port Title:
Corporation Income Tax
Description:
Repeals the corporate income tax.
HOUSE OF REPRESENTATIVES |
H.B. NO. |
1629 |
TWENTY-FOURTH LEGISLATURE, 2007 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO CORPORATION INCOME TAX.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 235-2.4, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (o) to read:
"(o) Sections 512 to 514 (with respect to taxation of business income of certain exempt organizations) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this subsection.
"Unrelated business taxable income" means the same as in the Internal Revenue Code, except that in the computation thereof sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall apply, and in the determination of the net operating loss deduction there shall not be taken into account any amount of income or deduction that is excluded in computing the unrelated business taxable income. Unrelated business taxable income shall not include any income from a prepaid legal service plan.
For a person described in section 401 or 501 of
the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by
section 235-51 [or 235-71] shall be imposed upon the person's unrelated
business taxable income."
2. By amending subsection (q) to read:
"(q) Sections 527 (with respect to
political organizations) and 528 (with respect to certain homeowners
associations) of the Internal Revenue Code shall be operative for the purposes
of this chapter and the taxes imposed in each such section are hereby imposed
by this chapter [at the rates determined under section 235-71]."
SECTION 2. Section 235-3, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The Internal Revenue Code, so far as made operative by this chapter, is a statute adopted and incorporated by reference. The Internal Revenue Code shall be applied using changes in nomenclature and other language, including the omission of inapplicable language, where necessary to effectuate the intent of this section. In the Internal Revenue Code, references to terms such as:
(1) "Secretary or his delegate" shall refer to the director of taxation and the director's duly authorized subordinates;
(2) "Estate taxes" shall refer to the estate and transfer tax imposed by chapter 236D;
(3) "The highest rate of tax imposed upon individuals" or "39.6 per cent" shall refer to the highest rate imposed upon individuals under section 235-51; and
[(4) "The highest rate of tax imposed
upon corporations" shall refer to the highest rate imposed upon
corporations under section 235-71; and
(5)] (4) "Interest at the
underpayment rate" or "interest at the overpayment rate" shall
refer to the interest rate set forth in section 231-39(b)(4) or section
231-23(d)(1), as the case may be."
SECTION 3. Section 235-110, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) This section does not apply in the
case of a payment made pursuant to an assessment by the department of taxation
under section 235-107 or 235-108(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 sections 235-55[,] or 235‑66[,
or 235-71,] 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."
SECTION 4. Section 235-111.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) A qualified high technology business
as defined in section 235-7.3 may apply to the department to sell its unused
net operating loss carryover to another taxpayer. If approved by the
department, a qualified high technology business may sell its unused net
operating loss carryover to another taxpayer in an amount equal to at least
seventy-five per cent of the amount of the surrendered tax benefit[,
computed at the corporate rate pursuant to section 235-71]; provided that
the qualified high technology business may sell no more than $500,000 of its
unused net operating loss carryover to another taxpayer per year. In the case
of partnerships, limited liability partnerships, limited liability companies
classified as partnerships, and S corporations, each partner, member, or
shareholder may sell its share of the entity's total net operating loss. The
tax benefit purchased by the buyer shall be claimed in the year for which the
sale is approved by the department. Any use of the purchased net operating
loss carryover for tax carryback or carryforward purposes shall comply with
applicable law. The income from the sale of the net operating loss carryover
received by the seller shall be reported on its tax return in the taxable year
received but shall not be considered taxable income."
SECTION 5. Section 235-122, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) [Except as provided in the
following sentence, an S corporation shall not be subject to the tax imposed by
section 235-71.] If income of an S corporation is subject to federal
income tax, then such income as modified by section 235-123, to the extent it
constitutes income attributable to the State, shall be taxed [at the highest
marginal rate of tax imposed on the net income of corporations.] accordingly.
If an S corporation is required to pay a tax to this State by reason of the
preceding sentence, then the income attributable to the State of the S
corporation shall be reduced by the amount of the tax."
SECTION 6. Section 235-129, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) Each shareholder of an S corporation
shall be allowed a credit against the tax imposed by section 235-51 in an
amount equal to the shareholder's pro rata share of the tax credits described
in sections 209E-10, 235-12, [235-71(c),] 235-55.91, 235-110.6,
235-110.7, and 235-110.8. With the exception of the credit allowed by section
235-12, nonresident shareholders shall be allowed the credits allowed to
resident shareholders which are earned by the S corporation in this State. The
credit allowed by section 235-12 shall be allowed to nonresident shareholders
to the extent the credit is earned by virtue of property purchased and placed
in service in this State."
SECTION 7. Section 235-130, Hawaii Revised Statutes, is amended to read as follows:
"[[]§235-130[]] LIFO
recapture. If an S corporation is subject to last in first out (LIFO)
recapture pursuant to section 1363 of the Internal Revenue Code, then:
(1) Any increase in the tax [imposed by section
235-71] by reason of the inclusion of the LIFO recapture amount in its
income shall be payable in four equal installments;
(2) The first installment shall be paid on or before the due date (determined without regard to extensions) for filing the return for the first taxable year for which the corporation was subject to the LIFO recapture;
(3) The three succeeding installments shall be paid on or before the due date (determined without regard to extensions) for filing the corporation's return for the three succeeding taxable years; and
(4) For purposes of computing interest on underpayments, the last three installments shall not be considered underpayments until after the payment due date specified above."
SECTION 8. Chapter 235, part IV, Hawaii Revised Statutes, is repealed.
SECTION 9. The revisor of statutes shall submit a report to the legislature not less than twenty days prior to the convening of the regular session of 2008, identifying other conforming statutory amendments, if any, that should be made in response to the enactment of this Act.
SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.
SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 12. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2006.
INTRODUCED BY: |
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