Report Title:

Earned Income Tax Credit

 

Description:

Provides a state earned income tax credit.

 

THE SENATE

S.B. NO.

121

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO EARNED INCOME TAX CREDIT.

 

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

SECTION 1. Since its enactment in 1975, the federal earned income tax credit has proven to be one of the nation’s most effective anti-poverty programs for working families. The federal earned income tax credit has encouraged people to work, supplemented earnings, and has assisted nearly five million people out of poverty each year, approximately half of them children. The federal earned income tax credit has also resulted in significant gains in the overall labor force.

A Hawaii earned income tax credit would build upon the federal program by cutting taxes for families struggling to provide for their children, reducing child poverty, and making Hawaii a better place to live, work, and raise a family.

A Hawaii earned income tax credit would also support local welfare-to-work efforts. Since the implementation of federal welfare reform legislation in 1996, a growing number of Hawaii families on welfare have made the transition from public assistance to work, often beginning in low-wage or entry—level positions. A Hawaii earned income tax credit would assist these families by supplementing their incomes as they move away from public assistance and work toward economic independence.

The purpose of this Act is to establish a state earned income tax credit.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235— Earned income tax credit. (a) Each resident individual taxpayer, who files an individual net income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for income tax purposes, may claim an earned income tax credit. The tax credit, for the appropriate taxable year, shall be equal to:

(1) For taxable years beginning after December 31, 2000, and ending before January 1, 2002, ten per cent of the federal earned income tax credit determined under section 32 of the Internal Revenue Code and reported as such on the resident individual’s federal income tax return; and

(2) For taxable years beginning after December 31, 2001, fifteen per cent of the federal earned income tax credit determined under section 32 of the Internal Revenue Code and reported as such on the resident individual’s federal income tax return.

(b) In the case of a part—year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a)(1) or (2) multiplied by the ratio of adjusted gross income attributed to this State to the entire adjusted gross income computed without regard to source in the State pursuant to section 235—5.

(c) For purposes of claiming the tax credit allowed by this section, a resident individual taxpayer shall use the same filing status (i.e., "married filing jointly", "head of household", "qualifying widow(er)", or "single") on their Hawaii tax return as used on the taxpayer’s federal return for the taxable year.

(d) If the tax credit under this section exceeds the taxpayer’s income tax liability, the excess of tax credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1. All claims including any amended claims for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the preceding sentence shall constitute a waiver of the right to claim the tax credit.

(e) The director of taxation:

(1) Shall prepare such forms as may be necessary to claim a tax credit under this section;

(2) May require proof of the claim for the tax credit; and

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

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2000.

INTRODUCED BY: