HOUSE OF REPRESENTATIVES	H.B. NO.	1850
THIRTY-THIRD LEGISLATURE, 2026		H.D. 2
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO CAPITAL GAINS TAX.

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

SECTION 1. Section 231-8.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If the requirements of subsection (c) are satisfied, the department may require electronic filing of any tax return, application, report, or other document required under the provisions of title 14 administered by the department for the following taxpayers:

(1) For withholding tax filings required under chapter 235, only employers whose total tax liability under sections 235-61 and 235-62 for the calendar or fiscal year exceeds $40,000;

(2) For income tax filings required under chapter 235, only taxpayers who are subject to tax under section 235-71[, 235-71.5,] or 235-72;

(3) For general excise tax filings required under chapter 237, only taxpayers whose total tax liability under chapter 237 for the calendar or fiscal year exceeds $4,000;

(4) For transient accommodations tax filings required under chapter 237D, only operators and plan managers whose total tax liability under chapter 237D for the calendar or fiscal year exceeds $4,000; and

(5) For filings required under the following chapters, all taxpayers subject to tax under those chapters:

(A) 236E;

(B) 239;

(C) 241;

(D) 243;

(E) 244D;

(F) 245; and

(G) 251."

SECTION 2. Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) If a taxpayer has a net capital gain from the sale of real property that is used as a principal home and eligible for a county homeowner's exemption for any taxable year [to which this subsection applies], then the tax imposed on the net capital gain [by this section] shall [not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of] be at a rate of 7.25 per cent [of the amount of taxable income in excess of the amount determined under paragraph (1)].

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

SECTION 3. Section 235-71.5, Hawaii Revised Statutes, is repealed.

["§235-71.5 Alternative tax for corporations. Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section. If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

(1) A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

(2) The sum of:

(A) 3.08 per cent of the lesser of:

(i) The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

(ii) The net capital gain for the taxable year, plus

(B) 4 per cent of the excess (if any) of:

(i) The net capital gain for the taxable year, over

(ii) The amount of the net capital gain taken into account under subparagraph (A)."]

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 3000, and shall apply to taxable years beginning after December 31, 2026.

Report Title:

Capital Gains Tax; Corporations

Description:

Taxes capital gains tax for individuals, estates, and trusts as ordinary income, except for capital gains that are eligible for a county homeowner's exemption. Repeals the alternative capital gains tax for corporations. Applies to taxable years beginning after 12/31/2026. Effective 7/1/3000. (HD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.