Bill Text: HI SB2725 | 2024 | Regular Session | Amended
Bill Title: Relating To Pass-through Entity Taxation.
Spectrum: Moderate Partisan Bill (Democrat 4-1)
Status: (Engrossed) 2024-04-25 - The Conference Committee recommends that the measure be Passed, with Amendments. The votes were as follows: 4 Ayes: Representative(s) Kitagawa, Chun, Garrett, Alcos; Ayes with reservations: none; 0 Noes: none; and 0 Excused: none. [SB2725 Detail]
Download: Hawaii-2024-SB2725-Amended.html
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THE SENATE |
S.B. NO. |
2725 |
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THIRTY-SECOND LEGISLATURE, 2024 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO PASS-THROUGH ENTITY TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
Under Act 50, the entity level tax was calculated by applying the eleven per cent rate, highest individual income tax rate, to the income to be distributed. Members receive a nonrefundable income tax credit that may not be carried forward to a subsequent year if the credit exceeds the tax liability. The high tax rate and inability to carry the credit forward made it difficult for many small businesses to benefit from Act 50 as originally intended.
The purpose of this Act is to reduce the pass-through entity level tax rate and to allow the tax credit to be carried forward to subsequent years to allow more small businesses owners to benefit from the entity level tax election that Act 50 provided.
SECTION 2. Section 235-51.5, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (b) to read:
"(b) Notwithstanding any provision of law
to the contrary, the following tax is imposed on each electing pass-through
entity: the sum of all member's
distributive shares and guaranteed payments of Hawaii taxable income as
calculated under this chapter, multiplied by [the highest rate of tax
applicable to the individual under section 235-51;] nine per cent;
provided that the distributive shares and guaranteed payments of members [who]
that are corporations, partnerships, S corporations, tax-exempt
entities, and other taxpayers designated by the department shall not be
included in the sum and shall not be subject to the tax under this
section. If the income calculated
pursuant to this subsection reflects a net loss for the electing pass-through
entity, the net loss may be carried forward to subsequent tax years for as long
as the electing pass-through entity elects to be subject to the tax pursuant to
this section until exhausted."
2. By amending subsection (e) to read:
"(e)
Each member of an electing pass-through entity whose
distributive share or guaranteed payment of Hawaii taxable income is subject to
tax under this section shall be entitled to a nonrefundable credit equal
to the member's share of the tax paid pursuant to this section. If the amount of the credit authorized by
this subsection exceeds the member's tax liability imposed pursuant to this
chapter, [the excess amount shall not be refundable to the member.] the
excess of the credit over liability may be used as a credit against the
member's income tax liability in subsequent years until exhausted. Any member claiming a credit shall not be
entitled to deduct from the member's Hawaii state taxable income those amounts
of Hawaii state income taxes paid by the member on the member's distributive
share or guaranteed payment of income from the electing pass-through entity."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on July 1, 3000, and apply to taxable years beginning after December 31, 2023.
Report Title:
Taxation; Pass-through Entity; S Corporations; Partnerships
Description:
Reduces the pass-through entity level tax rate and allows the tax credit to be carried forward to subsequent years. Applies to taxable years beginning after 12/31/2023. Effective 7/1/3000. (HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
