STAND. COM. REP. NO. 1550

Honolulu, Hawaii

, 2005

RE: S.B. No. 834

S.D. 2

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Finance, to which was referred S.B. No. 834, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO CONFORMITY OF THE HAWAII INCOME TAX LAW TO THE INTERNAL REVENUE CODE,"

begs leave to report as follows:

The purpose of this bill is to conform state income tax law under chapter 235, Hawaii Revised Statutes (HRS), to amendments made to the federal Internal Revenue Code (IRC) for all taxable years beginning after December 31, 2004. Specifically, this bill, among other things:

(1) Provides that the provisions of federal Public Law 109-001 accelerating the income tax deductions for charitable cash contributions made to victims of the Indian Ocean tsunami apply for the calendar years ending December 31, 2004, and December 31, 2005;

(2) Removes from application to chapter 235, HRS, the following provisions of the IRC:

(A) Subchapter A, sections 2(a), 2(b), and 2(c), relating to the definitions of "surviving spouse" and "head of household";

(B) Section 179B, relating to expensing of capital costs incurred in complying with Environmental Protection Agency sulphur regulations;

(C) Section 181, relating to special rules for certain film and television productions; and

(D) Section 199, relating to the U.S. production activities deduction;

(3) Extends for two years the exceptions to the operation of section 179, IRC (relating to the election to expense certain depreciable business assets) which increase:

(A) The maximum deduction to $100,000; and

(B) The qualifying investment amount to $400,000;

and

(4) Applies to chapter 235, HRS, the provisions of sections 6103(i)(3)(C) and 6103(i)(7) of the IRC, authorizing disclosures of tax information to the United States Justice Department or appropriate federal or state law enforcement agencies for purposes of investigating terrorist incidents, threats, or activities.

The Department of Taxation testified in support of this bill. The Tax Foundation of Hawaii offered comments.

Your Committee has amended this bill by:

(1) Clarifying transactions relating to section 114 of the IRC as specified in the transitional rule for 2005 and 2006 as specified in the American Jobs Creation Act of 2004 section 101(d) and transactions that have occurred pursuant to a binding contract as specified in the American Jobs Creation Act of 2004 section 101(f) are inoperative;

(2) Adding subchapter R, which relates to the election to determine corporate tax on certain international shipping activities using per ton rate, to the provisions of the IRC which are not operative for the state tax code;

(3) Making inoperative the provision in section 168(k) relating to special allowance for certain property acquired after September 10, 2001, and before January 1, 2005, including the extension of the qualifying aircraft placed in service before January 1, 2006; and

(4) Making technical, nonsubstantive amendments for clarity and style.

As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 834, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 834, S.D. 2, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

 

____________________________

DWIGHT TAKAMINE, Chair