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THE SENATE |
S.B. NO. |
3125 |
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THIRTY-THIRD LEGISLATURE, 2026 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 1 |
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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. Section 235-51, Hawaii Revised Statutes, is amended by amending subsections (a), (b), and (c) to read as follows:
"(a)
There is hereby imposed on the taxable income of every:
(1) Taxpayer who files a joint return under section 235−93; and
(2) Surviving spouse,
a tax determined in accordance with the following table:
In the case of any taxable year beginning
after December 31, 2017:
If the taxable income is: The
tax shall be:
Not over $4,800 1.40%
of taxable income
Over $4,800 but $67.00
plus 3.20% of
not over $9,600 excess
over $4,800
Over $9,600 but $221.00
plus 5.50% of
not over $19,200 excess
over $9,600
Over $19,200 but $749.00
plus 6.40% of
not over $28,800 excess
over $19,200
Over $28,800 but $1,363.00
plus 6.80% of
not over $38,400 excess
over $28,800
Over $38,400 but $2,016.00
plus 7.20% of
not over $48,000 excess
over $38,400
Over $48,000 but $2,707.00
plus 7.60% of
not over $72,000 excess
over $48,000
Over $72,000 but $4,531.00
plus 7.90% of
not over $96,000 excess
over $72,000
Over $96,000 but $6,427.00
plus 8.25% of
not over $300,000 excess
over $96,000
Over $300,000 but $23,257.00
plus 9.00% of
not over $350,000 excess
over $300,000
Over $350,000 but $27,757.00
plus 10.00% of
not over $400,000 excess
over $350,000
Over $400,000 $32,757.00
plus 11.00% of
excess over $400,000.
In the case of any taxable year beginning
after December 31, 2024:
If the taxable income is: The
tax shall be:
Not over $19,200 1.40%
of taxable income
Over $19,200 but $269.00
plus 3.20% of
not over $28,800 excess
over $19,200
Over $28,800 but $576.00
plus 5.50% of
not over $38,400 excess
over $28,800
Over $38,400 but $1,104.00
plus 6.40% of
not over $48,000 excess
over $38,400
Over $48,000 but $1,718.00
plus 6.80% of
not over $72,000 excess
over $48,000
Over $72,000 but $3,350.00
plus 7.20% of
not over $96,000 excess
over $72,000
Over $96,000 but $5,078.00
plus 7.60% of
not over $250,000 excess
over $96,000
Over $250,000 but $16,782.00
plus 7.90% of
not over $350,000 excess
over $250,000
Over $350,000 but $24,682.00
plus 8.25% of
not over $450,000 excess
over $350,000
Over $450,000 but $32,932.00
plus 9.00% of
not over $550,000 excess
over $450,000
Over $550,000 but $41,932.00
plus 10.00% of
not over $650,000 excess
over $550,000
Over $650,000 $51,932.00
plus 11.00% of
excess over $650,000.
[In the case of any taxable year
beginning after December 31, 2026:
If the taxable income is: The tax shall be:
Not over $28,800 1.40%
of taxable income
Over $28,800 but $403.00
plus 3.20% of
not over $38,400 excess
over $28,800
Over $38,400 but $710.00
plus 5.50% of
not over $48,000 excess
over $38,400
Over $48,000 but $1,238.00
plus 6.40% of
not over $72,000 excess
over $48,000
Over $72,000 but $2,774.00
plus 6.80% of
not over $96,000 excess
over $72,000
Over $96,000 but $4,406.00
plus 7.20% of
not over $250,000 excess
over $96,000
Over $250,000 but $15,494.00
plus 7.60% of
not over $350,000 excess
over $250,000
Over $350,000 but $23,094.00
plus 7.90% of
not over $450,000 excess
over $350,000
Over $450,000 but $30,994.00
plus 8.25% of
not over $550,000 excess
over $450,000
Over $550,000 but $39,244.00
plus 9.00% of
not over $650,000 excess
over $550,000
Over $650,000 but $48,244.00
plus 10.00% of
not over $800,000 excess
over $650,000
Over $800,000 $63,244.00 plus 11.00% of
excess over $800,000.
In the case of any taxable year
beginning after December 31, 2028:
If the taxable income is: The tax shall be:
Not over $38,400 1.40%
of taxable income
Over $38,400 but $538.00
plus 3.20% of
not over $48,000 excess
over $38,400
Over $48,000 but $845.00
plus 5.50% of
not over $72,000 excess
over $48,000
Over $72,000 but $2,165.00
plus 6.40% of
not over $96,000 excess
over $72,000
Over $96,000 but $3,701.00
plus 6.80% of
not over $250,000 excess
over $96,000
Over $250,000 but $14,173.00
plus 7.20% of
not over $350,000 excess
over $250,000
Over $350,000 but $21,373.00
plus 7.60% of
not over $450,000 excess
over $350,000
Over $450,000 but $28,973.00
plus 7.90% of
not over $550,000 excess
over $450,000
Over $550,000 but $36,873.00
plus 8.25% of
not over $650,000 excess
over $550,000
Over $650,000 but $45,123.00
plus 9.00% of
not over $800,000 excess
over $650,000
Over $800,000 but $58,623.00
plus 10.00% of
not over $950,000 excess
over $800,000
Over $950,000 $73,623.00
plus 11.00% of
excess over $950,000.]
In the case of any taxable year
beginning after December 31, 2026:
If the taxable income is: The tax shall be:
Not over $19,200 1.40%
of taxable income
Over $19,200 but $269.00
plus 3.20% of
not over $28,800 excess
over $19,200
Over $28,800 but $576.00
plus 5.50% of
not over $38,400 excess
over $28,800
Over $38,400 but $1,104.00
plus 6.40% of
not over $48,000 excess
over $38,400
Over $48,000 but $1,718.00
plus 6.80% of
not over $72,000 excess
over $48,000
Over $72,000 but $3,350.00
plus 7.20% of
not over $96,000 excess
over $72,000
Over $96,000 but $5,078.00
plus 7.60% of
not over $250,000 excess
over $96,000
Over $250,000 but $16,782.00
plus 7.90% of
not over $350,000 excess
over $250,000
Over $350,000 but $24,682.00
plus 8.25% of
not over $450,000 excess
over $350,000
Over $450,000 but $32,932.00
plus 10.00% of
not over $550,000 excess
over $450,000
Over $550,000 but $42,932.00
plus 11.00% of
not over $650,000 excess
over $550,000
Over $650,000 $53,932.00
plus 12.00% of
excess over $650,000.
(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:
In the case of any taxable year beginning after December 31, 2017:
If the taxable income is: The
tax shall be:
Not over $3,600 1.40%
of taxable income
Over $3,600 but $50.00
plus 3.20% of
not over $7,200 excess
over $3,600
Over $7,200 but $166.00
plus 5.50% of
not over $14,400 excess
over $7,200
Over $14,400 but $562.00
plus 6.40% of
not over $21,600 excess
over $14,400
Over $21,600 but $1,022.00
plus 6.80% of
not over $28,800 excess
over $21,600
Over $28,800 but $1,512.00
plus 7.20% of
not over $36,000 excess
over $28,800
Over $36,000 but $2,030.00
plus 7.60% of
not over $54,000 excess
over $36,000
Over $54,000 but $3,398.00
plus 7.90% of
not over $72,000 excess
over $54,000
Over $72,000 but $4,820.00
plus 8.25% of
not over $225,000 excess
over $72,000
Over $225,000 but $17,443.00
plus 9.00% of
not over $262,500 excess
over $225,000
Over $262,500 but $20,818.00
plus 10.00% of
not over $300,000 excess
over $262,500
Over $300,000 $24,568.00
plus 11.00% of
excess over $300,000.
In the case of any taxable year beginning after December 31, 2024:
If the taxable income is: The
tax shall be:
Not over $14,400 1.40%
of taxable income
Over $14,400 but $202.00
plus 3.20% of
not over $21,600 excess
over $14,400
Over $21,600 but $432.00
plus 5.50% of
not over $28,800 excess
over $21,600
Over $28,800 but $828.00
plus 6.40% of
not over $36,000 excess
over $28,800
Over $36,000 but $1,289.00
plus 6.80% of
not over $54,000 excess
over $36,000
Over $54,000 but $2,513.00
plus 7.20% of
not over $72,000 excess
over $54,000
Over $72,000 but $3,809.00
plus 7.60% of
not over $187,500 excess
over $72,000
Over $187,500 but $12,587.00
plus 7.90% of
not over $262,500 excess
over $187,500
Over $262,500 but $18,512.00
plus 8.25% of
not over $337,500 excess
over $262,500
Over $337,500 but $24,699.00
plus 9.00% of
not over $412,500 excess
over $337,500
Over $412,500 but $31,449.00
plus 10.00% of
not over $487,500 excess
over $412,500
Over $487,500 $38,949.00
plus 11.00% of
excess over $487,500.
[In the case of any taxable year
beginning after December 31, 2026:
If the taxable income is: The tax shall be:
Not over $21,600 1.40%
of taxable income
Over $21,600 but $302.00
plus 3.20% of
not over $28,800 excess
over $21,600
Over $28,800 but $533.00
plus 5.50% of
not over $36,000 excess
over $28,800
Over $36,000 but $929.00
plus 6.40% of
not over $54,000 excess
over $36,000
Over $54,000 but $2,081.00
plus 6.80% of
not over $72,000 excess
over $54,000
Over $72,000 but $3,305.00
plus 7.20% of
not over $187,500 excess
over $72,000
Over $187,500 but $11,621.00
plus 7.60% of
not over $262,500 excess
over $187,500
Over $262,500 but $17,321.00
plus 7.90% of
not over $337,500 excess
over $262,500
Over $337,500 but $23,246.00
plus 8.25% of
not over $412,500 excess
over $337,500
Over $412,500 but $29,433.00
plus 9.00% of
not over $487,500 excess
over $412,500
Over $487,500 but $36,183.00
plus 10.00% of
not over $600,000 excess
over $487,500
Over $600,000 $47,433.00
plus 11.00% of
excess over $600,000.
In the case of any taxable year
beginning after December 31, 2028:
If the taxable income is: The tax shall be:
Not over $28,800 1.40%
of taxable income
Over $28,800 but $403.00
plus 3.20% of
not over $36,000 excess
over $28,800
Over $36,000 but $634.00
plus 5.50% of
not over $54,000 excess
over $36,000
Over $54,000 but $1,624.00
plus 6.40% of
not over $72,000 excess
over $54,000
Over $72,000 but $2,776.00
plus 6.80% of
not over $187,500 excess
over $72,000
Over $187,500 but $10,630.00
plus 7.20% of
not over $262,500 excess
over $187,500
Over $262,500 but $16,030.00
plus 7.60% of
not over $337,500 excess
over $262,500
Over $337,500 but $21,730.00
plus 7.90% of
not over $412,500 excess
over $337,500
Over $412,500 but $27,655.00
plus 8.25% of
not over $487,500 excess
over $412,500
Over $487,500 but $33,842.00
plus 9.00% of
not over $600,000 excess
over $487,500
Over $600,000 but $43,967.00
plus 10.00% of
not over $712,500 excess
over $600,000
Over $712,500 $55,217.00
plus 11.00% of
excess over $712,500.]
In
the case of any taxable year beginning after December 31, 2026:
If the taxable income is: The tax shall be:
Not over $14,400 1.40%
of taxable income
Over $14,400 but $202.00
plus 3.20% of
not over $21,600 excess
over $14,400
Over $21,600 but $432.00
plus 5.50% of
not over $28,800 excess
over $21,600
Over $28,800 but $828.00
plus 6.40% of
not over $36,000 excess
over $28,800
Over $36,000 but $1,289.00
plus 6.80% of
not over $54,000 excess
over $36,000
Over $54,000 but $2,513.00
plus 7.20% of
not over $72,000 excess
over $54,000
Over $72,000 but $3,809.00
plus 7.60% of
not over $187,500 excess
over $72,000
Over $187,500 but $12,587.00
plus 7.90% of
not over $262,500 excess
over $187,500
Over $262,500 but $18,512.00
plus 8.25% of
not over $337,500 excess
over $262,500
Over $337,500 but $24,699.00
plus 10.00% of
not over $412,500 excess
over $337,500
Over $412,500 but $32,199.00
plus 11.00% of
not over $487,500 excess
over $412,500
Over $487,500 $40,449.00
plus 12.00% of
excess over $487,500.
(c) There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:
In the case of any taxable year beginning
after December 31, 2017:
If the taxable income is: The
tax shall be:
Not over $2,400 1.40%
of taxable income
Over $2,400 but $34.00
plus 3.20% of
not over $4,800 excess
over $2,400
Over $4,800 but $110.00
plus 5.50% of
not over $9,600 excess
over $4,800
Over $9,600 but $374.00
plus 6.40% of
not over $14,400 excess
over $9,600
Over $14,400 but $682.00
plus 6.80% of
not over $19,200 excess
over $14,400
Over $19,200 but $1,008.00
plus 7.20% of
not over $24,000 excess
over $19,200
Over $24,000 but $1,354.00
plus 7.60% of
not over $36,000 excess
over $24,000
Over $36,000 but $2,266.00
plus 7.90% of
not over $48,000 excess
over $36,000
Over $48,000 but $3,214.00
plus 8.25% of
not over $150,000 excess
over $48,000
Over $150,000 but $11,629.00
plus 9.00% of
not over $175,000 excess
over $150,000
Over $175,000 but $13,879.00
plus 10.00% of
not over $200,000 excess
over $175,000
Over $200,000 $16,379.00
plus 11.00% of
excess over $200,000.
In the case of any taxable year beginning after December 31, 2024:
If the taxable income is The
tax shall be:
Not over $9,600 1.40%
of taxable income
Over $9,600 but $134.00
plus 3.20% of
not over $14,400 excess
over $9,600
Over $14,400 but $288.00
plus 5.50% of
not over $19,200 excess
over $14,400
Over $19,200 but $552.00
plus 6.40% of
not over $24,000 excess
over $19,200
Over $24,000 but $859.00
plus 6.80% of
not over $36,000 excess
over $24,000
Over $36,000 but $1,675.00
plus 7.20% of
not over $48,000 excess
over $36,000
Over $48,000 but $2,539.00
plus 7.60% of
not over $125,000 excess
over $48,000
Over $125,000 but $8,391.00
plus 7.90% of
not over $175,000 excess
over $125,000
Over $175,000 but $12,341.00
plus 8.25% of
not over $225,000 excess
over $175,000
Over $225,000 but $16,466.00
plus 9.00% of
not over $275,000 excess
over $225,000
Over $275,000 but $20,966.00
plus 10.00% of
not over $325,000 excess
over $275,000
Over $325,000 $25,966.00
plus 11.00% of
excess over $325,000.
[In
the case of any taxable year beginning after December 31, 2026:
If the taxable income is: The tax shall be:
Not over $14,400 1.40%
of taxable income
Over $14,400 but $202.00
plus 3.20% of
not over $19,200 excess
over $14,400
Over $19,200 but $355.00
plus 5.50% of
not over $24,000 excess
over $19,200
Over $24,000 but $619.00
plus 6.40% of
not over $36,000 excess
over $24,000
Over $36,000 but $1,387.00
plus 6.80% of
not over $48,000 excess
over $36,000
Over $48,000 but $2,203.00
plus 7.20% of
not over $125,000 excess
over $48,000
Over $125,000 but $7,747.00
plus 7.60% of
not over $175,000 excess
over $125,000
Over $175,000 but $11,547.00
plus 7.90% of
not over $225,000 excess
over $175,000
Over $225,000 but $15,497.00
plus 8.25% of
not over $275,000 excess
over $225,000
Over $275,000 but $19,622.00
plus 9.00% of
not over $325,000 excess
over $275,000
Over $325,000 but $24,122.00
plus 10.00% of
not over $400,000 excess
over $325,000
Over $400,000 $31,622.00
plus 11.00% of
excess over $400,000.
In
the case of any taxable year beginning after December 31, 2028:
If the taxable income is: The tax shall be:
Not over $19,200 1.40%
of taxable income
Over $19,200 but $269.00
plus 3.20% of
not over $24,000 excess
over $19,200
Over $24,000 but $422.00
plus 5.50% of
not over $36,000 excess
over $24,000
Over $36,000 but $1,082.00
plus 6.40% of
not over $48,000 excess
over $36,000
Over $48,000 but $1,850.00
plus 6.80% of
not over $125,000 excess
over $48,000
Over $125,000 but $7,086.00
plus 7.20% of
not over $175,000 excess
over $125,000
Over $175,000 but $10,686.00
plus 7.60% of
not over $225,000 excess
over $175,000
Over $225,000 but $14,486.00
plus 7.90% of
not over $275,000 excess
over $225,000
Over $275,000 but $18,436.00
plus 8.25% of
not over $325,000 excess
over $275,000
Over $325,000 but $22,561.00
plus 9.00% of
not over $400,000 excess
over $325,000
Over $400,000 but $29,311.00
plus 10.00% of
not over $475,000 excess
over $400,000
Over $475,000 $36,811.00
plus 11.00% of
excess over $475,000.]
In
the case of any taxable year beginning after December 31, 2026:
If the taxable income is The tax shall be:
Not over $9,600 1.40%
of taxable income
Over $9,600 but $134.00
plus 3.20% of
not over $14,400 excess
over $9,600
Over $14,400 but $288.00
plus 5.50% of
not over $19,200 excess
over $14,400
Over $19,200 but $552.00
plus 6.40% of
not over $24,000 excess
over $19,200
Over $24,000 but $859.00
plus 6.80% of
not over $36,000 excess
over $24,000
Over $36,000 but $1,675.00
plus 7.20% of
not over $48,000 excess
over $36,000
Over $48,000 but $2,539.00
plus 7.60% of
not over $125,000 excess
over $48,000
Over $125,000 but $8,391.00
plus 7.90% of
not over $175,000 excess
over $125,000
Over $175,000 but $12,341.00
plus 8.25% of
not over $225,000 excess
over $175,000
Over $225,000 but $16,466.00
plus 10.00% of
not over $275,000 excess
over $225,000
Over $275,000 but $21,466.00
plus 11.00% of
not over $325,000 excess
over $275,000
Over $325,000 $26,966.00
plus 12.00% of
excess over $325,000."
SECTION 2. Section 235-55.6, Hawaii Revised Statutes, is amended to read as follows:
"§235-55.6 Expenses for household and dependent care services necessary for gainful employment. (a) Allowance of credit.
(1) In general. For each resident taxpayer, who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes, who maintains a household which includes as a member one or more qualifying individuals (as defined in subsection (b)(1)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by the individual during the taxable year. If the tax credit claimed by a resident taxpayer exceeds the amount of income tax payment due from the resident taxpayer, the excess of the credit over payments due shall be refunded to the resident taxpayer; provided that tax credit properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.
(2) Applicable
percentage. For purposes of paragraph
(1), the taxpayer's applicable percentage shall be determined as follows:
Adjusted gross income Applicable percentage
Not over [$25,000] $80,000 [25%] 50%
Over [$25,000] $80,000
but [24%] 45%
not
over [$30,000] $90,000
Over [$30,000] $90,000
but [23%] 40%
not
over [$35,000] $100,000
Over [$35,000] $100,000
but [22%] 35%
not over [$40,000] $110,000
Over [$40,000] $110,000
but [21%] 30%
not over [$45,000] $120,000
Over [$45,000] $120,000
but [20%] 25%
not over [$50,000] $130,000
Over [$50,000] $130,000
but [15%.] 20%
not over $140,000
Over $140,000 but 15%
not over $150,000
Over $150,000 but 10%
not over $160,000
Over $160,000 5%.
(b) Definitions of qualifying individual and employment-related expenses. For purposes of this section:
(1) Qualifying individual. The term "qualifying individual" means:
(A) A
dependent of the taxpayer who is under the age of thirteen and with respect to
whom the taxpayer is entitled to a deduction under section 235-54(a)[,];
(B) A
dependent of the taxpayer who is physically or mentally incapable of caring for
oneself[,]; or
(C) The spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for oneself.
(2) Employment-related expenses.
(A) In general. The term "employment-related expenses" means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are one or more qualifying individuals with respect to the taxpayer:
(i) Expenses for household services[,]; and
(ii) Expenses for the care of a qualifying individual.
Such term shall not include any amount paid for services outside the taxpayer's household at a camp where the qualifying individual stays overnight.
(B) Exception. Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of:
(i) A qualifying individual described in paragraph (1)(A)[,];
or
(ii) A qualifying individual (not described in paragraph (1)(A)) who regularly spends at least eight hours each day in the taxpayer's household.
(C) Dependent care centers. Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayer's household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if:
(i) Such center complies with all applicable laws, rules, and regulations of this State, if the center is located within the jurisdiction of this State; or
(ii) Such center complies with all applicable laws, rules, and regulations of the jurisdiction in which the center is located, if the center is located outside the State; and
(iii) The requirements of subparagraph (B) are met.
(D) Dependent
care center defined. For purposes of
this paragraph, the term "dependent care center" means any facility [which:]
that:
(i) Provides care for more than six individuals (other than individuals
who reside at the facility)[,]; and
(ii) Receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).
(1) $10,000
if there is one qualifying individual with respect to the taxpayer for such
taxable year[,]; or
(2) $20,000 if there are two or more qualifying individuals with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is applicable) shall be reduced by the aggregate amount excludable from gross income under section 129 (with respect to dependent care assistance programs) of the Internal Revenue Code for the taxable year.
(d) Earned income limitation.
(1) In general. Except as otherwise provided in this subsection, the amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed:
(A) In
the case of an individual who is not married at the close of such year, such
individual's earned income for such year[,]; or
(B) In the case of an individual who is married at the close of such year, the lesser of such individual's earned income or the earned income of the individual's spouse for such year.
(2) Special rule for spouse who is a student or incapable of caring for oneself. In the case of a spouse who is a student or a qualified individual described in subsection (b)(1)(C), for purposes of paragraph (1), such spouse shall be deemed for each month during which such spouse is a full-time student at an educational institution, or is such a qualifying individual, to be gainfully employed and to have earned income of not less than:
(A) $200
if subsection (c)(1) applies for the taxable year[,]; or
(B) $400 if subsection (c)(2) applies for the taxable year.
In the case of any husband and wife, this paragraph shall apply with respect to only one spouse for any one month.
(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. If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
(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)] 152(c)(1)
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.
(f) No credit shall be allowed under this section
for any taxable year in the disallowance period. For purposes of this subsection, the
disallowance period is:
(1) The period of ten taxable years
after the most recent taxable year for which there was a final administrative
or judicial decision that the taxpayer's claim for credit under this section
was due to fraud; and
(2) The period of two taxable years after the most recent taxable year for which there was a final administrative or judicial decision disallowing the taxpayer's claim for credit.
[(f)] (g) Rules.
The director of taxation shall prescribe such rules under chapter 91 as
may be necessary to carry out the purposes of this section."
SECTION 3. Act 163, Session Laws of Hawaii 2023, is amended by amending section 5 to read as follows:
"This
Act, upon its approval, shall apply to taxable years beginning after December
31, 2022; provided that on December 31, [2027,] 2032, this Act
shall be repealed and sections 235-55.6(c), 235-55.75(a), and 235-55.85(b), Hawaii
Revised Statutes, shall be reenacted in the form in which they read on the day
prior to the effective date of this Act."
PART
II
SECTION 4. The legislature finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy. Renewable energy systems that capture solar and wind energy and convert it to thermal or mechanical energy, electricity, and fuel will be key in the State's transition away from fossil fuels. The legislature further finds that the renewable energy technologies income tax credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets. The legislature additionally finds that such changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the State's energy industry.
Accordingly, the purpose of this part is to amend the renewable energy technologies income tax credit by:
(1) Limiting claims for certain solar energy systems installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly;
(2) Removing certain cap amounts for solar energy systems that are not third-party financed systems; and
(3) Increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess credits refunded and limiting refundability to systems that are not third-party financed systems.
SECTION 5. Section 235-12.5, Hawaii Revised Statutes, is amended as follows:
1. By amending subsections (a) to (c) to read:
"(a) Each individual or corporate taxpayer that
files an individual or corporate net income tax return for a taxable year may
claim a tax credit under this section against the Hawaii state individual or
corporate net income tax. The tax credit
may be claimed for every eligible renewable energy technology system that is
installed and placed in service in the State by a taxpayer during the taxable
year. No taxpayer may claim a tax
credit under this section for a solar energy system with the primary purpose other
than using energy from the sun to heat water for household use that is
installed and placed in service on a single-family residential property unless
the taxpayer's adjusted gross income is $250,000 or less if filing as an
individual or $350,000 or less if filing jointly; provided that this income
restriction shall only apply to systems that are not third-party financed
systems. The tax credit may be
claimed as follows:
(1) For each solar energy system: thirty-five per cent of the actual cost or the cap amount determined in subsection (b); provided that:
(A) For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;
(B) A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty-five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and
(C) For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or
(2) For each wind-powered energy system: twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;
provided
further that multiple owners of a single system shall be entitled to a single
tax credit; and provided further that the tax credit shall be apportioned
between the owners in proportion to their contribution to the cost of the
system.
In
the case of a partnership, S corporation, estate, or trust, the tax credit
allowable is for every eligible renewable energy technology system that is
installed and placed in service in the State by the entity. The cost upon which the tax credit is
computed shall be determined at the entity level. Distribution and share of credit shall be
determined pursuant to administrative rule.
(b) The amount of credit allowed for each
eligible renewable energy technology system shall not exceed the applicable cap
amount, which is determined as follows:
(1) If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:
(A) $2,250 per system for single-family residential property;
(B) $350 per unit per system for multi-family residential property; and
(C) $250,000 per system for commercial property;
(2) For all other solar energy systems, the cap amounts shall be:
(A) [$5,000 per system for] For
single-family residential property[;]:
(i) $5,000 per third-party financed system; or
(ii) No cap for a system that is not a third-party financed system;
provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;
(B) $350 per unit per system for multi-family residential property; and
(C) $500,000 per system for commercial property; and
(3) For all wind-powered energy systems, the cap amounts shall be:
(A) $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;
(B) $200 per unit per system for multi-family residential property; and
(C) $500,000 per system for commercial property.
(c) For the purposes of this section:
"Actual
cost" means costs related to the renewable energy technology systems under
subsection (a), including accessories and installation, but not including the
cost of consumer incentive premiums unrelated to the operation of the system or
offered with the sale of the system and costs for which another credit is
claimed under this chapter.
"Household
use" means any use to which heated water is commonly put in a residential
setting, including commercial application of those uses.
"Renewable
energy technology system" means a new system that captures and converts a
renewable source of energy, such as solar or wind energy, into:
(1) A usable source of thermal or mechanical
energy;
(2) Electricity; or
(3) Fuel.
"Solar
or wind energy system" means any identifiable facility, equipment,
apparatus, or the like that converts solar or wind energy to useful thermal or
electrical energy for heating, cooling, or reducing the use of other types of
energy that are dependent upon fossil fuel for their generation.
"Third-party
financed system" means a renewable energy technology system for which a
tax credit under this section is claimed by a taxpayer who is not the owner of
the property on which the system is installed and placed into service."
2. By amending subsection (h) to read:
"(h) Notwithstanding subsection (g), for any renewable energy technology system, an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer, if:
(1) All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or
(2) The system is not a third-party
financed system and the taxpayer's adjusted gross income is [$20,000]
$40,000 or less (or [$40,000] $60,000 or less if filing a
tax return as married filing jointly);
provided
that tax credits properly claimed by a taxpayer who has no income tax liability
shall be paid to the taxpayer; [and] provided further that no refund on
account of the tax credit allowed by this section shall be made for amounts
less than $1.
[A
husband and wife] Spouses who do not file a joint tax return shall
only be entitled to make this election to the extent that they would have been
entitled to make the election had they filed a joint tax return.
The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the system is installed and placed in service. A separate election may be made for each separate system that generates a credit. An election once made is irrevocable."
PART III
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect on July 1, 3000; provided that:
(1) Section 2 of this Act shall apply to taxable years beginning after December 31, 2026;
(2) On December 31, 2032, section 2 of this Act shall be repealed and section 235-55.6, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of Act 163, Session Laws of Hawaii 2023; and
(3) Part II of this Act shall apply to taxable years beginning after December 31, 2026.
Report Title:
Income Tax; Income Tax Brackets; Household and Dependent Care Services Tax Credit; Disallowance Period; Earned Income Tax Credit; Food/Excise Tax Credit; Renewable Energy Technologies Income Tax Credit; Income Restriction; Solar Energy Systems; Third-party Financed Systems
Description:
PART I: Repeals future adjustments to income tax brackets. For taxable years beginning after 12/31/2026, adds an income tax bracket and increases the income tax rates for the three highest income tax brackets by one percentage point each. Increases a taxpayer's applicable percentage of employment-related expenses that is used to calculate the household and dependent care services tax credit and increases income eligibility thresholds for the credit. Establishes certain disallowance periods following a final decision that a claim for the credit was due to fraud and that the claim was disallowed. Extends the sunset for enhancements made by Act 163, SLH 2023, to the Household and Dependent Care Services Tax Credit, Earned Income Tax Credit, and Food/Excise Tax Credit to 12/31/2032. PART II: Amends the renewable energy technologies income tax credit by: for taxable years beginning after 12/31/26, limiting claims for certain solar energy systems that are not third-party financed systems and installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly; removing certain cap amounts for solar energy systems that are not third-party financed systems; and increasing the maximum adjusted gross income an individual taxpayer must be below in order to be eligible to have any excess credits refunded and limiting credit refundability to systems that are not third-party financed systems. Effective 7/1/3000. (HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.