HAR § 18-235-38-01 — Equitable adjustment of apportionment formula

(a) If the director of taxation determines that the apportionment formula prescribed by section 235-29, HRS, does not fairly determine net income derived from or attributable to Hawaii, the director may direct or permit the use of an apportionment formula based on other factors that would more clearly reflect income attributable to Hawaii. (b) A taxpayer may petition the director to use an allocation or apportionment method other than that prescribed in part II of chapter 235, HRS, by written request. (1) The petition shall include data clearly showing that the application of factors provided in the law, including these rules, do not result in a reasonable attribution of net income to Hawaii due to the peculiar nature of the taxpayer’s business and that the taxpayer’s proposed method more clearly reflects income attributable to Hawaii. (2) The petition shall disclose whether the method that is being used or requested is being employed in all other states to which the taxpayer reports under Article IV of the Multistate Tax Compact or the Uniform Division of Income for Tax Purposes Act. (c) The following shall be sufficient to constitute the director’s imposition of alternative apportionment under this section: (1) Issuance of an assessment based on an alternative method accompanied by notification that an alternative method was used; (2) For a claim for refund on an original return, denial of a taxpayer’s claim for refund accompanied by notification that an alternative method was used; (3) For a claim for refund made via an amended original return, denial of a taxpayer’s claim for refund without more, provided that the alternative used by the director consists wholly of the method used by the taxpayer in filing its original return. (4) In all other cases, any notification that an alternative method was used.”