DAVID Y. IGE

ISAAC W. CHOY

GOVERNORDIRECTOR OF TAXATIONJOSH GREEN, M.D.
LT. GOVERNORSTATE OF HAWAII

DEPARTMENT OF TAXATIONP.O. BOX 259
HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1530
FAX NO: (808) 587-1584

September 18, 2020

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2020-04
RE:Tax Law Changes from the 2020 Regular Legislative Session

This Announcement summarizes the two measures passed during the Regular Legislative
Session of 2020 that amend or affect the State tax laws.
Act 13: Income and Estate Tax Conformity
Act 13 (Senate Bill 2920, S.D. 1, H.D. 1) is effective August 12, 2020 and applies totaxable years beginning and to decedents dying after December 31, 2019. Retroactive
amendments to operative Internal Revenue Code (IRC) sections are adopted for Hawaii income
tax and estate and generation-skipping transfer tax (estate) tax laws.
Act 13 updates section 235-2.3(a), Hawaii Revised Statutes (HRS), to conform to theoperative sections of subtitle A, chapter 1, of the IRC, as amended as of March 27, 2020. March27, 2020 was chosen to conform to the changes made by the “Coronavirus Aid, Relief, andEconomic Security Act” (CARES Act), P.L. 116-36, enacted March 27, 2020. Act 13 also
updates section 236E-3, HRS, to conform Hawaii's estate tax to subtitle B of the IRC as amended
as of December 31, 2019.
Act 13 also amended section 235-2.3(a), HRS, to adopt several important provisions thatwere not direct amendments to IRC code sections, including:••••Section 1106(i) of the CARES Act, which excludes forgiveness of Paycheck Protection
Program loans from gross income;Section 2202(b) of the CARES Act, which increases the amount of non-taxable loans thatcan be made from retirement plans;
Section 2205 of the CARES Act, which increases certain charitable contribution limits;andThe exclusion of the $1,200 federal stimulus payments from gross income for Hawaii
income tax purposes.
Act 13 also amended conformity to several IRC sections, including:•Section 172, which was amended by the CARES Act to allow taxpayers to amend their2017, 2018, and 2019 returns to deduct amounts of net operating losses (NOL) that werepreviously disallowed by the “Tax Cuts and Jobs Act of 2017,” (TCJA) P.L. 115-97,enacted December 22, 2017. Act 13 provides that the TCJA restrictions on NOLs arestill operative for Hawaii income tax purposes. For more detail on Hawaii’s NOL rules,

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September 18, 2020
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see section 235-7(d), HRS.
Section 461, which was amended to allow deductions for excess business losses, whichwere disallowed by the TCJA. The excess business loss is defined as any deduction inexcess of the business’s aggregate gross income plus $250,000. Act 13 provides that theexcess business loss is still not deductible for Hawaii income tax purposes.
Section 512(a)(7) provided that the unrelated business taxable income of a charitableorganization must be increased by the amount of certain fringe benefit expenses forwhich a deduction is disallowed. Section 512(a)(7) was added by the TCJA, but was later
repealed by the “Further Consolidated Appropriations Act, 2020,” P.L. 116-94, enacted
December 20, 2019. This repeal does not affect Hawaii income tax because Hawaii did
not conform to section 512(a)(7) previously.

Act 61: Renewable Energy Credit for Commercial Projects
Act 61 (Senate Bill 2820, S.D.2, H.D.2) is effective December 31, 2019. Act 61
disallows the Renewable Energy Technologies Income Tax Credit for commercial projects of 5
megawatts of total output capacity or greater. The Act also provides multiple exceptions,
including for systems subject to a power purchase agreement which receives Public Utilities
Commission (PUC) approval or was pending approval before December 31, 2019, and forcertain systems integrated with a pumped hydroelectric energy storage system where therequisite approval filings are submitted to the PUC by December 31, 2021. Act 61 also contains
a nonsubstantive amendment which specifies that the Department may determine the distribution
and share of the credit by administrative rule for pass-through entities.
For more. Information, please contact the Rules Office at (808) 587-1530 or by email at
Tax.Rules.Office@hawaii.gov.

ISAAC W. CHOY
Director of Taxation