Report Title:
Tax Administration; Act 190, SHL 2002, and Act 221, SLH 2001; Adjusted
Description:
Corrects an inadvertent regressive effect on taxpayers with adjusted gross incomes of $50,000 or less due to Act 190, Session Laws of Hawaii 2002. Conforms Hawaii tax law to the Internal Revenue Code by lowering the minimum estimated tax payment to 100% for prior year returns. Authorizes department of taxation to allow extensions of filing in a manner similar to IRS. Allows State to continue to receive estate tax revenues. Refines the high technology industry tax incentives. (SD2)
HOUSE OF REPRESENTATIVES |
H.B. NO. |
1225 |
TWENTY-SECOND LEGISLATURE, 2003 |
S.D. 2 |
|
STATE OF HAWAII |
||
|
A BILL FOR AN ACT
RELATING TO THE ADMINISTRATION OF TAXES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I.
SECTION 1. Section 235-97, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:
"(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, or estimated tax payments or payments remitted with extension requests 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, as of the date set forth in section 235-2.3(a), shall be operative for the purposes of this section; provided that the due dates contained in any of the preceding Internal Revenue Code sections shall be deemed to be the twentieth day of the applicable month; and provided further that, for purposes of this chapter in applying section 6654(d), [if the adjusted gross income shown on the return of the individual for the preceding taxable year exceeds $50,000,] the required annual payment shall be the lesser of sixty per cent of the tax shown on the return for the taxable year (or, if no return is filed, sixty per cent of the tax for the taxable year) or one hundred [ten] per cent of the tax shown on the return of the individual for the preceding taxable year."
SECTION 2. Section 235-98, Hawaii Revised Statutes, is amended to read as follows:
"§235-98 Returns; form, verification and authentication, time of filing. Returns shall be in such form as the department of taxation 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] as otherwise provided by statute for cases in which exceptional circumstances require additional time, including cases of persons who are outside the United States, no extension of time for filing returns shall be for more than six months[.] in order to expedite the timely determination of tax liability and the timely remission of taxes."
PART II.
SECTION 3. Section 236D-2, Hawaii Revised Statutes, is amended by:
1. Adding a new definition to be appropriately inserted and to read as follows:
""Internal Revenue Code: means the federal Internal Revenue Code of 1986, as amended and renumbered, except sections 2011 and 2604 of the Internal Revenue Code as they existed on December 31, 2001."
2. By amending the definitions of "federal credit", "generation-skipping transfer", and "gross estate" to read as follows:
""Federal credit" means:
(1) For a transfer, the maximum amount of the credit for state death taxes allowed by section 2011 for the decedent's adjusted taxable estate; and
(2) For a generation-skipping transfer, the maximum amount of the credit for state taxes allowed by section 2604 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered.] as it existed on December 31, 2001.
"Generation-skipping transfer" means a generation-skipping transfer as defined and used in section 2611 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered].
"Gross estate" means gross estate as defined and used in sections 2031 to [2045] 2046 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered]."
3. By amending the definition of "personal representative" to read as follows:
""Personal representative" means the personal representative of a decedent appointed under chapter 560, and includes an executor (as defined under section 2203 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered]), administrator, successor personal representative, special administrator, and persons who perform substantially the same function under the law governing their status."
4. By amending the definitions of "section 2011", "taxable estate", and "transfer" to read as follows:
""Section 2011" means section 2011 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered.] as it existed on December 31, 2001."
"Taxable estate" means taxable estate as defined in sections 2051 to [2056] 2057 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered.], and section 2058 of the Internal Revenue Code, with respect to estates of decedents dying and generation-skipping transfers, after December 31, 2004.
"Transfer" means transfer as defined and used in section 2001 of the [federal] Internal Revenue Code [of 1986, as amended or renumbered]."
PART III.
SECTION 4. Section 235-110.91, Hawaii Revised Statutes, is amended as follows:
1. By amending its title and subsection (a) to read:
"§235-110.91 Tax credit for increasing research activities. (a) Section 41 (with respect to the credit for increasing research activities) and section 280C(c) (with respect to certain expenses for which the credit for increasing research activities are allowable) of the Internal Revenue Code shall be operative for the purposes of this chapter as provided in this section[; except that references to the base amount shall not apply and credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years]. If section 41 of the Internal Revenue Code is repealed or terminated prior to January 1, 2006, its provisions shall remain in effect for purposes of the income tax law of the State [as modified by this section,] as provided for in subsection (h)."
2. By amending subsection (c) to read:
"(c) There shall be allowed to each taxpayer, subject to the tax imposed by this chapter, an income tax credit for increased qualified research activities equal to the credit for research activities provided by section 41 of the Internal Revenue Code [and as modified by this section]. The credit shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed."
3. By amending subsection (e) to read:
"(e) If the tax credit for increased qualified research activities claimed by a taxpayer exceeds the amount of income tax payment due from the taxpayer, the excess of the tax credit over payments due [shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.] may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted."
4. By amending subsection (h) to read:
"(h) This section shall apply to taxable years beginning after December 31, 2000, but not to taxable years beginning after December 31, 2005[.]; provided that research conducted after June 30, 2003, shall be subject to the amendments made by Act , Session Laws of Hawaii 2003."
SECTION 5. Act 221, Session Laws of Hawaii 2001, is amended by amending section 13 to read as follows:
"SECTION 13. It is the intention of the legislature that the amendments [in this Act be liberally construed.] encourage increased expenditures in Hawaii, promote long-term benefits to Hawaii and its economy, raise new capital, increase spending to accelerate research projects, create new jobs in Hawaii, and encourage the continued growth and development of high technology and certain performing arts ventures. The department of taxation is [further] given latitude to interpret these amendments in light of industry developments. The legislature does not intend by the amendments in this Act to opine on the interpretation taken by any taxpayer or the department of taxation on any issue arising under prior law."
SECTION 6. Act 297, Session Laws of Hawaii 2000, is amended by amending section 10 to read as follows:
"SECTION 10. It is the intention of the legislature in making amendments in this [Part] part to sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes, that the amendments [be liberally construed, and in this regard, the] encourage increased expenditures in Hawaii, promote long-term benefits to Hawaii and its economy, raise new capital, increase spending to accelerate research projects, create new jobs in Hawaii, and encourage the continued growth and development of high technology and certain performing arts ventures. The department of taxation is given latitude to interpret those amendments in light of current industry standards. The amendments made in this Part to sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes, shall not be construed to disqualify any taxpayer who has received a favorable written determination from the department of taxation under the original provisions of those sections as enacted by Act 178, Session Laws of Hawaii, 1999."
SECTION 7. To prevent abuse and promote efficient administration of taxes, the department of taxation is authorized to prescribe rules, as may be necessary or appropriate, to carry out the purposes of sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes. The department of taxation may also provide guidance through various publications regarding the types of transactions that do not qualify for the high technology business investment tax credit, including:
(1) Investments that lack economic substance or a business purpose;
(2) Related party transactions that minimize the amount of actual investment or "new money";
(3) Certain restructuring and reorganizations that lack economic substance or a business purpose; and
(4) Investments in commercial television and film products and businesses that lack the long-term potential that this Act is intended to promote.
SECTION 8. Upon enactment, the revisor of statutes shall insert the number of this Act into section 235-110.91, Hawaii Revised Statutes, where indicated in section 4 of this Act.
PART IV.
SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 10. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2002; provided that part II shall apply to property or interests that pass from any individual who dies after December 31, 2002, and to generation-skipping transfers after December 31, 2002.