IRC Conformity Bill Goes to Hawaii Governor

Hawaii’s Internal Revenue Code (IRC) tie-in date would move to February 9, 2018, under a bill passed by the Legislature. The date change would apply to corporate and personal income taxes for tax years beginning after 2017. However, the bill would decouple from many federal provisions.

The bill awaits the governor’s signature.

Current IRC Conformity Date

The current IRC conformity date is December 31, 2016, for tax years beginning after 2016.

Inoperative Federal Tax Provisions

The bill would make the following IRC provisions inoperative for Hawaii purposes:

  • §67(g), suspending miscellaneous itemized deductions;
  • §68(f), temporarily repealing the overall limitation on itemized deductions;
  • §91, relating to certain foreign branch losses;
  • §132(f)(8), suspending the qualified bicycle commuting reimbursements exclusion;
  • §162(f)(2), (3), and (4), providing exceptions to certain nondeductible fines and penalties;
  • §163(h)(3)(F), limiting itemized deductions for home mortgage interest;
  • §164(b)(6)(B), limiting deductions for state and local taxes;
  • §165(h)(5), limiting the deductibility of personal casualty losses that are not attributable to federally declared disasters;
  • §199A, relating to the deduction for qualified business income;
  • §217(k), suspending moving expense deductions;
  • §250, relating to foreign-derived intangible income and global intangible low-taxed income;
  • §267A, relating to certain related party amounts paid or accrued in hybrid transactions or with hybrid entities; and
  • §§1400Z-1 to 1400Z-2, relating to opportunity zones.

In addition, the bill would not adopt Tax Cuts and Jobs Act changes made to IRC §274. The federal law eliminates business expense deductions for most entertainment costs and commuting benefits after 2017. It also eliminates business expense deductions for some employer-provided meals after 2025.

Partnerships

The bill would generally conform to IRC §§6221, 6222, 6223, 6225, and 6226, relating to partnership audits. Partnerships that elect under IRC §6221(b) to opt out of the new rules for federal purposes would have to make the same election for state purposes.

The bill would also generally adopt the definitions and special rules regarding partnerships in IRC §6241. However, it would not adopt the definitions in:

  • §6241(1) – partnership;
  • §6241(3) – return due date; and
  • §6241(5) – partnerships having principal place of business outside United States.

Subscribers can view the text of the bill as passed by the Legislature at https://www.capitol.hawaii.gov/session2018/bills/SB2821_CD1_.pdf.

S.B. 2821, as passed by the Hawaii Legislature on April 27, 2018

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