STAND. COM. REP. NO.2671
RE: S.B. No. 2824
Honorable Robert Bunda
President of the Senate
Twenty-First State Legislature
Regular Session of 2002
State of Hawaii
Your Committee on Ways and Means, to which was referred S.B. No. 2824, S.D. 1, entitled:
"A BILL FOR AN ACT RELATING TO CONFORMITY OF THE HAWAII INCOME TAX LAW TO THE INTERNAL REVENUE CODE,"
begs leave to report as follows:
The purpose of this measure is to conform the Hawaii State Tax Laws with changes to the Internal Revenue Code as directed by Hawaii Revised Statutes section 235-2.5(c).
Your Committee received testimony in favor of this measure from the Department of Taxation and the Department of Human Resources, and comments from Tax Foundation of Hawaii.
Your Committee finds that the adoption of the amendments to the Internal Revenue Code sections for State income tax purposes assures continued State conformity with federal income tax law and minimizes taxpayers' burdens in complying with Hawaii's income tax law.
The following amendments, among others, are adopted:
(1) Education Incentives – Increases the limit for contributions to education IRAs; expands the definition of "qualified tuition programs"; and extends the exclusion for employer-provided educational assistance; and
(2) Pensions and Individual Retirement Accounts – Increases contribution limits for IRAs and qualified retirement plans; and allows distributions from qualified retirement plans, §403(b) annuities, and governmental §457 plans to be rolled over.
However, this measure does not conform to the following Internal Revenue Code changes:
(1) Deduction for Qualified Higher Education Expenses – Permits taxpayers to take an above-the-line deduction for higher education expenses paid by the taxpayer during a taxable year; and
(2) Dependent Care Credit – Increases the amount of expenses eligible for the dependent care credit, the maximum credit, and the income levels at which the credit begins to phase-out.
Your Committee has amended this measure in the following ways:
(1) Deleting, in section 2, paragraph (11) of the bill, the words "paid by the taxpayer during the taxable year" to conform to the title of Internal Revenue Code Section 222;
(2) To provide consistent tax treatment for the taxation of trusts and trust beneficiaries subject to taxation in Hawaii, special income tax rules provided for Alaska Native Claims Settlement Trusts are designated inoperative for Hawaii income tax law; and
(3) Making other technical changes for accuracy.
As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2824, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2824, S.D. 2.
Respectfully submitted on behalf of the members of the Committee on Ways and Means,
BRIAN T. TANIGUCHI, Chair