JOSH GREEN, M.D.

GARY S. SUGANUMAGOVERNORDIRECTOR OF TAXATIONSYLVIA LUKEKRISTEN M.R. SAKAMOTO

LT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAI’IDEPARTMENT OF TAXATION
Ka 'Oihana 'Auhau
P.O. BOX 259
HONOLULU, HAWAI’I 96809

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

August 21, 2023

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2023-04
RE:Tax Law Changes from the 2023 Regular Legislative Session

This Announcement summarizes the measures passed during the Regular Legislative
Session of 2023 that amend or affect State tax laws.
Act 48: Extension for Adoption of County Surcharge
Act 48 (House Bill 1363, H.D. 3, S.D. 2, C.D. 1) extends the period in which Maui
County may adopt a surcharge on state tax from March 31, 2019 to December 31, 2023. Anysurcharge adopted after December 31, 2022 shall be used only for housing infrastructure. Act 48
also authorizes counties with a population equal to or less than 500,000 that have adopted asurcharge prior to March 31, 2019 (i.e., Kauaʻi and Hawaiʻi counties) to amend their ordinances
to change the authorized uses of surcharge revenues to include housing infrastructure. Act 48
became effective on June 1, 2023.
Act 50: Establishment of Passthrough Entity Tax and Tax Credit
Act 50 (Senate Bill 1437, S.D. 1, H.D. 2, C.D. 1) amends chapter 235, Hawaii Revised
Statutes (HRS), to allow partnerships and S corporations to annually elect to pay Hawaiʻi incometaxes at the entity level. An electing pass-through entity (PTE) will be liable for Hawaiʻiincome tax on the sum of all eligible members' distributive shares and guaranteed payments ofHawaiʻi taxable income, multiplied by the highest rate of tax applicable to the individual under
section 235-51, HRS.
Eligible members of an electing PTE may claim a nonrefundable income tax credit for
their pro rata share of PTE taxes paid by the entity. Additionally, residents and part-year
residents are entitled to a nonrefundable credit for their share of taxes paid to another state or to
the District of Columbia on income of any partnership or S corporation, so long as the taxes paid
to the other state are found to be substantially similar to the taxes imposed by Act 50.
Act 50 is effective on January 1, 2024 and applies to taxable years beginning after
December 31, 2022.

Act 56: Income and Estate Tax Conformity
Act 56 (House Bill 1100, H.D. 1, S.D. 2) updates section 235-2.3(a), HRS, to conform toDepartment of Taxation Announcement No. 2023-04
August 21, 2023
Page 2 of 3

the operative sections of subtitle A, chapter 1, of the Internal Revenue Code of 1986 (IRC), asamended as of December 31, 2022. Act 56 also updates section 236E-3, HRS, to conform tooperative sections of subtitle B of the IRC, as amended as of December 31, 2022.
Additionally, Act 56 amends section 235-2.3(b)(40), HRS, to conform to IRC section
1341, which provides relief for taxpayers when an item of income reported in an earlier tax year
at a higher tax rate is returned in a subsequent year at a lower tax rate if it is determined that thetaxpayer did not have an unrestricted right to the item of income when reported.
Act 56 became effective on June 5, 2023 and applies to taxable years beginning after
December 31, 2022 and to decedents dying or taxable transfers occurring after December 31,2022, except for the amendments to section 235-2.3(b)(40), HRS, which apply to taxable years
beginning after December 31, 2021.
Act 62: Amendments to Cigarette and Tobacco Tax
Act 62 (Senate Bill 975, S.D. 2, H.D. 3, C.D. 1) amends the Cigarette Tax and Tobacco
Tax in chapter 245, HRS, as follows:
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••
•
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Establishes the offense of unlawful shipment of tobacco products;
Adds definitions for "electronic smoking device" and "e-liquid" and amends thedefinition of "tobacco products" to include "electronic smoking device" and "eliquid";
Increases the wholesaler and dealer license fee from $2.50 to $250;
Increases the retail tobacco permit fee from $20 to $50;
Requires retail tobacco permit applicants to specify whether each place of businesssells electronic smoking devices, e-liquid, or both; andBeginning January 1, 2024, imposes a tax of 70% of the wholesale price of eachelectronic smoking device or e-liquid sold, used, or possessed by a wholesaler ordealer, whether or not sold at wholesale, or if not sold, then at the same rate upon theuse by the wholesaler or dealer.

Act 62 became effective on July 1, 2023.
Act 109: Repeal of the Nursing Facility Tax
Act 109 (House Bill 1369, H.D. 1, S.D. 1) repeals chapter 346E, HRS, relating to thenursing facility tax, and section 237-24.7, HRS, which provides a general excise tax exemption
on taxes on nursing facility income imposed by chapter 346E, HRS, and passed on and collectedby operators of nursing facilities. Act 109 became effective on June 22, 2023.
Act 163: Tax Credits to Assist Working Families
Act 163 (House Bill 954, H.D. 2, S.D. 2, C.D. 1) amends the household and dependent
care services credit in section 235-55.6, HRS, by increasing the cap on employment-related
expenses that may be used to claim the credit from $2,400 to $10,000 for one qualifying
individual and from $4,800 to $20,000 for two or more qualifying individuals.

Department of Taxation Announcement No. 2023-04
August 21, 2023
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Act 163 also amends the refundable earned income tax credit in section 235-55.75, HRS,by increasing the amount of the credit from 20% to 40% of the federal earned income tax credit
allowed and properly claimed under IRC section 32.
Additionally, Act 163 amends the refundable food/excise tax credit in section 235-55.85,HRS, by doubling the amount of credit per qualified exemption and increasing the adjusted grossincome limits by $10,000 in all income brackets.
Act 163 became effective on June 30, 2023, applies to taxable years beginning after
December 31, 2022, and will be repealed on December 31, 2027.

For more information, please contact the Rules Office at (808) 587-1530 or by emailing
Tax.Rules.Office@hawaii.gov.

GARY S. SUGANUMA
Director of Taxation