REPORT TITLE:
Capital Gains Tax


DESCRIPTION:
Waives capital gains tax on investments made in Hawaii between
7/1/99 and 6/30/2001, if the investment is held for more than two
years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1265       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO EXEMPTIONS FROM THE CAPITAL GAINS TAX.
 


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

 1      SECTION 1.  The purpose of this Act is to stimulate our
 
 2 economy by the encouragement of long-term capital investment in
 
 3 the State of Hawaii.  In addition to encouraging immediate local
 
 4 investment, reaping both the short-term direct and multiplier
 
 5 effect benefits to our economy, and initiating the ongoing
 
 6 taxable exchange of capital, this bill will also preserve
 
 7 currently anticipated tax revenues since the investor cannot
 
 8 benefit from this measure's tax liability reduction for at least
 
 9 two years.  While our state continues to borrow money for capital
 
10 investment (and pays out interest immediately) to stimulate the
 
11 economy, this bill compliments our revitalization strategy by
 
12 having immediate capital investment and economic benefits to the
 
13 State.
 
14      SECTION 2.  Section 235-51, Hawaii Revised Statutes, is
 
15 amended by amending subsection (f) to read as follows:
 
16      "(f)  If a taxpayer has a net capital gain for any taxable
 
17 year to which this subsection applies, then the tax imposed by
 
18 this section shall not exceed the sum of:
 
19      (1)  The tax computed at the rates and in the same manner as
 

 
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                                     H.B. NO.1265       
                                                        
                                                        

 
 1           if this subsection had not been enacted on the greater
 
 2           of:
 
 3           (A)  The taxable income reduced by the amount of net
 
 4                capital gain, or
 
 5           (B)  The amount of taxable income taxed at a rate below
 
 6                7.25 per cent, plus
 
 7      (2)  A tax of 7.25 per cent of the amount of taxable income
 
 8           in excess of the amount determined under paragraph (1).
 
 9      This subsection shall apply to individuals, estates, and
 
10 trusts for taxable years beginning after December 31, 1986. 
 
11 Notwithstanding any other provision to the contrary, the
 
12 definition of "taxable income" for purposes of the individual
 
13 income tax under this section shall not include any income
 
14 derived from a capital gain arising out of a long-term investment
 
15 made, operated, or conducted in the State of Hawaii.
 
16      For the purposes of this section, "long-term investment"
 
17 means an investment held by the taxpayer for a period of two or
 
18 more years that was initially made between July 1, 1999, and June
 
19 30, 2001."
 
20      SECTION 3.  Section 235-71.5, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "235-71.5  Alternative tax for corporations.  (a) Section
 
23 1201 (with respect to alternative tax for corporations) of the
 

 
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                                     H.B. NO.1265       
                                                        
                                                        

 
 1 Internal Revenue Code of 1986, as amended as of December 31,
 
 2 1996, shall be operative for the purposes of this chapter and
 
 3 shall be applied as set forth in this section.  If for any
 
 4 taxable year a corporation, regulated investment company, or real
 
 5 estate investment trust has a net capital gain, then, in lieu of
 
 6 the tax imposed by section 235-71, there is hereby imposed a tax
 
 7 (if such tax is less than the tax imposed under section 235-71)
 
 8 which shall consist of the sum of:
 
 9      (1)  A tax computed on the taxable income reduced by the
 
10           amount of the net capital gain, at the rates and in the
 
11           manner as if this section had not been enacted, plus
 
12      (2)  The sum of:
 
13           (A)  3.08 per cent of the lesser of:
 
14                (i)  The net capital gain determined by including
 
15                     only the gain or loss which is properly taken
 
16                     into account for the portion of the taxable
 
17                     year before April 1, 1987 (i.e., the amount
 
18                     in paragraph (1)), or
 
19               (ii)  The net capital gain for the taxable year,
 
20                     plus
 
21           (B)  4 per cent of the excess (if any) of:
 
22                (i)  The net capital gain for the taxable year,
 
23                     over
 

 
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                                     H.B. NO.1265       
                                                        
                                                        

 
 1               (ii)  The amount of the net capital gain taken into
 
 2                     account under subparagraph (A). 
 
 3      (b)  Capital gains exemption.  Notwithstanding any other
 
 4 provision to the contrary, the definition of "taxable income" for
 
 5 purposes of the corporation income tax under this section shall
 
 6 not include any income derived from a capital gain arising out of
 
 7 a long-term investment made, operated, or conducted in the State
 
 8 of Hawaii.
 
 9      For the purposes of this section, "long-term investment"
 
10 means an investment held by the taxpayer for a period of two or
 
11 more years that was initially made between July 1, 1999, and
 
12 June 30, 2001."
 
13      SECTION 4.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 5.  This Act shall take effect upon its approval.
 
16 
 
17                           INTRODUCED BY:_________________________
 
18 
 
19                                         _________________________