HRS § 235-2.4 — Operation of certain Internal Revenue Code provisions; sections 63 to 530


§235-2.4 Operation of certain Internal
Revenue Code provisions; sections 63 to 530. (a) Section 63 (with respect
to taxable income defined) of the Internal Revenue Code shall be operative for
the purposes of this chapter, subject to the following:
(1) Section 63(c)(1)(B) (relating to the additional
standard deduction), 63(c)(1)(C) (relating to the real property tax deduction),
63(c)(1)(D) (relating to the disaster loss deduction), 63(c)(1)(E) (relating to
the motor vehicle sales tax deduction), 63(c)(4) (relating to inflation
adjustments), 63(c)(7) (defining the real property tax deduction), 63(c)(8)
(defining the disaster loss deduction), 63(c)(9) (defining the motor vehicle
sales tax deduction), and 63(f) (relating to additional amounts for the aged or
blind) of the Internal Revenue Code shall not be operative for purposes of this
chapter;
(2) Section 63(c)(2) (relating to the basic standard
deduction) of the Internal Revenue Code shall be operative, except that the
standard deduction amounts provided therein shall instead mean:
(A) $4,400 in the case of:
(i) A joint return as provided by section
235-93; or
(ii) A surviving spouse (as defined in section
2(a) of the Internal Revenue Code);
(B) $3,212 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(C) $2,200 in the case of an individual who
is not married and who is not a surviving spouse or head of household;
(D) $2,200 in the case of a married
individual filing a separate return;
(E) For taxable years beginning after
December 31, 2023:
(i) $8,800 in the case of a joint return as
provided by section 235-93 or a surviving spouse (as defined in section 2(a) of
the Internal Revenue Code);
(ii) $6,424 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(iii) $4,400 in the case of an individual who is
not married and who is not a surviving spouse or head of household; or
(iv) $4,400 in the case of a married individual
filing a separate return;
(F) For taxable years beginning after
December 31, 2025:
(i) $16,000 in the case of a joint return as
provided by section 235-93 or a surviving spouse (as defined in section 2(a) of
the Internal Revenue Code);
(ii) $12,000 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(iii) $8,000 in the case of an individual who is
not married and who is not a surviving spouse or head of household; or
(iv) $8,000 in the case of a married individual
filing a separate return;
(G) For taxable years beginning after
December 31, 2027:
(i) $18,000 in the case of a joint return as
provided by section 235-93 or a surviving spouse (as defined in section 2(a) of
the Internal Revenue Code);
(ii) $13,500 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(iii) $9,000 in the case of an individual who is
not married and who is not a surviving spouse or head of household; or
(iv) $9,000 in the case of a married individual
filing a separate return;
(H) For taxable years beginning after
December 31, 2029:
(i) $20,000 in the case of a joint return as
provided by section 235-93 or a surviving spouse (as defined in section 2(a) of
the Internal Revenue Code);
(ii) $15,000 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(iii) $10,000 in the case of an individual who is
not married and who is not a surviving spouse or head of household; or
(iv) $10,000 in the case of a married individual
filing a separate return; and
(I) For taxable years beginning after
December 31, 2030:
(i) $24,000 in the case of a joint return as
provided by section 235-93 or a surviving spouse (as defined in section 2(a) of
the Internal Revenue Code);
(ii) $18,000 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);
(iii) $12,000 in the case of an individual who is
not married and who is not a surviving spouse or head of household; or
(iv) $12,000 in the case of a married individual
filing a separate return;
(3) Section 63(c)(5) (limiting the basic standard
deduction in the case of certain dependents) of the Internal Revenue Code shall
be operative, except that the limitation shall be the greater of $500 or the
individual's earned income; and
(4) The standard deduction amount for nonresidents
shall be calculated pursuant to section 235-5.
(b) Section 67 (with respect to the 2-percent
floor on miscellaneous itemized deductions) of the Internal Revenue Code shall
be operative for purposes of this chapter, except that the suspension in
section 67(g) shall not be operative for purposes of this chapter.
(c) Section 68 (with respect to the overall
limitation on itemized deductions) of the Internal Revenue Code shall be
operative; provided that the:
(1) Thresholds shall be those that were operative for
federal tax year 2009; and
(2) Suspension in section 68(f) shall not be
operative for purposes of this chapter.
(d) Section 72 (with respect to annuities;
certain proceeds of endowment and life insurance contracts) of the Internal
Revenue Code shall be operative for purposes of this chapter and be interpreted
with due regard to section 235-7(a), except that the ten per cent additional
tax on early distributions from retirement plans in section 72(t) shall not be
operative for purposes of this chapter.
(e) Section 85 (with respect to unemployment
compensation) of the Internal Revenue Code shall be operative for purposes of
this chapter, except that section 85(c) shall not be operative for purposes of
this chapter.
(f) Section 108 (with respect to income from
discharge of indebtedness) of the Internal Revenue Code shall be operative for
purposes of this chapter, except that section 108(i) (relating to deferral and
ratable inclusion of income arising from business indebtedness discharged by
the reacquisition of a debt instrument) shall not be operative for purposes of
this chapter.
(g) Section 121 (with respect to exclusion of
gain from sale of principal residence) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that for the election under
section 121(f), a reference to section 1034 treatment means a reference to
section 235-2.4(n) in effect for taxable year 1997.
(h) Section 132 (with respect to certain
fringe benefits) of the Internal Revenue Code shall be operative for purposes
of this chapter, except that:
(1) The suspensions in section 132(f)(8) and
132(g)(2) shall not be operative for purposes of this chapter; and
(2) Section 132(n) shall not apply to United States
Department of Defense Homeowners Assistance Program payments authorized by the
American Recovery and Reinvestment Act of 2009.
(i) Section 162 (with respect to trade or
business expenses) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that sections 162(f)(2), (3), and (4) (all of
which relate to exceptions to the general rule, established in section
162(f)(1), that no deduction is allowed for the payment of fines or penalties)
shall not be operative for purposes of this chapter.
(j) Section 163 (with respect to interest) of
the Internal Revenue Code shall be operative for the purposes of this chapter,
except that the following provisions shall not be operative for the purposes of
this chapter:
(1) Section 163(d)(4)(B) (defining net investment
income to exclude dividends);
(2) Section 163(e)(5)(F) (suspension of applicable
high-yield discount obligation (AHYDO) rules);
(3) Section 163(h)(3)(F) (limiting mortgage
interest); and
(4) Section 163(i)(1) as it applies to debt
instruments issued after January 1, 2010 (defining AHYDO).
(k) Section 164 (with respect to taxes) of the
Internal Revenue Code shall be operative for the purposes of this chapter,
except that:
(1) Section 164(b)(6)(B) (limiting the deduction for
state and local taxes) shall not be operative for the purposes of this chapter;
(2) The deductions under section 164(a)(3) and (b)(5)
shall not be operative for corporate taxpayers and shall be operative only for
the following individual taxpayers:
(A) A taxpayer filing a single return or a
married person filing separately with a federal adjusted gross income of less
than $100,000;
(B) A taxpayer filing as a head of household
with a federal adjusted gross income of less than $150,000; and
(C) A taxpayer filing a joint return or as a
surviving spouse with a federal adjusted gross income of less than $200,000;
and
(3) Section 164(a)(3) shall not be operative for any
amounts for which the credit under section 235-55 has been claimed.
(l) Section 165 (with respect to losses) of
the Internal Revenue Code shall be operative for purposes of this chapter,
except that:
(1) The amount prescribed by section 165(h)(1)
(relating to the limitation per casualty) of the Internal Revenue Code shall be
a $100 limitation per casualty;
(2) Section 165(h)(3)(A) and (B) (both of which
relate to special rules for personal casualty gains and losses in federally
declared disasters) of the Internal Revenue Code shall not be operative for the
purposes of this chapter;
(3) Section 165(h)(5) (relating to the limitation on
the deductibility of personal casualty losses that are not attributable to
federally declared disasters) shall not be operative for purposes of this
chapter; and
(4) Section 165 as operative for this chapter shall
also apply to losses sustained from the sale of stocks or other interests
issued through the exercise of the stock options or warrants granted by a
qualified high technology business as defined in section 235-7.3.
(m) Section 168 (with respect to the
accelerated cost recovery system) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that sections 168(j) (relating
to property on Indian reservations), 168(k) (relating to the special allowance
for certain property acquired during the period specified therein), and 168(m)
(relating to the special allowance for certain reuse and recycling property) of
the Internal Revenue Code shall not be operative for purposes of this chapter.
(n) Section 172 (with respect to net operating
loss deductions) of the Internal Revenue Code shall be operative for purposes
of this chapter in the form that it existed as of December 31, 2019, and as
further provided in section 235-7(d).
(o) Section 179 (with respect to the election
to expense certain depreciable business assets) of the Internal Revenue Code
shall be operative for purposes of this chapter, except as provided in this
subsection:
(1) The aggregate cost provided in section 179(b)(1),
which may be taken into account under section 179(a) for any taxable year,
shall not exceed $25,000;
(2) The amount at which the reduction in limitation
provided in section 179(b)(2) begins shall exceed $200,000 for any taxable
year; and
(3) The following shall not be operative for purposes
of this chapter:
(A) Defining section 179 property to include
computer software in section 179(d)(1);
(B) Inflation adjustments in section
179(b)(5);
(C) Irrevocable election in section
179(c)(2); and
(D) Special rules for qualified disaster
assistance property in section 179(e).
(p) Section 198A (with respect to the
expensing of qualified disaster assistances expenses) of the Internal Revenue
Code shall not be operative for purposes of this chapter.
(q) Section 217 (with respect to moving
expenses) of the Internal Revenue Code shall be operative for purposes of this
chapter, except that the suspension in section 217(k) shall not be operative
for purposes of this chapter.
(r) Section 219 (with respect to retirement
savings) of the Internal Revenue Code shall be operative for the purpose of
this chapter. For the purpose of computing the limitation on the deduction for
active participants in certain pension plans for state income tax purposes,
adjusted gross income as used in section 219 as operative for this chapter
means federal adjusted gross income.
(s) Section 220 (with respect to medical
savings accounts) of the Internal Revenue Code shall be operative for the
purpose of this chapter, but only with respect to medical services accounts
that have been approved by the Secretary of the Treasury of the United States.
(t) Section 265 (with respect to expenses and
interest relating to tax-exempt income) of the Internal Revenue Code shall be
operative for purposes of this chapter; except that section 265(b)(3)(G) and
(7) shall not be operative and section 265 shall not apply to expenses for
royalties and other income derived from any patents, copyrights, and trade
secrets by an individual or a qualified high technology business as defined in
section 235-7.3. These expenses shall be deductible.
(u) Section 274 (with respect to the
disallowance of certain entertainment, etc., expenses) of the Internal Revenue
Code shall be operative for this chapter in the form that it existed as of
December 21, 2017.
(v) Section 280E (with respect to expenditures
in connection with the illegal sale of drugs) of the Internal Revenue Code
shall be operative for the purposes of this chapter, except that section 280E
shall not be operative with respect to the production and sale of medical
cannabis and manufactured cannabis products by dispensaries licensed under
chapter 329D and their subcontractors, as defined in section 329D-1.
(w) Section 382 (with respect to limitation on
net operating loss carryforwards and certain built-in losses following
ownership change) of the Internal Revenue Code shall be operative for the
purposes of this chapter, except that section 382(n) shall not be operative for
purposes of this chapter.
(x) Section 408A (with respect to Roth
Individual Retirement Accounts) of the Internal Revenue Code shall be operative
for the purposes of this chapter, except that section 408A(d)(3)(A)(iii) shall
not be operative for purposes of this chapter. For the purposes of determining
the aggregate amount of contributions to a Roth Individual Retirement Account
or qualified rollover contribution to a Roth Individual Retirement Account from
an individual retirement plan other than a Roth Individual Retirement Account,
adjusted gross income as used in section 408A as operative for this chapter
means federal adjusted gross income.
(y) In administering the provisions of
sections 410 to 417 (with respect to special rules relating to pensions, profit
sharing, stock bonus plans, etc.), sections 418 to 418E (with respect to
special rules for multiemployer plans), and sections 419 and 419A (with respect
to treatment of welfare benefit funds) of the Internal Revenue Code, the
department of taxation shall adopt rules under chapter 91 relating to the
specific requirements under those sections and to other administrative
requirements under those sections as may be necessary for the efficient
administration of sections 410 to 419A.
In administering sections 401 to 419A (with
respect to deferred compensation) of the Internal Revenue Code, Public Law
93-406, section 1017(i), shall be operative for the purposes of this chapter.
In administering section 402 (with respect to
the taxability of beneficiary of employees' trust) of the Internal Revenue
Code, the tax imposed on lump sum distributions by section 402(e) of the
Internal Revenue Code shall be operative for the purposes of this chapter and
the tax imposed therein is hereby imposed by this chapter at the rate
determined under this chapter.
(z) In administering section 403 (with respect
to taxation of employee annuities) of the Internal Revenue Code, any funds that
represent pre-tax employee deferrals or contributions that are distributed from
the annuity and used solely to obtain retirement credits under the state
employees' retirement system shall not be treated as a rollover for purposes of
section 403(b)(8)(A) of the Internal Revenue Code, and those funds shall be
subject to income tax under this chapter.
(aa) Section 451 (which provides general rules
for taxable year of inclusion) of the Internal Revenue Code shall be operative,
except that section 451(k)(3) and (6), as it relates to a qualified electric
utility, shall not be operative for purposes of this chapter.
(bb) In administering section 457 (with
respect to compensation plans of state and local governments and tax-exempt
organizations) of the Internal Revenue Code, any funds that represent pre-tax
employee deferrals or contributions that are distributed from the deferred
compensation plan and used solely to obtain retirement credits under the state
employees' retirement system shall not be treated as a rollover for purposes of
section 457(e)(16)(A) of the Internal Revenue Code and those funds shall be subject
to income tax under this chapter.
(cc) Section 461 (with respect to the general
rule for taxable year of deduction) of the Internal Revenue Code, shall be
operative for purposes of this chapter in the form that it existed as of
December 31, 2019.
(dd) Section 468B (with respect to special
rules for designated settlement funds) of the Internal Revenue Code shall be
operative for the purposes of this chapter and the tax imposed therein is
hereby imposed by this chapter at a rate equal to the maximum rate in effect
for the taxable year imposed on estates and trusts under section 235-51.
(ee) Section 469 (with respect to passive
activities and credits limited) of the Internal Revenue Code shall be operative
for the purposes of this chapter. For the purpose of computing the offset for
rental real estate activities for state income tax purposes, adjusted gross
income as used in section 469 as operative for this chapter means federal
adjusted gross income.
(ff) Sections 512 to 514 (with respect to
taxation of business income of certain exempt organizations) of the Internal
Revenue Code shall be operative for the purposes of this chapter as provided in
this subsection.
"Unrelated business taxable income"
means the same as in the Internal Revenue Code, except that:
(1) In the computation of unrelated business taxable
income, sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall
apply;
(2) In the determination of the net operating loss
deduction there shall not be taken into account any amount of income or
deduction that is excluded in computing the unrelated business taxable income;
and
(3) Unrelated business taxable income shall not
include any income from a legal service plan.
For a person described in section 401 or 501 of
the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by
section 235-51 or 235-71 shall be imposed upon the person's unrelated business
taxable income.
(gg) Section 521 (with respect to
cooperatives) and subchapter T (sections 1381 to 1388, with respect to
cooperatives and their patrons) of the Internal Revenue Code shall be operative
for the purposes of this chapter as to any cooperative fully meeting the
requirements of section 421-23, except that Internal Revenue Code section 521
cooperatives need not be organized in Hawaii.
(hh) Sections 527 (with respect to political
organizations) and 528 (with respect to certain homeowners associations) of the
Internal Revenue Code shall be operative for the purposes of this chapter and
the taxes imposed in each section are hereby imposed by this chapter at the
rates determined under section 235-71.
(ii) Section 529 (with respect to qualified
tuition programs) shall be operative for the purposes of this chapter, except
that sections 529(c)(6), 529(c)(7), and 529(e)(3)(A)(iii) shall not be
operative.
(jj) Section 529A (with respect to qualified
ABLE programs) shall be operative for the purposes of this chapter, except that
section 529A(c)(3) (with respect to additional tax for distributions not used
for disability expenses) shall not be operative.
(kk) Section 530 (with respect to Coverdell education savings accounts) of the
Internal Revenue Code shall be operative for the purposes of this chapter. For
the purpose of determining the maximum amount that a contributor could make to
an education individual retirement account for state income tax purposes,
modified adjusted gross income as used in section 530 as operative for this
chapter means federal modified adjusted gross income as defined in section 530.