Tax credits; Household and
Dependent Care

Provides an exemption to military personnel who do not file a
joint return to qualify for the household and dependent care tax

THE SENATE                              S.B. NO.           2137
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 235-55.6, Hawaii Revised Statutes, is
 2 amended by amending subsection (e) to read as follows:
 3      "(e)  Special rules.  For purposes of this section:
 4      (1)  Maintaining household.  An individual shall be treated
 5           as maintaining a household for any period only if over
 6           half the cost of maintaining the household for the
 7           period is furnished by the individual (or, if the
 8           individual is married during the period, is furnished
 9           by the individual and the individual's spouse).
10      (2)  Married couples must file joint return[.  If];
11           exception.  Except as provided herein, if the taxpayer
12           is married at the close of the taxable year, the credit
13           shall be allowed under subsection (a) only if the
14           taxpayer and the taxpayer's spouse file a joint return
15           for the taxable year.  A joint return shall not be
16           required for a taxpayer who is in the "military
17           service" as the term is used under section 235-100 and
18           who submits a form as prescribed by the department,
19           stating that the taxpayer's spouse is not claiming the

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                                     S.B. NO.           2137

 1           same credit for the taxable year.
 2      (3)  Marital status.  An individual legally separated from
 3           the individual's spouse under a decree of divorce or of
 4           separate maintenance shall not be considered as
 5           married.
 6      (4)  Certain married individuals living apart.  If:
 7           (A)  An individual who is married and who files a
 8                separate return:
 9                (i)  Maintains as the individual's home a
10                     household that constitutes for more than one-
11                     half of the taxable year the principal place
12                     of abode of a qualifying individual, and
13               (ii)  Furnishes over half of the cost of
14                     maintaining the household during the taxable
15                     year, and
16           (B)  During the last six months of the taxable year the
17                individual's spouse is not a member of the
18                household,
19           the individual shall not be considered as married.
20      (5)  Special dependency test in case of divorced parents,
21           etc.  If:
22           (A)  Paragraph (2) or (4) of section 152(e) of the

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                                     S.B. NO.           2137

 1                Internal Revenue Code of 1986, as amended, applies
 2                to any child with respect to any calendar year,
 3                and
 4      (B)  The child is under age thirteen or is physically or
 5           mentally incompetent of caring for the child's self,
 6           in the case of any taxable year beginning in the
 7           calendar year, the child shall be treated as a
 8           qualifying individual described in subsection (b)(1)(A)
 9           or (B) (whichever is appropriate) with respect to the
10           custodial parent (within the meaning of section
11           152(e)(1) of the Internal Revenue Code of 1986, as
12           amended), and shall not be treated as a qualifying
13           individual with respect to the noncustodial parent.
14      (6)  Payments to related individuals.  No credit shall be
15           allowed under subsection (a) for any amount paid by the
16           taxpayer to an individual:
17           (A)  With respect to whom, for the taxable year, a
18                deduction under section 151(c) of the Internal
19                Revenue Code of 1986, as amended (relating to
20                deduction for personal exemptions for dependents)
21                is allowable either to the taxpayer or the
22                taxpayer's spouse, or

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                                     S.B. NO.           2137

 1           (B)  Who is a child of the taxpayer (within the meaning
 2                of section 151(c)(3) of the Internal Revenue Code
 3                of 1986, as amended) who has not attained the age
 4                of nineteen at the close of the taxable year.
 5           For purposes of this paragraph, the term "taxable year"
 6           means the taxable year of the taxpayer in which the
 7           service is performed.
 8      (7)  Student.  The term "student" means an individual who,
 9           during each of five calendar months during the taxable
10           year, is a full-time student at an educational
11           organization.
12      (8)  Educational organization.  The term "educational
13           organization" means a school operated by the department
14           of education under chapter 302A, an educational
15           organization described in section 170(b)(1)(A)(ii) of
16           the Internal Revenue Code of 1986, as amended, or a
17           university, college, or community college.
18      (9)  Identifying information required with respect to
19           service provider.  No credit shall be allowed under
20           subsection (a) for any amount paid to any person
21           unless:
22           (A)  The name, address, taxpayer identification number,

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                                     S.B. NO.           2137

 1                and general excise tax license number of the
 2                person are included on the return claiming the
 3                credit,
 4           (B)  If the person is located outside the State, the
 5                name, address, and taxpayer identification number,
 6                if any, of the person and a statement indicating
 7                that the service provider is located outside the
 8                State and that the general excise tax license and,
 9                if applicable, the taxpayer identification numbers
10                are not required, or
11           (C)  If the person is an organization described in
12                section 501(c)(3) of the Internal Revenue Code and
13                exempt from tax under section 501(a) of the
14                Internal Revenue Code, the name and address of the
15                person are included on the return claiming the
16                credit.
17           In the case of a failure to provide the information
18           required under the preceding sentence, the preceding
19           sentence shall not apply if it is shown that the
20           taxpayer exercised due diligence in attempting to
21           provide the information so required."
22      SECTION 2.  Statutory material to be repealed is bracketed.

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                                     S.B. NO.           2137

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