July 11, 2000

RE:  Act 174,  Session Laws of Hawaii 2000 (Act 174),
Relating to Hawaii Income Tax Conformity to the Internal Revenue Code of 1986, as Amended

Act 174 conforms the Hawaii income tax law with the amendments to the operative sections of the Internal Revenue Code (IRC) of 1986, as amended.  Act 174 complies with section 235-2.5(c), Hawaii Revised Statutes (HRS), that directs the Department of Taxation to submit to each regular session of the Legislature, a bill to conform to Subtitle A, Chapter 1 of the IRC, as it applies to the determination of gross income, adjusted gross income, ordinary income and loss, and taxable income.

Adoption of the IRC amendments assures continued State conformity with federal income tax law and minimizes taxpayers' burdens in complying with Hawaii's income tax law.  The federal effective date for the operative IRC sections is adopted unless otherwise provided.

Among other things, Act 174 conforms to IRC § 7525 which extended the attorney-client privilege to communications between a taxpayer and any "federally authorized tax practitioner" (which includes attorneys, certified public accountants, enrolled agents, and enrolled actuaries) with respect to "tax advice," to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney.

Act 174 amends § 235-110.91, HRS, to ensure that if Congress repeals or terminates the tax credit for increasing research activities in IRC § 41, State law will continue to allow the credit to be claimed for tax years beginning before January 1, 2006.

For a complete listing of the conforming and non-conforming items, please refer to our digests of the 1999 federal tax laws which may be obtained from our website, calling Jo-Ann Shintani of the Rules Office at 808-587-1530, faxing your request to 808-587-1560, or e-mailing your request to:  The digests transmitted by e-mail will be available in WordPerfect 6.1, Word 97 or PDF format.

Forms and other tax information are available at the Department's website at:

On Oahu, forms may be ordered by calling the Department's Forms Request Line at:  808-587-7572.  Persons who are not calling from Oahu, may call:  1-800-222-7572 (toll-free) to receive forms by mail or 808-678-0522 from a fax machine to receive forms by fax.

Director of Taxation

HRS Sections Explained: HRS Sections 235-     , 235-2.3, 235-2.5, and 235-110.91.

>>Download a pdf copy of the DIGEST OF THE IRS TAX RELIEF ACT OF 1999 P. L. 106-170