowed as a refund under section 431:7-203.

Any insurer failing or refusing to pay the required taxes above stated when due and payable shall be liable for a fine of $500 or ten per cent of the tax due, whichever is greater; plus interest at a rate of twelve per cent per annum on the delinquent taxes. The taxes may be collected by distraint, or the taxes, fine, and interest may be recovered by an action to be instituted by the commissioner in the name of this State, in any court of competent jurisdiction. The commissioner may suspend the certificate of authority of the delinquent insurer until the taxes, fine, and interest, should any be imposed, are fully paid.

(g) In establishing the prepayment amount of an insurer who has acquired the business of another insurer, the amount of tax liability of the acquiring insurer for the preceding calendar year shall be deemed to include the amount of tax liability of the acquired insurer for that year.]"

SECTION 49. Section 431:7-204.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§431:7-204.5[]] Appeals. Notwithstanding section 431:2-308, any person aggrieved by any assessment of the tax for any month or any year may appeal from the assessment in the manner and within the time and in all other respects as provided in section [235-114,]    -144; provided the tax so assessed shall have been paid."

SECTION 50. Section 432:2-503, Hawaii Revised Statutes, is amended to read as follows:

"§432:2-503 Taxation. Every society organized and operating or licensed under this article shall be, from the time of such organization, exempt from every [state,] county[,] and municipal tax, except real property taxes and unemployment compensation taxes; provided that nothing in this section shall be deemed to exempt the association or society from liability to withhold such taxes payable by its employees and pay the same to the proper collection officers, and to keep such records and make such returns and reports, as may be required in the case of other corporations, associations, or societies similarly exempt from the taxes hereinabove first mentioned[; provided further, that the exemption hereby granted as to general excise taxes under chapter 237 shall not apply to any activity the primary purpose of which is to produce income]."

SECTION 51. Section 444-17, Hawaii Revised Statutes, is amended to read as follows:

"§444-17 Revocation, suspension, and renewal of licenses. In addition to any other actions authorized by law, the board may revoke any license issued pursuant to this section, or suspend the right of a licensee to use a license, or refuse to renew a license for any cause authorized by law, including but not limited to the following:

(1) Any dishonest, fraudulent, or deceitful act as a contractor that causes substantial damage to another;

(2) Engaging in any unfair or deceptive act or practice as prohibited by section 480-2;

(3) Abandonment of any construction project or operation without reasonable or legal excuse;

(4) Wilful diversion of funds or property received for prosecution or completion of a specific construction project or operation, or for a specified purpose in the prosecution or completion of any construction project or operation, and the use thereof for any other purpose;

(5) Wilful departure from, or wilful disregard of plans or specifications in any material respect without consent of the owner or the owner's duly authorized representative, that is prejudicial to a person entitled to have the construction project or operation completed in accordance with those plans and specifications;

(6) Wilful violation of any law of the State, or any county, relating to building, including any violation of any applicable rule of the department of health, or of any applicable safety or labor law;

(7) Failure to make and keep records showing all contracts, documents, records, receipts, and disbursements by a licensee of all the licensee's transactions as a contractor for a period of not less than three years after completion of any construction project or operation to which the records refer or to permit inspection of those records by the board;

(8) When the licensee being a partnership or a joint venture permits any partner, member, or employee of the partnership or joint venture who does not hold a license to have the direct management of the contracting business thereof;

(9) When the licensee being a corporation permits any officer or employee of the corporation who does not hold a license to have the direct management of the contracting business thereof;

(10) Misrepresentation of a material fact by an applicant in obtaining a license;

(11) Failure of a licensee to complete in a material respect any construction project or operation for the agreed price if the failure is without legal excuse;

(12) Wilful failure in any material respect to comply with this chapter or the rules adopted pursuant thereto;

(13) Wilful failure or refusal to prosecute a project or operation to completion with reasonable diligence;

(14) Wilful failure to pay when due a debt incurred for services or materials rendered or purchased in connection with the licensee's operations as a contractor when the licensee has the ability to pay or when the licensee has received sufficient funds therefor as payment for the particular operation for which the services or materials were rendered or purchased;

(15) The false denial of any debt due or the validity of the claim therefor with intent to secure for a licensee, the licensee's employer, or other person, any discount of the debt or with intent to hinder, delay, or defraud the person to whom the debt is due;

(16) Failure to secure or maintain workers' compensation insurance, unless the licensee is authorized to act as a self-insurer under chapter 386 or is excluded from the requirements of chapter 386;

(17) Entering into a contract with an unlicensed contractor involving work or activity for the performance of which licensing is required under this chapter;

(18) Performing service on a residential or commercial air conditioner, utilizing CFCs, without using refrigerant recovery and recycling equipment;

(19) Performing service on any air conditioner after January 1, 1994, without successful completion of an appropriate training course in the recovery and recycling of CFC and HCFC refrigerants, which included instruction in the proper use of refrigerant recovery and recycling equipment that is certified by Underwriters Laboratories, Incorporated;

(20) Violating chapter 342C; and

(21) Failure to pay delinquent taxes, interest, and penalties assessed under chapter [237]     that relate to the business of contracting, or to comply with the terms of a conditional payment plan with the department of taxation for the payment of such delinquent taxes, interest, and penalties."

SECTION 52. Section 480B-2, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The media shall submit to the attorney general, no later than thirty days after December 31 of the reporting year, [an income] a comprehensive tax return filed pursuant to section [235-4.]    -4."

SECTION 53. Section 481I-3, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If the manufacturer, its agents, distributors, or authorized dealers are unable to conform the motor vehicle to any applicable express warranty by repairing or correcting any defect or condition which substantially impairs the use, market value, or safety of the motor vehicle after a reasonable number of documented attempts, then the manufacturer shall provide the consumer with a replacement motor vehicle or accept return of the vehicle from the consumer and refund to the consumer the following: the full purchase price including but not limited to charges for undercoating, dealer preparation, transportation, installed options, and all collateral and incidental charges, and less a reasonable offset for the consumer's use of the motor vehicle.

If either a replacement motor vehicle or a refund is awarded, an "offset" may be made for damage to the vehicle not attributable to normal wear and tear, if unrelated to the nonconformity. If a replacement motor vehicle is awarded, a reasonable offset shall be made for the use of the motor vehicle and an additional offset may be made for loss to the fair market value of the vehicle resulting from damage beyond normal wear and tear, unless the damage resulted from the nonconformity. When the manufacturer supplies a replacement motor vehicle, the manufacturer shall be responsible for the general excise tax, and license and registration fees. [Refunds made pursuant to this subsection shall be deemed to be refunds of the sales price and treated as such for purposes of section 237-3.] Refunds shall be made to the consumer and lienholder, if any, as their interests may appear on the records of ownership. If applicable, refunds shall be made to the lessor and lessee pursuant to rules adopted by the department of commerce and consumer affairs."

SECTION 54. Section 486K-1, Hawaii Revised Statutes, is amended by amending the definition of "hotel/hotel-condo" to read as follows:

""Hotel/hotel-condo" means an establishment consisting of any building or structure used primarily for the business of providing for consideration transient accommodation lodging facilities and that furnishes, as part of its routine operations, one or more customary lodging services, other than living accommodations and the use of furniture and fixtures, including, but not limited to, restaurant facilities, or room attendant, bell, telephone switchboard, laundering, or concierge services[, and is subject to the transient accommodations tax under chapter 237D]."

SECTION 55. Section 515-3, Hawaii Revised Statutes, is amended to read as follows:

"§515-3 Discriminatory practices. It is a discriminatory practice for an owner or any other person engaging in a real estate transaction, or for a real estate broker or salesperson, because of race, sex, color, religion, marital status, familial status, ancestry, disability, age, or HIV (human immunodeficiency virus) infection:

(1) To refuse to engage in a real estate transaction with a person;

(2) To discriminate against a person in the terms, conditions, or privileges of a real estate transaction or in the furnishing of facilities or services in connection therewith;

(3) To refuse to receive or to fail to transmit a bona fide offer to engage in a real estate transaction from a person;

(4) To refuse to negotiate for a real estate transaction with a person;

(5) To represent to a person that real property is not available for inspection, sale, rental, or lease when in fact it is so available, or to fail to bring a property listing to the person's attention, or to refuse to permit the person to inspect real property, or to steer a person seeking to engage in a real estate transaction;

(6) To print, circulate, post, or mail, or cause to be so published a statement, advertisement, or sign, or to use a form of application for a real estate transaction, or to make a record or inquiry in connection with a prospective real estate transaction, which indicates, directly or indirectly, an intent to make a limitation, specification, or discrimination with respect thereto;

(7) To offer, solicit, accept, use, or retain a listing of real property with the understanding that a person may be discriminated against in a real estate transaction or in the furnishing of facilities or services in connection therewith;

(8) To refuse to engage in a real estate transaction with a person or to deny equal opportunity to use and enjoy a housing accommodation due to a disability because the person uses the services of a guide dog, signal dog, or service animal; provided that reasonable restrictions or prohibitions may be imposed regarding excessive noise or other problems caused by those animals. For the purposes of this paragraph:

"Blind" [shall be as defined in section 235-1;] means a person whose central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or whose visual acuity is greater than 20/200 but is accompanied by a limitation in the field of vision such that the widest diameter of the visual field subtends an angle no greater than twenty degrees. The impairment of sight shall be certified to on forms prescribed by the department of taxation on the basis of a written report on an examination performed by a qualified ophthalmologist or qualified optometrist.

"Deaf" [shall be as defined in section 235-1;] means a person whose average loss in the speech frequencies (500-2000 Hertz) in the better ear is eighty-two decibels, A.S.A., or worse. The impairment of deafness shall be certified to by a qualified otolaryngologist on forms prescribed by the department of taxation.

"Guide dog" means any dog individually trained by a licensed guide dog trainer for guiding a blind person by means of a harness attached to the dog and a rigid handle grasped by the person;

"Reasonable restriction" shall not include any restriction that allows any owner or person to refuse to negotiate or refuse to engage in a real estate transaction; provided that as used in this paragraph, the "reasonableness" of a restriction shall be examined by giving due consideration to the needs of a reasonable prudent person in the same or similar circumstances. Depending on the circumstances, a "reasonable restriction" may require the owner of the service animal, guide dog, or signal dog to comply with one or more of the following:

(A) Observe applicable laws including leash laws and pick-up laws;

(B) Assume responsibility for damage caused by the dog; or

(C) Have the housing unit cleaned upon vacating by fumigation, deodorizing, professional carpet cleaning, or other method appropriate under the circumstances.

The foregoing list is illustrative only, and neither exhaustive nor mandatory;

"Service animal" means any animal that is trained to provide those life activities limited by the disability of the person;

"Signal dog" means any dog that is trained to alert a deaf person to intruders or sounds;

(9) To solicit or require as a condition of engaging in a real estate transaction that the buyer, renter, or lessee be tested for human immunodeficiency virus infection (HIV), the causative agent of acquired immunodeficiency syndrome (AIDS);

(10) To refuse to permit, at the expense of a person with a disability, reasonable modifications to existing premises occupied or to be occupied by the person if modifications may be necessary to afford the person full enjoyment of the premises. A real estate broker or salesperson, where it is reasonable to do so, may condition permission for a modification on the person agreeing to restore the interior of the premises to the condition that existed before the modification, reasonable wear and tear excepted;

(11) To refuse to make reasonable accommodations in rules, policies, practices, or services, when the accommodations may be necessary to afford a person with a disability equal opportunity to use and enjoy a housing accommodation;

(12) In connection with the design and construction of covered multifamily housing accommodations for first occupancy after March 13, 1991, to fail to design and construct housing accommodations in such a manner that:

(A) The housing accommodations have at least one accessible entrance, unless it is impractical to do so because of the terrain or unusual characteristics of the site; and

(B) With respect to housing accommodations with an accessible building entrance:

(i) The public use and common use portions of the housing accommodations are accessible to and usable by disabled persons;

(ii) Doors allow passage by persons in wheelchairs; and

(iii) All premises within covered multifamily housing accommodations contain an accessible route into and through the housing accommodations; light switches, electrical outlets, thermostats, and other environmental controls are in accessible locations; reinforcements in the bathroom walls allow installation of grab bars; and kitchens and bathrooms are accessible by wheelchair; or

(13) To discriminate against or deny a person access to, or membership or participation in any multiple listing service, real estate broker's organization, or other service, organization, or facility involved either directly or indirectly in real estate transactions, or to discriminate against any person in the terms or conditions of such access, membership, or participation."

SECTION 56. Section 516-27, Hawaii Revised Statutes, is amended to read as follows:

"§516-27 Compulsory or involuntary conversion. It is the intent of the legislature, within the meaning of section 1033 or section 1231 of the Internal Revenue Code [or the applicable provisions of chapter 235, Hawaii Revised Statutes,] as well as all other statutes, rules, regulations, administrative orders, and legal interpretations within the federal and state governments relating to taxation, that any conveyance of title to property by a fee owner to the corporation under this part shall constitute a compulsory or involuntary conversion (as a result of the exercise of the power of condemnation or the threat of imminence thereof), and that such fee owner shall not be deemed, by reason, in whole or in part, of any provision of this part or by reason of the execution by the fee owner of leases to the property and other properties subsequent to June 24, 1967, to hold the property primarily for sale to customers in the ordinary course of trade or business."

SECTION 57. Section 560:3-910, Hawaii Revised Statutes, is amended to read as follows:

"§560:3-910 Purchasers from distributees protected. If property distributed in kind or a security interest therein is acquired for value by a purchaser from or lender to a distributee who has received an instrument or deed of distribution from the personal representative, or is so acquired by a purchaser from or lender to a transferee from such distributee, the purchaser or lender takes title free of rights of any interested person in the estate and incurs no personal liability to the estate, or to any interested person, whether or not the distribution was proper or supported by court order or the authority of the personal representative was terminated before execution of the instrument or deed. This section protects a purchaser from or lender to a distributee who, as personal representative, has executed a deed of distribution to the distributee's self, as well as a purchaser from or lender to any other distributee or the distributee's transferee. To be protected under this provision, a purchaser or lender need not inquire whether a personal representative acted properly in making the distribution in kind, even if the personal representative and the distributee are the same person, or whether the authority of the personal representative had terminated before the distribution. Any recorded instrument described in this section on which a state documentary fee is noted [pursuant to chapter 247] shall be prima facie evidence that such transfer was made for value."

SECTION 58. Section 560:6-108, Hawaii Revised Statutes, is amended to read as follows:

"§560:6-108 Financial institution protection; payment on signature of one party. Financial institutions may enter into multiple-party accounts to the same extent that they may enter into single-party accounts. Subject to the provision of [sections 236D-12 and] section 560:6-107, any multiple-party account may be paid, on request and according to its terms, to any one or more of the parties. A financial institution shall not be required to inquire as to the source of funds received for deposit to a multiple-party account, or to inquire as to the proposed application of any sum withdrawn from an account."

SECTION 59. Section 560:6-109, Hawaii Revised Statutes, is amended to read as follows:

"§560:6-109 Financial institution protection; payment after death or disability; joint account. Subject to the provisions of [sections 236D-12 and] section 560:6-107 any sums in a joint account may be paid, on request and according to its terms, to any party without regard to whether any other party is incapacitated or deceased at the time the payment is demanded; but payment may not be made to the personal representative or heirs of a deceased party unless proofs of death are presented to the financial institution showing that the decedent was the last surviving party or unless there is no right of survivorship under section 560:6-104."

SECTION 60. Section 612-11, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each year the clerk for each circuit shall compile a master list. The master list shall consist of all voter registration lists for the circuit, which shall be supplemented with names from other lists of persons resident therein such as lists of taxpayers and drivers' licenses. This includes names, addresses, and social security numbers taken from [income] comprehensive tax returns and estimates notwithstanding section [235-116.]    -116. Each person's name shall appear only once on the master list."

SECTION 61. Section 657D-43, Hawaii Revised Statutes, is amended to read as follows:

"[[]§657D-43[] Income] Comprehensive taxes; collection deferred; interest; statute of limitations. The collection from any person in the state military forces of any tax on the income or gross proceeds, or value of goods traded, of such person pursuant to chapter 235, whether falling due prior to or during the person's period of military service, shall be deferred for a period of not more than sixty days after the termination of the person's period of military service if such person's ability to pay such tax is materially impaired by reason of the service. No interest on any amount of tax, collection of which is deferred for any period under this section, and no penalty for nonpayment of such amount during such period, shall accrue for such period of deferment by reason of nonpayment. The running of any statute of limitations against the collection of such tax by distraint or otherwise shall be suspended for the period of military service of any person whose tax collection is deferred under this section, and for an additional period of sixty days beginning with the day following the period of military service.

The provisions of this section shall not apply to the retention or recovery of debt under sections 231-51 to 231-59."

SECTION 62. Section 842-11, Hawaii Revised Statutes, is amended to read as follows:

"§842-11 Failure to report income[;] gross proceeds or value of goods and services traded; penalty. Any law to the contrary notwithstanding, no person shall wilfully fail to report income derived, directly or indirectly, from a racketeering activity or through collection of an unlawful debt, or to pay the taxes due thereon as provided by chapter [235 or 237.]    . Whoever violates this section shall be guilty of a class B felony and in addition shall be subject to any assessment and collection of taxes, penalties, and interest to which the State may be entitled under [chapters 235 and 237.] chapter    ."

SECTION 63. Section 11-226, Hawaii Revised Statutes, is repealed.

["§11-226 Tax deductions. (a) As a condition of allowing an individual to take a tax deduction for campaign contributions to a candidate pursuant to section 235-7(g)(2), a candidate shall have filed an affidavit with the commission prior to or simultaneous with the filing of the candidate's organizational report stating that the candidate shall not exceed the expenditure limit for the candidate's respective office as set forth in section 11-209.

(b) The affidavit shall remain effective until the termination of the central committee of the candidate or the opening of filing for the next succeeding election for the office held or sought at the time of filing of the affidavit whichever occurs first. An affidavit filed under this section may not be rescinded.

(c) The director of taxation shall not allow any individual or married couple filing jointly to take a deduction against any tax due, pursuant to section 235-7(g)(2), for any contribution to a candidate for statewide or county office, who has not filed an affidavit as provided in this section.

(d) The commission shall forward a certified copy of any affidavit filed under this section to the director of taxation.

(e) The director of taxation shall only allow an individual or married couple filing jointly to take an income tax deduction, pursuant to section 235-7(g)(2), for any contribution to a candidate for a statewide or county office, if a receipt is attached to the state income tax return. Canceled checks or copies of the same shall be considered adequate receipt forms.

(f) If a candidate has not filed an affidavit pursuant to this section, the candidate shall inform all contributors to the candidate's campaign in writing immediately upon receipt of the contribution that they are not entitled to count their contributions to the candidate for purposes of taking a tax deduction under this section."]

SECTION 64. Section 201G-116, Hawaii Revised Statutes, is repealed.

["§201G-116 Exemption from general excise taxes. (a) In accordance with section 237-29, the corporation may approve and certify for exemption from general excise taxes any qualified person or firm involved with a newly constructed, or moderately or substantially rehabilitated project:

(1) Developed under this subpart;

(2) Developed under a government assistance program approved by the corporation, including but not limited to, the United States Department of Agriculture 502 program and Federal Housing Administration 235 program; or

(3) Developed under the sponsorship of a private nonprofit corporation providing home rehabilitation or new homes for qualified families in need of decent, low-cost housing.

(b) All claims for exemption under this section shall be filed with and certified by the corporation and forwarded to the department of taxation. Any claim for exemption that is filed and approved, shall not be considered a subsidy for the purpose of this subpart.

(c) For the purposes of this section, "moderate rehabilitation" means rehabilitation to upgrade a unit to a decent, safe, and sanitary condition, or to repair or replace major building systems or components in danger of failure. "Substantial rehabilitation" means the improvement of a property to a decent, safe, and sanitary condition that requires more than routine or minor repairs or improvements and may include, but is not limited to, the gutting and extensive reconstruction of a unit or cosmetic improvements coupled with the curing of a substantial accumulation of deferred maintenance. "Substantial rehabilitation" also includes renovation, alteration, or remodeling to convert or adapt structurally sound property to the design and condition required for a specific use (e.g., conversion of a hotel to housing for elders)."]

SECTION 65. Section 431:7-203, Hawaii Revised Statutes, is repealed.

["§431:7-203 Administrative refunds. (a) In the event any person has paid to the commissioner any tax, fee, or other charge in error or in excess of that which the person is lawfully obligated to pay under this code, the commissioner, upon written request made by the person to the commissioner within the time set forth in section 431:7-204.6, shall authorize a refund thereof out of the insurance regulation fund, except that a tax refund shall be payable out of the general fund, by submitting a voucher therefor to the comptroller subject to the following limitations:

(1) No recourse may be had except under section 40-35 or by appeal for refunds of taxes paid pursuant to an assessment by the commissioner; provided that if the assessment by the commissioner contains clerical errors, transposition of figures, typographical errors, and errors in calculation or if there is an illegal or erroneous assessment because the assessment is not in accordance with this code, the refund procedures in subsection (a) shall apply; and

(2) No refund or overpayment credit shall be made unless the original payment of the tax was due to the law having been interpreted or applied with respect to the taxpayer concerned differently than with respect to taxpayers generally.

As to all tax payments for which a refund or credit is not authorized by this subsection (including, without prejudice to the generality of the foregoing, cases of unconstitutionality), the remedies provided by appeal or under section 40-35 are exclusive.

(b) Where a taxpayer is entitled to a refund, the taxpayer, at the taxpayer's election, may apply the amount of the refund as an overpayment credit to taxes subsequently accruing under this code.

(c) This subsection shall apply to a refund for an overpayment of tax.

(1) If the tax return as filed by a taxpayer shows the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax due, and the taxpayer requests a refund of the overpayment, the amount of overpayment together with interest, if any, shall be refunded in the manner provided in subsection (a). The interest shall be allowed and paid at the rate of two-thirds of one per cent for each calendar month or fraction thereof, beginning with the first calendar day after the due date of the return or, if the return is filed after the prescribed due date, the first month following the month the return is received, and continuing until the date that the commissioner approves the refund voucher. If the commissioner approves the refund voucher within ninety days from the due date or the date the return is received, whichever is later, and the comptroller of the State sends the taxpayer a refund warrant within forty-five days from the date of the commissioner's approval, no interest on the overpayment will be allowed or paid. However, if either the commissioner or the comptroller exceeds the time allowed herein, interest will be computed from the first calendar day after the due date of the return or from the first month following the month the return is received by the commissioner if the return is filed after the prescribed due date, until the date that the comptroller sends the refund warrant to the taxpayer.

(2) If any overpayment of taxes results or arises from

(A) The taxpayer filing an amended return, or from

(B) A determination made by the commissioner and such overpayment is not shown on the original return as filed by the taxpayer, interest on the overpayment shall be allowed and paid from the first calendar day after the due date of the original return or, if the original return is filed after the prescribed due date, the first month following the month the return is received, to the date that the commissioner signs the refund voucher. If the comptroller does not send the refund warrant to the taxpayer within forty-five days after the commissioner's approval, interest will continue until the date that the comptroller sends the refund warrant to the taxpayer.

(3) In the case of credit, interest shall be allowed and paid from the first calendar day after the due date of the return, the first month following the month the return is received by the commissioner, or the date of payment, whichever is later, to the date the credit is taken; provided that the commissioner may make a refund of any credit to a taxpayer where the taxpayer has no underpayment against which to apply the credit."]

SECTION 66. Section 431:7-204, Hawaii Revised Statutes, is repealed.

["§431:7-204 In lieu provision. As to insurers, the taxes and fees imposed by section 431:7-201 to section 431:7-204, and the fees imposed by this code, when paid shall be in settlement of and in lieu of all demands for taxes, licenses, or fees of every character imposed by the laws of this State, the ordinances or other laws, rules, or regulations of any county of this State, except:

(1) As expressly otherwise provided;

(2) Taxes on real property;

(3) Taxes on the purchase, use, or ownership of tangible personal property; and

(4) Taxes on gross income, gross proceeds, gross rental, or gross rental proceeds under chapter 237 or 237D.

Nothing in this section shall be deemed to exempt insurers from liability for withholding taxes payable by their employees and paying the same to the proper collection officers, or from keeping such records, and making such returns and reports, as may be required in the case of other persons enjoying tax exemption."]

SECTION 67. Section 431:7-204.6, Hawaii Revised Statutes, is repealed.

["[§431:7-204.6] Limitation period for assessment, levy, collection, or refund. (a) The amount of insurance taxes imposed by this chapter shall be assessed or levied within three years after the annual return was filed, or within three years of the due date prescribed for the filing of the return, whichever is later, and no proceeding in court without assessment for the collection of any such taxes shall be begun after the expiration of the period.

(b) In the case of a false or fraudulent return with intent to evade tax, or of a failure to file the annual return, the tax may be assessed or levied at any time.

(c) Where, before the expiration of the period prescribed in subsection (a) or (d), both the commissioner and the taxpayer have consented in writing to the assessment or levy of the tax after the date fixed by subsection (a) or the credit or refund of the tax after the date fixed by subsection (d), the tax may be assessed or levied, or the overpayment, if any, may be credited or refunded, at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

(d) No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for such credit or refund shall be filed as follows:

(1) If an annual return is timely filed, or is filed within three years after the date prescribed for filing the annual return, then the credit or refund shall be claimed within three years after the date the annual return was filed or the date prescribed for filing the annual return, whichever is later.

(2) If an annual return is not filed, or is filed more than three years after the date prescribed for filing the annual return, a claim for credit or refund shall be filed within:

(A) Three years after payment of the tax; or

(B) Three years after the date prescribed for the filing of the annual return, whichever is later.

Paragraphs (1) and (2) are mutually exclusive. The limitation shall not apply to a credit or refund pursuant to an appeal provided for by section 431:7-204.5, or to a payment under protest as provided in section 40-35."]

SECTION 68. Section 431:7-205, Hawaii Revised Statutes, is repealed.

["§431:7-205 Reports to department of taxation. The commissioner shall promptly report to the department of taxation all amounts of taxes collected under section 431:7-201 to section 431:7-204 and section 431:8-315 and all amounts of refunds of such taxes made under section 431:7-203."]

SECTION 69. Section 431:7-206, Hawaii Revised Statutes, is repealed.

["§431:7-206 Domestic company credit for retaliatory taxes paid other states. If by the laws of any state other than this State, or by the action of any public official of another state, any insurer or company, as defined in section 431:1-202, organized or domiciled in this State, shall be required to pay taxes for the privilege of doing business in the other state, and the amounts are imposed or assessed so that the taxes which are or would be imposed against Hawaii domestic insurance companies are greater than those taxes required of insurers organized or domiciled in the other state, to the extent the amounts are legally due to the other states, an insurer or company organized or domiciled in this State may claim a credit against the tax payable pursuant to this article of a sum not to exceed one hundred per cent of the amount. The credit shall not be greater than the tax payable pursuant to this article during the taxable year."]

SECTION 70. Section 431:7-207, Hawaii Revised Statutes, is repealed.

["§431:7-207 Tax credit to facilitate regulatory oversight. (a) Each authorized insurer that meets the requirements of subsection (b) may claim a tax credit under this section against the tax imposed by section 431:7-202(a) or (b) for the taxable year for which the credit is properly claimed. The tax credit shall be an amount equal to one per cent of the premiums taxed by section 431:7-202(a) and (b).

(b) An insurer may claim the credit only if, at all times during the taxable year, the insurer:

(1) Maintains in Hawaii books and records required by the commissioner sufficient to conduct the examination authorized by section 431:2-302;

(2) Employs in Hawaii personnel knowledgeable about the insurer's financial operations and who are authorized to represent the insurer in all matters pertaining to examination; and

(3) Maintains in Hawaii a customer service center with employees authorized to promptly adjust, settle, and pay claims and to promptly answer all questions from customers regarding their insurance policies.

(c) The commissioner shall prepare the forms necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91.

(d) All claims for the tax credit under this section, including any amended claims, must 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 provision shall constitute a waiver of the right to claim the credit.

(e) The tax credit allowed by subsection (a) may be claimed on the interim returns required by section [431:7-202(f)]."]

SECTION 71. Chapter 235, Hawaii Revised Statutes, is repealed.

SECTION 72. Chapter 236D, Hawaii Revised Statutes, is repealed.

SECTION 73. Chapter 237, Hawaii Revised Statutes, is repealed.

SECTION 74. Chapter 237D, Hawaii Revised Statutes, is repealed.

SECTION 75. Chapter 238, Hawaii Revised Statutes, is repealed.

SECTION 76. Chapter 239, Hawaii Revised Statutes, is repealed.

SECTION 77. Chapter 240, Hawaii Revised Statutes, is repealed.

SECTION 78. Chapter 241, Hawaii Revised Statutes, is repealed.

SECTION 79. Chapter 246A, Hawaii Revised Statutes, is repealed.

SECTION 80. Chapter 247, Hawaii Revised Statutes, is repealed.

SECTION 81. Chapter 251, Hawaii Revised Statutes, is repealed.

SECTION 82. The legislative reference bureau shall prepare proposed conforming legislation to make necessary amendments to statutes affected by the repeal of the chapters under sections 71 to 81 of this Act. The legislative reference bureau shall transmit such proposed legislation to the legislature not later than twenty days prior to the convening of the regular session of 2003.

SECTION 83. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 84. This Act shall take effect on January 1, 2003.

INTRODUCED BY:

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