Act 125 simplifies the application process for certain nonprofit organizations seeking exemption from the payment of general excise tax (GET) and reduces the filing burden for these organizations.  Act 125 became effective on July 1, 2001.

Act 125 replaces the application process under current law with minimal registration requirements for certain organizations that have applied for federal tax exempt status with the Internal Revenue Service (IRS) such as a charity, civic league, business league, or fraternal beneficiary society. ¹  By registering these nonprofit organizations the Department will be able to obtain general information from the organizations; disseminate educational material to promote compliance with applicable state tax laws; and obtain data for research.

A subordinate person is an exempt organization that did not file its own application for tax exemption with the IRS because it is covered by a group exemption letter issued to its parent organization. ²  Act 125 specifies that a subordinate person covered by a group exemption letter issued by the IRS for income tax purposes will not have to separately apply for its own GET exemption letter if the Department has issued a GET exemption letter to the subordinate person's parent or supervisory person.

Act 125 also repeals the provisions in section 237-23(d) ³ HRS, which limited the extension of time for registration or the time for filing an application for an exemption to two months.  This will allow the Department for good cause to grant an extension of more than two months.

The Department will be revising Form G-6 because of Act 125.

Current forms and other tax information are available at the Department's website at:   www.hawaii.gov/tax.  On Oahu, forms may be ordered by calling the Department's Forms Request Line at:  587-7572.  Persons who are not calling from Oahu, may call:  1-800-222-7572 (toll-free) to receive forms by mail or by fax.

/s/
MARIE Y. OKAMURA
Director of Taxation

HRS Section Explained:  HRS Section 237-23

1. Under the prior law certain organizations created for purposes enumerated in sections 237-23(a)(3) through (6), Hawaii Revised Statutes (HRS), had to apply for exemption from the payment of GET by filing an application with the Department of Taxation (Department).
2. A subordinate person had to apply for its own GET exemption under the prior law because the GET exemption letter issued by the Department to the subordinate person's parent or supervisory person was not applicable to the subordinate person.
3. Section 237-23(d), HRS, will be renumbered as section 237-23(e), HRS.