STAND. COM. REP. NO. 1037

Honolulu, Hawaii

RE: S.B. No. 1398

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1398 entitled:

"A BILL FOR AN ACT RELATING TO CONFORMITY TO THE INTERNAL REVENUE CODE,"

begs leave to report as follows:

The purpose and intent of this measure is to conform Hawaii income and estate and generation-skipping transfer tax laws to the Internal Revenue Code.

Your Committee received written comments in support of this measure from the Department of Taxation.

Your Committee received written comments on this measure from the Tax Foundation of Hawaii.

Your Committee finds that this annual conformity measure is submitted by the Department of Taxation in compliance with section 235-2.5, Hawaii Revised Statutes, which requires the Department to annually submit a measure to maintain state income tax conformity with the federal Internal Revenue Code. This measure is also intended to comply with section 236E-4, Hawaii Revised Statutes, which requires the Department to annually submit a measure to maintain state estate and generation-skipping transfer tax conformity with the federal Internal Revenue Code. The purpose of conformity is to update the state tax laws with those changes made to the federal Internal Revenue Code during the past year and to adopt those changes that are appropriate for Hawaii law.

Your Committee has amended this measure by:

(1) Making corrections to the quoted text of section 235‑2.5, Hawaii Revised Statutes, in the measure to accurately reflect the printed version of the Hawaii Revised Statutes;

(2) Clarifying that sections 3 and 4 of the measure shall apply to taxable years beginning after December 31, 2022;

(3) Changing the effective date to July 1, 2050, to facilitate further discussion on the measure; and

(4) Making technical nonsubstantive amendments for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1398, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1398, S.D. 1.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair