HOUSE OF REPRESENTATIVES

H.B. NO.

306

TWENTY-SIXTH LEGISLATURE, 2011

H.D. 1

STATE OF HAWAII

S.D. 2

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


PART I.

SECTION 1. Section 236D-2, Hawaii Revised Statutes, is amended as follows:

1. By amending the definitions of "generation-skipping transfer", "Internal Revenue Code", and "taxable estate" to read:

""Generation-skipping transfer" means a generation-skipping transfer as defined and used in section 2611 of the Internal Revenue Code[.] that occurs at the same time as, or as a result of, the death of an individual. A "generation-skipping transfer" does not include a direct skip described in section 2612(c) of the Internal Revenue Code.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended and renumbered, as of December 31, 2009; provided that sections [2011, 2102, and 2604 of the Internal Revenue Code shall mean those sections as of December 31, 2000; and provided further that section] 2058 and 2106(a)(4) shall not be operative for purposes of this chapter. "Internal Revenue Code" includes the federal tax principles of alter ego, nominee, sham transaction, substance over form, economic substance, or business purpose, as those principles are developed by statute or common law. The Internal Revenue Code, for purposes of this chapter, shall be applied using changes in nomenclature and other language, including the omission of inapplicable language or the insertion of interpretive language, where necessary to effectuate the intent of this chapter.

"Taxable estate" means taxable estate as defined in sections 2051 to [2056] 2056A of the Internal Revenue Code. For purposes of section 236D-4.5, "taxable estate" means a taxable estate as defined and used [in section 2106] pursuant to sections 2106(a)(1), (2), and (3), and 2106(b) of the Internal Revenue Code[, with situs in Hawaii]."

2. By repealing the definitions of "federal credit" and "section 2011".

[""Federal credit" means:

(1) For a transfer, the maximum amount of the credit for state death taxes allowed by section 2011 of the Internal Revenue Code, as it existed on December 31, 2000, for the decedent's adjusted taxable estate;

(2) For a generation-skipping transfer, the maximum amount of the credit for state taxes allowed by section 2604 of the Internal Revenue Code as it existed on December 31, 2000; and

(3) For a noncitizen transfer, the maximum amount of the credit for state death taxes allowed by section 2102 of the Internal Revenue Code, as it existed on December 31, 2000, for the decedent's adjusted taxable estate.

"Section 2011" means section 2011 of the Internal Revenue Code as it existed on December 31, 2000."]

SECTION 2. Section 236D-3, Hawaii Revised Statutes, is amended to read as follows:

"[[]236D-3[]] Residents; tax imposed; credit for tax paid other state. (a) A tax in [an amount equal to the federal credit] accordance with the following table is imposed on the transfer of the taxable estate of every resident[.]:

If the taxable estate is: The tax shall be:

Not over $3,560,000 Zero

Over $3,560,000 but not over

$3,600,000 9.6% of the amount by which the taxable estate exceeds $3,560,000

Over $3,600,000 but not over

$4,100,000 $3,840 plus 10.4% of the amount by which the taxable estate exceeds $3,600,000

Over $4,100,000 but not over

$5,100,000 $55,840 plus 11.2% of the amount by which the taxable estate exceeds $4,100,000

Over $5,100,000 but not over

$6,100,000 $167,840 plus 12% of the amount by which the taxable estate exceeds $5,100,000

Over $6,100,000 but not over

$7,100,000 $287,840 plus 12.8% of the amount by which the taxable estate exceeds $6,100,000

Over $7,100,000 but not over

$8,100,000 $415,840 plus 13.6% of the amount by which the taxable estate exceeds $7,100,000

Over $8,100,000 but not over

$9,100,000 $551,840 plus 14.4% of the amount by which the taxable estate exceeds $8,100,000

Over $9,100,000 but not over

$10,100,000 $695,840 plus 15.2% of the amount by which the taxable estate exceeds $9,100,000

Over $10,100,000 $847,840 plus 16% of the amount by which the taxable estate exceeds $10,100,000.

(b) If any property of a resident is subject to a death tax imposed by another state [for which a credit is allowed by section 2011]; and, if the tax imposed by the other state is not qualified by a reciprocal provision allowing the property to be taxed in the state of decedent's domicile, the amount of the tax due under this section shall be credited with the lesser of:

(1) The amount of the death tax paid the other state [and credited against the federal estate tax]; or

(2) An amount computed by multiplying the [federal credit] tax imposed under subsection (a) by a fraction, the numerator of which is the value of the property subject to the death tax imposed by the other state, and the denominator of which is the value of the decedent's gross estate."

SECTION 3. Section 236D-3.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]236D-3.5[]] Generation-skipping transfers; tax imposed; credit for tax paid other state. (a) A tax in an amount equal to [the federal credit] 2.25 per cent is imposed on every generation-skipping transfer exceeding an aggregate exclusion of $3,560,000 per decedent of:

(1) Property located in this State; and

(2) Property from a resident trust.

(b) If the generation-skipping transfer is subject in another state to a similar tax [and qualifies for the federal credit], the amount of the tax due under this section shall be credited with the lesser of:

(1) The amount of the tax paid to the other state [and credited against the federal tax]; or

(2) An amount computed by multiplying the [federal credit] tax imposed under subsection (a) by a fraction, the numerator of which is the value of the property subject to the generation-skipping transfer tax paid to the other state, and the denominator of which is the value of all property subject to the federal generation-skipping transfer tax.

[If paragraph (1) or (2) results in an amount less than the total federal credit allowed being paid to all states which may claim any part of the credit, then the interested states may agree to a fair and equitable apportionment of the credit without regard to the residence of the trust.]"

SECTION 4. Section 236D-4, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The tax shall be computed by multiplying the [federal credit] tax imposed on the transfer of the decedent's taxable estate under section 236D-3(a) by a fraction, the numerator of which is the value of the property located in Hawaii, and the denominator of which is the value of the decedent's gross estate."

SECTION 5. Section 236D-4.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The tax shall be computed by multiplying the [federal credit] tax imposed on the transfer of the decedent's taxable estate in accordance with the following table by a fraction, the numerator of which is the value of the property with a situs in Hawaii, and the denominator of which is the value of the decedent's gross estate[.] under section 2103 of the Internal Revenue Code.

If the taxable estate is: The tax shall be:

Not over $120,000 Zero

Over $120,000 but not over

$150,000 0.8% of the amount by which the taxable estate exceeds $120,000

Over $150,000 but not over

$200,000 $240 plus 1.6% of the amount by which the taxable estate exceeds $150,000

Over $200,000 but not over

$300,000 $1,040 plus 2.4% of the amount by which the taxable estate exceeds $200,000

Over $300,000 but not over

$500,000 $3,440 plus 3.2% of the amount by which the taxable estate exceeds $300,000

Over $500,000 but not over

$700,000 $9,840 plus 4% of the amount by which the taxable estate exceeds $500,000

Over $700,000 but not over

$900,000 $17,840 plus 4.8% of the amount by which the taxable estate exceeds $700,000

Over $900,000 but not over

$1,100,000 $27,440 plus 5.6% of the amount by which the taxable estate exceeds $900,000

Over $1,100,000 but not over

$1,600,000 $38,640 plus 6.4% of the amount by which the taxable estate exceeds $1,100,000

Over $1,600,000 but not over

$2,100,000 $70,640 plus 7.2% of the amount by which the taxable estate exceeds $1,600,000

Over $2,100,000 but not over

$2,600,000 $106,640 plus 8% of the amount by which the taxable estate exceeds $2,100,000

Over $2,600,000 but not over

$3,100,000 $146,640 plus 8.8% of the amount by which the taxable estate exceeds $2,600,000

Over $3,100,000 but not over

$3,600,000 $190,640 plus 9.6% of the amount by which the taxable estate exceeds $3,100,000

Over $3,600,000 but not over

$4,100,000 $238,640 plus 10.4% of the amount by which the taxable estate exceeds $3,600,000

Over $4,100,000 but not over

$5,100,000 $290,640 plus 11.2% of the amount by which the taxable estate exceeds $4,100,000

Over $5,100,000 but not over

$6,100,000 $402,640 plus 12% of the amount by which the taxable estate exceeds $5,100,000

Over $6,100,000 but not over

$7,100,000 $522,640 plus 12.8% of the amount by which the taxable estate exceeds $6,100,000

Over $7,100,000 but not over

$8,100,000 $650,640 plus 13.6% of the amount by which the taxable estate exceeds $7,100,000

Over $8,100,000 but not over

$9,100,000 $786,640 plus 14.4% of the amount by which the taxable estate exceeds $8,100,000

Over $9,100,000 but not over

$10,100,000 $930,640 plus 15.2% of the amount by which the taxable estate exceeds $9,100,000

Over $10,100,000 $1,082,640 plus 16% of the amount by which the taxable estate exceeds $10,100,000."

SECTION 6. Section 236D-2.5, Hawaii Revised Statutes, is repealed.

["[236D-2.5] Taxation under chapter 236D; applicable exclusion amount. Notwithstanding any other law to the contrary, a decedent shall be entitled to all applicable exclusion or exemption amounts as determined under the Internal Revenue Code as of December 31, 2009, before being subject to any taxes imposed under this chapter, including up to a $3,500,000 applicable exclusion amount allowed by section 2010 of the Internal Revenue Code on December 31, 2009, as further adjusted by law."]

PART II.

SECTION 7. Section 209E-2, Hawaii Revised Statutes, is amended by amending the definition of "eligible business activity" to read as follows:

""Eligible business activity" means the:

(1) Manufacture of tangible personal property, the wholesale sale of tangible personal property as described in section 237-4, or a service business as defined in this section;

(2) Production of agricultural products where the business is a producer as defined in section 237-5, or the processing of agricultural products, all or some of which were grown within an enterprise zone;

(3) Research, development, sale, or production of all types of genetically-engineered medical, agricultural, or maritime biotechnology products; [or]

(4) Production of electric power from [wind] renewable energy as defined in section 269-91, for sale primarily to a public utility company for resale to the public[.]; or

(5) Ownership, control, operation, or management of any seawater air conditioning district cooling project."

PART III.

SECTION 8. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2030.



 

 

Report Title:

Estate and Transfer Tax; Enterprise Zones

 

Description:

Amends the method of computing the estate and transfer tax, generation-skipping transfer tax, and the estate tax for noncitizens. Amends the definition of "eligible business activity" in the State's enterprise zone program to include production of certain electric power from renewable energy, and owning, controlling, operating, or managing a seawater air conditioning district cooling project. Effective 7/1/2030. (SD2)

 

 

 

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