TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO ASSET BUILDING.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that one third of Hawaii's middle class families are asset poor, lacking the resources to subsist at the poverty level for three months in the absence of a source of income. The legislature further finds that assets are necessary to provide financial security during economically difficult times, create economic opportunities, and improve future generations' quality of life.
Senate Concurrent Resolution No. 92, S.D. 1 (2008) and Senate Resolution No. 52, S.D. 1 (2008) established the Hawaii state asset building and financial education task force, charged with developing policy recommendations to implement various asset building strategies in the State. In 2010, the task force submitted its recommendations to the legislature. The recommendations included implementing tax policies that make work pay, improving financial education, encouraging people to save, helping people start businesses, helping people become homeowners, and removing barriers to asset building. The purpose of this Act is to implement some of the recommendations submitted by the Hawaii state asset building and financial education task force.
EARNED INCOME TAX CREDIT
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:
"§235- Earned income tax credit. (a) Each resident individual taxpayer who:
(1) Files an individual income tax return for a taxable year; and
(2) Is not claimed or is not 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, for the appropriate taxable year, shall be equal to per cent of the federal earned income tax credit allowed under section 32 of the Internal Revenue Code, as amended, 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) 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 tax credit allowed under this section, 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.
(d) 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.
(e) No credit shall be allowed under this section for any taxable year in the disallowance period. For purposes of this subsection, the disallowance period is:
(1) The period of ten taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud; and
(2) The period of two taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to reckless or intentional disregard of rules and regulations, but not due to fraud.
(f) Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary of the United States Department of the Treasury by regulations with respect to determining eligibility for, or the amount of, the credit allowable by section 32 of the Internal Revenue Code shall pay a penalty of $100 for each such failure.
(g) The director of taxation:
(1) Shall prepare any forms 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 legislature, the governor, and the public containing the:
(A) Number of credits granted for the prior calendar year;
(B) Total amount of the credits granted; and
(C) 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. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to part II to be appropriately designated and to read as follows:
"§346‑ Financial education. The department shall offer financial education to applicants for and recipients of temporary assistance for needy families, in addition to any mandatory programs available to these applicants, as required by federal law.
For purposes of this section, "financial education" means education that promotes an understanding of consumer, economic, and personal finance concepts, including the basic principles involved in earning, budgeting, spending, saving, investing, and taxation."
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 2011-2012 and the same sum or so much thereof as may be necessary for fiscal year 2012-2013 for the department of human services to offer financial education to applicants for and recipients of temporary assistance for needy families.
The sums appropriated shall be expended by the department of human services for the purposes of this part.
SECTION 5. Section 257-3, Hawaii Revised Statutes, is amended to read as follows:
§257-3[ ]] Fiduciary
organizations. (a) [ Fiduciary organizations] A fiduciary
organization shall serve as an intermediary between individual development
account holders and financial institutions holding accounts. The fiduciary
organization's responsibilities may include:
(1) Marketing participation;
(2) Soliciting matching contributions;
(3) Counseling program participants; and
(4) Conducting verification and compliance activities.
(b) Locally-based organizations shall enter
into a competitive process for the right to become fiduciary organizations for
a portion of the state matching dollars [
that would be authorized initially].
Fiduciary organization proposals shall be evaluated and participation rights
awarded on the basis of [ such items as]:
(1) Their ability to market the program to potential individual development account holders and potential matching fund contributors;
(2) Their ability to provide safe and secure investments for individual development accounts;
(3) Their overall administrative capacity, including:
(A) Certifications or verifications required to assure compliance with eligibility requirements;
(B) Authorized uses of the accounts matching contributions by individuals or businesses; and
(C) Penalties for unauthorized distributions;
(4) Their capacity to provide financial counseling and other related services to potential participants; and
(5) Their links to other activities designed to increase the independence of individuals and families through high return investments, including homeownership, education and training, and small business development.
The department of human services shall contract with an appropriate agency whose regular course of business dealings involves financial obligations or contracts. The agency contracted by the department of human services shall provide technical and administrative assistance to fiduciary organizations to meet the criteria under this subsection; provided that the State may expend appropriate federal moneys, including community development block grants, for this purpose as applicable.
(c) If the State approves an application to
fund an individual development account project under this section, the State
, not later than one month after June 28, 1999,] authorize the
applicant to conduct the project with state funds [ for five project years]
in accordance with the approved application and this section; provided that an
applicant may apply for funding during future fiscal years [ for five project
years if the State lacks the] if there are insufficient resources to
fund an individual development account project pursuant to this subsection.
(d) For each individual development
account program approved under this section, the State shall make a grant to
the qualified entity or collaboration of entities authorized to conduct the
project on the first day of the project year in an amount not to exceed
$100,000 per year for five years. (e)] (d) From among the
individuals eligible for assistance under the Hawaii individual development
account program, each selected fiduciary organization shall select the
individuals whom the fiduciary organization deems to be best suited to receive
SECTION 6. Section 257-11, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) The fiduciary organization running
an individual development account program shall have sole authority over the
administration of the project. The State may [
prescribe only such
regulations] adopt rules with respect to demonstration projects [ under
this chapter] as are necessary to ensure compliance [ pursuant to] with
2. By amending subsection (d) to read:
"(d) Selected fiduciary organizations may
use no more than [
ten] twenty-five per cent of state funds as
appropriated under this [ chapter[ ]] to cover [ administrative]
operating costs in any given year."
SECTION 7. 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 2011-2012 and the same sum or so much thereof as may be necessary for fiscal year 2012-2013 for fiduciary organizations, as defined in section 257-1, Hawaii Revised Statutes, to conduct individual development account programs, as provided in section 257-3, Hawaii Revised Statutes.
The sums appropriated shall be expended by the department of human services for the purposes of this section.
SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 9. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2010; provided that sections 4 and 7 of this Act shall take effect on July 1, 2011.
Earned Income Tax Credit; Asset Building; Appropriation
Establishes a refundable state earned income tax credit. Requires the department of human services to provide financial education to applicants for and recipients of temporary assistance for needy families. Amends provisions of section 257, HRS, regarding individual development accounts. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.