April 19, 1996


RE: Adoption of Hawaii Administrative Rules (HAR) Relating to the Allocation and Apportionment of Income of Construction Contractors Under the Uniform Division of Income for Tax Purposes Act
Effective March 11, 1996, construction contractors and other taxpayers doing business both in Hawaii and in another state or country who use the percentage of completion method of accounting or the completed contract method of accounting must comply with newly-approved rules.

The rules determine how much of the taxpayer's income is Hawaii income for income tax purposes.

The rules, for the most part, are identical to the Multistate Tax Commission's Regulation IV.18.(d) which the Commission adopted on July 10, 1980. One difference is that the rules, unlike the Commission's regulations, take into account the election in section 460(b)(5) of the federal Internal Revenue Code that was enacted after the Commission's regulation was adopted.

Copies of the Rules are available during normal business hours at the Department of Taxation, Technical Review Office, Room 220, Princess Ruth Keelikolani Building, 830 Punchbowl Street, Honolulu, Hawaii. To request a copy by telephone, call the Department of Taxation, Technical Review Office at (808) 587-1577.

Director of Taxation