NEIL ABERCROMBIE

FREDERICK D. PABLO

GOVERNORDIRECTOR OF TAXATIONBRIAN SCHATZRANDOLF L. M. BALDEMORLT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII

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

PHONE NO: (808) 587-1540
FAX NO: (808) 587-1560

July 19, 2011

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2011-20
RE:Act 97, Session Laws of Hawaii 2011, Relating to Taxation

On June 9, 2011, Governor Neil Abercrombie signed into law Senate Bill 570 SD2, HD1,CD1 as Act 97, Session Laws of Hawaii 2011.
Part II of this Act makes the income tax deduction for state taxes paid inoperative forindividual filers or married filing separately filers with federal adjusted gross incomes of$100,000 or more, joint filers or surviving spouse filers with federal adjusted gross incomes of$200,000 or more and head of household filers with federal adjusted gross incomes of $150,000
or more. The Act states: "The deductions under 164(a)(3) and 164(b)(5) shall not be operative
for corporate taxpayers." This means corporate taxpayers will no longer be able to deduct state
income tax paid under Internal Revenue Code (IRC) § 164(a)(3), nor will they be able to deduct
general excise tax paid in lieu of state income tax under IRC § 164(b)(5). However, this bill has
no effect on a corporate taxpayer's ability to deduct income tax or general excise tax as an
ordinary and necessary business expense under IRC § 162, which remains operative andincorporated into Chapter 235.
Part III of this Act caps itemized income tax deductions at the lesser of either the overall
limitation under IRC § 68 or the amounts below:
Type of filer

Federal AGI

Amount of cap

Individual$100,000 or more

$25,000

Head of Household$150,000 or more

$37,500

Joint or Surviving Spouse$200,000 or more

$50,000

Married filing separately$100,000 or more

$25,000

For purposes of Hawaii income tax, section 68 limitations on the amount of itemized
deductions apply to taxpayers whose Hawaii adjusted gross incomes exceed an applicableamount ($83,400 for individual or married filing separately filers and $166,800 for all otherfilers). For taxpayers whose adjusted gross incomes exceed the applicable amount, the amount of
their itemized deductions allowed is reduced by the lesser of: (1) 3 percent of the excess ofadjusted gross income over the applicable amount or (2) 80 percent of the amount of the itemized
deductions otherwise allowed.

Department of Taxation Announcement No. 2011-20
July 19, 2011
Page 2
Part IV of this Act delays the standard deduction and personal exemption increases
approved under Act 60, Session Laws of Hawaii, 2009, and makes the increases permanent. The
effect is that for tax years 2011 and 2012, the standard deduction and personal exemptions will
be at their 2009 amounts, and for tax years 2013 and thereafter, the standard deduction andpersonal exemptions will be at the higher amounts found in Act 60. The charts below illustrate
what the deduction and exemption amounts will be for different filers in the coming years.
Standard Deduction
Tax YearAmount for
Individual or
Married Filing
Separately filers

Amount for Headof Household
filersAmount for Jointor Surviving
Spouse filers

2011$2,000$2,920$4,0002012$2,000$2,920$4,0002013 andthereafter$2,200$3,212$4,400

Personal Exemptions
Tax YearAmount perexemption

2011$1,0402012$1,0402013 andthereafter$1,144Parts II and III of Act 97 take effect July 1, 2011. Part IV takes effect retroactively backto December 30, 2010.
For more information on this Act, please contact the Rules Office at 808-587-1577 or
e-mail Tax.Technical.Section@hawaii.gov.

FREDERICK D. PABLO
Director of Taxation