RE: INCOME TAX RELIEF FOR STORM AND FLOODING LOSSES

In order to provide assistance to those who have suffered losses or damages to property resulting from the recent storms and flooding, Governor Cayetano asked the President of the United States to proclaim the State of Hawaii a disaster area. In response to Governor Cayetano's request, President Clinton has declared the Island of Oahu a disaster area.

For purposes of the Hawaii Income Tax Law, you may claim all of the casualty loss deductions allowed by Section 165 of the Internal Revenue Code. A casualty loss on business property is deductible in full. A loss on nonbusiness property is deductible to the extent it exceeds $100.00 plus 10 percent of adjusted gross income. The following options are available after you have determined the amount of your losses:

Taxpayers suffering losses to property on the Island of Oahu

1. As a result of the Presidential declaration, you may elect to amend your 1995 income tax return, deduct the losses to property on the Island of Oahu as a casualty loss in that year, and receive a refund for taxes paid in 1995. If President Clinton subsequently declares the counties of Maui, Hawaii, and Kauai disaster areas, the same provision will apply to taxpayers suffering losses to property in those counties.

All Taxpayers

1. You may elect to deduct the losses as a casualty loss on your 1996 income tax return; or
2. You may elect to deduct the losses as a casualty loss in five (5) equal installments over a period of five (5) consecutive years, beginning with your income tax return for 1996; or
3. If your casualty losses are more than your income, you may have a net operating loss. A net operating loss may be used to lower your taxes in an earlier year, allowing you to receive a refund for taxes that you have already paid. Or a net operating loss may be used to lower your taxes in a later year. You do not have to be a business to claim this benefit; all taxpayers may claim this carryback or carryover net operating loss.

   EXAMPLE: If you elect to deduct your losses on your 1996 return, you may carry back your unused losses to 1993 (3 year carryback) or carry over your unused losses through 2011 (15 year carryover). If you wish, you may elect on a timely filed tax return to forego the carryback and use only the fifteen-year carryover loss provision.

   PLEASE CONTACT YOUR NEAREST DISTRICT TAX OFFICE OF THE DEPARTMENT OF TAXATION SHOULD YOU HAVE ANY QUESTIONS OR IF YOU NEED FURTHER ASSISTANCE.
    

/s/
RAY K. KAMIKAWA
Director of Taxation