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) 587-1577
FAX NO: (808) 587-1584

May 23, 2022

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2022-02
RE:Act 7, Session Laws of Hawaii 2022, Relating to Conformity of the Hawaii Income andEstate Tax Law to the Internal Revenue CodeOn April 21, 2022, S.B. 3143 was approved by Governor David Y. Ige and became Act7, Session Laws of Hawaii 2022 (Act 7). Act 7 conforms Hawaii income and estate andgeneration-skipping transfer tax laws to the Internal Revenue Code of 1986 (IRC), as amended
as of December 31, 2021.
Act 7 generally addresses the IRC amendments made by the American Rescue Plan Act
of 2021, P. L. 117-2 (ARPA), which became law on March 11, 2021. IRC amendments made by
the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated
Appropriations Act of 2021 were addressed in Act 13, Session Laws of Hawaii (SLH) 2020, andAct 89, SLH 2021, respectively. The purpose of this Tax Announcement is to highlightsignificant changes brought about by Act 7.
Targeted Economic Injury Disaster Loan (EIDL) Advances
Act 7 adopts ARPA section 9672(1) which allows the exclusion of EIDL advances fromgross income for the purposes of income tax. However, it is important to note that Hawaii has
not adopted ARPA section 9672(2). As such, deductions for expenses paid with EIDL advancefunds are disallowed for Hawaii income tax purposes.
Restaurant Revitalization Fund (RRF) Grants
Act 7 adopts ARPA section 9673(1) which allows the exclusion RRF grants from grossincome for the purposes of income tax. However, it is important to note that Hawaii has not
adopted ARPA section 9673(2). As such, deductions for expenses paid with RRF grant funds
are disallowed for Hawaii income tax purposes.
Recovery Rebate Credit (RRC) Payments
Act 7 excludes the RRC payments provided under ARPA section 9601 from grossincome for Hawaii income tax purposes. The maximum RRC payment was $1,400 per person,with a maximum phaseout income threshold of $75,000, or $150,000 for joint filers. Hawaii also
conformed to the exclusion from income of the first and second RRC payments.

Department of Taxation Announcement No. 2022-02
May 23, 2022
Page 2 of 2Student Loan Forgiveness
ARPA amended IRC section 108(f)(5)(A), to allow the exclusion of qualified student
loans cancelled or discharged in 2021 through 2025 from gross income. This amendment applies
to Hawaii income tax through existing conformity to IRC section 108, except for subsection (i).
Qualified student loans include loans for post-secondary education provided by thegovernment or the educational institution, private education loans, and original and certain
refinanced loans from tax-exempt organizations with a public service requirement. Forgivenessdoes not apply to private education loans or loans from tax-exempt organizations if the discharge
is on account of services provided to the lending organization.
Special Tax Treatment for Coronavirus-related Distributions
Act 7 adopted section 2202(a) of the CARES Act retroactively to taxable years beginning
after December 31, 2019. Prior to Act 7 becoming law, Hawaii did not conform to thisprovision.
Section 2202(a) provides expanded distribution options and favorable tax treatment for
up to $100,000 of coronavirus-related distributions from eligible retirement plans to qualifiedindividuals; allows the coronavirus-related distribution to be included in income ratably overthree years; and provides that if the amount distributed is recontributed to an eligible retirement
plan within the three-year period beginning on the day after the date on which the distribution
was received, the distribution may be treated as if it were paid in a direct trustee-to-trustee
transfer to an eligible retirement plan. For more information, please see Internal Revenue Notice2020-50, “Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans
Under the CARES Act.”A qualified individual who included a coronavirus-related distribution in gross income inthe year of the distribution, and desires to report the distribution ratably over three years, willneed to file an amended Hawaii income tax return for 2020 and 2021 (if already filed).
Likewise, a qualified individual who recontributes the distribution to an eligible retirement plan
after reporting the distribution as income will also need to file an amended Hawaii income tax
return for the year of the distribution to report the amount of the recontribution and should
reduce their gross income by the amount of the recontribution, but not in an amount exceeding
the amount of the coronavirus-related distribution.
As section 2202(a) of the CARES Act characterizes such a recontribution as a directtrustee-to-trustee transfer to an eligible retirement plan, such amounts will retain their character,as between employer contribution, pretax employee contribution, and previously taxed
contribution pursuant to Hawaii Administrative Rules section 18-235-7-03(d)(2).
This Tax Announcement only provides the highlights of Act 7 and is not intended to be
an exhaustive or complete analysis of the law. For a more comprehensive analysis of Hawaii’s

Department of Taxation Announcement No. 2022-02
May 23, 2022
Page 3 of 2

conformity to federal tax law changes, please see the 2022 Digest of Tax Measures. If you haveany questions, you may contact the Technical Section by email attax.technical.section@hawaii.gov or by telephone at (808) 587-1577.

ISAAC W. CHOY
Director of Taxation