Bill > SB314

This bill addresses corporate tax avoidance by requiring corporations to report income from all foreign subsidiaries and close tax loopholes that currently allow companies to reduce their state tax liability. Specifically, corporations will now be mandated to file a copy of federal form 5471 (a form used to report information about foreign corporations) with Hawaii's department of taxation at the same time they file with the Internal Revenue Service. All income from a corporation's subsidiaries will be apportioned as business income using the state's existing apportionment formula. The legislative findings indicate that the state is losing an estimated $38 million annually due to current tax reporting practices, and worldwide combined reporting is considered the most effective method for addressing tax avoidance. The bill aims to make corporate tax calculations more fair and effective by ensuring that all income, including that from foreign subsidiaries in low or no-tax jurisdictions, is properly reported and taxed. The new requirements will take effect on January 1, 2026, giving corporations time to adjust their financial reporting processes.

Business and Industry

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=SB&billnumber=314&year=2026