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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2329 |
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THIRTY-THIRD LEGISLATURE, 2026 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO CONFORMITY TO THE INTERNAL REVENUE CODE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 2. Section 235-2.3, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.3 Conformance to the federal Internal Revenue
Code; general application. (a) For all taxable years beginning after
December 31, [2024,] 2025, as used in this chapter, except as
provided in this section and sections 235-2.35, 235-2.4, and 235-2.45, "Internal
Revenue Code" means subtitle A, chapter 1, of the federal Internal Revenue
Code of 1986, as amended as of December 31, [2024,] 2025, as it
applies to the determination of gross income, adjusted gross income, ordinary
income and loss, and taxable income, except those provisions of the Internal
Revenue Code which, pursuant to this chapter, do not apply or are otherwise
limited in application.
Sections 9672(1) (relating to tax treatment of targeted EIDL advances) and 9673(1) (relating to tax treatment of restaurant revitalization grants) of Public Law 117-2 shall be operative for purposes of this chapter. No amount received under section 9601 (relating to 2021 recovery rebates to individuals) of Public Law 117-2 shall be included in gross income for purposes of this chapter.
Sections 276(b)(1) (relating to subsequent paycheck protection program loans), 277 (relating to emergency financial aid grants), 278(b)(1) (relating to emergency EIDL grants and targeted EIDL advances), 278(c)(1) (relating to subsidy for certain loan payments), and 278(d)(1) (relating to grants for shuttered venue operators) of Division N of Public Law 116-260 shall be operative for purposes of this chapter. Sections 213 (relating to modification of limitations on charitable contributions) and 214 (relating to temporary special rules for health and dependent care flexible spending arrangements) of Division EE of Public Law 116-260 shall be operative for purposes of this chapter. Sections 301, 302, and 304 (relating to disaster tax relief) of Division EE of Public Law 116-260 shall be operative for purposes of this chapter. No amount received under section 272 (relating to additional 2020 recovery rebates for individuals) of Division N of Public Law 116-260 shall be included in gross income for purposes of this chapter.
Sections 1106(i) (relating to exclusion of loan forgiveness from gross income), 2202(b) (relating to loans from retirement plans), and 2205 (relating to charitable contributions) of Public Law 116-136 shall be operative for purposes of this chapter. No amount received under section 2201 (relating to recovery rebates) of Public Law 116-136 shall be included in gross income for purposes of this chapter.
Section 2202(a) (relating to tax-favored withdrawals from retirement plans) of Public Law 116-136 shall be operative for purposes of this chapter and shall apply to taxable years beginning after December 31, 2019.
Prior law shall continue to be used to determine:
(1) The basis of property, if a taxpayer first determined the basis of property in a taxable year to which prior law applies; and
(2) Gross income, adjusted gross income, ordinary income and loss, and taxable income for a taxable year to which prior law applies.
(b) The following Internal Revenue Code subchapters, parts of subchapters, sections, subsections, and parts of subsections shall not be operative for the purposes of this chapter, unless otherwise provided:
(1) Subchapter A (sections 1 to 59A) (with respect to determination of tax liability), except section 1(h)(2) (relating to net capital gain reduced by the amount taken into account as investment income), except sections 2(a), 2(b), and 2(c) (with respect to the definition of "surviving spouse" and "head of household"), except section 41 (with respect to the credit for increasing research activities), except section 42 (with respect to low-income housing credit), except sections 47 and 48, as amended, as of December 31, 1984 (with respect to certain depreciable tangible personal property), and except section 48(d)(3), as amended, as of February 17, 2009 (with respect to the treatment of United States Department of Treasury grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009). For treatment, see sections 235-110.91, 235-110.7, and 235-110.8;
(2) Section 78 (with respect to dividends received from certain foreign corporations by domestic corporations choosing foreign tax credit);
(3) Section 86 (with respect to social security and tier 1 railroad retirement benefits);
(4) Section 91 (with respect to certain foreign branch losses transferred to specified 10-percent owned foreign corporations);
(5) Section 103 (with respect to interest on state and local bonds). For treatment, see section 235-7(b);
(6) Section 114 (with respect to extraterritorial income). For treatment, any transaction as specified in the transitional rule for 2005 and 2006 as specified in the American Jobs Creation Act of 2004 section 101(d) and any transaction that has occurred pursuant to a binding contract as specified in the American Jobs Creation Act of 2004 section 101(f) are inoperative;
(7) Section 120 (with respect to amounts received under qualified group legal services plans). For treatment, see section 235-7(a)(9) to (11);
(8) Section 122 (with respect to certain reduced uniformed services retirement pay). For treatment, see section 235-7(a)(3);
(9) Section 135 (with respect to income from United States savings bonds used to pay higher education tuition and fees). For treatment, see section 235-7(a)(1);
(10) Section 139C (with respect to COBRA premium assistance);
(11) Section 139K (with respect to scholarships for qualified elementary or secondary education expenses of eligible students);
(12) Section 139L (with respect to interest on loans secured by rural or agricultural real property);
[(11)] (13) Subchapter B (sections 141 to 150) (with
respect to tax exemption requirements for state and local bonds);
[(12)] (14) Section 151 (with respect to allowance of
deductions for personal exemptions). For
treatment, see section 235-54;
(15) Section 174A (with respect to domestic research or experimental expenditures);
[(13)] (16) Section 179B (with respect to expensing of
capital costs incurred in complying with Environmental Protection Agency
sulphur regulations);
[(14)] (17) Section 181 (with respect to special rules
for certain film and television productions);
[(15)] (18) Section 196 (with respect to deduction for
certain unused investment credits);
[(16)] (19) Section 199 (with respect to the U.S.
production activities deduction);
[(17)] (20) Section 199A (with respect to qualified
business income);
[(18)] (21) Section 222 (with respect to qualified
tuition and related expenses);
(22) Section 225 (with respect to qualified overtime compensation);
[(19)] (23) Sections 241 to 247 (with respect to special
deductions for corporations). For
treatment, see section 235-7(c);
[(20)] (24) Section 250 (with respect to foreign-derived
intangible income and global intangible low-taxed income);
[(21)] (25) Section 267A (with respect to certain related
party amounts paid or accrued in hybrid transactions or with hybrid entities);
[(22)] (26) Section 280C (with respect to certain
expenses for which credits are allowable).
For treatment, see section 235-110.91;
[(23)] (27) Section 291 (with respect to special rules
relating to corporate preference items);
[(24)] (28) Section 367 (with respect to foreign
corporations);
[(25)] (29) Section 501(c)(12), (15), (16) (with respect
to exempt organizations); except that section 501(c)(12) shall be operative for
companies that provide potable water to residential communities that lack any
access to public utility water services;
[(26)] (30) Section 515 (with respect to taxes of foreign
countries and possessions of the United States);
[(27)] (31) Subchapter G (sections 531 to 565) (with
respect to corporations used to avoid income tax on shareholders);
[(28)] (32) Subchapter H (sections 581 to 597) (with
respect to banking institutions), except section 584 (with respect to common
trust funds). For treatment, see chapter
241;
[(29)] (33) Section 642(a) and (b) (with respect to
special rules for credits and deductions applicable to trusts). For treatment, see sections 235-54(b) and
235-55;
[(30)] (34) Section 646 (with respect to tax treatment of
electing Alaska Native settlement trusts);
[(31)] (35) Section 668 (with respect to interest charge
on accumulation distributions from foreign trusts);
[(32)] (36) Subchapter L (sections 801 to 848) (with
respect to insurance companies). For
treatment, see sections 431:7-202 and 431:7-204;
[(33)] (37) Section 853 (with respect to foreign tax
credit allowed to shareholders). For
treatment, see section 235-55;
[(34)] (38) Section 853A (with respect to credits from
tax credit bonds allowed to shareholders);
[(35)] (39) Subchapter N (sections 861 to 999) (with
respect to tax based on income from sources within or without the United
States), except sections 985 to 989 (with respect to foreign currency
transactions). For treatment, see
sections 235-4, 235-5, and 235-7(b), and 235-55;
[(36)] (40) Section 1042(g) (with respect to sales of
stock in agricultural refiners and processors to eligible farm cooperatives);
[(37)] (41) Section 1055 (with respect to redeemable
ground rents);
[(38)] (42) Section 1057 (with respect to election to
treat transfer to foreign trust, etc., as taxable exchange);
(43) Section 1062 (with respect to gain from the sale or exchange of qualified farmland property to qualified farmers);
[(39)] (44) Sections 1291 to 1298 (with respect to
treatment of passive foreign investment companies);
[(40)] (45) Subchapter Q (sections 1311 to 1351) (with
respect to readjustment of tax between years and special limitations), except
for section 1341 (with respect to computation of tax where taxpayer restores
substantial amount held under claim of right);
[(41)] (46) Subchapter R (sections 1352 to 1359) (with
respect to election to determine corporate tax on certain international
shipping activities using per ton rate);
[(42)] (47) Subchapter U (sections 1391 to 1397F) (with
respect to designation and treatment of empowerment zones, enterprise
communities, and rural development investment areas). For treatment, see chapter 209E;
[(43)] (48) Subchapter W (sections 1400 to 1400C) (with
respect to District of Columbia enterprise zone);
[(44)] (49) Section 1400O (with respect to education tax
benefits);
[(45)] (50) Section 1400P (with respect to housing tax
benefits);
[(46)] (51) Section 1400R (with respect to employment
relief);
[(47)] (52) Section 1400T (with respect to special rules
for mortgage revenue bonds);
[(48)] (53) Section 1400U-1 (with respect to allocation
of recovery zone bonds);
[(49)] (54) Section 1400U-2 (with respect to recovery
zone economic development bonds); and
[(50)] (55) Section 1400U-3 (with respect to recovery
zone facility bonds)."
SECTION 3. Section 235-2.4, Hawaii Revised Statutes, is amended to read as follows:
"§235-2.4 Operation of certain Internal Revenue Code provisions; sections 63 to 530. (a) Section 63 (with respect to taxable income defined) of the Internal Revenue Code shall be operative for the purposes of this chapter, subject to the following:
(1) Section
63(c)(1)(B) (relating to the additional standard deduction), [63(c)(1)(C)
(relating to the real property tax deduction), 63(c)(1)(D) (relating to the
disaster loss deduction), 63(c)(1)(E) (relating to the motor vehicle sales tax
deduction),] 63(c)(4) (relating to inflation adjustments), 63(c)(7) [(defining
the real property tax deduction), 63(c)(8) (defining the disaster loss
deduction), 63(c)(9) (defining the motor vehicle sales tax deduction),] (relating
to special rules for taxable years beginning after 2017), and 63(f)
(relating to additional amounts for the aged or blind) of the Internal Revenue
Code shall not be operative for purposes of this chapter;
(2) Section 63(c)(2) (relating to the basic standard deduction) of the Internal Revenue Code shall be operative, except that the standard deduction amounts provided therein shall instead mean:
(A) $4,400 in the case of:
(i) A joint return as provided by section 235-93; or
(ii) A surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(B) $3,212 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(C) $2,200 in the case of an individual who is not married and who is not a surviving spouse or head of household;
(D) $2,200 in the case of a married individual filing a separate return;
(E) For taxable years beginning after December 31, 2023:
(i) $8,800 in the case of a joint return as provided by section 235-93 or a surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(ii) $6,424 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(iii) $4,400 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(iv) $4,400 in the case of a married individual filing a separate return;
(F) For taxable years beginning after December 31, 2025:
(i) $16,000 in the case of a joint return as provided by section 235-93 or a surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(ii) $12,000 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(iii) $8,000 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(iv) $8,000 in the case of a married individual filing a separate return;
(G) For taxable years beginning after December 31, 2027:
(i) $18,000 in the case of a joint return as provided by section 235-93 or a surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(ii) $13,500 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(iii) $9,000 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(iv) $9,000 in the case of a married individual filing a separate return;
(H) For taxable years beginning after December 31, 2029:
(i) $20,000 in the case of a joint return as provided by section 235-93 or a surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(ii) $15,000 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(iii) $10,000 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(iv) $10,000 in the case of a married individual filing a separate return; and
(I) For taxable years beginning after December 31, 2030:
(i) $24,000 in the case of a joint return as provided by section 235-93 or a surviving spouse (as defined in section 2(a) of the Internal Revenue Code);
(ii) $18,000 in the case of a head of household (as defined in section 2(b) of the Internal Revenue Code);
(iii) $12,000 in the case of an individual who is not married and who is not a surviving spouse or head of household; or
(iv) $12,000 in the case of a married individual filing a separate return;
(3) Section 63(c)(5) (limiting the basic standard deduction in the case of certain dependents) of the Internal Revenue Code shall be operative, except that the limitation shall be the greater of $500 or the individual's earned income; and
(4) The standard deduction amount for nonresidents shall be calculated pursuant to section 235-5.
[(b)
Section 67 (with respect to the 2-percent floor on miscellaneous
itemized deductions) of the Internal Revenue Code shall be operative for
purposes of this chapter, except that the suspension in section 67(g) shall not
be operative for purposes of this chapter.
(c)] (b) Section 68 (with respect to the overall
limitation on itemized deductions) of the Internal Revenue Code shall be
operative; provided that the[:
(1) Thresholds]
thresholds shall be those that were operative for federal tax year 2009[;
and
(2) Suspension
in section 68(f) shall not be operative for purposes of this chapter].
[(d)] (c) Section 72 (with respect to annuities;
certain proceeds of endowment and life insurance contracts) of the Internal
Revenue Code shall be operative for purposes of this chapter and be interpreted
with due regard to section 235-7(a), except that the ten per cent additional
tax on early distributions from retirement plans in section 72(t) shall not be
operative for purposes of this chapter.
[(e)] (d) Section 85 (with respect to unemployment
compensation) of the Internal Revenue Code shall be operative for purposes of
this chapter, except that section 85(c) shall not be operative for purposes of
this chapter.
[(f)] (e) Section 108 (with respect to income from
discharge of indebtedness) of the Internal Revenue Code shall be operative for
purposes of this chapter, except that section 108(i) (relating to deferral and
ratable inclusion of income arising from business indebtedness discharged by
the reacquisition of a debt instrument) shall not be operative for purposes of
this chapter.
[(g)] (f) Section 121 (with respect to exclusion of
gain from sale of principal residence) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that for the election under
section 121(f), a reference to section 1034 treatment means a reference to
section 235-2.4(n) in effect for taxable year 1997.
[(h)] (g) Section 132 (with respect to certain fringe
benefits) of the Internal Revenue Code shall be operative for purposes of this
chapter, except that:
(1) The
[suspensions] suspension in section [132(f)(8) and]
132(g)(2) shall not be operative for purposes of this chapter; and
(2) Section 132(n) shall not apply to United States Department of Defense Homeowners Assistance Program payments authorized by the American Recovery and Reinvestment Act of 2009.
[(i)] (h) Section 162 (with respect to trade or
business expenses) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that sections 162(f)(2), (3), and (4) (all of
which relate to exceptions to the general rule, established in section
162(f)(1), that no deduction is allowed for the payment of fines or penalties)
shall not be operative for purposes of this chapter.
[(j)] (i) Section 163 (with respect to interest) of the
Internal Revenue Code shall be operative for the purposes of this chapter,
except that the following provisions shall not be operative for the purposes of
this chapter:
(1) Section 163(d)(4)(B) (defining net investment income to exclude dividends);
(2) Section 163(e)(5)(F) (suspension of applicable high-yield discount obligation (AHYDO) rules);
(3) Section
163(h)(3)(F) (limiting mortgage interest); [and]
(4) Section
163(h)(4) (qualified passenger vehicle loan interest); and
[(4)] (5) Section 163(i)(1) as it applies to debt
instruments issued after January 1, 2010 (defining AHYDO).
[(k)] (j) Section 164 (with respect to taxes) of the
Internal Revenue Code shall be operative for the purposes of this chapter,
except that:
(1) Section 164(b)(6)(B) (limiting the deduction for state and local taxes) and (b)(7) (with respect to applicable limitation amount) shall not be operative for the purposes of this chapter;
(2) The deductions under section 164(a)(3) and (b)(5) shall not be operative for corporate taxpayers and shall be operative only for the following individual taxpayers:
(A) A taxpayer filing a single return or a married person filing separately with a federal adjusted gross income of less than $100,000;
(B) A taxpayer filing as a head of household with a federal adjusted gross income of less than $150,000; and
(C) A taxpayer filing a joint return or as a surviving spouse with a federal adjusted gross income of less than $200,000; and
(3) Section 164(a)(3) shall not be operative for any amounts for which the credit under section 235-55 has been claimed.
[(l)] (k) Section 165 (with respect to losses) of the
Internal Revenue Code shall be operative for purposes of this chapter, except
that:
(1) The amount prescribed by section 165(h)(1) (relating to the limitation per casualty) of the Internal Revenue Code shall be a $100 limitation per casualty;
(2) Section 165(h)(3)(A) and (B) (both of which relate to special rules for personal casualty gains and losses in federally declared disasters) of the Internal Revenue Code shall not be operative for the purposes of this chapter;
[(3) Section
165(h)(5) (relating to the limitation on the deductibility of personal casualty
losses that are not attributable to federally declared disasters) shall not be
operative for purposes of this chapter;] and
[(4)] (3) Section 165 as operative for this chapter
shall also apply to losses sustained from the sale of stocks or other interests
issued through the exercise of the stock options or warrants granted by a
qualified high technology business as defined in section 235-7.3.
[(m)] (l) Section 168 (with respect to the accelerated
cost recovery system) of the Internal Revenue Code shall be operative for
purposes of this chapter, except that sections 168(j) (relating to property on
Indian reservations), 168(k) (relating to the special allowance for certain
property acquired during the period specified therein), [and] 168(m)
(relating to the special allowance for certain reuse and recycling property),
and 168(n) (relating to the special allowance for qualified production
property) of the Internal Revenue Code shall not be operative for purposes
of this chapter.
[(n)] (m) Section 172 (with respect to net operating
loss deductions) of the Internal Revenue Code shall be operative for purposes
of this chapter in the form that it existed as of December 31, 2019, and as
further provided in section 235-7(d).
(n)
Section 174 (with respect to amortization of research and experimental
expenditures) of the Internal Revenue Code shall be operative for purposes of
this chapter in the form that it existed as of December 31, 2024.
(o) Section 179 (with respect to the election to expense certain depreciable business assets) of the Internal Revenue Code shall be operative for purposes of this chapter, except as provided in this subsection:
(1) The aggregate cost provided in section 179(b)(1), which may be taken into account under section 179(a) for any taxable year, shall not exceed $25,000;
(2) The amount at which the reduction in limitation provided in section 179(b)(2) begins shall exceed $200,000 for any taxable year; and
(3) The following shall not be operative for purposes of this chapter:
(A) Defining section 179 property to include computer software in section 179(d)(1);
(B) Inflation
adjustments in section [179(b)(5);] 179(b)(6); and
(C) Irrevocable
election in section 179(c)(2)[; and
(D) Special rules for qualified disaster assistance property in
section 179(e)].
(p) Section 198A (with respect to the expensing of qualified disaster assistances expenses) of the Internal Revenue Code shall not be operative for purposes of this chapter.
(q) Section 217 (with respect to moving expenses) of the Internal Revenue Code shall be operative for purposes of this chapter, except that the suspension in section 217(k) shall not be operative for purposes of this chapter.
(r) Section 219 (with respect to retirement savings) of the Internal Revenue Code shall be operative for the purpose of this chapter. For the purpose of computing the limitation on the deduction for active participants in certain pension plans for state income tax purposes, adjusted gross income as used in section 219 as operative for this chapter means federal adjusted gross income.
(s) Section 220 (with respect to medical savings accounts) of the Internal Revenue Code shall be operative for the purpose of this chapter, but only with respect to medical services accounts that have been approved by the Secretary of the Treasury of the United States.
(t) Section 265 (with respect to expenses and interest relating to tax-exempt income) of the Internal Revenue Code shall be operative for purposes of this chapter; except that section 265(b)(3)(G) and (7) shall not be operative and section 265 shall not apply to expenses for royalties and other income derived from any patents, copyrights, and trade secrets by an individual or a qualified high technology business as defined in section 235-7.3. These expenses shall be deductible.
[(u)
Section 274 (with respect to the disallowance of certain entertainment,
etc., expenses) of the Internal Revenue Code shall be operative for this
chapter in the form that it existed as of December 21, 2017.
(v)] (u) Section 280E (with respect to expenditures in
connection with the illegal sale of drugs) of the Internal Revenue Code shall
be operative for the purposes of this chapter, except that section 280E shall
not be operative with respect to the production and sale of medical cannabis
and manufactured cannabis products by dispensaries licensed under chapter 329D
and their subcontractors, as defined in section 329D-1.
[(w)] (v) Section 382 (with respect to limitation on
net operating loss carryforwards and certain built-in losses following
ownership change) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that section 382(n) shall not be operative for
purposes of this chapter.
[(x)] (w) Section 408A (with respect to Roth Individual
Retirement Accounts) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that section 408A(d)(3)(A)(iii) shall not be
operative for purposes of this chapter.
For the purposes of determining the aggregate amount of contributions to
a Roth Individual Retirement Account or qualified rollover contribution to a
Roth Individual Retirement Account from an individual retirement plan other
than a Roth Individual Retirement Account, adjusted gross income as used in
section 408A as operative for this chapter means federal adjusted gross income.
[(y)] (x) In administering the provisions of sections
410 to 417 (with respect to special rules relating to pensions, profit sharing,
stock bonus plans, etc.), sections 418 to 418E (with respect to special rules
for multiemployer plans), and sections 419 and 419A (with respect to treatment
of welfare benefit funds) of the Internal Revenue Code, the department of
taxation shall adopt rules under chapter 91 relating to the specific
requirements under those sections and to other administrative requirements under
those sections as may be necessary for the efficient administration of sections
410 to 419A.
In administering sections 401 to 419A (with respect to deferred compensation) of the Internal Revenue Code, Public Law 93-406, section 1017(i), shall be operative for the purposes of this chapter.
In administering section 402 (with respect to the taxability of beneficiary of employees' trust) of the Internal Revenue Code, the tax imposed on lump sum distributions by section 402(e) of the Internal Revenue Code shall be operative for the purposes of this chapter and the tax imposed therein is hereby imposed by this chapter at the rate determined under this chapter.
[(z)] (y) In administering section 403 (with respect to
taxation of employee annuities) of the Internal Revenue Code, any funds that
represent pre-tax employee deferrals or contributions that are distributed from
the annuity and used solely to obtain retirement credits under the state
employees' retirement system shall not be treated as a rollover for purposes of
section 403(b)(8)(A) of the Internal Revenue Code, and those funds shall be
subject to income tax under this chapter.
[(aa)] (z) Section 451 (which provides general rules for
taxable year of inclusion) of the Internal Revenue Code shall be operative,
except that section 451(k)(3) and (6), as it relates to a qualified electric
utility, shall not be operative for purposes of this chapter.
[(bb)] (aa) In administering section 457 (with respect to
compensation plans of state and local governments and tax-exempt organizations)
of the Internal Revenue Code, any funds that represent pre-tax employee
deferrals or contributions that are distributed from the deferred compensation
plan and used solely to obtain retirement credits under the state employees'
retirement system shall not be treated as a rollover for purposes of section
457(e)(16)(A) of the Internal Revenue Code and those funds shall be subject to
income tax under this chapter.
[(cc)
Section 461 (with respect to the general rule for taxable year of
deduction) of the Internal Revenue Code, shall be operative for purposes of
this chapter in the form that it existed as of December 31, 2019.
(dd)] (bb) Section 468B (with respect to special rules
for designated settlement funds) of the Internal Revenue Code shall be
operative for the purposes of this chapter and the tax imposed therein is
hereby imposed by this chapter at a rate equal to the maximum rate in effect
for the taxable year imposed on estates and trusts under section 235-51.
[(ee)] (cc) Section 469 (with respect to passive
activities and credits limited) of the Internal Revenue Code shall be operative
for the purposes of this chapter. For
the purpose of computing the offset for rental real estate activities for state
income tax purposes, adjusted gross income as used in section 469 as operative
for this chapter means federal adjusted gross income.
[(ff)] (dd) Sections 512 to 514 (with respect to taxation
of business income of certain exempt organizations) of the Internal Revenue
Code shall be operative for the purposes of this chapter as provided in this
subsection.
"Unrelated business taxable income" means the same as in the Internal Revenue Code, except that:
(1) In the computation of unrelated business taxable income, sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall apply;
(2) In the determination of the net operating loss deduction there shall not be taken into account any amount of income or deduction that is excluded in computing the unrelated business taxable income; and
(3) Unrelated business taxable income shall not include any income from a legal service plan.
For a person described in section 401 or 501 of the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by section 235-51 or 235-71 shall be imposed upon the person's unrelated business taxable income.
[(gg)] (ee) Section 521 (with respect to cooperatives)
and subchapter T (sections 1381 to 1388, with respect to cooperatives and their
patrons) of the Internal Revenue Code shall be operative for the purposes of
this chapter as to any cooperative fully meeting the requirements of section
421-23, except that Internal Revenue Code section 521 cooperatives need not be
organized in Hawaii.
[(hh)] (ff) Sections 527 (with respect to political
organizations) and 528 (with respect to certain homeowners associations) of the
Internal Revenue Code shall be operative for the purposes of this chapter and
the taxes imposed in each section are hereby imposed by this chapter at the
rates determined under section 235-71.
[(ii)] (gg) Section 529 (with respect to qualified
tuition programs) shall be operative for the purposes of this chapter, except
that sections 529(c)(6), 529(c)(7), and 529(e)(3)(A)(iii) shall not be
operative.
[(jj)] (hh) Section 529A (with respect to qualified ABLE
programs) shall be operative for the purposes of this chapter, except that
section 529A(c)(3) (with respect to additional tax for distributions not used
for disability expenses) shall not be operative.
[(kk)] (ii) Section 530 (with respect to Coverdell
education savings accounts) of the Internal Revenue Code shall be operative for
the purposes of this chapter. For the
purpose of determining the maximum amount that a contributor could make to an
education individual retirement account for state income tax purposes, modified
adjusted gross income as used in section 530 as operative for this chapter
means federal modified adjusted gross income as defined in section 530."
SECTION 4. Section 235-2.45, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
"(e)
Section 1202 (with respect to partial exclusion for gain from certain
small business stock) of the Internal Revenue Code shall be operative for
purposes of this chapter[,] in the form that it existed as of
December 31, 2024, except that section 1202(a)(3) and (4) shall not be
operative for purposes of this chapter."
SECTION 5. Section 236E-3, Hawaii Revised Statutes, is amended to read as follows:
"§236E-3 Conformance to the Internal Revenue Code;
general application. For all
decedents dying, or transfers occurring, after December 31, [2024,] 2025,
as used in this chapter, "Internal Revenue Code" means subtitle B of
the federal Internal Revenue Code of 1986, as amended as of December 31, [2024,]
2025, as it applies to the determination of gross estate, adjusted gross
estate, federal taxable estate, and generation-skipping transfers, except those
provisions of the Internal Revenue Code and federal public laws that, pursuant
to this chapter, do not apply or are otherwise limited in application."
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect upon its approval; provided that:
(1) Sections 2, 3, and 4 shall apply to taxable years beginning after December 31, 2025; and
(2) Section 5 shall apply to decedents dying or taxable transfers occurring after December 31, 2025.
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BY REQUEST |
Report Title:
Conformity to the Internal Revenue Code for 2025; Income Tax; Estate and Generation-Skipping Transfer Tax
Description:
Conforms Hawaii income and estate and generation-skipping transfer tax laws to the Internal Revenue Code of 1986, as amended as of December 31, 2025.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.