HAR § 18-235-2.3 — (ii) The amount qualifying under section 642(c), IRC, that is actually paid for charitable purposes, subject to the percentage limitations in section 170(b) (1) (with respect to percentage limitations applicable to contributions by an individual), IRC

In computing the percentage limitations, the contribution base of the estate or trust shall be adjusted gross income as defined in section 235-1, HRS, computed without regard to any net operating loss carryback to the taxable year. (5) Section 642(d) (with respect to net operating loss deduction), IRC, is not operative in Hawaii. An estate or trust shall be allowed the net operating loss deduction to the extent permitted by section 235-7(d), HRS, and the rules thereunder. (6) With respect to section 644 (with respect to gain on property transferred to trust at less than fair market value), IRC, as operative under chapter 235, HRS: (A) In section 644(a)(2)(A), IRC, the tax shall be computed under chapter 235, HRS; and (B) In section 644(a)(2)(B), IRC, the interest rate shall be that specified in section 231- 39(b)(4), HRS. (7) With respect to section 667 (with respect to treatment of amounts deemed distributed by a complex trust in preceding years), IRC, as operative under chapter 235, HRS: (A) In section 667(a)(1) and (2), IRC, the tax shall be computed under chapter 235, HRS; and (B) Interest income exempt from Hawaii tax under section 235-7, HRS, in the hands of a trust, retains its character when distributed to a beneficiary pursuant to section 662(b) (with respect to character of amounts distributed), IRC. Other interest income that is not exempt from Hawaii tax in the hands of a trust pursuant to section 235-7(b), HRS, is considered a taxable amount for purposes of computing the tax under section 667, IRC, when that income is distributed. (8) Section 668 (with respect to interest charge on accumulation distributions from foreign trusts), IRC, is not operative in Hawaii. (i) to (k) (Reserved) (l) Capital loss carrybacks and carryovers. (I.R.C. section 1212). (1) In general. The federal regulations relating to capital loss carrybacks and carryovers in the Internal Revenue Code shall be operative except that the provisions relating to capital loss carryback shall not be operative and the capital loss carryover allowed by I.R.C. section 1212(a) shall be limited to five years. Individual taxpayers shall be allowed capital loss carryovers until exhausted. (See section 235-2.3(l), HRS.) (m) Subchapter S. (I.R.C. sections 1371 to 1379). (1) In general. The federal regulations relating to the Internal Revenue Code on election of small business corporation shall be operative subject to certain other requirements and modifications for this State. (See section 235-2.3(l), HRS.) (A) A small business corporation shall not have (A) A nonresident as a shareholder; or (B) A resident individual who has taken up residence in the State after age 65 and before 7/1/76 and who is taxed under chapter 235 only on the income from within this State, unless such individual shall have waived the benefit of section 3, Act 60, L. 1976, and shall have included all income from sources within and without this State in the same manner as if the individual had taken up residence in the State after 6/30/76. (2) Election. Effective 1/1/79, an election under I.R.C. Section 1372(a) not to be subject to income taxes shall terminate for the taxable year in which such corporation derives more than 80 per cent of its gross income from sources outside the State. Termination shall remain in effect for all succeeding taxable years. (A) An election under I.R.C. section 1372 shall not be valid unless there is also in effect for such taxable year, an election for federal tax purposes. (B) The tax imposed by I.R.C. section 1378(a) is hereby imposed by this chapter and shall be at a rate of 3.08 per cent on the amount by which the net capital gain exceeds $25,000.00. For purposes of I.R.C. section 1378(c)(3), the amount of tax to be determined shall not exceed 3.08 per cent of the net capital gain attributable to property described under that section. (3) Returns. Every small business corporation as described in I.R.C. section 1371 and this article shall file an income tax return for each taxable year on Form N-35, stating specifically items of its gross income and deductions and such other information as required by the form or in the instruction issued thereto provided under section 235-80, HRS.