Bill > HB1146

This bill modifies Hawaii's tax law regarding pass-through entities (businesses like partnerships and S-corporations where business income "passes through" to be taxed at the individual owner level) by requiring qualified members to adjust their taxable income to include their share of taxes paid by an electing pass-through entity, starting in tax years after December 31, 2024. Specifically, the bill amends Section 235-51.5 of Hawaii Revised Statutes to mandate that when a qualified member claims a tax credit for taxes paid by their pass-through entity, they must add the entity's tax payment amount to their own taxable income. This means that while members can still claim a credit for taxes paid by the entity, they must also report those tax payments as income, effectively neutralizing the potential tax benefit. The change aims to ensure that pass-through entity tax credits are applied more precisely and prevent potential tax advantages that might arise from how these credits are currently treated.

Budget and Finance

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=HB&billnumber=1146&year=2025