HOUSE OF REPRESENTATIVES

H.B. NO.

2510

THIRTY-FIRST LEGISLATURE, 2022

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to INCOME.

 

 

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

 


PART I

SECTION 1. The legislature finds that the coronavirus disease 2019 (COVID-19) pandemic presented the world with unprecedented issues, forcing people out of employment or even their own homes. The COVID-19 pandemic further exacerbated the economic hardship for many Hawaii families who are above the federal poverty line but still struggle to make ends meet. According to Aloha United Way, the COVID-19 pandemic significantly increased the percentage of households that are considered to be asset limited, income constrained, and employed (ALICE) to fifty-nine per cent, which is up from forty-two per cent prior to the pandemic. Aloha United Way further reported a six hundred per cent increase in calls received from people seeking assistance during the pandemic.

The legislature recognizes that to address the unprecedented issues presented by the COVID-19 pandemic for residents of the State, changes to the existing tax structure and minimum wage must be made to help working families succeed. Amending certain tax credits targeted for the working class will improve the quality of life for many and will help lessen the financial burden of the working class.

The legislature further finds that increases to the cost of living in the State, combined with stagnant wages, have contributed to the increase in the number of ALICE households. The legislature also finds that while the cost of living continues to increase, minimum wage has not increased to an appropriate amount necessary to offset the higher increase in cost of living. Increasing the minimum wage to support the working class is necessary to ensure that living in Hawaii is affordable. The legislature acknowledges the economic hardships experienced not only by ALICE households, but also by businesses that employ many of these families. While increasing the minimum wage will support employees, it will also have an impact on certain businesses, especially during a time of significant economic hardships brought on by government mandates to mitigate the spread of COVID-19. However, the legislature believes that helping working families by increasing the minimum wage is a necessary step to foster economic stability in Hawaii.

Accordingly, the purpose of this Act is to help working families by improving certain tax credits, increasing minimum wages, and appropriating funds specifically for an outreach program to help educate low-wage earners regarding their withholding options.

PART II

SECTION 2. The purpose of this part is to make the earned income tax credit refundable and permanent and provide a carryforward of nonrefundable credits previously claimed.

SECTION 3. Section 235-55.75, Hawaii Revised Statutes, is amended to read as follows:

"[[]235-55.75[] Earned] Refundable earned income tax credit. (a) Each qualifying individual taxpayer may claim a [nonrefundable] refundable earned income tax credit. The tax credit, for the appropriate taxable year, shall be twenty per cent of the federal earned income tax credit allowed and properly claimed under section 32 of the Internal Revenue Code and reported as such on the individual's federal income tax return.

(b) For a part-year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a) multiplied by the ratio of Hawaii adjusted gross income to federal adjusted gross income.

(c) For purposes of this section, "qualifying individual taxpayer" means a taxpayer that:

(1) Files a federal income tax return for the taxable year claiming the earned income tax credit under section 32 of the Internal Revenue Code; and

(2) Files a Hawaii income tax return using the filing status used on the federal income tax return for the taxable year and claiming the same dependents claimed on the federal income tax return for the taxable year.

(d) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. [If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted.] If the tax credit claimed by the taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1. All claims, including amended claims, for a tax credit 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 credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the 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 administrative or judicial decision that the taxpayer's claim for 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 administrative or judicial decision disallowing the taxpayer's claim for credit.

(f) 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 public report to the legislature and the governor 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.

[(g) This section shall apply to taxable years beginning after December 31, 2017, but shall not apply to taxable years beginning after December 31, 2022.]

(g) If nonrefundable credits claimed under this section for any of the four consecutive taxable years beginning after December 31, 2017, exceed the taxpayer's income tax liability for the original claim year, the excess of the tax credits over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted; provided that no credit carried forward under this subsection shall be used as a credit for a taxable year beginning after December 31, 2024."

PART III

SECTION 4. The purpose of this part is to amend the eligibility and claimable amount of the food/excise tax credit.

SECTION 5. Section 235-55.85, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each [individual]:

(1) Individual taxpayer with a federal adjusted gross income equal to or less than $30,000; or

(2) Heads of household, married couples filing joint returns, and surviving spouses with a federal adjusted gross income equal to or less than $50,000,

may claim a refundable food/excise tax credit of $150 multiplied by the number of qualified exemptions to which the taxpayer is entitled [in accordance with the table below]; provided that a [husband and wife] married couple filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled had a joint return been filed.

[Adjusted gross income Credit per exemption

for taxpayers filing

a single return

Under $5,000 $110

$5,000 under $10,000 $100

$10,000 under $15,000 $ 85

$15,000 under $20,000 $ 70

$20,000 under $30,000 $ 55

$30,000 and over $ 0.

Adjusted gross income Credit per exemption

for heads of household,

married individuals filing

separate returns, and

married couples filing

joint returns

Under $5,000 $110

$5,000 under $10,000 $100

$10,000 under $15,000 $ 85

$15,000 under $20,000 $ 70

$20,000 under $30,000 $ 55

$30,000 under $40,000 $ 45

$40,000 under $50,000 $ 35

$50,000 and over $ 0.]"

PART IV

SECTION 6. The purpose of this part is to:

(1) Increase the minimum wage each year starting on January 1, 2023, through January 1, 2030; and

(2) Increase the tip credit starting on January 1, 2023, through January 1, 2030.

SECTION 7. Section 387-2, Hawaii Revised Statutes, is amended to read as follows:

"387-2 Minimum wages. (a) Except as provided in section 387‑9 and this section, every employer shall pay to each employee employed by the employer, wages at the rate of not less than:

(1) $6.25 per hour beginning January 1, 2003;

(2) $6.75 per hour beginning January 1, 2006;

(3) $7.25 per hour beginning January 1, 2007;

(4) $7.75 per hour beginning January 1, 2015;

(5) $8.50 per hour beginning January 1, 2016;

(6) $9.25 per hour beginning January 1, 2017; [and]

(7) $10.10 per hour beginning January 1, 2018[.];

(8) $11.00 per hour beginning January 1, 2023;

(9) $12.00 per hour beginning January 1, 2024;

(10) $13.00 per hour beginning January 1, 2025;

(11) $14.00 per hour beginning January 1, 2026;

(12) $15.00 per hour beginning January 1, 2027;

(13) $16.00 per hour beginning January 1, 2028;

(14) $17.00 per hour beginning January 1, 2029; and

(15) $18.00 per hour beginning January 1, 2030.

(b) The hourly wage of a tipped employee may be deemed to be increased on account of tips if the employee is paid [not] no less than:

(1) 25 cents;

(2) 50 cents per hour beginning January 1, 2015; [and]

(3) 75 cents per hour beginning January 1, 2016[,];

(4) $1.00 per hour beginning January 1, 2023;

(5) $1.25 per hour beginning January 1, 2024;

(6) $1.50 per hour beginning January 1, 2025;

(7) $1.75 per hour beginning January 1, 2026;

(8) $2.00 per hour beginning January 1, 2027;

(9) $2.25 per hour beginning January 1, 2028;

(10) $2.50 per hour beginning January 1, 2029; and

(11) $2.75 per hour beginning January 1, 2030,

below the applicable minimum wage by the employee's employer and the combined amount the employee receives from the employee's employer and in tips is at least 50 cents more than the applicable minimum wage; provided that beginning January 1, 2015, the combined amount the employee receives from the employee's employer and in tips is at least $7.00 more than the applicable minimum wage."

PART V

SECTION 8. The purpose of this part is to:

(1) Apply the household and dependent care tax credit to expenses paid for the care of a qualifying individual, regardless of age; and

(2) Specify that a qualified individual is, among other things, a recipient or eligible to be a recipient of Social Security disability insurance.

SECTION 9. Section 235-55.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Definitions of qualifying individual and employment-related expenses. For purposes of this section:

(1) Qualifying individual. The term "qualifying individual" means:

(A) A dependent of the taxpayer who is [under the age of thirteen and] a recipient or eligible to be a recipient of Social Security Disability Insurance under title 42 United States Code sections 1381 to 1383 and with respect to whom the taxpayer is entitled to a deduction under section 235-54(a)[,];

(B) A dependent of the taxpayer who is a recipient, or eligible to be a recipient, of Social Security Disability Insurance under title 42 United States Code sections 1381 to 1383 and physically or mentally incapable of caring for oneself[,]; or

(C) The spouse of the taxpayer, if the spouse is a recipient or eligible to be a recipient of Social Security Disability Insurance under title 42 United States Code sections 1381 to 1383 and physically or mentally incapable of caring for oneself.

(2) Employment-related expenses.

(A) In general. The term "employment-related expenses" means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are one or more qualifying individuals with respect to the taxpayer:

(i) Expenses for household services[,]; and

(ii) Expenses for the care of a qualifying individual.

[Such] The term shall not include any amount paid for services outside the taxpayer's household at a camp where the qualifying individual stays overnight.

(B) Exception. Employment-related expenses described in subparagraph (A) [which] that are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of:

(i) A qualifying individual described in paragraph (1)(A)[,]; or

(ii) A qualifying individual (not described in paragraph (1)(A)) who regularly spends at least eight hours each day in the taxpayer's household.

(C) Dependent care centers. Employment-related expenses described in subparagraph (A) [which] that are incurred for services provided outside the taxpayer's household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if:

(i) [Such] The center complies with all applicable laws, rules, and regulations of this State, if the center is located within the jurisdiction of this State; or

(ii) [Such] The center complies with all applicable laws, rules, and regulations of the jurisdiction in which the center is located, if the center is located outside the State; and

(iii) The requirements of subparagraph (B) are met.

(D) Dependent care center defined. For purposes of this paragraph, the term "dependent care center" means any facility [which:] that:

(i) Provides care for more than six individuals (other than individuals who reside at the facility)[,]; and

(ii) Receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit)."

PART VI

SECTION 10. The purpose of this part is to appropriate funds specifically for the department of taxation to provide an outreach campaign for low-wage earners to educate them about their income withholding options and provide support when completing their federal and state withholding forms.

SECTION 11. 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 2022-2023 for the department of taxation to provide an outreach campaign for low-wage earners to educate them about their income withholding options and provide support when completing their federal and state withholding forms.

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

PART VII

SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on July 1, 2022; provided that parts II, III, and V shall apply to taxable years beginning after December 31, 2022.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Earned Income Tax Credit; Refundable Food/Excise Tax Credit; Minimum Wage; Household and Dependent Care Tax Credit; Appropriation

 

Description:

Part II: Makes the state earned income tax credit refundable and permanent. Provides for carryforward of nonrefundable credits previously claimed. Part III: Increases and amends the refundable food/excise tax credit. Part IV: Increases minimum wage rate to $11.00 per hour beginning on 1/1/2023, $12.00 per hour beginning on 1/1/2024, $13.00 per hour beginning on 1/1/2025, $14.00 per hour beginning on 1/1/2026, $15.00 per hour beginning on 1/1/2027, $16.00 per hour beginning on 1/1/2028, $17.00 per hour beginning on 1/1/2029, and $18.00 per hour beginning 1/1/2030. Increases the tip credit over the same period. Part V: Amends the household and dependent care tax credit to apply to expenses paid for the care of a qualifying individual, regardless of age and specify that a qualified individual is, among other things, a recipient or eligible to be a recipient of Social Security disability insurance. Part VI: Appropriates funds for an outreach campaign to educate low-wage earners about their withholding options and to provide support when completing their withholding forms.

 

 

 

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