REPORT TITLE:
Medical/food tax credit


DESCRIPTION:
Restores to the income tax law the medical services excise tax
credit and the food tax credit for resident individuals and low
income taxpayers.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO TAX CREDITS.
 


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

 1      SECTION 1.  The purpose of this Act is to restore the tax
 
 2 credits for food/excise taxes.  This tax credit was intended to
 
 3 offset high income tax rates paid by Hawaii residents.  Although
 
 4 the repeal of the above tax credit has been characterized as a
 
 5 fair and equitable way to balance the state's executive operating
 
 6 budget, in effect, it is an effort to cure the state's financial
 
 7 problems by taking limited financial resources from poor and low
 
 8 income families.
 
 9      The repeal of the food tax credit is a highly regressive tax
 
10 increase for low income families.  Balancing the budget on the
 
11 finite resources of the most vulnerable in our community is not
 
12 responsible economic or social policy.
 
13      This bill is intended to restore the food/excise tax credit
 
14 to $55 for individual and low income taxpayers and also to
 
15 restore the medical services excise tax credit.
 
16      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
 
17 by adding a new section to read as follows:
 
18      "235-    Food/excise tax credit.  (a)  Each resident
 
19 individual taxpayer, who files an individual income tax return
 

 
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 1 for a taxable year, and who is not claimed or is not otherwise
 
 2 eligible to be claimed as a dependent by another taxpayer for 
 
 3 federal or Hawaii state individual income tax purposes, may claim
 
 4 a food/excise credit against the resident taxpayer's individual
 
 5 income tax liability for the taxable year for which the
 
 6 individual income tax return is being filed; provided that a
 
 7 resident individual who has no income or no income taxable under
 
 8 this chapter and who is not claimed or is not otherwise eligible
 
 9 to be claimed as a dependent by a taxpayer for federal or Hawaii
 
10 state individual income tax purposes may claim this credit.
 
11      (b)  Each resident individual taxpayer may claim tax credits
 
12 in the amount indicated in this subsection:
 
13      (1)  A tax credit of $55 multiplied by the number of
 
14           qualified exemptions to which the taxpayer is entitled;
 
15           provided that no additional tax credit shall be claimed
 
16           because of age;
 
17      (2)  In addition to the amount of the credit allowed under
 
18           paragraph (1), the taxpayer may claim an additional tax
 
19           credit for each adjusted gross income bracket as shown
 
20           in the schedule below multiplied by the number of
 
21           qualified exemptions to which the taxpayer is entitled;
 
22           provided that each taxpayer sixty-five years of age or
 
23           over may claim double the tax credit set forth in the
 

 
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 1           following Tax Credit Schedule:
 
 2                        TAX CREDIT SCHEDULE
 
 3           Adjusted Gross Income                       Tax Credit
 
 4           Under $6,000                                       $55
 
 5           $ 6,000 to under $ 8,000                           $45
 
 6           $ 8,000 to under $10,000                           $35
 
 7           $10,000 to under $12,000                           $25
 
 8           $12,000 to under $15,000                           $20
 
 9           $15,000 to under $20,000                           $15
 
10           $20,000 to under $30,000                           $10
 
11                       Over $30,000                           $ 0
 
12 provided that a husband and wife filing separate tax returns for
 
13 a taxable year for which a joint return could have been filed by
 
14 them shall claim only the tax credit to which they would have
 
15 been entitled under paragraph (2) had a joint return been filed
 
16 and may each claim $55 under paragraph (1)."
 
17      (c)  For the purposes of this section, a qualified exemption
 
18 is defined to include those exemptions permitted under this
 
19 chapter, provided that a person for whom exemption is claimed has
 
20 physically resided in the State for more than nine months during
 
21 the taxable year; and provided further that multiple exemptions
 
22 shall not be granted because of deficiencies in vision or
 
23 hearing, or other disability.  For purposes of claiming the
 

 
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 1 credit only, a minor child receiving support from the department
 
 2 of human services of the State, social security survivor's
 
 3 benefits, and the like may be considered a dependent and a
 
 4 qualified exemption of the parent or guardian.
 
 5      (d)  The tax credit under this section shall not be
 
 6 available to (1) any person who has been convicted of a felony
 
 7 and who has been committed to prison and has been physically
 
 8 confined for the full taxable year; (2)  any person who would
 
 9 otherwise be eligible to be claimed as a dependent but who has
 
10 been committed to a youth correctional facility and has resided
 
11 at the facility for the full taxable year, or (3) any
 
12 misdemeanant who has been committed to jail and has been
 
13 physically confined for the full taxable year.
 
14      (e)  The tax credits claimed by a resident taxpayer pursuant
 
15 to this section shall be deductible from the resident taxpayer's
 
16 individual income tax liability, if any, for the tax year in
 
17 which they are properly claimed.  If the tax credits claimed by a
 
18 resident taxpayer exceed the amount of income tax payment due
 
19 from the resident taxpayer, the excess of credits over payments
 
20 due shall be refunded to the resident taxpayer; provided that tax
 
21 credits properly claimed by a resident individual who has no
 
22 income tax liability shall be paid to the resident individual;
 
23 and provided further that no refunds or payment on account of the
 

 
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 1 tax credits allowed by this section shall be made for amounts
 
 2 less than $1.
 
 3      (f)  All claims for tax credits under this section,
 
 4 including any amended claims, must be filed on or before the end
 
 5 of the twelfth month following the close of the taxable year for
 
 6 which the credits may be claimed.  Failure to comply with the
 
 7 foregoing provision shall constitute a waiver of the right to
 
 8 claim the credit."
 
 9      SECTION 3.  Section 235-55.9, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "235-55.9  Medical services excise tax credit.(a)  Each
 
12 resident individual taxpayer, who files an individual income tax
 
13 return for a taxable year, and who is not claimed or is not
 
14 otherwise eligible to be claimed as a dependent by another
 
15 taxpayer for Hawaii state individual income tax purposes, may
 
16 claim a medical services excise tax credit against the resident
 
17 taxpayer's individual income tax liability for the taxable year
 
18 for which the individual income tax return is being filed;
 
19 provided that a resident individual who has no income or no
 
20 income taxable under this chapter and who is not claimed or is
 
21 not otherwise eligible to be claimed as a dependent by a taxpayer
 
22 for Hawaii state individual income tax purposes may claim this
 

 
 
 
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 1 credit.
 
 2      (b)  The medical services excise tax credit shall be four
 
 3 per cent of qualified medical expenses paid by the resident
 
 4 individual during the taxable year plus six per cent of the
 
 5 nursing facilities expenses paid by or for the resident
 
 6 individual during the taxable year.  For individual resident
 
 7 taxpayers residing for more than two hundred days of the taxable
 
 8 year in the aggregate in a county in which the county general
 
 9 excise and use tax surcharge is in effect, the medical services
 
10 excise tax credit shall be four and one-half per cent of
 
11 qualified medical expenses paid by the resident individual during
 
12 the taxable year plus six per cent of nursing facilities expenses
 
13 paid by the resident individual during the taxable year.  The
 
14 portion of the tax credit attributable to medical expenses
 
15 claimed on each individual income tax return shall not exceed:
 
16           (1)  $200;
 
17           (2)  $400 for a resident individual sixty-five years of
 
18           age or over; or
 
19           (3)  $600 for a resident individual and spouse both
 
20           sixty-five years of age or over.
 
21 The preceding limitations shall not apply to the portion of the
 
22 credit attributable to nursing facilities expenses; provided that
 
23 a husband and wife filing separate returns for a taxable year for
 

 
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 1 which a joint return could have been filed by them shall claim
 
 2 only the tax credit to which they would have been entitled had a
 
 3 joint return been filed.
 
 4      (c)  For the purposes of this section ["nursing] "qualified
 
 5 medical expenses" is defined to include those medical expenses
 
 6 paid for the taxpayer or the taxpayer's dependent allowable as
 
 7 deductions for income tax purposes under section 213 (with
 
 8 respect to medical, dental, etc., expenses) of the Internal
 
 9 Revenue Code; provided that the medical expense was subject to
 
10 the imposition and payment of the general excise tax under
 
11 chapter 237.  "Qualified medical expenses" shall not include the
 
12 following:
 
13           (1)  Capital improvements; or
 
14           (2)  Prescription drugs or prosthetic devices exempt
 
15           under section 237-24.3(7).
 
16 "Nursing facility expenses" are amounts actually paid by the
 
17 taxpayer for services provided to the taxpayer or to any
 
18 individual who bears a relationship to the taxpayer as described
 
19 in section 152(a) (with respect to dependent defined) of the
 
20 Internal Revenue Code by a nursing facility licensed under
 
21 section 321-9 and 321-11 and any intermediate care facility for
 
22 mentally retarded persons under sections 321-9 and 321-11;
 
23 provided that the nursing facility expense was subject to the
 

 
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 1 imposition and payment of the tax imposed by chapter 346E.
 
 2      The amount of medical expenses and nursing facility expenses
 
 3 paid during the taxable year shall not be reduced by any
 
 4 insurance reimbursement.
 
 5      (d)  The tax credits claimed by a resident taxpayer pursuant
 
 6 to this section shall be deductible from the resident taxpayer's
 
 7 individual income tax liability, if any, for the tax year in
 
 8 which they are properly claimed.  If the tax credits claimed by a
 
 9 resident taxpayer exceed the amount of income tax payment due
 
10 from the resident taxpayer, the excess of credits over payments
 
11 due shall be refunded to the resident taxpayer; provided that tax
 
12 credits properly claimed by a resident individual who has no
 
13 income tax liability shall be paid to the resident individual;
 
14 and provided further that no refunds or payment on account of the
 
15 tax credits allowed by this section shall be made for amounts
 
16 less than $1.
 
17      (e)  The director of taxation shall prepare such forms as
 
18 may be necessary to claim a credit under this section.  The
 
19 director may also require the taxpayer to furnish reasonable
 
20 information in order that the director may ascertain the validity
 
21 of the claim for credit made under this section and the director
 
22 may adopt rules necessary to effectuate the purposes of this
 
23 section pursuant to chapter 91.
 

 
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 1      (f)  If the tax credit claimed by an individual includes
 
 2 qualified medical expenses calculated at the rate of four and
 
 3 one-half per cent, and the individual resides in a county in
 
 4 which the county general excise and use tax surcharge is not in
 
 5 effect, or if the tax credit that includes qualified medical
 
 6 expenses calculated at the rate of four and one-half per cent is
 
 7 claimed in a county that has a county general excise and use tax
 
 8 surcharge in effect by an individual who has resided in that
 
 9 county for not more than two hundred days of the taxable year in
 
10 the aggregate, there shall be added to and become part of the tax
 
11 liability of the individual:
 
12           (1)  The amount of the tax credit claimed under this
 
13           section multiplied by three; or
 
14           (2)  Ten per cent of the income tax liability for the
 
15           taxable year for which the individual income tax return
 
16           is being filed,
 
17 whichever is greater.
 
18      [(f)] (g)  All claims for tax credits under this section,
 
19 including any amended claims, must be filed on or before the end
 
20 of the twelfth month following the close of the taxable year for
 
21 which the credits may be claimed.  Failure to comply with the
 
22 foregoing provision shall constitute a waiver of the right to
 
23 claim the credit.
 

 
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 1      [(g)] (h)  This section shall not be effective after
 
 2 June 30, [1997.] 2000." 
 
 3      SECTION 4.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 5.  This Act, upon its approval, shall apply to
 
 6 taxable years beginning after December 31, 1997.
 
 7 
 
 8                           INTRODUCED BY:_________________________