REPORT TITLE:
Corporate Income Tax


DESCRIPTION:
Aids corporations and small businesses by lowering corporate
income tax rates.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           727
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  Purpose.  The legislature finds that the State
 
 2 needs to stimulate the economy by assisting corporations and
 
 3 small businesses.  A logical approach is to lower Hawaii's
 
 4 corporate taxes.  A reduction in corporate taxes would attract
 
 5 more capital-intensive firms, that in turn would create full-time
 
 6 jobs, pay higher wages, and benefit those with more education and
 
 7 job skills.  A tax reduction would also allow corporations and
 
 8 small businesses to retain needed capital to fund future growth
 
 9 and better secure long-term viability.  The purpose of this Act
 
10 is to achieve these goals by lowering corporate tax rates.
 
11      SECTION 2.  Section 235-71, Hawaii Revised Statutes, is
 
12 amended as follows:
 
13      1.  By amending subsections (a) and (b) to read:
 
14      "(a)  A tax at the rates herein provided shall be assessed,
 
15 levied, collected, and paid for each taxable year on the taxable
 
16 income of every corporation, including a corporation carrying on
 
17 business in partnership, except that in the case of a regulated
 
18 investment company the tax is as provided by subsection (b) and
 
19 further that in the case of a real estate investment trust as
 

 
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 1 defined in section 856 of the Internal Revenue Code of 1954 the
 
 2 tax is as provided in subsection (d).  "Corporation" includes any
 
 3 professional corporation incorporated pursuant to chapter 415A.
 
 4      The tax on all taxable income shall be at the rate of [4.4]
 
 5 0 per cent if the taxable income is not over [$25,000, 5.4]
 
 6 $50,000, 2.5 per cent if over [$25,000] $50,000 but not over
 
 7 $100,000, and on all over $100,000, [6.4] 5.0 per cent.
 
 8      (b)  In the case of a regulated investment company there is
 
 9 imposed on the taxable income, computed as provided in sections
 
10 852 and 855 of the Internal Revenue Code but with the changes and
 
11 adjustments made by this chapter (without prejudice to the
 
12 generality of the foregoing, the deduction for dividends paid is
 
13 limited to such amount of dividends as is attributable to income
 
14 taxable under this chapter), a tax consisting in the sum of the
 
15 following:  [4.4]        per cent if the taxable income is not
 
16 over $25,000, [5.4]        per cent if over $25,000 but not over
 
17 $100,000, and on all over $100,000, [6.4]        per cent."
 
18      2.  By amending subsections (d) to read:
 
19      "(d)  In the case of a real estate investment trust there is
 
20 imposed on the taxable income, computed as provided in sections
 
21 857 and 858 of the Internal Revenue Code but with the changes and
 
22 adjustments made by this chapter (without prejudice to the
 
23 generality of the foregoing, the deduction for dividends paid is
 

 
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                                     S.B. NO.           727
                                                        
                                                        

 
 1 limited to such amount of dividends as is attributable to income
 
 2 taxable under this chapter), a tax consisting in the sum of the
 
 3 following: [4.4 per]        cent if the taxable income is not
 
 4 over $25,000, [5.4]        per cent if over $25,000 but not over
 
 5 $100,000, and on all over $100,000, [6.4]        per cent.  In
 
 6 addition to any other penalty provided by law any real estate
 
 7 investment trust whose tax liability for any taxable year is
 
 8 deemed to be increased pursuant to section 859(b)(2)(A) or
 
 9 860(c)(1)(A) after December 31, 1978, (relating to interest and
 
10 additions to tax determined with respect to the amount of the
 
11 deduction for deficiency dividends allowed) of the Internal
 
12 Revenue Code shall pay a penalty in an amount equal to the amount
 
13 of interest for which such trust is liable that is attributable
 
14 solely to such increase.  The penalty payable under this
 
15 subsection with respect to any determination shall not exceed
 
16 [one-half]           of the amount of the deduction allowed by
 
17 section 859(a), or 860(a) after December 31, 1978, of the
 
18 Internal Revenue Code for such taxable year."
 
19      SECTION 3.  Section 235-71.5, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§235-71.5  Alternative tax for corporations.  Section 1201
 
22 (with respect to alternative tax for corporations) of the
 
23 Internal Revenue Code of 1986, as amended as of December 31,
 

 
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                                     S.B. NO.           727
                                                        
                                                        

 
 1 1996, shall be operative for the purposes of this chapter and
 
 2 shall be applied as set forth in this section.  If for any
 
 3 taxable year a corporation, regulated investment company, or real
 
 4 estate investment trust has a net capital gain, then, in lieu of
 
 5 the tax imposed by section 235-71, there is hereby imposed a tax
 
 6 (if such tax is less than the tax imposed under section 235-71)
 
 7 which shall consist of the sum of:
 
 8      (1)  A tax computed on the taxable income reduced by the
 
 9           amount of the net capital gain, at the rates and in the
 
10           manner as if this section had not been enacted, plus
 
11      (2)  The sum of:
 
12           (A)  [3.08] 2.0 per cent of the lesser of:
 
13                (i)  The net capital gain determined by including
 
14                     only the gain or loss which is properly taken
 
15                     into account for the portion of the taxable
 
16                     year before April 1, 1987 (i.e., the amount
 
17                     in paragraph (1)), or
 
18               (ii)  The net capital gain for the taxable year,
 
19                     plus
 
20           (B)  [4] 2.0 per cent of the excess (if any) of:
 
21                (i)  The net capital gain for the taxable year,
 
22                     over
 
23               (ii)  The amount of the net capital gain taken into
 

 
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                                     S.B. NO.           727
                                                        
                                                        

 
 1                     account under subparagraph (A)."
 
 2      SECTION 4.  Statutory material to be repealed is bracketed.
 
 3 New statutory material is underscored.
 
 4      SECTION 5.  This Act shall take effect upon its approval.
 
 5 
 
 6                           INTRODUCED BY:  _______________________