HRS § 237-23.5 — Related entities; common paymaster; certain exempt transactions


§237-23.5 Related entities; common
paymaster; certain exempt transactions. (a) This chapter shall not apply
to amounts received, charged, or attributable to services furnished by one
related entity to another related entity or to imputed or stated interest
attributable to loans, advances, or use of capital between related entities.
As used in this subsection:
"Related entities" means:
(1) An affiliated group of corporations within the
meaning of section 1504 (with respect to affiliated group defined) of the
federal Internal Revenue Code of 1986, as amended;
(2) A controlled group of corporations within the
meaning of section 1563 (with respect to definitions and special rules) of the
federal Internal Revenue Code of 1986, as amended;
(3) Those entities connected through ownership of at
least eighty per cent of the total value and at least eighty per cent of the
total voting power of each such entity (or combination thereof), including
partnerships, associations, trusts, S corporations, nonprofit corporations,
limited liability partnerships, or limited liability companies; and
(4) Any group or combination of the entities
described in paragraph (3) constituting a unitary business for income tax
purposes;
whether or not the entity is located within or
without the State or licensed under this chapter.
"Services" means legal and accounting
services, the use of computer software and hardware, information technology
services, database management, and those managerial and administrative services
performed by an employee, officer, partner, trustee, sole proprietor, member,
or manager in the person's capacity as an employee, officer, partner, trustee,
sole proprietor, member, or manager of one of the related entities and shall
include overhead costs attributable to those services.
(b) This chapter shall not apply to amounts
received by common paymasters which are disbursed as remuneration to employees
of two or more related corporations where the common paymaster is making such
remunerations on behalf of such corporations. Such amounts received or
disbursed by the common paymaster shall include payments of payroll taxes and
employee benefits which the common paymaster is making on behalf of related
corporations and which payments are related to the employees being
remunerated. The definitions of related corporations, common paymaster,
multiple common paymasters, and concurrent employment contained in 26 Code of
Federal Regulations, section 31.3121(s)-1(b) are incorporated and made a part
of this subsection.
To the extent not covered by subsection (a),
the exemption allowed by this subsection shall not apply to the cost of
services, or reimbursements of such cost by one corporation to another
corporation, of an employee disbursing the amounts exempted under this
subsection. Each related corporation using a common paymaster or multiple
common paymaster shall keep separate payroll records and other documentation
required to prove the existence of concurrent employment. Such records and
documents shall be available for inspection by the director of taxation during
normal business hours.