January 22, 1998


RE: Adoption of Amendments to Section 18-235-98, Hawaii Administrative Rules (HAR), Relating to Requirements for Extensions of Time for Filing Income Tax Returns
The Department of Taxation will grant an automatic extension of time for filing income tax returns filed in 1998 if an application for an extension shows the full amount "properly estimated" as the tax liability due for the taxable year. A "properly estimated" tax liability means the taxpayer made a bona fide and reasonable attempt at the time the extension was submitted to locate and gather all of the necessary information to make a proper estimate of tax liability for the taxable year.

The automatic extensions to file an income tax return are as follows:

  1. An individual taxpayer may apply for a four-month extension;
  2. A partnership, entity classified as a partnership, estate, trust, or real estate mortgage investment conduit may apply for a three-month extension; and
  3. A corporation, or entity classified as a corporation may apply for a six-month extension.
The prior rule authorized the Department to grant an extension for filing an individual tax return if the individual paid 90% of the tax due for the taxable year on or before April 20. Similarly, the Department granted a corporation an extension for filing a corporate tax return if the corporation paid 97% of the tax due for the taxable year or 100 percent of its tax liability for the preceding year on or before the due date of the return.

The amendments to section 18-235-98, HAR, were made in response to concerns that shareholders of S corporations and partners in partnerships were having problems meeting the 90% payment requirement because financial information regarding the corporation or partnership was not available until after April 20. Further, the amendment of section 18-235-98, HAR, conforms with the Internal Revenue Service's regulations regarding extensions of time for filing income tax returns.

To request a copy of the rules, please call the Department of Taxation, forms Request Line at (808) 587-7572 or toll free at (800) 222-7572 and select the "mail" option. You will be asked to leave your name, address, and the type of document you need (i.e., pension rules).

Director of Taxation