reglab/statecodes huggingface dataset:
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-12 - Solar energy devices; income tax credit

Current through June, 2024
(a) Definitions. As
				used in section
				235-12,
				HRS:
"Cost of the device" means the amount paid by the taxpayer
				  minus the fair market value of merchandise, gift, or other items of value
				  received, if any, as part of the purchase contract. Cost when used in reference
				  to the acquisition of materials or services refer to the invoice price directly
				  related to the solar energy device and does not include indirect cost such as
				  replacing existing water heaters, plumbing, wiring, etc. Also labor, materials
				  and components which will serve a significant structural function in the
				  dwelling (e.g. extra-thick walls, supports, etc.) shall not be eligible for the
				  credit.
(b) Claim for
				credit.
(1) Credit shall be claimed for the
				year the new solar energy device was purchased and placed in use in this State.
				However, where separate taxable years are involved where the device is
				purchased in one year and placed in use in another year, the credit shall be
				allowed in the year placed in use. (After December 31, 1974, but before
				December 31, 1981.)
(2) The claim
				for tax credit, not to exceed ten percent of the total cost of the device,
				shall be against the income tax liability and any remaining credit may be
				carried forward and used in subsequent taxable years until exhausted. The claim
				shall contain the necessary information provided for on the form and shall be
				attached to the income tax return in the year first placed in use and
				subsequent taxable years for carrying forward the remaining credit. The forms
				provided are:
N-157
Individual taxpayer;
N-157-A
Taxpayers who are members of a
							 partnership, estate or trust, or small business corporation; and
N-306
Corporation
(3)
				Taxpayer shall maintain proper supporting documents to substantiate the cost of
				the device for the period the claim remains valid, and upon request shall
				submit such documents to the department of taxation.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-12.2 - Energy conservation devices for hot water heaters; income tax credit

Current through June, 2024
(a) Limitation of credit. Section
				235-12.2, HRS,
				provides a tax credit against the tax imposed by chapter
				235, HRS, to resident individuals and
				corporations who have installed energy conservation devices for hot water
				heaters.
(b) Claim for credit.
(1) Credit shall be claimed for the year the
				insulation material was purchased and installed in this State. Hence, where the
				insulation material is purchased in one year and installed in another, the
				credit shall be allowed in the year of installation. (After 12/31/77 but before
				12/31/84.)
(2) The claim for tax
				credit, not to exceed $30.00 shall be claimed against the income tax liability
				and any remaining credit shall be carried forward and used in subsequent
				taxable years until exhausted. The claim shall contain the necessary
				information provided for on the form and shall be attached to the income tax
				return in the year first installed and subsequent taxable years for which a tax
				credit is claimed. The forms provided are:
N-159
Individual taxpayer;
N-159-A
Taxpayers who are members of a
							 partnership, estate or trust, or small business corporation; and
N-307
Corporation
(3)
				Taxpayer shall maintain proper supporting documents to substantiate the cost of
				the energy conservation device for the period the claim remains valid and upon
				request shall submit such documents to the department of taxation.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-12.5-03 - Other Solar Energy Systems

Current through June, 2024
(a) "Solar energy
				system" means any identifiable facility, equipment, apparatus, or the like that
				converts solar energy to useful thermal or electrical energy for heating,
				cooling, or reducing the use of other types of energy that are dependent upon
				fossil fuel for their generation. Unless subsection (b) applies, each solar
				energy system installed and placed in service on or after January 1, 2013 shall
				have a total output capacity at Standard Test Conditions as follows:
(1) Single-family residential property: For
				credits calculated under section
				235-12.5(a)(1),
				HRS, and capped under section
				235-12.5(b)(2)(A),
				HRS, each system for which a credit is claimed shall have a total output
				capacity of at least 5 kilowatts.
(2) Multi-family residential property: For
				credits calculated under section
				235-12.5(a)(1),
				HRS, and capped under section
				235-12.5(b)(2)(B),
				HRS, each system for which a credit is claimed shall have a total output
				capacity of at least 0.360 kilowatts per unit per system.
(3) Commercial property: For credits
				calculated under section 235- 12.5(a)(1), HRS, and capped under section
				235-12.5(b)(2)(C),
				HRS, each system for which a credit is claimed shall have a total output
				capacity of at least 1,000 kilowatts.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-12.5-06 - Application of sections 18-235-12.5-01 through 18-235-12.5-05

Current through June, 2024
Sections
				  18-235-12.5-01 through
				  18-235-12.5-05 shall apply to
				  renewable energy technology systems that are installed and placed in service on
				  or after January 1, 2013. To the extent that sections
				  18-235-12.5-01 through
				  18-235-12.5-05 conflict with
				  guidance issued by the department prior to January 1, 2013, these sections
				  shall prevail.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-02 - Motion picture, digital media, and film production income tax credit; allowed

Current through June, 2024
(a) Section
				235-17,
				HRS, allows qualified taxpayers to claim a refundable income tax credit equal
				to the following percentages of qualified costs incurred for qualified
				productions being produced in the State:
(1)
				Twenty per cent of qualified production costs incurred in any county in the
				State with a population of over seven hundred thousand (i.e., as of the date
				this rule became effective, the city and county of Honolulu); and
(2) Twenty-five per cent of qualified
				production costs incurred in any county in the State with a population of seven
				hundred thousand or less (i.e., as of the date this rule became effective,
				Kauai, Maui, and Hawaii counties).
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-03 - Claim for credit; procedures; production reports; multiple entities involved

Current through June, 2024
(a) Every taxpayer
				claiming the credit is required to prequalify for the credit under section
				235-17(f),
				HRS, by submitting a preproduction registration to the Hawaii film office. All
				taxpayers must submit a preproduction registration for each qualified
				production to the Hawaii film office no later than seven days before the
				principal photography start date. The preproduction registration shall include:
(1) A proof of registration with every state
				agency requiring registration to do business in the State;
(2) A detailed synopsis of the
				production;
(3) An estimated
				budget; and
(4) An estimated number
				of Hawaii resident and non-resident hires, including above-the-line,
				below-the-line, and extras.
The Hawaii film office will review each request for
				  preproduction registration and issue a letter to each production, notifying the
				  production that it has successfully prequalified under section
				  235-17(f),
				  HRS. This letter shall also state the amount of credits that were tentatively
				  allocated under section 18-235-17-04(c).
Failure to obtain preproduction registration approval and a
				  tentative allocation of credit under section 18-235-17-04(c) from the Hawaii
				  film office shall constitute a waiver of the credit.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-05 - Claim for credit; costs incurred in more than one calendar year

Current through June, 2024
(a) The credit under section
				235-17,
				HRS, is based on the qualified production costs incurred during each calendar
				year. A taxpayer with qualified production costs for one production that incurs
				qualified production costs in more than one calendar year must submit a
				production report as described in section 18-235-17-03(b) to the Hawaii film
				office for each calendar year in which qualified production costs are
				incurred.
(b) If a qualified
				production incurs qualified production costs in two separate calendar years,
				then the credit under section
				235-17,
				HRS, for each taxable year will be based upon the qualified production costs
				incurred in each respective calendar year.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-06 - Claiming the credit; timing; twelve-month rule

Current through June, 2024
Section
				  235-17(c),
				  HRS, requires all claims for the credit, including amended claims, be filed on
				  or before the end of the twelfth month following the close of the taxable year
				  for which the credit may be claimed. Failure to comply with the twelve-month
				  filing requirement constitutes waiver of the right to claim the credit. The
				  department has no authority to suspend or waive this provision.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-08 - Distribution of credit

Current through June, 2024
Section
				  235-17(a),
				  HRS, provides that the cost upon which the tax credit is computed is determined
				  at the entity level for partnerships, S corporations, estates, and trusts.
				  However, the credit cannot be claimed at the entity level for a partnership, S
				  corporation, estate, or trust unless such entity has elected to be taxed as a
				  corporation under relevant federal tax law. Distributions of the credit under
				  section
				  235-17,
				  HRS, shall be made in accordance with Subchapter K, Subchapter J, Subchapter S,
				  or other relevant passthrough entity allocation laws of the Internal Revenue
				  Code of 1986, as amended, to which the State conforms.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-13 - Qualified production costs; premiums paid to insurers subject to tax under chapter 431, HRS

Current through June, 2024
Not all taxpayers conducting business transactions occurring
				  in the State are subject to chapter
				  235, HRS. In recognition of its
				  unique business structure and place within the community, authorized insurers
				  are subject to tax on insurance premium income under chapter
				  431, HRS, in lieu of tax under
				  chapter
				  235, HRS. Insurance premiums paid to
				  insurance companies not registered with the State are presumed not to be
				  subject to tax under chapter 431, HRS, and thus are not qualified production
				  costs under
				  235-17,
				  HRS.
Example 1:
J3T Productions is filming a
				  qualified production in the State and pays insurance premiums to BDDF Insurance
				  Company, which is doing business in the State, for insurance on J3T
				  Productions' activities and property associated with the qualified production.
				  The insurance premiums J3T Productions pays to the insurance company are
				  qualified production costs. J3T Productions must submit BDDF's insurance
				  license number as part of the production report required under section
				  18-235-17-03(b).
Example 2:
J3T Productions is filming a
				  qualified production in the State and pays insurance premiums to DEED Insurance
				  Company, which is not registered to do business in the State, for insurance on
				  J3T Productions' activities. The insurance premiums J3T Productions pays to
				  DEED Insurance Company are presumed not subject to chapter
				  431, HRS, and not qualified
				  production costs.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-14 - Verification review of motion picture, digital media, and film production income tax credit claims

Current through June, 2024
(a) As required by
				section
				235-17(h),
				HRS, and Section 6 of Act 143, Session Laws of Hawaii 2017, a taxpayer claiming
				the tax credit under section
				235-17,
				HRS, must submit to the Hawaii film office a verification review, together with
				a production report as described in section 18-235-17-03(b), no later than
				ninety days following the end of the calendar year in which the qualified
				production costs were incurred.
(b)
				A "verification review" is an agreed-upon procedures report prepared by a
				qualified certified public accountant. The agreed-upon procedures report, must:
(1) Verify that the production has obtained a
				preproduction registration approval letter and tentative allocation of credit
				under section 18-235-17-04(c) from the Hawaii film office;
(2) Evaluate the taxpayer's assertion of the
				amounts proposed as qualified production costs within the meaning of section
				235-17,
				HRS, for the calendar year;
(3)
				Test compliance with the elements set forth in section
				235-17,
				HRS, and any relevant administrative rules or administrative guidance issued by
				the department and Hawaii film office;
(4) Verify that the production report to be
				submitted to the Hawaii film office complies with section
				18-235-17-03(b);
(5) Separately
				state any costs that were deemed not qualified production costs; and
(6) Separately state the total of qualified
				production costs for which no exceptions were noted.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-15 - Hawaii promotion; shared-card, end-title screen credit

Current through June, 2024
(a) Section
				235-17(d)(3),
				HRS, requires that a production provide the State a qualified Hawaii promotion,
				at a minimum, a shared-card, end-title screen credit. A shared-card, end-title
				screen credit is provided by:
(1) Including
				in the end credits of each qualified production the phrase "Filmed on location
				on the Island of in Hawaii with the assistance of Hawaii Production Tax Credits
				administered by the Hawaii Film Office and the Department of Taxation" and a
				logo provided by the Hawaii film office; or
(2) If it is not feasible to include an end
				credit as required under paragraph (1), including in each qualified production
				distributed by digital video disc, Blu-ray disc, digital download, or other
				media for the secondary market, a Hawaii promotional video approved by the
				Hawaii film office.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-16 - Evidence of reasonable efforts to hire local talent and crew

Current through June, 2024
(a) Section
				235-17(d)
				(4), HRS, requires that a production provide
				to the department of business, economic development, and tourism evidence of
				reasonable efforts to hire local talent and crew.
(b) Evidence of reasonable efforts to hire
				local talent and crew means:
(1) Documentary
				evidence of having contacted state chapters of industry unions or guilds,
				including the date and time of any telephone calls, emails or other contact;
				the name of the union or guild representative contacted; the name of the
				production representative initiating contact; and the name of the union or
				guild contacted; or
(2) Documentary
				evidence of the specific means of notifying the public of the production's
				desire to hire local talent and crew, including copies of any press releases;
				solicitations; requests for proposals; bids; local newspaper ads; trade journal
				ads; flyers posted; open casting calls; radio spots; Hawaii film office website
				or other internet posting; or engagement of local production professionals as
				references for local talent and crew hires.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-17-19 - Access to production company set and locations; required courtesy visit and press coverage

Current through June, 2024
(a) All taxpayers
				submitting a production report to the Hawaii film office shall allow access to
				the taxpayer's production set or location at least once during production for a
				courtesy visit by government officials. Taxpayers are entitled to at least
				seven days' notice of the government's intent to visit the taxpayer's set or
				location. The taxpayer is entitled to escort the government officials on the
				visit and restrict access to any part of the set or location deemed proprietary
				or that access to which would result in competitive harm if government
				officials were allowed to visit. Government officials allowed to participate in
				the courtesy visit include, but shall not be limited to. Hawaii film office
				personnel; department personnel; state and county film commissioners; and
				legislators.
(b) All taxpayers
				submitting a production report to the Hawaii film office shall hold a press
				conference or agree to at least one press story, broadcast or print, as agreed
				to by both the production and the Hawaii film office, where the taxpayer and
				any of its representatives shall allow themselves to be interviewed by
				government officials and the media regarding the qualified production. The
				press conference or other press story shall be held at a location mutually
				agreed upon between the production and the Hawaii film office and may be held
				at the production's set or other location.
(c) The courtesy visit and press requirements
				of this section must be satisfied before the Hawaii film office accepts a
				taxpayer's production report as being complete.
(d) Nothing in this section shall be
				interpreted as limiting or restricting the department's authority to access
				premises or documents, including exercise of its subpoena power as otherwise
				allowed.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-20.5-01 - Fees for issuing comfort letters, certificates under section 235-110.9, HRS, and certificates under section 235-110.91, HRS

Current through June, 2024
(a) The department may charge a fee of $1,000
				to any person requesting the issuance of a comfort ruling from the
				department.
(b) The department may
				charge the following fees to each person requesting a certificate under section
				235-110.9,
				HRS:
(1) $100 for complete requests received
				by the department prior to the third Wednesday in January following the year in
				which the investment was made;
(2)
				$150 for complete requests received by the department on or after the third
				Wednesday in January following the year in which the investment was made;
				or
(3) For entities taxable as a
				partnership for net income tax purposes, such entities may request a
				certificate on behalf of their partners or members, and the following fees
				shall apply:
(A) $750 for complete requests
				received by the department prior to the third Wednesday in January following
				the year in which the investment was made; or
(B) $1,000 for complete requests received by
				the department on or after the third Wednesday in January following the year in
				which the investment was made.
These fees shall apply provided that the person submits the
				  application for certification in the manner prescribed by the department
				  through published guidance.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-21-04 - Proration of deductions

Current through June, 2024
(a) In most cases
				an allowable deduction of a taxpayer will be applicable only to the business
				income arising from a particular trade or business or to a particular item of
				nonbusiness income. In some cases an allowable deduction may be applicable to
				the business incomes of more than one trade or business, or to several items of
				nonbusiness income, or both. In such cases the deduction shall be prorated
				among the trades or businesses and the items of nonbusiness income in a manner
				which fairly distributes the deduction among the classes of income to which it
				is applicable.
(b) In filing
				returns with this State, if the taxpayer departs from or modifies the manner of
				prorating any deduction used in returns for prior years, the taxpayer shall
				disclose in the return for the current year the nature and extent of the
				modification.
(c) If the returns or
				reports filed by a taxpayer with all states to which the taxpayer reports under
				Article IV of the Multistate Tax Compact or the Uniform Division of Income for
				Tax Purposes Act are not uniform in the application or proration of any
				deduction, the taxpayer shall disclose in its return to this State the nature
				and extent of the variance.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-22-01 - Definitions

Current through June, 2024
As used in this subchapter:
"Allocation" refers to the assignment of nonbusiness income
				  to a particular state.
"Apportionment" refers to the division of business income
				  between states by the use of a formula containing apportionment factors.
"Combined reporting method" means the same as in section
				  18-235-22-03.
"Director" means the director of taxation.
"Multistate Tax Compact" means the Multistate Tax Compact as
				  enacted by several of the states of the United States and the District of
				  Columbia, and by this State in section
				  255-1,
				  HRS.
"Taxpayer" means a taxpayer as defined as in section
				  235-1, HRS,
				  which:
(1) Has income from business activity that is taxable both in
				  this State and in another State, other than activity as a public utility or the
				  rendering of purely personal services by an individual; or
(2) Conducts business activity within this State and is a
				  member of a unitary group that has income from business activity described in
				  paragraph (1).
"Uniform Division of Income for Tax Purposes Act" means the
				  Uniform Division of Income for Tax Purposes Act as enacted by several of the
				  states of the United States, and by this State in part II of chapter
				  235, HRS.
"Unitary business" means a business carried on by a group of
				  entities that includes the taxpayer where there are flows of value among the
				  entities resulting from (1) functional integration, (2) centralization of
				  management, or (3) economies of scale. Generally, if the operation of a
				  business within Hawaii is integrated with, is dependent on, or contributes to
				  the operation of the business outside Hawaii, the entire business is unitary in
				  character.
"Unitary group" means a group of entities carrying on a
				  unitary business, but with respect to any taxpayer a unitary group does not
				  include:
(1) Any foreign affiliate (as defined in section
				  18-235-38.5-02 ) of the taxpayer;
				  or
(2) Any entity that is not related to the taxpayer within the
				  meaning of section 267(b) and (c) (with respect to disallowance of deductions
				  for transactions between related taxpayers), IRC.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-22-02 - Apportionment

Current through June, 2024
If the business activity in respect to any trade or business
				  of a taxpayer occurs both within and without this State, and if by reason of
				  the business activity the taxpayer is taxable in another state, the portion of
				  the net income (or net loss) arising from the trade or business which is
				  attributable to the taxpayer's activity in this State shall be determined by
				  apportionment in accordance with sections
				  235-28
				  to
				  235-36,
				  HRS.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-22-03 - Combined reporting method; combined return

Current through June, 2024
(a) As
				used in this section:
"Combined business income" means the business income of all
				  members of a unitary group from the unitary business.
"Combined reporting method" means the accounting method of
				  determining the portion of the business income of a unitary group that is
				  attributable to the taxpayer's activity in this State with respect to that
				  unitary business.
"Combined return" means a single return that is filed to
				  reflect the income of all taxpayers in a unitary group, but does not mean a
				  consolidated return.
"Designated member" means the member of a group that is
				  designated, pursuant to subsection (d)(3)(B), to represent the group for tax
				  matters relating to a combined return.
"Group" means a unitary group as defined in section
				  18-235-22-01.
(b) In the
				combined reporting method, nonbusiness income shall be allocated for each
				entity separately under sections
				235-24
				to
				235-28,
				HRS, the same as if there were no group; and the combined business income of
				the group is apportioned with reference to the income from, and the property,
				payroll, and sales factors of, the entire unitary business just as would be
				done if the business had been conducted by one entity rather than a group. This
				method is different from a consolidated return, which is a taxing method in
				which two or more corporations are treated as one taxpayer. (See section
				18-235-92(d).) In apportioning combined business income:
(1) Transactions between members of the group
				relating to the unitary business, such as intercompany dividends, royalties,
				interest payments, sales, and rentals, shall be eliminated in computing
				combined business income and the property, payroll, and sales factors of each
				taxpayer in the group.
(2) For each
				taxpayer in a group, the numerators of the property, payroll, and sales factors
				shall be those of the taxpayer, and the denominators of the factors shall be
				those of the group.
(3) The
				business income attributable to the unitary business of each taxpayer in a
				group shall be the combined business income multiplied by the average of the
				taxpayer's property, payroll, and sales factors.
(4) The tax, deductions, credits, and
				allowances of each member of the group shall be computed separately. Credits,
				loss carrybacks, or loss carryovers of a group member shall not be applied
				against the income or Hawaii tax liability of any other group member because of
				the combined reporting method.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-22-04 - Allocation

Current through June, 2024
A taxpayer shall allocate all of its nonbusiness income or
				  loss within or without this State in accordance with sections
				  235-23
				  to
				  235-27,
				  HRS.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-22-05 - Consistency and uniformity in reporting

Current through June, 2024
(a) In filing
				returns with this State, if the taxpayer departs from or modifies the manner in
				which income has been classified as business income or nonbusiness income in
				returns for prior years, the taxpayer shall disclose in the return for the
				current year the nature and extent of the modification.
(b) If the returns or reports filed by a
				taxpayer for all states to which the taxpayer reports under Article IV of the
				Multistate Tax Compact or the Uniform Division of Income for Tax Purposes Act
				are not uniform in the classification of income as business or nonbusiness
				income, the taxpayer shall disclose in its return to this State the nature and
				extent of the variance.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-23-01 - Taxable in another state; in general

Current through June, 2024
(a) Under section
				235-22, HRS,
				the taxpayer is subject to the allocation and apportionment provisions of
				sections
				235-21 to
				235-29,
				HRS, if it has income from business activity that is taxable both within and
				without this State. A taxpayer's income from business activity is taxable
				without this State if the taxpayer, by reason of that business activity (i.e.,
				the transactions and activity occurring in the regular course of a particular
				trade or business), is taxable in another state within the meaning of section
				235-23,
				HRS.
(b) A taxpayer is taxable in
				another state if it meets either one of two tests:
(1) If by reason of business activity in
				another state, the taxpayer is subject to a net income tax, a franchise tax
				measured by net income, a franchise tax for the privilege of doing business, or
				a corporate stock tax; or
(2) If by
				reason of that business activity, another state has jurisdiction to subject the
				taxpayer to a net income tax, whether or not the state imposes such a tax on
				the taxpayer.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-23-02 - When a taxpayer is subject to a tax under section 235-23(1), HRS

Current through June, 2024
(a) A taxpayer is subject to one of the taxes
				specified in section
				235-23(1),
				HRS, if it carries on business activity in a state and the state imposes such a
				tax on that activity. Any taxpayer which asserts that it is subject to one of
				the taxes specified in section
				235-23(1),
				HRS, in another state shall furnish to the department upon its request evidence
				to support that assertion. The department may request that such evidence
				include proof that the taxpayer has filed the requisite tax return in the other
				state and has paid any taxes imposed under the law of the other state; the
				taxpayer's failure to produce that proof may be taken into account in
				determining whether the taxpayer in fact is subject to one of the taxes
				specified in section
				235-23(1),
				HRS, in the other state. The federal income tax imposed under chapter 1 of the
				federal Internal Revenue Code is not one of the taxes specified in section
				235-23(1),
				HRS.
(b) If the taxpayer
				voluntarily files and pays one or more of those taxes when not required to do
				so by the laws of that state or pays a minimal fee for qualification,
				organization, or the privilege of doing business in that state, but
(1) Does not actually engage in business
				activity in that state; or
(2) Does
				actually engage in some business activity, not sufficient for nexus, and the
				minimum tax bears no relationship to the taxpayer's business activity in that
				state, the taxpayer is not subject to one of the taxes specified in section
				235-23(1),
				HRS.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-23-03 - When a state has jurisdiction to subject a taxpayer to a net income tax

Current through June, 2024
(a) The second
				test, that of section
				235-23(2),
				HRS, applies if the taxpayer's business activity is sufficient to give the
				state jurisdiction to impose a net income tax by reason of that business
				activity under the Constitution and statutes of the United States. Jurisdiction
				to tax is not present where the state is prohibited from imposing the tax by
				reason of the provisions of Public Law 86-272,
				15 U.S.C. sections
				381 -
				384.
(b) For a state that is a foreign country or
				a political subdivision of a foreign country, the determination of whether the
				state has jurisdiction to subject the taxpayer to a net income tax shall be
				made as though the jurisdictional standards applicable to a state of the United
				States applied in that state. If jurisdiction is otherwise present, that state
				is not considered as being without jurisdiction by reason of the provisions of
				a treaty between that state and the United States.
Example:
Corporation X is actively engaged in
				  manufacturing farm equipment in State A and in foreign country B. Both State A
				  and foreign country B impose a net income tax but foreign country B exempts
				  corporations engaged in manufacturing farm equipment. Corporation X is subject
				  to the jurisdiction of State A and foreign country B.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-29-01 - Apportionment formula

Current through June, 2024
All business income of each trade or business of the
				  taxpayer shall be apportioned to this State by use of the apportionment formula
				  set forth in section
				  235-29,
				  HRS. The elements of the apportionment formula are the property factor (see
				  sections 18-235-30-01 to
				  18-235-32-01 ), the payroll factor
				  (see sections
				  18-235-33-01 to
				  18-235-34-01 ) and the sales
				  factor (see sections
				  18-235-35-01 to
				  18-235-37-01 ) of the trade or
				  business of the taxpayer.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-29-02 - Apportionment formula; denominator of zero

Current through June, 2024
If the denominator of the property factor, payroll factor,
				  or sales factor is zero, then the denominator of the fraction in section
				  235-29,
				  HRS, shall be reduced by the number of factors with a zero denominator, and the
				  numerator of that fraction shall not include any factor with a zero
				  denominator.
Example:
X is a company that provides data
				  entry services to United States companies. X performs its services exclusively
				  through employees of F, its foreign parent that does no business in the United
				  States. X has no employees of its own. X's property factor is 5 percent, its
				  sales factor is 17 percent, and its payroll factor has a zero denominator. X's
				  apportionment percentage is 11 percent (5 percent plus 17 percent, divided by
				  2).
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-29-03 - Apportionment for installment sales

Current through June, 2024
(a) Income from
				installment sales shall be apportioned on the basis of the apportionment
				percentage for the year of sale. This is because installment sale income is
				reported at least in part in a year other than the year in which the sale took
				place, and apportionment of installment sale income on the basis of the factors
				in the years other than the year of sale would result in that income being
				apportioned by activities that had no connection with the earning of the
				income.
(b) This rule applies
				whether or not the income from the sale was included in the sales factor for
				the year of sale.
Example:
X is doing business in states A and B,
				  and this State. In 1988, the taxpayer sold a plant in state A and realized a
				  $500,000 gain on the sale which is properly classified as business income under
				  section 18-235-21-03(c).
				  The taxpayer elects to report on the installment method. Under applicable
				  federal principles (section 453, IRC, as operative under chapter
				  235, HRS), the gain is recognized in
				  two equal installments in 1989 and 1990. The taxpayer's apportionment
				  percentages are as follows:
Taxable Year
Apportionment Percentage
1988
11%
1989
1%
1990
32%
In 1989, X's apportioned business income includes $250,000
				  (gain recognized in 1989) x 11 percent (apportionment factor for year of sale)
				  = $27,500. In 1990, X's apportioned business income includes $250,000 (gain
				  recognized in 1990) x 11 percent (apportionment factor for year of sale) =
				  $27,500.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-29-04 - Apportionment formula as applied to partnerships

Current through June, 2024
(a) If a
				taxpayer is a partner in a partnership, and the partnership's activities and
				the taxpayer's activities constitute a unitary business:
(1) The taxpayer's share of the partnership's
				trade or business shall be combined with the taxpayer's trade or
				business;
(2) The property,
				payroll, and sales factors, or other applicable factors, of the taxpayer and
				the partnership shall be combined; and
(3) Intercompany items shall be eliminated,
				under the principles set forth in section 18-235-22-03.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-30-01 - Property factor; in general

Current through June, 2024
(a) The property
				factor of the apportionment formula for each trade or business of the taxpayer
				shall include all real and tangible personal property owned or rented by the
				taxpayer and used during the tax period in the regular course of the trade or
				business.
(b) "Real and tangible
				personal property" includes land, buildings, machinery, stocks of goods,
				equipment, and other real and tangible personal property but does not include
				money.
(c) Property used in
				connection with the production of nonbusiness income shall be excluded from the
				property factor. Property used both in the regular course of the taxpayer's
				trade or business and in the production of nonbusiness income shall be included
				in the factor only to the extent that the property is used in the regular
				course of the taxpayer's trade or business.
(d) The method of determining that portion of
				the value to be included in the factor will depend upon the facts of each case.
				The property factor shall include the average value of property includable in
				the factor. See section 18-235-32-01.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-30-02 - Property factor; property used for the production of business income

Current through June, 2024
(a) Property shall be included in the
				property factor if it is actually used or is available for or capable of being
				used during the tax period in the regular course of the trade or business of
				the taxpayer.
(b) Property held as
				reserves or standby facilities or property held as a reserve source of
				materials shall be included in the factor. For example, a plant temporarily
				idle or raw material reserves not currently being processed are includable in
				the factor.
(c) Property or
				equipment under construction during the tax period (except inventoriable goods
				in process) shall be excluded from the factor until that property is actually
				used in the regular course of the trade or business of the taxpayer. If the
				property is partially used in the regular course of the trade or business of
				the taxpayer while under construction, the value of the property to the extent
				used shall be included in the property factor.
(d) Property used in the regular course of
				the trade or business of the taxpayer shall remain in the property factor until
				its permanent withdrawal is established by an identifiable event such as its
				conversion to the production of nonbusiness income, its sale, or the lapse of
				an extended period of time during which the property is held for
				sale.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-30-03 - Property factor; consistency in reporting

Current through June, 2024
(a) In
				filing returns with this State, if the taxpayer departs from or modifies the
				manner of valuing property, or of excluding or including property in the
				property factor, used in returns for prior years, the taxpayer shall disclose
				in the return for the current year the nature and extent of the
				modification.
(b) If the returns or
				reports filed by a taxpayer with all states to which the taxpayer reports under
				Article IV of the Multistate Tax Compact or the Uniform Division of Income for
				Tax Purposes Act are not uniform in the valuation of property and in the
				exclusion or inclusion of property in the property factor, the taxpayer shall
				disclose in its return to this State the nature and extent of the
				variance.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-30-04 - Property factor; numerator

Current through June, 2024
(a) The numerator
				of the property factor shall include the average value of the real and tangible
				personal property owned, rented, or leased by the taxpayer and used in this
				State during the tax period in the regular course of the trade or business of
				the taxpayer.
(b) Property in
				transit between locations of the taxpayer to which it belongs shall be
				considered to be at the destination for purposes of the property factor.
				Property in transit between a buyer and seller which is included by a taxpayer
				in the denominator of its property factor in accordance with its regular
				accounting practices shall be included in the numerator according to the state
				of destination.
(c) The value of
				mobile or movable property such as construction equipment, trucks, or leased
				electronic equipment which are located within and without this State during the
				tax period shall be determined for purposes of the numerator of the factor on
				the basis of total time within the State during the tax period.
(d) A motor vehicle assigned to a traveling
				employee shall be included in the numerator of the factor of the state to which
				the employee's compensation is assigned under the payroll factor or in the
				numerator of the state in which the motor vehicle is licensed.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-31-01 - Property factor; valuation of owned property

Current through June, 2024
(a)
				Property owned by the taxpayer shall be valued at its original cost. As a
				general rule, original cost is deemed to be the basis of the property for
				federal income tax purposes (before any federal adjustments) at the time of
				acquisition by the taxpayer and adjusted by subsequent capital additions or
				improvements and partial dispositions. However, capitalized intangible drilling
				and development costs shall be included in the property factor whether or not
				they have been expensed for either federal or state tax purposes.
Example 1:
The taxpayer acquired a factory
				  building in this State at a cost of $500,000 and, eighteen months later,
				  expended $100,000 for major remodeling of the building. Taxpayer files its
				  return for the current taxable year on the calendar-year basis. A depreciation
				  deduction in the amount of $22,000 was claimed with respect to the building on
				  the return for the current taxable year. The value of the building includable
				  in the numerator and denominator of the property factor is $600,000; the
				  depreciation deduction is not taken into account in determining the value of
				  the building for purposes of the factor.
Example 2:
During the current taxable year,
				  Corporation X merges into Corporation Y in a tax-free reorganization under the
				  Internal Revenue Code. At the time of the merger, Corporation X owns a factory
				  which X built five years earlier at a cost of $1,000,000. X has been
				  depreciating the factory at the rate of two percent per year, and its basis in
				  X's hands at the time of the merger is $900,000. Since the property is acquired
				  by Y in a transaction in which, under the Internal Revenue Code, its basis in
				  Y's hands is the same as its basis in X's hands, Y includes the property in Y's
				  property factor at X's original cost, without adjustment for depreciation,
				  i.e., $1,000,000.
Example 3:
Corporation Y acquires the stock of
				  Corporation X and makes an election under section 338 of the Internal Revenue
				  Code of 1986 (with respect to certain stock purchases treated as asset
				  acquisitions). Under these circumstances, Y's cost of the assets is the
				  purchase price of the X stock, prorated over the X assets.
If the original cost of property is unascertainable, the
				  property is included in the factor at its fair market value as of the date of
				  acquisition by the taxpayer.
(b)
				Inventory of stock of goods shall be included in the factor in accordance with
				the valuation method used for federal income tax purposes.
(c) Property acquired by gift or inheritance
				shall be included in the factor at its basis for determining depreciation for
				federal income tax purposes.
Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-31-02 - Property factor; valuation of rented property

Current through June, 2024
(a)
				Property rented or leased by the taxpayer is valued at eight times its net
				annual rental rate.
(1) The net annual rental
				rate for any item of rented property is the annual rental rate paid by the
				taxpayer for the property less the aggregate annual subrental rates paid by
				subtenants of the taxpayer. (See section 18-235-38-02 for special rules when
				the use of such net annual rental rate produces a negative or clearly
				inaccurate value or when property is used by the taxpayer at no charge or is
				rented at a nominal rental rate.)
(2) Subrents are not deducted when the
				subrents constitute business income because the property which produces the
				subrents is used in the regular course of a trade or business of the taxpayer
				when it is producing that income. Accordingly, there is no reduction in its
				value.