Report Title:

Earned Income Tax Credit; Tax Preparers; TANF Funds

 

Description:

Creates a state earned income tax credit funded initially with TANF funds. Restricts the interest charged by tax preparers to clients who claim the earned income tax credit. Takes effect January 1, 2050. (SD1)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

333

TWENTY-FIFTH LEGISLATURE, 2009

H.D. 2

STATE OF HAWAII

S.D. 1

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"231- Tax preparation; earned income tax credit. No person who is engaged in the business of preparing or providing services in connection with the preparation of tax returns for compensation to clients who are recipients of the state earned income tax credit under section 235- , shall charge recipients more than      per cent interest for any tax preparation service provided to the recipient. Interest received on any refund anticipation loan or comparable arrangement shall be deemed to be interest charged for tax preparation service.

Any person who violates this section shall be guilty of a misdemeanor."

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 income tax return for a taxable year, and is not claimed or eligible to be claimed as a dependent by another taxpayer for income tax purposes, may claim a refundable earned income tax credit. The tax credit shall be equal to      per cent of the earned income tax credit allowed under Section 32 of the Internal Revenue Code, as amended as of December 31, 2008.

(b) In the case of a part-year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a) 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) To claim the earned income tax credit, a resident individual taxpayer shall use the same filing status on the taxpayer's Hawaii income tax return as used on the taxpayer's federal income tax return for the taxable year.

In the case of a husband and wife filing separately, the tax credit allowed may be applied against the income tax liability of either, or divided between them, as they elect.

(d) The earned income tax credit shall be reduced by other tax credits allowed under this chapter. 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 refund or payment on account of the tax credits allowed by this section shall be made for amounts less than $1.

(e) 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 this subsection shall constitute a waiver of the right to claim the tax credit.

(f) The director of taxation, with the assistance of the director of human services, shall calculate the value of the refundable portion of the tax credits provided under this section. The director of human services shall transfer temporary assistance for needy families funds to the director of taxation to pay for the refundable portion of the tax credits; provided that the transfer of the funds shall not apply to credits for taxable years after December 31, 2009.

(g) The director of taxation:

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

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

(3) Shall alert eligible taxpayers of the tax credit using appropriate and available means;

(4) Shall prepare an annual report to the governor and the legislature containing:

(A) The number of credits granted for the prior calendar year;

(B) The total amount of the credits granted; and

(C) The average value of the credits granted to taxpayers whose earned income falls within various income ranges; and

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

SECTION 3. There is appropriated, pursuant to section 346-51.5, Hawaii Revised Statutes, out of temporary assistance for needy families funds the sum of $           or so much thereof as may be necessary for fiscal year 2009-2010 to fund the refundable earned income tax credit pursuant to this Act.

The sum appropriated shall be expended by the department of human services for the purposes of this Act.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2009-2010 and the same sum or so much thereof as may be necessary for fiscal year 2010-2011 to fund public service announcements to alert eligible taxpayers of the earned income tax credit, pursuant to this Act.

The sums appropriated shall be expended by the department of taxation for the purposes of this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on January 1, 2050.