Bill Text: HI HB1612 | 2024 | Regular Session | Introduced

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Bill Title: Relating To Unemployment Compensation.

Spectrum: Moderate Partisan Bill (Democrat 8-1)

Status: (Introduced) 2024-01-24 - Referred to LGO, FIN, referral sheet 1 [HB1612 Detail]

Download: Hawaii-2024-HB1612-Introduced.html

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HOUSE OF REPRESENTATIVES	H.B. NO.	1612
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to unemployment compensation.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that Hawaii's cost of living continues to be burdensome for island residents.  According to the National Low Income Housing Coalition's "Out of Reach 2023" report, a minimum-wage employee must work one hundred seven hours per week to afford a one-bedroom rental home at fair market prices.  To afford a two-bedroom residence without being cost-burdened, the National Low Income Housing Coalition estimates that a person must earn $41.83 per hour.  Hawaii's electricity prices are also the highest in the nation, while the cost of other essential items, like food and clothing, has risen significantly in recent years.

     The legislature further finds that taxing unemployment compensation worsens the financial hardship faced by individuals who have lost their jobs.  Fifteen states, including Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington, and Wyoming, do not tax unemployment compensation; nine of those states do not impose personal income taxes.  Moreover, Hawaii was one of only thirteen states that levied its personal income tax on the first $10,200 of unemployment income received by individuals in 2020, when the first emergency public health orders related to the COVID-19 pandemic went into effect.

     The legislature additionally finds that on August 8, 2023, wildfires swept across Maui and killed at least one hundred persons, making it one of the nation's deadliest natural disasters.  The wildfires destroyed over two thousand two hundred structures, including homes and businesses.  According to a report issued by the University of Hawaii economic research organization on September 22, 2023, the unemployment rate on Maui was expected to soar above eleven per cent by the end of 2023 and remain above four per cent through 2026.  A total of 10,448 new claims for unemployment in Maui county were filed in the four weeks following the wildfires, about nine thousand nine hundred more than in the preceding four weeks.  As displaced families and workers who lost their jobs attempt to recover from the disaster, eliminating the state income tax on unemployment compensation would boost their ability to regain financial security.

     Therefore, the purpose of this Act is to strengthen financial security for individuals who have lost their income by exempting unemployment compensation from the State's personal income tax and increasing the maximum weekly benefit a person may receive in unemployment compensation.

     SECTION 2.  Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There shall be excluded from gross income, adjusted gross income, and taxable income:

     (1)  Income not subject to taxation by the State under the Constitution and laws of the United States;

     (2)  Rights, benefits, and other income exempted from taxation by section 88-91, having to do with the state retirement system, and the rights, benefits, and other income, comparable to the rights, benefits, and other income exempted by section 88-91, under any other public retirement system;

     (3)  Any compensation received in the form of a pension for past services;

     (4)  Compensation paid to a patient affected with Hansen's disease employed by the State or the United States in any hospital, settlement, or place for the treatment of Hansen's disease;

     (5)  Except as otherwise expressly provided, payments made by the United States or this State, under an act of Congress or a law of this State, which by express provision or administrative regulation or interpretation are exempt from both the normal and surtaxes of the United States, even though not so exempted by the Internal Revenue Code itself;

     (6)  Any income expressly exempted or excluded from the measure of the tax imposed by this chapter by any other law of the State, it being the intent of this chapter not to repeal or supersede any such express exemption or exclusion;

     (7)  Income received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii National Guard as compensation for performance of duty, equivalent to pay received for forty-eight drills (equivalent of twelve weekends) and fifteen days of annual duty, at an:

          (A)  E-1 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2004;

          (B)  E-2 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2005;

          (C)  E-3 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2006;

          (D)  E-4 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2007; and

          (E)  E-5 pay grade after eight years of service; provided that this subparagraph shall apply to taxable years beginning after December 31, 2008;

     (8)  Income derived from the operation of ships or aircraft if the income is exempt under the Internal Revenue Code pursuant to the provisions of an income tax treaty or agreement entered into by and between the United States and a foreign country[;] provided that the tax laws of the local governments of that country reciprocally exempt from the application of all of their net income taxes, the income derived from the operation of ships or aircraft that are documented or registered under the laws of the United States;

     (9)  The value of legal services provided by a legal service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

    (10)  Amounts paid, directly or indirectly, by a legal service plan to a taxpayer as payment or reimbursement for the provision of legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

    (11)  Contributions by an employer to a legal service plan for compensation (through insurance or otherwise) to the employer's employees for the costs of legal services incurred by the employer's employees, their spouses, and their dependents; and

    (12)  Amounts received in the form of a monthly surcharge by a utility acting on behalf of an affected utility under section 269-16.3; provided that amounts retained by the acting utility for collection or other costs shall not be included in this exemption[.]; and

    (13) Income received as unemployment compensation benefits under chapter 383."

     SECTION 3.  Section 383-161, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Any agreement by an individual to waive, release, or commute the individual's rights to benefits or any other rights under this chapter shall be void, except agreements to withhold and deduct benefits for the following purposes:

     (1)  The payment of child support obligations as provided in section 383-163.5;

     (2)  The voluntary deduction and withholding of federal [and state] income tax from unemployment compensation as provided in section 383-163.6; and

     (3)  The repayment of uncollected overissuances of food stamp coupons as provided in section 383-163.7."

     SECTION 4.  Section 383-163, Hawaii Revised Statutes, is amended to read as follows:

     "§383-163  No assignment of benefits; waiver.  No assignment, pledge, or encumbrance of any right to benefits which are or may become due or payable under this chapter shall be valid and the right to benefits shall not be subject to levy, execution, attachment, garnishment, or any other remedy for the collection of debt.  No waiver of this section shall be valid, except that this section shall not apply to:

     (1)  Section 383-163.5 with respect to the withholding and deduction of benefits for the payment of child support obligations;

     (2)  Section 383-163.6 with respect to the voluntary withholding and deduction of benefits for payment of federal [and state] income taxes; and

     (3)  Section 383-163.7 with respect to the withholding and deduction of benefits for repayment of uncollected overissuances of food stamp coupons."

     SECTION 5.  Section 383-163.6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  An individual filing a new claim for unemployment compensation shall, at the time of filing the claim, be advised that:

     (1)  Unemployment compensation is subject to federal [and state] income tax;

     (2)  Requirements exist pertaining to estimated tax payments;

     (3)  The individual may elect to have federal income tax deducted and withheld from the individual's payment of unemployment compensation at the amount specified in the federal Internal Revenue Code;

    [(4)  The individual may elect to have state income tax deducted and withheld from the individual's payment of unemployment compensation at the amount specified in section 235-69;

     (5)] (4)  The individual may elect to have state and local income taxes deducted and withheld from the individual's payment of unemployment compensation for other states and localities outside this State at the percentage established by the state or locality, if the department by agreement with the other state or locality is authorized to deduct and withhold income tax; and

    [(6)] (5)  The individual shall be permitted to change a previously elected withholding status no more than once during a benefit year."

     SECTION 6.  Section 383-22, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  In the case of an individual whose benefit year begins after January 4, 1992, the individual's weekly benefit amount shall be, except as otherwise provided in this section, an amount equal to one twenty-first of the individual's total wages for insured work paid during the calendar quarter of the individual's base period in which such total wages were highest.  The weekly benefit amount, if not a multiple of $1, shall be computed to the next higher multiple of $1.  If an individual's weekly benefit amount is less than $5, it shall be $5.  The maximum weekly benefit amount shall be determined annually as follows:  On or before November 30 of each year the total remuneration paid by employers, as reported on contribution reports submitted on or before such date, with respect to all employment during the four consecutive calendar quarters ending on June 30 of the year shall be divided by the average monthly number of individuals performing services in the employment during the same four calendar quarters as reported on the contribution reports.  The amount thus obtained shall be divided by fifty-two and the average weekly wage (rounded to the nearest cent) thus determined.  For benefit years beginning January 1, 1992, but prior to January 1, 2008, and beginning again on January 1, 2012, but prior to April 1, 2012, then beginning again on January 1, 2013, but prior to January 1, 2025, seventy per cent of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount.  For benefit years beginning January 1, 2008, and ending December 31, 2011, and beginning again on April 1, 2012, and ending December 31, 2012, seventy-five per cent of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount.  For benefit years beginning January 1, 2025, eighty-five per cent of the average weekly wage shall constitute the maximum weekly benefit amount and shall apply to all claims for benefits filed by an individual qualifying for payment at the maximum weekly benefit amount in the benefit year commencing on or after the first day of the calendar year immediately following the determination of the maximum weekly benefit amount.  The maximum weekly benefit amount, if not a multiple of $1, shall be computed to the next higher multiple of $1.

 

      (Column A)     (Column B)     (Column C)      (Column D)

         High          Basic         Minimum         Maximum

        Quarter        Weekly       Qualifying    Total Benefits

        Wages         Benefit         Wages      in Benefit Year

 

  $  37.50 - 125.00     $ 5.00       $ 150.00        $ 130.00

    125.01 - 150.00       6.00         180.00          156.00

    150.01 - 175.00       7.00         210.00          182.00

    175.01 - 200.00       8.00         240.00          208.00

    200.01 - 225.00       9.00         270.00          234.00

    225.01 - 250.00      10.00         300.00          260.00

    250.01 - 275.00      11.00         330.00          286.00

    275.01 - 300.00      12.00         360.00          312.00

    300.01 - 325.00      13.00         390.00          338.00

    325.01 - 350.00      14.00         420.00          364.00

    350.01 - 375.00      15.00         450.00          390.00

    375.01 - 400.00      16.00         480.00          416.00

    400.01 - 425.00      17.00         510.00          442.00

    425.01 - 450.00      18.00         540.00          468.00

    450.01 - 475.00      19.00         570.00          494.00

    475.01 - 500.00      20.00         600.00          520.00

    500.01 - 525.00      21.00         630.00          546.00

    525.01 - 550.00      22.00         660.00          572.00

    550.01 - 575.00      23.00         690.00          598.00

    575.01 - 600.00      24.00         720.00          624.00

    600.01 - 625.00      25.00         750.00          650.00

    625.01 - 650.00      26.00         780.00          676.00

    650.01 - 675.00      27.00         810.00          702.00

    675.01 - 700.00      28.00         840.00          728.00

    700.01 - 725.00      29.00         870.00          754.00

    725.01 - 750.00      30.00         900.00          780.00

    750.01 - 775.00      31.00         930.00          806.00

    775.01 - 800.00      32.00         960.00          832.00

    800.01 - 825.00      33.00         990.00          858.00

    825.01 - 850.00      34.00       1020.00          884.00

    850.01 - 875.00      35.00       1050.00          910.00

    875.01 - 900.00      36.00       1080.00          936.00

    900.01 - 925.00      37.00       1110.00          962.00

    925.01 - 950.00      38.00       1140.00          988.00

    950.01 - 975.00      39.00       1170.00        1014.00

    975.01 -1000.00      40.00       1200.00        1040.00

   1000.01 -1025.00      41.00       1230.00        1066.00

   1025.01 -1050.00      42.00       1260.00        1092.00

   1050.01 -1075.00      43.00       1290.00        1118.00

   1075.01 -1100.00      44.00       1320.00        1144.00

   1100.01 -1125.00      45.00       1350.00        1170.00

   1125.01 -1150.00      46.00       1380.00        1196.00

   1150.01 -1175.00      47.00       1410.00        1222.00

   1175.01 -1200.00      48.00       1440.00        1248.00

   1200.01 -1225.00      49.00       1470.00        1274.00

   1225.01 -1250.00      50.00       1500.00        1300.00

   1250.01 -1275.00      51.00       1530.00        1326.00

   1275.01 -1300.00      52.00       1560.00        1352.00

   1300.01 -1325.00      53.00       1590.00        1378.00

   1325.01 -1350.00      54.00       1620.00        1404.00

   1350.01 and over      55.00       1650.00        1430.00."

 

     SECTION 7.  Section 235-69, Hawaii Revised Statutes, is repealed.

     ["[§235-69]  Voluntary deduction and withholding of state income tax from unemployment compensation.  An individual receiving unemployment compensation benefits under chapter 383 may elect to have state income tax deducted and withheld from the individual's payment of unemployment compensation at the rate of five per cent in accordance with section 383-163.6."]

     SECTION 8.  The department of taxation shall retroactively refund any state income tax deducted and withheld from individuals for unemployment compensation benefits, as set forth under chapter 383, Hawaii Revised Statutes, during the period of January 1, 2023, through December 31, 2023.

     SECTION 9.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 10.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2022.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Unemployment Compensation; State Income Tax Exemption; Maximum Weekly Benefit

 

Description:

Exempts unemployment compensation from state personal income tax beginning in the 2023 tax year.  Increases the maximum weekly benefit a person may receive in unemployment compensation beginning on 1/1/2025.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.