Hawaii 2025 Regular Session

Hawaii House Bill HB759 Compare Versions

Only one version of the bill is available at this time.

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1	1	HOUSE OF REPRESENTATIVES H.B. NO. 759 THIRTY-THIRD LEGISLATURE, 2025 STATE OF HAWAII A BILL FOR AN ACT relating to tax haven abuse. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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3	3	HOUSE OF REPRESENTATIVES H.B. NO. 759
4	4	THIRTY-THIRD LEGISLATURE, 2025
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7	7	HOUSE OF REPRESENTATIVES
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9	9	H.B. NO.
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13	13	THIRTY-THIRD LEGISLATURE, 2025
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17	17	STATE OF HAWAII
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31	31	A BILL FOR AN ACT
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37	37	relating to tax haven abuse.
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43	43	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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47	47	PART I SECTION 1. The legislature finds that the State's tax revenue showed robust growth, starting in the last quarter of fiscal year 2020, as Hawaii's economy recovered from the effects of the COVID-19 pandemic. Although tax collections totaled $10,440,000,000 in fiscal year 2023, a relatively marginal decrease from $10,460,000 in fiscal year 2022, the legislature finds that additional sources of state revenue should be considered. The legislature further finds that corporations use complicated schemes to shift domestic earnings to subsidiaries incorporated in offshore tax havens, countries with minimal or no taxes, in order to reduce their state and federal income tax liability by billions of dollars in certain cases. A January 2019 report by the Institute on Taxation and Economic Policy and the United States Public Interest Research Group estimated that the State is losing $38,000,000 annually by not updating tax laws to mandate worldwide combined reporting of corporate income. Worldwide combined reporting is considered the gold standard for closing tax loopholes, and the report found it would raise nearly three times more revenue than other options to address revenue currently lost to tax avoidance. The purpose of this part is to ensure transparency in the manner in which corporations conduct business in the State by: (1) Changing the manner in which corporate tax is determined in the State to a more fair and effective form of calculating corporate tax liability through: (A) Requiring corporations to include in their income the income of all foreign subsidiaries to the State, as is already required by the Internal Revenue Service; and (B) Applying the State's apportionment formula to determine the share of reported profits subject to the appropriate tax, to be deposited into the state general fund; and (2) Requiring corporations to report all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states. SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows: "§235-A Corporation income reporting; foreign subsidiaries. (a) Every corporation subject to the tax imposed under this chapter shall report all income from foreign subsidiaries by filing a copy of federal Internal Revenue form 5471 with the department of taxation at the same time as such forms must be filed with the Internal Revenue Service. (b) All income from a corporation's foreign subsidiaries shall be apportioned as business income pursuant to section 235-29. (c) The revenues generated from the tax imposed on the business income apportioned pursuant to subsection (b) shall be deposited into the general fund for the purposes of funding critical public services. §235-B Corporation income; state-by-state reporting . (a) Every corporation subject to the tax imposed under this chapter shall submit to the department of taxation a report on all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states at the same time as the forms required pursuant to section 235-A must be filed with the Internal Revenue Service." PART II SECTION 3. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§231- Corporate tax law task force. (a) There is established within the department of taxation for administrative purposes a corporate tax law task force to annually review the State's corporate tax laws and recommend updates to close corporate tax loopholes. (b) The task force shall include the following: (1) The director of taxation or the director's designee, who shall serve as chairperson of the working group; and (2) The chairperson of the council on revenues or the chairperson's designee. (c) In addition to the members designated by subsection (b), the task force may invite any other appropriate person to join the working group. (d) Members of the task force shall serve without compensation. (e) In reviewing the State's corporate tax laws, the task force shall: (1) Determine what income generated by a corporation, regardless of the corporation's physical presence in the State, may be taxed in accordance with state corporate tax laws; and (2) Review new or amended federal corporate tax laws and make recommendations to amend state corporate tax laws to align with federal laws. (f) The task force shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of each regular session beginning with the regular session of 2026." PART III SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act. SECTION 5. New statutory material is underscored. SECTION 6. This Act shall take effect upon its approval; provided that section 2 shall take effect on January 1, 2026. INTRODUCED BY: _____________________________
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49	49	PART I
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51	51	SECTION 1. The legislature finds that the State's tax revenue showed robust growth, starting in the last quarter of fiscal year 2020, as Hawaii's economy recovered from the effects of the COVID-19 pandemic. Although tax collections totaled $10,440,000,000 in fiscal year 2023, a relatively marginal decrease from $10,460,000 in fiscal year 2022, the legislature finds that additional sources of state revenue should be considered.
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53	53	The legislature further finds that corporations use complicated schemes to shift domestic earnings to subsidiaries incorporated in offshore tax havens, countries with minimal or no taxes, in order to reduce their state and federal income tax liability by billions of dollars in certain cases. A January 2019 report by the Institute on Taxation and Economic Policy and the United States Public Interest Research Group estimated that the State is losing $38,000,000 annually by not updating tax laws to mandate worldwide combined reporting of corporate income. Worldwide combined reporting is considered the gold standard for closing tax loopholes, and the report found it would raise nearly three times more revenue than other options to address revenue currently lost to tax avoidance.
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55	55	The purpose of this part is to ensure transparency in the manner in which corporations conduct business in the State by:
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57	57	(1) Changing the manner in which corporate tax is determined in the State to a more fair and effective form of calculating corporate tax liability through:
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59	59	(A) Requiring corporations to include in their income the income of all foreign subsidiaries to the State, as is already required by the Internal Revenue Service; and
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61	61	(B) Applying the State's apportionment formula to determine the share of reported profits subject to the appropriate tax, to be deposited into the state general fund; and
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63	63	(2) Requiring corporations to report all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states.
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65	65	SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:
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67	67	"§235-A Corporation income reporting; foreign subsidiaries. (a) Every corporation subject to the tax imposed under this chapter shall report all income from foreign subsidiaries by filing a copy of federal Internal Revenue form 5471 with the department of taxation at the same time as such forms must be filed with the Internal Revenue Service.
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69	69	(b) All income from a corporation's foreign subsidiaries shall be apportioned as business income pursuant to section 235-29.
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71	71	(c) The revenues generated from the tax imposed on the business income apportioned pursuant to subsection (b) shall be deposited into the general fund for the purposes of funding critical public services.
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73	73	§235-B Corporation income; state-by-state reporting . (a) Every corporation subject to the tax imposed under this chapter shall submit to the department of taxation a report on all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states at the same time as the forms required pursuant to section 235-A must be filed with the Internal Revenue Service."
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75	75	PART II
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77	77	SECTION 3. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
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79	79	"§231- Corporate tax law task force. (a) There is established within the department of taxation for administrative purposes a corporate tax law task force to annually review the State's corporate tax laws and recommend updates to close corporate tax loopholes.
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81	81	(b) The task force shall include the following:
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83	83	(1) The director of taxation or the director's designee, who shall serve as chairperson of the working group; and
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85	85	(2) The chairperson of the council on revenues or the chairperson's designee.
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87	87	(c) In addition to the members designated by subsection (b), the task force may invite any other appropriate person to join the working group.
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89	89	(d) Members of the task force shall serve without compensation.
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91	91	(e) In reviewing the State's corporate tax laws, the task force shall:
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93	93	(1) Determine what income generated by a corporation, regardless of the corporation's physical presence in the State, may be taxed in accordance with state corporate tax laws; and
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95	95	(2) Review new or amended federal corporate tax laws and make recommendations to amend state corporate tax laws to align with federal laws.
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97	97	(f) The task force shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of each regular session beginning with the regular session of 2026."
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99	99	PART III
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101	101	SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
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103	103	SECTION 5. New statutory material is underscored.
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105	105	SECTION 6. This Act shall take effect upon its approval; provided that section 2 shall take effect on January 1, 2026.
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109	109	INTRODUCED BY: _____________________________
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111	111	INTRODUCED BY:
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113	113	_____________________________
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119	119	Report Title: Taxation; Corporations; Combined Reporting; State-by-state Reporting; Department of Taxation; Corporate Tax Law Task Force Description: Part I: Effective 1/1/2026, requires corporations to include in their income the income of all foreign subsidiaries to the State; applies the State's apportionment formula to determine the share of reported profits subject to the appropriate tax, which shall be deposited into the state general fund; and requires corporations to report all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states. Part II: Establishes within DOTAX a Corporate Tax Law Task Force to annually review the State's corporate tax laws and recommend updates to close tax loopholes. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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125	125	Report Title:
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127	127	Taxation; Corporations; Combined Reporting; State-by-state Reporting; Department of Taxation; Corporate Tax Law Task Force
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131	131	Description:
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133	133	Part I: Effective 1/1/2026, requires corporations to include in their income the income of all foreign subsidiaries to the State; applies the State's apportionment formula to determine the share of reported profits subject to the appropriate tax, which shall be deposited into the state general fund; and requires corporations to report all profits, losses, revenues, and inter-company transactions made and all taxes paid in other states. Part II: Establishes within DOTAX a Corporate Tax Law Task Force to annually review the State's corporate tax laws and recommend updates to close tax loopholes.
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141	141	The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.