HOUSE OF REPRESENTATIVES

H.B. NO.

306

TWENTY-SIXTH LEGISLATURE, 2011

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


PART I

     SECTION 1.  Section 236D-2, Hawaii Revised Statutes, is amended as follows:

     1.  By amending the definitions of "federal credit" and "Internal Revenue Code" to read:

     ""Federal credit" means:

     (1)  [For a transfer, the maximum amount of the credit for state death taxes allowed by section 2011 of the Internal Revenue Code, as it existed on December 31, 2000, for the decedent's adjusted taxable estate;

     (2)] For a generation-skipping transfer, the maximum amount of the credit for state taxes allowed by section 2604 of the Internal Revenue Code as it existed on December 31, 2000; and

    [(3)] (2)  For a noncitizen transfer, the maximum amount of the credit for state death taxes allowed by section 2102 of the Internal Revenue Code, as it existed on December 31, 2000, for the decedent's adjusted taxable estate.

     "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended and renumbered, as of December 31, 2009; provided that sections [2011,] 2102[,] and 2604 of the Internal Revenue Code shall mean those sections as of December 31, 2000; and provided further that section 2058 shall not be operative for purposes of this chapter.  "Internal Revenue Code" includes the federal tax principles of alter ego, nominee, sham transaction, substance over form, economic substance, or business purpose, as those principles are developed by statute or common law.  The Internal Revenue Code, for purposes of this chapter, shall be applied using changes in nomenclature and other language, including the omission of inapplicable language or the insertion of interpretive language, where necessary to effectuate the intent of this chapter."

     2. By repealing the definition of "section 2011":

     [""Section 2011" means section 2011 of the Internal Revenue Code as it existed on December 31, 2000."]

     SECTION 2.  Section 236D-3, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§236D-3[]]  Residents; tax imposed; credit for tax paid other state.  (a)  A tax in [an amount equal to the federal credit] accordance with the following table is imposed on the transfer of the taxable estate of every resident[.]:

If the taxable estate is:         The tax shall be:

Not over $3,560,000               Zero

Over $3,560,000 but not over

     $3,600,000                   9.6% of the amount by which the taxable estate exceeds $3,560,000

Over $3,600,000 but not over

     $4,100,000                   $3,840 plus 10.4% of the amount by which the taxable estate exceeds $3,600,000

Over $4,100,000 but not over

     $5,100,000                   $55,840 plus 11.2% of the amount by which the taxable estate exceeds $4,100,000

Over $5,100,000 but not over

     $6,100,000                  $167,840 plus 12% of the amount by which the taxable estate exceeds $5,100,000

Over $6,100,000 but not over

     $7,100,000                   $287,840 plus 12.8% of the amount by which the taxable estate exceeds $6,100,000

Over $7,100,000 but not over

     $8,100,000                   $415,840 plus 13.6% of the amount by which the taxable estate exceeds $7,100,000

Over $8,100,000 but not over

     $9,100,000                   $551,840 plus 14.4% of the amount by which the taxable estate exceeds $8,100,000

Over $9,100,000 but not over

     $10,100,000                  $695,840 plus 15.2% of the amount by which the taxable estate exceeds $9,100,000

Over $10,100,000                  $847,840 plus 16% of the amount by which the taxable estate exceeds $10,100,000

     (b)  If any property of a resident is subject to a death tax imposed by another state [for which a credit is allowed by section 2011]; and, if the tax imposed by the other state is not qualified by a reciprocal provision allowing the property to be taxed in the state of decedent's domicile, the amount of the tax due under this section shall be credited with the lesser of:

     (1)  The amount of the death tax paid the other state and credited against the federal estate tax; or

     (2)  An amount computed by multiplying the [federal credit] tax imposed under subsection (a) by a fraction, the numerator of which is the value of the property subject to the death tax imposed by the other state, and the denominator of which is the value of the decedent's gross estate."

     SECTION 3.  Section 236D-4, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The tax shall be computed by multiplying the [federal credit] tax imposed on the transfer of the decedent's taxable estate under section 236D-3(a) by a fraction, the numerator of which is the value of the property located in Hawaii, and the denominator of which is the value of the decedent's gross estate."

     SECTION 4.  Section 236D-2.5, Hawaii Revised Statutes, is repealed.

     ["[§236D-2.5]  Taxation under chapter 236D; applicable exclusion amount.  Notwithstanding any other law to the contrary, a decedent shall be entitled to all applicable exclusion or exemption amounts as determined under the Internal Revenue Code as of December 31, 2009, before being subject to any taxes imposed under this chapter, including up to a $3,500,000 applicable exclusion amount allowed by section 2010 of the Internal Revenue Code on December 31, 2009, as further adjusted by law."]

PART II

     SECTION 5.  Section 235-2.3, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The following Internal Revenue Code subchapters, parts of subchapters, sections, subsections, and parts of subsections shall not be operative for the purposes of this chapter, unless otherwise provided:

     (1)  Subchapter A (sections 1 to 59A) (with respect to determination of tax liability), except section 1(h)(2) (relating to net capital gain reduced by the amount taken into account as investment income), except sections 2(a), 2(b), and 2(c) (with respect to the definition of "surviving spouse" and "head of household"), except section 41 (with respect to the credit for increasing research activities), except section 42 (with respect to low-income housing credit), except sections 47 and 48, as amended, as of December 31, 1984 (with respect to certain depreciable tangible personal property), and except section 48(d)(3), as amended, as of February 17, 2009 (with respect to the treatment of United States Department of Treasury grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009).  For treatment, see sections 235-110.91, 235-110.7, and 235-110.8;

     (2)  Section 78 (with respect to dividends received from certain foreign corporations by domestic corporations choosing foreign tax credit);

     (3)  Section 86 (with respect to social security and tier 1 railroad retirement benefits);

     (4)  Section 103 (with respect to interest on state and local bonds).  For treatment, see section 235-7(b);

     (5)  Section 114 (with respect to extraterritorial income).  For treatment, any transaction as specified in the transitional rule for 2005 and 2006 as specified in the American Jobs Creation Act of 2004 section 101(d) and any transaction that has occurred pursuant to a binding contract as specified in the American Jobs Creation Act of 2004 section 101(f) are inoperative;

     (6)  Section 120 (with respect to amounts received under qualified group legal services plans).  For treatment, see section 235-7(a)(9) to (11);

     (7)  Section 122 (with respect to certain reduced uniformed services retirement pay).  For treatment, see section 235-7(a)(3);

     (8)  Section 135 (with respect to income from United States savings bonds used to pay higher education tuition and fees).  For treatment, see section 235-7(a)(1);

     (9)  Section 139C (with respect to COBRA premium assistance);

    (10)  Subchapter B (sections 141 to 150) (with respect to tax exemption requirements for state and local bonds);

    (11)  Section 151 (with respect to allowance of deductions for personal exemptions).  For treatment, see section 235-54;

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

    (13)  Section 181 (with respect to special rules for certain film and television productions);

    (14)  Section 196 (with respect to deduction for certain unused investment credits);

    (15)  Section 199 (with respect to the U.S. production activities deduction);

    (16)  Section 222 (with respect to qualified tuition and related expenses);

    (17)  Sections 241 to 247 (with respect to special deductions for corporations).  For treatment, see section 235-7(c);

    (18)  Section 280C (with respect to certain expenses for which credits are allowable).  For treatment, see section 235-110.91;

    (19)  Section 291 (with respect to special rules relating to corporate preference items);

    (20)  Section 367 (with respect to foreign corporations);

    (21)  Section 501(c)(12), (15), (16) (with respect to exempt organizations);

    (22)  Section 515 (with respect to taxes of foreign countries and possessions of the United States);

    (23)  Subchapter G (sections 531 to 565) (with respect to corporations used to avoid income tax on shareholders);

    (24)  Subchapter H (sections 581 to 597) (with respect to banking institutions), except section 584 (with respect to common trust funds).  For treatment, see chapter 241;

    (25)  Section 642(a) and (b) (with respect to special rules for credits and deductions applicable to trusts).  For treatment, see [sections] section 235-54(b) [and 235-55];

    (26)  Section 646 (with respect to tax treatment of electing Alaska Native settlement trusts);

    (27)  Section 668 (with respect to interest charge on accumulation distributions from foreign trusts);

    (28)  Subchapter L (sections 801 to 848) (with respect to insurance companies).  For treatment, see sections 431:7-202 and 431:7-204;

    (29)  Section 853 (with respect to foreign tax credit allowed to shareholders)[.  For treatment, see section 235-55];

    (30)  Section 853A (with respect to credits from tax credit bonds allowed to shareholders);

    (31)  Subchapter N (sections 861 to 999) (with respect to tax based on income from sources within or without the United States), except sections 985 to 989 (with respect to foreign currency transactions).  For treatment, see sections 235-4, 235-5, and 235-7(b)[, and 235-55];

    (32)  Section 1042(g) (with respect to sales of stock in agricultural refiners and processors to eligible farm cooperatives);

    (33)  Section 1055 (with respect to redeemable ground rents);

    (34)  Section 1057 (with respect to election to treat transfer to foreign trust, etc., as taxable exchange);

    (35)  Sections 1291 to 1298 (with respect to treatment of passive foreign investment companies);

    (36)  Subchapter Q (sections 1311 to 1351) (with respect to readjustment of tax between years and special limitations);

    (37)  Subchapter R (sections 1352 to 1359) (with respect to election to determine corporate tax on certain international shipping activities using per ton rate);

    (38)  Subchapter U (sections 1391 to 1397F) (with respect to designation and treatment of empowerment zones, enterprise communities, and rural development investment areas).  For treatment, see chapter 209E;

    (39)  Subchapter W (sections 1400 to 1400C) (with respect to District of Columbia enterprise zone);

    (40)  Section 1400O (with respect to education tax benefits);

    (41)  Section 1400P (with respect to housing tax benefits);

    (42)  Section 1400R (with respect to employment relief);

    (43)  Section 1400T (with respect to special rules for mortgage revenue bonds);

(44)  Section 1400U-1 (with respect to allocation of recovery zone bonds);

(45)  Section 1400U-2 (with respect to recovery zone economic development bonds); and

(46)  Section 1400U-3 (with respect to recovery zone facility bonds)."

     SECTION 6.  Section 235-110, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  This section does not apply in the case of a payment made pursuant to an assessment by the department of taxation under section 235-107 or 235-108(b).  No refund or overpayment credit may be had under this section in any event unless the original payment of the tax was due to the law having been interpreted or applied in respect of the taxpayer concerned differently than in respect of the taxpayers generally.  As to all tax payments for which a refund or credit is not authorized by this section (including without prejudice to the generality of the foregoing cases of unconstitutionality) the remedies provided by appeal or under section 40-35 are exclusive.  However, nothing in this subsection shall be deemed applicable to a credit or refund authorized by sections [235-55,] 235-66, or 235-71, or resulting from the tax as returned being less than the tax as estimated; in any of these cases a credit or refund is authorized even though the tax for the taxable year remains subject to determination by the department and assessment as provided by law."

     SECTION 7.  Section 235-129, Hawaii Revised Statutes, is amended to read as follows:

     "§235-129  Tax credits.  [(a)  For purposes of section 235‑55, each resident shareholder shall be considered to have paid a tax imposed on the shareholder in an amount equal to the shareholder's pro rata share of any net income tax paid by the S corporation to a state that does not measure the income of S corporation shareholders by the income of the S corporation.  For purposes of the preceding sentence, the term "net income tax" means any tax imposed on or measured by a corporation's net income.

     (b)]  Each shareholder of an S corporation shall be allowed a credit against the tax imposed by section 235-51 in an amount equal to the shareholder's pro rata share of the tax credit earned by the S corporation in this State. "

     SECTION 8.  Section 235-55, Hawaii Revised Statutes, is repealed.

     ["§235-55  Tax credits for resident taxpayers.  (a)  Whenever an individual or person liable to the taxes imposed upon individuals, who is a resident of the State or who has filed a joint resident return under section 235-93, has become liable for income taxes to a state, or to the District of Columbia, Puerto Rico, or any other territory or possession of the United States, or to a foreign country upon any part of the individual's or person's taxable income for the taxable year, derived or received from sources without the State and taxed under the laws of such other jurisdiction irrespective of the residence or domicile of the recipient, there shall be credited against the tax payable by the individual or person under this chapter the tax so paid by the individual or person to the other jurisdiction upon the individual's or person's producing for the department of taxation satisfactory evidence:

     (1)  Of such tax payment; and

     (2)  That the laws of the other jurisdiction do not allow the individual or person a credit against the taxes imposed by such jurisdiction for the taxes paid or payable under this chapter, or do allow such credit in an amount which has been deducted in computing the amount of credit sought under this section.

     (b)  The application of such credit, however:

     (1)  Shall not be allowed with respect to any taxable income or any tax which under subchapter N of chapter 1 of the Internal Revenue Code of 1954 (which is applicable for federal purposes but not for state purposes) is or may be the subject of an exclusion, exemption, or tax credit; and

     (2)  Shall not operate to reduce the tax payable under this chapter to an amount less than that which would have been payable had the taxpayer been taxable only on the income from property owned, personal services performed, trade or business carried on, and other sources in the State.

     (c)  If any taxes paid to another jurisdiction for which a taxpayer has been allowed a credit under this section are at any time credited or refunded to the taxpayer, such fact shall be reported by the taxpayer to the department within twenty days after the credit or refund.  Failure to make such report shall be deemed failure to make a return and subject to the penalties imposed by law in such cases.  A tax equal to the credit allowed for the taxes so credited or refunded shall be due and payable from the taxpayer upon notice and demand from the department.  If the amount of such tax is not paid within ten days from the date of the notice and demand, the taxpayer shall be subject to the usual penalties and interest for delinquency in payment.

     (d)  Nothing in this section shall be construed to permit a credit against the taxes imposed by this chapter on account of federal income taxes."]

PART III

     SECTION 9.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

EXCISE TAX ON DIRECT BROADCAST SATELLITE SERVICE PROVIDERS

     §   -1  Definitions.  For the purposes of this chapter:

     "Department" means the department of taxation.

     "Direct broadcast satellite service" means the distribution or broadcasting of video programming or services by satellite directly to a subscriber's or paying customer's receiving equipment.

     "Gross revenue":

     (1)  Means revenues derived from supplying of regular subscriber direct broadcast satellite service and includes installation fees, disconnect and reconnect fees, and fees for regular direct broadcast satellite service benefits;

     (2)  But does not include per-program or per-channel charges, leased channel revenues, advertising revenues, and other income not derived from the supplying of regular subscriber direct broadcast satellite service.

     "Provider" means a provider of direct broadcast satellite service.

     §   -2  Imposition of tax.  (a)  There is hereby levied and shall be assessed and collected annually privilege taxes against providers on account of their business and other activities in the State measured by gross revenue derived from the sale of direct broadcast satellite services, multiplied by           per cent.

     (b)  The tax imposed by subsection (a) shall not apply to internet access services, including services purchased, used, or sold to provide direct broadcast satellite services.

     §   -3  Remittance.  The tax imposed by this chapter is due and payable to the department on or before the last day of the first month following the end of each calendar quarter.

     §   -4  Report.  (a)  A provider subject to the tax imposed by this chapter shall file a report with the department on a form prescribed by the department.  The report is due on the date the tax is due under section    -3.

     (b)  The report shall include a statement of the gross revenues received from the provision of direct broadcast satellite services and tax due during the preceding quarterly period and any other information required by the department.

     §   -5  Records.  (a)  A provider subject to the tax imposed by this chapter shall maintain the necessary records and any other information required by the department to determine the amounts of the tax that the provider is required to remit and any credit that the provider is entitled to claim under this chapter.

     (b)  The records shall be open at all times to inspection by the department.

     §   -6  Information shown on subscriber bill.  A provider may show, as a separate line item on each bill for each subscriber, the amount of the total bill resulting from any tax imposed under this chapter.

     §   -7  Rules.  The department may adopt rules under chapter 91 necessary to enforce this chapter.

     §   -8  Allocation of revenue.  The revenue from the tax imposed by this chapter shall be deposited to the credit of the general fund."

PART IV

     SECTION 10.  If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

     SECTION 11.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 12.  This Act shall take effect on July 1, 2030; provided that:

     (1)  Parts I and II shall apply to taxable years beginning after December 31, 2010; provided that part I shall apply retroactively to the estates of decedents who died after April 30, 2010; and

     (2)  Part III shall take effect on January 1, 2030, and shall apply to taxable years beginning after December 31, 2011.



 

 

Report Title:

Estate and Transfer Tax; Tax Credits for Resident Taxpayers; Excise Tax on Direct Broadcast Satellite Service Providers

 

Description:

Amends the method of computing the estate and transfer tax.  Repeals the income tax credit for resident taxpayers for income taxes paid to other jurisdictions.  Imposes an excise tax on direct broadcast satellite service providers.  Effective July 1, 2030.  (HB306 HD1)

 

 

 

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