May 14, 2018
From KPMG TaxWatch
Senate Bill 2821, Hawaii’s conformity bill, has been sent to Governor Ige for signature. Much of the bill focuses on Hawaii’s conformity to federal estate tax laws changes, but the legislation also addresses general conformity to the Internal Revenue Code for corporate and individual income tax purposes. Specifically, Senate Bill 2821 provides that for all taxable years beginning after December 31, 2017, except as provided in Hawaii Rev. Stat. section 235-2.35, Internal Revenue Code means Subtitle A, Chapter 1 of the federal Internal Revenue Code of 1986, as amended as of February 9, 2018. The statute addressing the date of conformity (Hawaii Rev. Stat. section 235-2.3) also provides, as it has historically, that certain Internal Revenue Code subchapters, parts of subchapters, sections, subsections, and parts of subsections are not operative for Hawaii purposes. This list of inoperative provisions is revised under Senate Bill 2821 to include: (A) Section 91, with respect to certain foreign branch losses; (B) Section 199A, with respect to the deduction for qualified business income; (C) Section 250, which addresses foreign-derived intangible income and global intangible low-taxed income; (D) Section 267A, with respect to certain related party amounts paid or accrued in hybrid transactions or with hybrid entities; and (E) Subchapter Z (sections 1400Z-1 to 1400Z-2), with respect to opportunity zones. Another Hawaii statute, Hawaii Rev. Stat. section 235-2.4, has also been revised to specifically address the operation of certain Internal Revenue Code provisions found in section 63 to 530. There are many changes to this section that are related to tax reform and must be considered by individual and corporate taxpayers. Finally, Senate Bill 2821 addresses the state’s conformity to the new federal partnership audit rules. The bill provides that several federal code sections related to partnership audits will be operative for Hawaii purposes, while others will not or must be modified. The bill does provide that partnerships with 100 or fewer members that opt out of the new rules for federal tax purposes must make the same election for state purposes. Please stay tuned to TWIST for more conformity updates.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.