REPORT TITLE:
Corporate Income Tax


DESCRIPTION:
Reduces corporate income tax by 50%.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            1406        
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO CORPORATE INCOME TAX. 


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

 1      SECTION 1.  Section 235-71, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      235-71  Tax on corporations; rates; credit of shareholder
 
 4 of regulated investment company.(a)  A tax at the rates herein
 
 5 provided shall be assessed, levied, collected, and paid for each
 
 6 taxable year on the taxable income of every corporation,
 
 7 including a corporation carrying on business in partnership,
 
 8 except that in the case of a regulated investment company the tax
 
 9 is as provided by subsection (b) and further that in the case of
 
10 a real estate investment trust as defined in section 856 of the
 
11 Internal Revenue Code of 1954 the tax is as provided in
 
12 subsection (d).  "Corporation" includes any professional
 
13 corporation incorporated pursuant to chapter 415A.
 
14      The tax on all taxable income shall be at the rate of [4.4]
 
15 2.2 per cent if the taxable income is not over $25,000, [5.4] 2.7
 
16 per cent if over $25,000 but not over $100,000, and on all over
 
17 $100,000, [6.4] 3.2 per cent.
 
18      (b)  In the case of a regulated investment company there is
 
19 imposed on the taxable income, computed as provided in sections
 

 
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 1 852 and 855 of the Internal Revenue Code but with the changes and
 
 2 adjustments made by this chapter (without prejudice to the
 
 3 generality of the foregoing, the deduction for dividends paid is
 
 4 limited to such amount of dividends as is attributable to income
 
 5 taxable under this chapter), a tax consisting in the sum of the
 
 6 following:  [4.4] 2.2 per cent if the taxable income is not over
 
 7 $25,000, [5.4] 2.7 per cent if over $25,000 but not over
 
 8 $100,000, and on all over $100,000, [6.4] 3.2 per cent.
 
 9      (c)  In the case of a shareholder of a regulated investment
 
10 company there is hereby allowed a credit in the amount of the tax
 
11 imposed on the amount of capital gains which by section
 
12 852(b)(3)(D) of the Internal Revenue Code is required to be
 
13 included in the shareholder's return and on which there has been
 
14 paid to the State by the regulated investment company the tax at
 
15 the rate imposed by subsection (b); the amount of this credit may
 
16 be applied or refunded as provided in section 235-110.
 
17      (d)  In the case of a real estate investment trust there is
 
18 imposed on the taxable income, computed as provided in sections
 
19 857 and 858 of the Internal Revenue Code but with the changes and
 
20 adjustments made by this chapter (without prejudice to the
 
21 generality of the foregoing, the deduction for dividends paid is
 
22 limited to such amount of dividends as is attributable to income
 
23 taxable under this chapter), a tax consisting in the sum of the
 

 
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 1 following:  [4.4] 2.2 per cent if the taxable income is not over
 
 2 $25,000, [5.4] 2.7 per cent if over $25,000 but not over
 
 3 $100,000, and on all over $100,000, [6.4] 3.2 per cent.  In
 
 4 addition to any other penalty provided by law any real estate
 
 5 investment trust whose tax liability for any taxable year is
 
 6 deemed to be increased pursuant to section 859(b)(2)(A) or
 
 7 860(c)(1)(A) after December 31, 1978, (relating to interest and
 
 8 additions to tax determined with respect to the amount of the
 
 9 deduction for deficiency dividends allowed) of the Internal
 
10 Revenue Code shall pay a penalty in an amount equal to the amount
 
11 of interest for which such trust is liable that is attributable
 
12 solely to such increase.  The penalty payable under this
 
13 subsection with respect to any determination shall not exceed
 
14 one-half of the amount of the deduction allowed by section
 
15 859(a), or 860(a) after December 31, 1978, of the Internal
 
16 Revenue Code for such taxable year.
 
17      (e)  Any corporation acting as a business entity in more
 
18 than one state and which is required by this chapter to file a
 
19 return and whose only activities in this State consist of sales
 
20 and which does not own or rent real estate or tangible personal
 
21 property and whose annual gross sales in or into this State
 
22 during the tax year are not in excess of $100,000 may elect to
 
23 report and pay a tax of [.5] .25 per cent of such annual gross
 

 
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 1 sales."
 
 2      SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "235-71.5  Alternative tax for corporations.  Section 1201
 
 5 (with respect to alternative tax for corporations) of the
 
 6 Internal Revenue Code of 1986, as amended as of December 31,
 
 7 1996, shall be operative for the purposes of this chapter and
 
 8 shall be applied as set forth in this section.  If for any
 
 9 taxable year a corporation, regulated investment company, or real
 
10 estate investment trust has a net capital gain, then, in lieu of
 
11 the tax imposed by section 235-71, there is hereby imposed a tax
 
12 (if such tax is less than the tax imposed under section 235-71)
 
13 which shall consist of the sum of:
 
14      (1)  A tax computed on the taxable income reduced by the
 
15           amount of the net capital gain, at the rates and in the
 
16           manner as if this section had not been enacted, plus
 
17      (2)  The sum of:
 
18           (A)  [3.08] 1.54 per cent of the lesser of:
 
19                (i)  The net capital gain determined by including
 
20                     only the gain or loss which is properly taken
 
21                     into account for the portion of the taxable
 
22                     year before April 1, 1987 (i.e., the amount
 
23                     in paragraph (1)), or
 

 
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 1               (ii)  The net capital gain for the taxable year,
 
 2                     plus
 
 3           (B)  [4] 2 per cent of the excess (if any) of:
 
 4                (i)  The net capital gain for the taxable year,
 
 5                     over
 
 6               (ii)  The amount of the net capital gain taken into
 
 7                     account under subparagraph (A)."
 
 8      SECTION 3.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 4.  This Act, upon its approval, shall apply to
 
11 taxable years beginning after December 31, 1999.
 
12 
 
13                           INTRODUCED BY:  _______________________