Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 6 - RETURNS AND PAYMENTS; ADMINISTRATION › Section 18-235-95 - Partnership returns

Current through June, 2024
(a) Filing returns.
(1) In general. Except as provided in
				subsection (b) with respect to certain organizations excluded from the
				application of chapter 1 (subchapter K) of the Internal Revenue Code of 1986,
				as amended, and certain partnerships having no business in the State, an
				unincorporated organization defined as a partnership in section 761, IRC,
				(partnership defined), through or by means of which any business, financial
				operation, or venture is carried on, shall file a return for each taxable year
				as prescribed by the department. Every partnership engaging in trade or
				business, or having income from sources within the State, shall file a
				partnership return pursuant to section
				235-95, HRS,
				and this section, regardless of the partnership's principal place of business
				or the residency status of the partners. A partnership return shall be filed in
				the first year the partners formally agree to engage in joint operation, or in
				the absence of a formal agreement, the first taxable year in which the
				organization receives income or makes or incurs any expenditures treated as
				deductions for Hawaii income tax purposes. The partnership return shall include
				and state specifically: gross income of the partnership; allowable deductions;
				the names and addresses of all partners; and the amount of the distributive
				shares of income, gain, loss, deduction, or credit allocated to each
				partner.
(2) Exception. Special
				election; in general. An unincorporated organization may elect to be excluded
				from the application of subchapter K if the organization is used for:
(A) Investment purposes only and does not
				actively conduct business activity;
(B) The joint production or use of property
				(including natural resources), but not for the sale of services or property
				which is produced; or
(C)
				Underwriting, selling, or distributing a particular issue of securities by
				securities dealers for a short period of time.
Any unicorporated organization excluded from the application
				  of part of subchapter K shall file a Form N-20 and provide such information as
				  the director of taxation or designee may require.
(3) Making the election. If an unincorporated
				organization qualifies and elects to be excluded from the application of
				subchapter K, the following information must be attached to, or incorporated
				in, a properly executed partnership return in lieu of the usual tax
				information, in the first taxable year in which exclusion is desired:
(A) The name or other identification and the
				address of the organization, together with information on the return;
(B) The names, addresses, and identification
				numbers of all the members of the organization;
(C) A statement describing the activities of
				the organization that qualify it for exclusion from section 761, IRC;
(D) A statement that all members of the
				organization elect to be excluded from subchapter K; and
(E) A statement indicating where a copy of
				the agreement under which the organization operates is available, or if the
				agreement is oral, from whom the provisions of the agreement may be obtained.
Thereafter, if the election remains in effect, annual
				  partnership tax returns need not be filed.
(4) Failure to make election. If an
				unincorporated organization does not make the election as prescribed by this
				section, the organization shall nevertheless be deemed to have made the
				election if it can be shown from all the facts and circumstances that at the
				time of its formation, the members of the organization intended to secure
				exclusion from all of subchapter K, beginning with the first taxable year of
				the organization. Either of the following facts, although not conclusive, may
				indicate the requisite intent:
(A) At the
				time of the formation of the organization, the members agree that the
				organization shall be excluded from subchapter K beginning with the first
				taxable year of the organization; or
(B) The members of the organization owning
				substantially all of the capital interests report their respective shares of
				income, deductions, and credits from the organization on their respective
				income tax returns, making such elections as to individual items as may be
				appropriate, in a manner consistent with the exclusion of the organization from
				subchapter K beginning with the first taxable year of the
				organization.
(5) Effect
				of election. An election to be excluded from subchapter K shall be effective,
				unless within ninety days after the formation of the organization, any member
				of the organization notifies the director of taxation that the member desires
				subchapter K to apply to the organization, and also advises the director that
				all other members of the organization have been notified of the change by
				registered or certified mail. As long as the organization remains qualified
				under section 761(a), IRC, the election is irrevocable. Application for
				permission to invoke the election must be submitted to the director.
(6) When to file. Partnership returns,
				including returns filed by unincorporated organizations electing to be excluded
				from subchapter K, shall be filed on or before the twentieth day of the fourth
				month following the close of the taxable year of the partnership. The return
				shall be made on the form as prescribed by the department, and shall be for the
				taxable year of the partnership or unincorporated organization, irrespective of
				the partners' taxable years.
(7)
				Where to file. Partnership returns shall be filed with the director of taxation
				or designee in the district in which the principal place of business is
				located, or if the organization has no principal place of business in the
				State, then the return shall be filed with the director in Honolulu.
(8) Accounting period. Where an organization,
				as described in federal Treasury Regulation section 1.761-2(a), has not adopted
				an accounting period, the organization's taxable year shall be the calendar
				year as set forth in section 441(g), IRC.