News Briefings - State Taxes

The following article was taken from the 5/12/2008 issue of State & Local Taxes Weekly.

5/12/08 -- Hawaii enacts one-time general income tax credit for 2008

by Saleem A. Shareef, Esq. (RIA)

HAWAII has enacted legislation allowing each resident individual taxpayer a refundable one-time, constitutionally mandated general income tax credit for the 2008 tax year. Each eligible taxpayer can claim a general income tax credit of $1 multiplied by the number of qualified exemptions to which the taxpayer is entitled. Multiple exemptions cannot be granted for the credit because of age or deficiencies in vision, hearing, or other disability. The Constitution of the State of Hawaii requires that whenever the state general fund balance at the close of each of two successive fiscal years exceeds 5% of general fund revenues for each of the two fiscal years, the legislature in the next regular session must provide for a tax refund or tax credit to taxpayers. (L. 2008, S2153 (Act 58), eff. 05/01/2008 and applicable to the taxable year 2008)

Eligibility. An eligible taxpayer must be a resident who files an individual income tax return for the taxable year 2008 and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii individual income tax purposes. The taxpayer must be a resident of Hawaii for at least nine months regardless of whether or not the resident was physically in the state for that period. An eligible taxpayer includes a resident individual who has no income or no taxable income and who is not claimed or is not otherwise eligible to be claimed as a dependent by a taxpayer for federal or Hawaii individual income tax purposes. However, the credit is not available to: (1) any person who has been convicted of a felony, committed to prison, and physically confined for the full taxable year; (2) any person who would otherwise be eligible to be claimed as a dependent, but who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or (3) any misdemeanant who has been committed to jail and physically confined for the full taxable year.

Excess credits. The credit claimed by a resident taxpayer is deductible from the taxpayer's individual income tax liability for the taxable year 2008. However, if the tax credit claimed by a taxpayer exceeds the amount of income tax payment due, the excess of credits over payments due will be refunded to the taxpayer. A credit properly claimed by a resident individual who has no income tax liability will be paid to the resident individual.

Filing requirement. All claims for tax credits, including any amended claims, must be filed on or before the end of the 12th month following the close of the taxable year for which the credits can be claimed. Failure to comply with this filing requirement constitutes a waiver of the right to claim the credit.

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