Corporations; domestic and foreign

# (a)

Domestic corporations, including HRS §235-4 professional and nonprofit corporations, are subject to tax on Hawaii source income. Domestic corporations also are subject to tax on out-of-state income that is not taxable in another jurisdiction.

# (b)

Income from business activity within and without Hawaii that is taxable in another jurisdiction shall be apportioned under the Uniform Division of Income for Tax Purposes Act, sections 235-21 to 235-39, HRS. A domestic corporation is subject to tax in Hawaii on income that is allocated or apportioned to any jurisdiction in which that corporation is not taxable. Example 1: Corporation X, a Hawaii corporation, is actively engaged in selling farm equipment in Hawaii and State A. Both Hawaii and State A impose a net income tax but State A exempts corporations engaged in selling farm equipment. Corporation X is taxable in both Hawaii and State A. Corporation X is not subject to tax in Hawaii on income that is allocated or apportioned to State A. Example 2: The facts are the same as in Example 1, except that State A may not impose a net income tax on Corporation X because of Public Law No. 86-272, 15 U.S.C. sections 381-384. Corporation X is taxable in Hawaii and is not taxable in State A. Corporation X is subject to tax in Hawaii on income that is allocated or apportioned to State A.

# (c)

Foreign corporations are subject to tax on Hawaii source income and are not subject to tax on out-of- state income.

# (d)

For rules relating to corporations for which an election under section 1362 (with respect to S corporations), IRC, is in effect, see section 18-235-122.

# (e)

For the election available under the Multistate Tax Compact to a foreign corporation whose only activities within the State consist of sales, see section 18-235-4-03(c).

# (f)

For rules used to determine the source of income, see section 18-235-4-08.

Last amended: [Eff 2/16/82; am and ren §18-235-4-05 9/3/94] (Auth: HRS §§231-3(9), 235-118) (Imp: HRS §§235-4, 235-5, 235-7, 235-22, 255-1) Historical note: §18-235-4-05 is based upon §18-235-5(a)(2)-(3). [Eff 2/16/82; am 9/3/94]

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