Report Title:
Income Tax Credit; Child and Dependent Care Expenses
Description:
Allows married couples who file separately to claim a child care tax credit.
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THE SENATE |
S.B. NO. |
662 |
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TWENTY-FIRST LEGISLATURE, 2001 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to income tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that current state income tax law does not allow married taxpayers filing separate returns to claim the tax credit for child and dependent care expenses. The same is true for the Internal Revenue Code. The unintended problem commonly arises when there is a spouse who works in Hawaii and the other spouse, while in Hawaii, maintains residence for tax purposes in another state. The legislature further finds that married taxpayers who file separate state income tax returns should also be able to avail themselves of the tax credit as they could have done by filing a joint return.
The purpose of this Act is to allow married taxpayers who file separate returns to claim the income tax credit for child and dependent care expenses. For purposes of determining the amount of adjusted gross income against which the credit is computed, the incomes of both are added together, just as married taxpayers; however, the tax is not increased or imposed against the separately filing taxpayer.
SECTION 2. Section 235-55.6, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
"(e) Special rules. For purposes of this section:
(1) Maintaining household. An individual shall be treated as maintaining a household for any period only if over half the cost of maintaining the household for the period is furnished by the individual (or, if the individual is married during the period, is furnished by the individual and the individual's spouse).
(2) [Married couples must file joint return.] Return filing. If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) [only] if [the]:
(A) The taxpayer and the taxpayer's spouse file a joint return for the taxable year[.]; or
(B) The taxpayer and the taxpayer's spouse file separate returns; provided that the taxpayer shall combine the spouse's Hawaii adjusted gross income with the taxpayer's Hawaii adjusted gross income to determine the taxpayer's adjusted gross income for the purposes of subsection (a)(2).
(3) Marital status. An individual legally separated from the individual's spouse under a decree of divorce or of separate maintenance shall not be considered as married.
(4) Certain married individuals living apart. If:
(A) An individual who is married and who files a separate return:
(i) Maintains as the individual's home a household that constitutes for more than one-half of the taxable year the principal place of abode of a qualifying individual, and
(ii) Furnishes over half of the cost of maintaining the household during the taxable year, and
(B) During the last six months of the taxable year the individual's spouse is not a member of the household,
the individual shall not be considered as married.
(5) Special dependency test in case of divorced parents, etc. If:
(A) Paragraph (2) or (4) of section 152(e) of the Internal Revenue Code of 1986, as amended, applies to any child with respect to any calendar year, and
(B) The child is under age thirteen or is physically or mentally incompetent of caring for the child's self,
in the case of any taxable year beginning in the calendar year, the child shall be treated as a qualifying individual described in subsection (b)(1)(A) or (B) (whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1) of the Internal Revenue Code of 1986, as amended), and shall not be treated as a qualifying individual with respect to the noncustodial parent.
(6) Payments to related individuals. No credit shall be allowed under subsection (a) for any amount paid by the taxpayer to an individual:
(A) With respect to whom, for the taxable year, a deduction under section 151(c) of the Internal Revenue Code of 1986, as amended (relating to deduction for personal exemptions for dependents) is allowable either to the taxpayer or the taxpayer's spouse, or
(B) Who is a child of the taxpayer (within the meaning of section 151(c)(3) of the Internal Revenue Code of 1986, as amended) who has not attained the age of nineteen at the close of the taxable year.
For purposes of this paragraph, the term "taxable year" means the taxable year of the taxpayer in which the service is performed.
(7) Student. The term "student" means an individual who, during each of five calendar months during the taxable year, is a full-time student at an educational organization.
(8) Educational organization. The term "educational organization" means a school operated by the department of education under chapter 302A, an educational organization described in section 170(b)(1)(A)(ii) of the Internal Revenue Code of 1986, as amended, or a university, college, or community college.
(9) Identifying information required with respect to service provider. No credit shall be allowed under subsection (a) for any amount paid to any person unless:
(A) The name, address, taxpayer identification number, and general excise tax license number of the person are included on the return claiming the credit,
(B) If the person is located outside the State, the name, address, and taxpayer identification number, if any, of the person and a statement indicating that the service provider is located outside the State and that the general excise tax license and, if applicable, the taxpayer identification numbers are not required, or
(C) If the person is an organization described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name and address of the person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2000.
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INTRODUCED BY: |
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