Report Title:

Capital Gains Tax

 

Description:

Waives capital gains tax on investments made in Hawaii between 7/1/01 and 6/30/02, if the investment is held for more than two years.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

316

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO EXEMPTIONS FROM THE CAPITAL GAINS TAX.

 

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

SECTION 1. The purpose of this Act is to stimulate our economy by the encouragement of long-term capital investment in the State of Hawaii. In addition to encouraging immediate local investment, reaping both the short-term direct and multiplier effect benefits to our economy, and initiating the ongoing taxable exchange of capital, this Act will also preserve currently anticipated tax revenues since the investor cannot benefit from this measure's tax liability reduction for at least two years. While our State continues to borrow money for capital investment (and pays out interest immediately) to stimulate the economy, this Act complements our revitalization strategy by having immediate capital investment and economic benefits to the State.

SECTION 2. Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986.

Notwithstanding any other provision to the contrary, the definition of "taxable income" for purposes of the individual income tax under this section shall not include any income derived from a capital gain arising out of a long-term investment made, operated, or conducted in the State.

For the purposes of this section, "long-term investment" means an investment held by the taxpayer for a period of two or more years that was initially made between July 1, 2001, and June 30, 2003."

SECTION 3. Section 235-71.5, Hawaii Revised Statutes, is amended to read as follows:

"§235-71.5 Alternative tax for corporations. (a) Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section. If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

(1) A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

(2) The sum of:

(A) 3.08 per cent of the lesser of:

(i) The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

(ii) The net capital gain for the taxable year, plus

(B) 4 per cent of the excess (if any) of:

(i) The net capital gain for the taxable year, over

(ii) The amount of the net capital gain taken into account under subparagraph (A).

(b) Capital gains exemption. Notwithstanding any other provision to the contrary, the definition of "taxable income" for purposes of the corporation income tax under this section shall not include any income derived from a capital gain arising out of a long-term investment made, operated, or conducted in the State of Hawaii.

For the purposes of this section, "long-term investment" means an investment held by the taxpayer for a period of two or more years that was initially made between July 1, 2001, and June 30, 2003."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2000.

INTRODUCED BY:

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