REPORT TITLE:
Income Tax; Capital Gains


DESCRIPTION:
Decreases capital gains rate by 50% for investments in Hawaii
held for more than 3 years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            1407        
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
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                   A  BILL  FOR  AN  ACT

RELATING TO CAPITAL GAINS.



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

 1      SECTION 1.  Section 235-51, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (f) to read as follows:
 
 3      "(f)  If a taxpayer has a net capital gain for any taxable
 
 4 year to which this subsection applies, then the tax imposed by
 
 5 this section shall not exceed the sum of:
 
 6      (1)  The tax computed at the rates and in the same manner as
 
 7           if this subsection had not been enacted on the greater
 
 8           of:
 
 9           (A)  The taxable income reduced by the amount of net
 
10                capital gain, or
 
11           (B)  The amount of taxable income taxed at a rate below
 
12                7.25 per cent, plus
 
13      (2)  A tax of 7.25 per cent of the amount of taxable income
 
14           in excess of the amount determined under paragraph
 
15           (1)[.];
 
16 provided that the tax rates in paragraphs (1) and (2) shall be
 
17 reduced by half in calculating the tax on capital gains under
 
18 this section for investments made in the State and held for more
 
19 than three years.  For the purposes of this chapter "investment"
 

 
Page 2                                         1407        
                                     H.B. NO.           
                                                        
                                                        

 
 1 means money that is placed with a business, company, or other
 
 2 person in Hawaii that is a separate person from the taxpayer who
 
 3 has placed that money for the purposes of obtaining an income or
 
 4 profit. "Investment" for the purposes of this section does not
 
 5 include funds placed with a stock brokerage firm."
 
 6      This subsection shall apply to individuals, estates, and
 
 7 trusts for taxable years beginning after December 31, 1986."
 
 8      SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "�235-71.5  Alternative tax for corporations.  Section 1201
 
11 (with respect to alternative tax for corporations) of the
 
12 Internal Revenue Code of 1986, as amended as of December 31,
 
13 1996, shall be operative for the purposes of this chapter and
 
14 shall be applied as set forth in this section.  If for any
 
15 taxable year a corporation, regulated investment company, or real
 
16 estate investment trust has a net capital gain, then, in lieu of
 
17 the tax imposed by section 235-71, there is hereby imposed a tax
 
18 (if such tax is less than the tax imposed under section 235-71)
 
19 which shall consist of the sum of:
 
20      (1)  A tax computed on the taxable income reduced by the
 
21           amount of the net capital gain, at the rates and in the
 
22           manner as if this section had not been enacted, plus
 
23      (2)  The sum of:
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           (A)  3.08 per cent of the lesser of:
 
 2                (i)  The net capital gain determined by including
 
 3                     only the gain or loss which is properly taken
 
 4                     into account for the portion of the taxable
 
 5                     year before April 1, 1987 (i.e., the amount
 
 6                     in paragraph (1)), or
 
 7               (ii)  The net capital gain for the taxable year,
 
 8                     plus
 
 9           (B)  4 per cent of the excess (if any) of:
 
10                (i)  The net capital gain for the taxable year,
 
11                     over
 
12               (ii)  The amount of the net capital gain taken into
 
13                     account under subparagraph (A)[.];
 
14           provided that the tax rates in paragraphs (2)(A) and
 
15           (B) shall be reduced by half in calculating the tax on
 
16           capital gains under this section for investments made
 
17           in the State and held for more than three years.  For
 
18           the purposes of this chapter "investment" means money
 
19           that is placed with a business, company, or other
 
20           person in Hawaii that is a separate person from the
 
21           taxpayer who has placed that money for the purposes of
 
22           obtaining an income or profit. "Investment" for the
 
23           purposes of this section does not include funds placed
 
24           with a stock brokerage firm."
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 3.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 4.  This Act, upon its approval, shall apply to
 
 4 taxable years beginning after December 31, 1998.
 
 5 
 
 6                           INTRODUCED BY:  _______________________