The proposed changes under HB149 include requiring corporations to report the income from all foreign subsidiaries similarly to federal requirements. This would require corporations to include these foreign earnings in their state tax calculations, thereby potentially increasing state revenue significantly. The bill also applies Hawaii's apportionment formula to appropriately determine the share of profits that will be taxed within the state, aligning local practice more closely with federal standards.
Summary
House Bill 149 aims to address tax haven abuse in Hawaii by reforming how corporate taxes are assessed. The legislation highlights the issue of corporations shifting profits to foreign subsidiaries in low or no tax jurisdictions to minimize their tax obligations. Recent reports indicate that Hawaii loses significant revenue—approximately $38 million annually—due to outdated tax laws that fail to mandate worldwide combined reporting of corporate income. The bill seeks to rectify this by implementing a more fair and effective system for calculating corporate tax liability.
Contention
While the intent of HB149 is to enhance state revenue and close tax loopholes exploited by corporations, there may be opposition from businesses that could argue that this measure increases their tax burden. Proponents assert that the increased revenue is essential for funding state services and infrastructure, while critics may view the bill as an additional challenge that could hinder business operations, especially for companies with extensive foreign dealings.
Businesses: nonprofit corporations; ability of a hospital to convert from a county hospital to a nonprofit hospital; allow. Amends sec. 305a of 1987 PA 230 (MCL 331.1305a).