Bill > HCR189

This concurrent resolution requests the Department of Taxation to conduct a thorough study of how corporations report their income, specifically examining how income earned by their foreign subsidiaries is treated for tax purposes, in order to help the state plan its long-term finances. The resolution acknowledges that the state relies on corporate income tax for public services and that current tax systems often start with federal income before state adjustments. It highlights that different states use various methods for reporting corporate income, such as "separate entity reporting" (treating each company individually), "water's-edge combined reporting" (combining income from domestic and certain foreign operations), and "worldwide combined reporting" (combining income from all global operations), each with different effects on revenue and business competitiveness. The study will assess the revenue generated from corporations with foreign subsidiaries, evaluate the potential financial impacts of these different reporting models, analyze how they interact with Hawaii's current tax allocation methods (apportionment methodology), consider administrative challenges and costs, compare approaches used by other states, and identify any data or implementation issues. The findings are to be reported to the Legislature by early 2027.