LINDA LINGLEKURT KAWAFUCHIGOVERNORDIRECTOR OF TAXATIONJAMES R. AIONA, JR.

STANLEY SHIRAKILT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII

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

PHONE NO: (808) 587-1510
FAX NO: (808) 587-1560

July 14, 2009
DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2009-10
RE:Act 133, Session Laws of Hawaii 2009, Relating to Conformity of the Hawaii Income Tax
Law to the Internal Revenue Code.

On June 18, 2009, Governor Linda Lingle signed into law Senate Bill 971, S.D. 2, H.D. 1,C.D. 1, as Act 133.
Act 133 provides for conforming amendments to Chapter 235, Hawaii Revised Statutes(HRS), based upon amendments made to the Internal Revenue Code for the calendar year 2008.
Section 235-2.5(c), HRS, mandates that the Department submit to each regular session ofthe Legislature a bill that amends Hawaii income tax law to conform to the changes in theInternal Revenue Code (IRC) for the previous calendar year.
Section 2 of Act 133 amends section 235-2.3(a), HRS, to conform the Hawaii Income Tax
Law to the operative IRC sections of Subtitle A, Chapter 1, amended as of December 31, 2008.
Generally, Subtitle A, Chapter 1, refers to sections 1 through 1400T, IRC.
A summary of the federal laws that were enacted in 2008 and their impact on Hawaii
income tax law follows:1.

Economic Stimulus Act (P. L. No. 110-85, February 13, 2008):
This Act amends operative provisions related to the depreciation of cellulosic
biomass ethanol plant property and New York Liberty Zone property.
The remaining deduction provisions of this Act relating to depreciable property are
not operative for Hawaii income tax purposes, such as: the extended bonus
depreciation provisions for tangible personal property, software and certain
leasehold improvements acquired and placed in service in 2008; the $8,000
increase to the first-year depreciation limit for passenger automobiles acquired andplaced in service in 2008; and the increased section 179 deduction of $250,000
and the higher phaseout limit of $800,000 for taxable years beginning in 2008.

Department of Taxation Announcement No. 2009-10
July 14, 2009
Page 2 of 5

2.

Heroes Earnings Assistance and Relief Tax Act of 2008 (P. L. No. 110-245, June18, 2008):
The operative provisions of this Act: relaxes the ownership and use exceptions forintelligence community employees and members of the Peace Corps with respect
to the exclusion of gain from the sale of a principal residence; allows unused
health flexible spending account balances to be distributed to reservists called toactive duty; clarifies that state bonus payments to service members constitutequalified military benefits that are excluded from gross income; includes
differential wage payments received by uniformed service members incompensation for purposes of the IRA contribution limit and for retirement planpurposes; requires qualified retirement plans to provide survivor payments forveterans; and allows military death gratuities and proceeds from Servicemembers'Group Life Insurance to be contributed to Roth IRAs or rolled over to Coverdell
education savings accounts, regardless of contribution limits.

3.

Heartland, Habitat, and Horticulture Act of 2008 (P. L. 110-246, June 18, 2008):
This Act provides relief to individuals affected by disasters in the Kansas area byrelaxing certain retirement plan rules related to distributions, recontribution ofwithdrawals, loans, and plan amendments; extending the replacement period for
involuntarily converted property; allowing taxpayers to expense certain costs
incurred in the Kansas disaster area; and extending the net operating loss
carryback period to five years for losses incurred in the Kansas disaster area. The
Act also amends other operative provisions by: extending increased limits on
qualified conservation contributions, allowing farmers to deduct endangered
species recovery expenditures, and relaxing rules relating to investments by a realestate investment trust in timber.

4.

Housing Assistance Tax Act of 2008 (P. L. 110-289, July 30, 2008):
This Act amends operative provisions as follows: provides a minimum 9%
applicable percentage for purposes of computing the low income housing tax
credit; increases states' allocation authority for low income housing tax credits
from $2/resident to $2.20/resident; amends other provisions relating toqualification and administration of low income housing projects; taxes gain
allocated to periods of nonqualified use with respect to a sale of a principal
residence; and relaxes rules regarding investment in foreign investments andhealth care facilities for real estate investment trusts.
This Act also provided an additional standard deduction for real property taxes for
non-itemizers that is not operative for Hawaii income tax purposes.

Department of Taxation Announcement No. 2009-10
July 14, 2009
Page 3 of 55.

Hubbard Act (P. L. 110-317, August 29, 2008):
This Act repeals the dollar limitation on contributions to qualified funeral trusts.

6.

Emergency Economic Stabilization Act of 2008 (P. L. 110-343, October 3, 2008):
This Act extends the exclusion for debt discharge income from home mortgages
for three years so that it applies to qualified indebtedness discharged before
January 1, 2013. It also caps executive compensation and applies golden
parachute rules to certain employers that participate in the Troubled Asset Relief
Program.
The provision of this Act that allows certain financial institutions to treat the gainor loss from the sale or exchange of certain preferred stock in either the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation
as ordinary gain or loss is not operative for Hawaii income tax purposes.

7.

Energy Improvement and Extension Act of 2008 (P. L. 110-343, October 3,2008):
The operative provisions of this Act provide as follows: establishes qualified
transportation fringe benefits for bicycle commuters; designates "Smart" electric
meters and distribution grid systems as 10-year modified accelerated cost recovery
system property; includes property used to produce any cellulosic biofuel as
property eligible for bonus depreciation; extends election to expense certain
refineries; extends deduction for energy efficient commercial building property;
modifies provisions relating to qualifying electric transmission transactions;applies valuation conventions for determining the basis of securities sold on an
account-by-account basis; and requires a basis reduction for any §30D credit
claimed on new qualified plug-in electric drive motor vehicles.
The 50% bonus depreciation provision of this Act for qualified reuse and recycling
property is not operative for Hawaii income tax purposes.

8.

Tax Extenders and AMT Relief Act of 2008 (P. L. 110-343, October 3, 2008):
This Act amends operative provisions as follows: allows income averaging foramounts received from the Exxon Valdez litigation and allows retirement plan
contributions to be made from such amounts; increases the alternative simplified
research credit and makes other changes to research credit provisions; extends theup-to-$250-above-the-line deduction for teachers' out-of-pocket expenses through2009; provides disaster relief for Midwest disaster areas (e.g., deductions forcapitalizable expenditures, longer replacement period for involuntarily converted
property, relaxed retirement plan provisions, etc.); extends the election to claim an
itemized deduction for state and local general sales taxes through 2009; provides
shorter recovery periods for certain types of property (i.e., qualified leasehold,Department of Taxation Announcement No. 2009-10
July 14, 2009
Page 4 of 5

restaurant, and retail improvement property); increases charitable contribution
limits/deduction for contributions of wholesome food inventory; extends theincreased deduction for contributions of book inventory to schools and computers
through 2009; extends the election to expense certain capital items through 2009;
extends the rule allowing tax-free treatment of IRA distributions donated tocharity through 2009; tightens the rules regarding taxation of nonqualified
deferred compensation received from certain tax-indifferent corporation andpartnerships; extends the rule including specified payments in unrelated businesstaxable income through 2009; and extends the rule that S corporation's charitable
contribution of property reduces shareholder's basis only by contributed property'sbasis through 2009.
This Act also provided the following provisions, all of which are not operative for
Hawaii income tax purposes: an additional standard deduction for net losses fromfederal declared disasters; an extension of the additional standard deduction forreal property taxes paid in 2009; an increase in the per casualty floor from $100 to$500 and a waiver of the 10%-of-adjusted gross income threshold on personalcasualty losses related to federally declared disasters in 2008 and 2009; 50%
bonus depreciation for qualified disaster assistance property acquired inconnection with federally declared disasters occurring before 2010; a 5-year carryback period for qualified disaster losses incurred in connection with federallydeclared disasters occurring before 2010; higher section 179 deduction limits for
qualified disaster assistance property; an extension of the qualified film and TV
production expense election to include 2009; an extension of the above-the-line
deduction for higher education expenses through 2009; and an election to expense
qualified disaster expenses.
9.

Fostering Connections to Success and Increasing Adoptions Act of 2008 (P. L.
110-351, October 7, 2008):
The only operative provision of this Act amends the definition of "qualifyingchild" for purposes of the dependency exemption.

10.

Worker, Retiree, and Employer Recovery Act of 2008 (P. L. 110-458, December23, 2008):
The operative provisions of this Act include the following: relief for employersponsors of pension plans by relaxing funding provisions; taxpayer relief by
waiving the required minimum distribution requirement for 2009, by requiring
plans to offer nonspouse beneficiary rollovers starting in 2010, and by allowing
distributions from designated Roth accounts to be rolled over to a Roth IRA.

Department of Taxation Announcement No. 2009-10
July 14, 2009
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Effective Date
The federal effective dates for amendments to operative IRC sections are adopted for
purposes of Hawaii income tax law. Each of the respective federal effective dates will be therespective effective dates for purposes of Chapter 235, HRS. These effective dates can be foundby referencing the specific federal Act.
For more information on Act 133, please contact the Rules Office at 808-587-1577.

KURT KAWAFUCHI
Director of Taxation