REPORT TITLE:
Corporate Income Tax


DESCRIPTION:
Eliminates the corporate income tax by reducing the rate of tax
to 0.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2089
TWENTIETH LEGISLATURE, 2000                                
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 as follows:
 
 3      1.  By amending subsections (a) and (b) to read:
 
 4      "(a)  A tax at the rates herein provided shall be assessed,
 
 5 levied, collected, and paid for each taxable year on the taxable
 
 6 income of every corporation, including a corporation carrying on
 
 7 business in partnership, except that in the case of a regulated
 
 8 investment company the tax is as provided by subsection (b) and
 
 9 further that in the case of a real estate investment trust as
 
10 defined in section 856 of the Internal Revenue Code of 1954 the
 
11 tax is as provided in subsection (d).  "Corporation" includes any
 
12 professional corporation incorporated pursuant to chapter 415A.
 
13      The tax on all taxable income shall be at the rate of [4.4]
 
14 zero per cent [if the taxable income is not over $25,000, 5.4 per
 
15 cent if over $25,000 but not over $100,000, and on all over
 
16 $100,000, 6.4 per cent].
 
17      (b)  In the case of a regulated investment company there is
 
18 imposed on the taxable income, computed as provided in sections
 
19 852 and 855 of the Internal Revenue Code but with the changes and
 

 
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                                     S.B. NO.           2089
                                                        
                                                        

 
 1 adjustments made by this chapter (without prejudice to the
 
 2 generality of the foregoing, the deduction for dividends paid is
 
 3 limited to such amount of dividends as is attributable to income
 
 4 taxable under this chapter), a tax [consisting in the sum of the
 
 5 following:  4.4] at the rate of zero per cent [if the taxable
 
 6 income is not over $25,000, 5.4 per cent if over $25,000 but not
 
 7 over $100,000, and on all over $100,000, 6.4 per cent]."
 
 8      2.  By amending subsections (d) and (e) to read:
 
 9      "(d)  In the case of a real estate investment trust there is
 
10 imposed on the taxable income, computed as provided in sections
 
11 857 and 858 of the Internal Revenue Code but with the changes and
 
12 adjustments made by this chapter (without prejudice to the
 
13 generality of the foregoing, the deduction for dividends paid is
 
14 limited to such amount of dividends as is attributable to income
 
15 taxable under this chapter), a tax [consisting in the sum of the
 
16 following:  4.4] at the rate of zero per cent [if the taxable
 
17 income is not over $25,000, 5.4 per cent if over $25,000 but not
 
18 over $100,000, and on all over $100,000, 6.4 per cent].  In
 
19 addition to any other penalty provided by law any real estate
 
20 investment trust whose tax liability for any taxable year is
 
21 deemed to be increased pursuant to section 859(b)(2)(A) or
 
22 860(c)(1)(A) after December 31, 1978, (relating to interest and
 
23 additions to tax determined with respect to the amount of the
 

 
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                                     S.B. NO.           2089
                                                        
                                                        

 
 1 deduction for deficiency dividends allowed) of the Internal
 
 2 Revenue Code shall pay a penalty in an amount equal to the amount
 
 3 of interest for which such trust is liable that is attributable
 
 4 solely to such increase.  The penalty payable under this
 
 5 subsection with respect to any determination shall not exceed
 
 6 one-half of the amount of the deduction allowed by section
 
 7 859(a), or 860(a) after December 31, 1978, of the Internal
 
 8 Revenue Code for such taxable year.
 
 9      (e)  Any corporation acting as a business entity in more
 
10 than one state and which is required by this chapter to file a
 
11 return and whose only activities in this State consist of sales
 
12 and which does not own or rent real estate or tangible personal
 
13 property and whose annual gross sales in or into this State
 
14 during the tax year are not in excess of $100,000 may elect to
 
15 report and pay a tax of [.5] zero per cent of such annual gross
 
16 sales." 
 
17      SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is
 
18 repealed.
 
19      ["235-71.5  Alternative tax for corporations.  Section 1201
 
20 (with respect to alternative tax for corporations) of the
 
21 Internal Revenue Code of 1986, as amended as of December 31,
 
22 1996, shall be operative for the purposes of this chapter and
 
23 shall be applied as set forth in this section.  If for any
 

 
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                                     S.B. NO.           2089
                                                        
                                                        

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

 
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                                     S.B. NO.           2089
                                                        
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 4.  This Act, upon its approval, shall apply to
 
 3 taxable years beginning after December 31, 1999.
 
 4 
 
 5                           INTRODUCED BY:  _______________________