LINDA LINGLEKURT KAWAFUCHIGOVERNORDIRECTOR OF TAXATIONJAMES R. AIONA, JR.

SANDRA L. YAHIRO

LT. 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

October 17, 2006

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2006-16
RE:Relief for Taxpayers Affected by the October 15, 2006 Hawaii Statewide Earthquake

In light of the recent earthquake that shook the State of Hawaii on October 15, 2006, theDepartment of Taxation (the "Department") recognizes that affected taxpayers may have difficulty
meeting their tax obligations. The Department, therefore, will consider requests for extensions tofile and pay other taxes and waivers of penalties and interest on a case-by-case basis. See Hawaii
Revised Statutes (HRS) §§ 231-3(12) and 235-98 (2005 Supp.). In addition, on October 17, 2006,
the President of the United States of America issued a proclamation of a natural disaster in Hawaii.
Therefore, the Department will also follow federal casualty loss provisions allowed in such event.
I.

MARK RETURNS "2006 EARTHQUAKE RELIEF"

All returns that are filed under the provisions of this Announcement should be clearlymarked "2006 Earthquake Relief" on the top center of the return. Do not place the words "2006
Earthquake Relief" in the "DO NOT WRITE IN THIS SPACE" area in the upper right corner of anyreturn. The Department recognizes that the earthquake impacted the entire State, whether the impact
on taxpayers was temporary loss of power, property loss, or injury. Taxpayers and tax practitioners
who rely on the provisions of this Announcement should also include a brief statement as to how thedisaster adversely affected their ability to meet their tax obligations.
II.

HAWAII EMPLOYER'S WITHHOLDING TAXES

Taxpayers whose Hawaii employer's withholding taxes were due October 16, 2006, and who,
as a result of the earthquake could not meet this due date, may file their returns and pay the tax due
by November 15, 2006, without incurring any penalties or interest. No late filing penalty will be
imposed for returns that are postmarked on or before November 15, 2006. This remission ofpenalties and interest also applies to those who are required under § 235-62, HRS, to file monthly
and remit payments on a semi-weekly schedule (tax payment may be made when the return is filed).
Employers who have employees at several locations in the State, including locations notaffected by the earthquake, must file their returns on time. If complete information from locations

Department of Taxation Announcement No. 2006-16
October 17, 2006
Page 2 of 3
affected by the earthquake is not available by the due date of the return, an amended return should befiled when the information becomes available.
III.

SPECIAL CONSIDERATIONThe Department will consider requests for extensions to file and pay other taxes and waiversof penalties and interest on a case-by-case basis. Each request should include a statement as to how
the 2006 statewide earthquake adversely impacted the taxpayer.
IV.

CASUALTY LOSSESFor purposes of the Hawaii income tax law, taxpayers may claim all of the casualty loss
deductions allowed by § 165 of the Internal Revenue Code of 1986, as amended. Casualty losses onbusiness property are deductible in full. The first $100 of the eligible unreimbursed casualty losses
on nonbusiness property is not deductible. The remaining loss is deductible to the extent it exceeds
10 per cent (10%) of the taxpayer's Hawaii adjusted gross income. The following options areavailable after determination of the amount of losses:
1. The President of the United States of America issued a proclamation of a natural disaster inHawaii. As a result, taxpayers may claim a casualty loss deduction on their 2005 income tax
returns, instead of on their 2006 income tax returns, for losses from the earthquake occurringon October 15, 2006 (an amended return must be filed if this option is chosen); or
2. Taxpayers may elect to deduct the losses on their 2006 income tax returns; or
3. Taxpayers may elect to deduct the losses in five (5) equal installments over a period of five(5) consecutive years, beginning with their 2006 income tax return; or
4. If taxpayers’ casualty losses are more than income, a net operating loss may result. A net
operating loss may be used to lower taxes in an earlier year, allowing receipt of a refund fortaxes already paid. If properly elected, a net operating loss may be used to lower taxes in alater year. Taxpayers do not have to be a business to claim this benefit; all taxpayers mayclaim this carryback or carryover net operating loss.
V.

GENERAL EXCISE TAX EXEMPTION FOR INSURANCE PROCEEDS RECEIVEDBECAUSE OF A NATURAL DISASTER, § 237-24.7(6), HRS

On October 15, 2006, the Governor signed a State Disaster Proclamation pursuant to § 209-2,
HRS that a disaster occurred in the State of Hawaii. Therefore, taxpayers may be eligible for ageneral excise tax exemption if they receive amounts under property and casualty insurance policies
for damage or loss of inventory used in a trade or business. Please refer to the instructions for Forms
G-45 and G-49 for more information.
Tax forms and information are available on the Department's website at www.hawaii.gov/tax.

Department of Taxation Announcement No. 2006-16
October 17, 2006
Page 3 of 3
Tax forms and publications are available through the Department's request line at 808-587-7572, or
toll-free from the neighbor islands and continental United States at 1-800-222-7572. This service isavailable 24 hours a day, 7 days a week. Additional information is available by calling the Taxpayer
Services Branch during business hours at 587-4242, or toll-free at 1-800-222-3229, or by e-mailingTaxpayer.Services@hawaii.gov.

KURT KAWAFUCHI
Director of Taxation