Bill > HB116

This bill addresses corporate tax avoidance by requiring corporations to report income from all foreign subsidiaries to the state of Hawaii, closing tax loopholes that currently allow businesses to reduce their tax liability by shifting earnings to offshore locations with minimal or no taxes. Specifically, the bill mandates that corporations file a copy of federal Internal Revenue form 5471, which tracks income from foreign subsidiaries, with the Hawaii Department of Taxation at the same time they file with the Internal Revenue Service. The legislation would also require that income from all subsidiaries be apportioned as business income using the state's existing apportionment formula, a method known as "worldwide combined reporting" which is considered the most effective way to prevent tax avoidance. According to a 2019 report, this approach could potentially prevent the state from losing an estimated $38 million annually in tax revenue. The bill is set to take effect on January 1, 2026, giving corporations time to prepare for the new reporting requirements.

Business and Industry

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=HB&billnumber=116&year=2026