Act 199 conforms the Hawaii income tax law with the amendments to the operative sections of the Internal Revenue Code (IRC) of 1986, as amended.  Act 199 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 199 conforms to the:

• Increase in the low-income housing tax credit cap, and other modifications to the low-income housing credit. (IRC §42(d), (h), (i), (m)(1))
• Extension and modification of the enhanced charitable deduction for corporate donations of computer technology.  (IRC §170(e)(6))
• Extension of the medical savings account program through 2002 and renaming the medical savings accounts (MSAs) as Archer MSAs.  (IRC §220(d),(i), & (j))
• Expansion of the definition of a lump-sum distribution for purposes of IRC §401(k)(10), relating to distributions upon termination of plan or disposition of assets or subsidiary, to permit distributions of an annuity contract from a qualified plan or a IRC §403(a) to be a lump sum distribution upon the termination of a plan or upon the disposition by a corporation of its assets or its interest in a subsidiary.  (IRC §401(k)(10)(B))
• Repeal of subsection (a) of the Ticket to Work and Incentives Improvement Act which disallowed the installment method of accounting for accrual basis taxpayers.

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 Sections 235-2.3, 235-2.5, 235-2.45, 235-7.5, 235-51(d), and 235-61(g).

VIEW AN ON-LINE COPY OF THE ACT (S.B. No. 854, SD1, HD1) ON THE CAPITOL WEBSITE
For official copies of acts, please contact:
Office of the Lieutenant Governor, State Capitol, 5th Floor, Honolulu 96813.
Phone: 586-0255, Monday - Friday, 7:45 am - 4:30 pm