HB 476: Capital Gains Tax

A BILL FOR AN ACT

RELATING TO CAPITAL GAINS TAX.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

     (1)  The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

          (A)  The taxable income reduced by the amount of net capital gain, or

          (B)  The amount of taxable income taxed at a rate below [7.25]      per cent, plus

     (2)  A tax of [7.25]      per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

     This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

     SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-71.5  Alternative tax for corporations.  Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section.  If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

     (1)  A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

     (2)  The sum of:

          (A)  3.08 per cent of the lesser of:

              (i)  The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

             (ii)  The net capital gain for the taxable year, plus

          (B)  [4]      per cent of the excess (if any) of:

              (i)  The net capital gain for the taxable year, over

             (ii)  The amount of the net capital gain taken into account under subparagraph (A)."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2024.

Report Title:

Capital Gains Tax

Description:

Amends the capital gains tax rate for individuals, estates, and trusts.  Amends the alternative capital gains tax for corporations.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO CAPITAL GAINS TAX.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

     (1)  The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

          (A)  The taxable income reduced by the amount of net capital gain, or

          (B)  The amount of taxable income taxed at a rate below [7.25]      per cent, plus

     (2)  A tax of [7.25]      per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

     This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

     SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-71.5  Alternative tax for corporations.  Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section.  If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

     (1)  A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

     (2)  The sum of:

          (A)  3.08 per cent of the lesser of:

              (i)  The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

             (ii)  The net capital gain for the taxable year, plus

          (B)  [4]      per cent of the excess (if any) of:

              (i)  The net capital gain for the taxable year, over

             (ii)  The amount of the net capital gain taken into account under subparagraph (A)."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Capital Gains Tax

Description:

Amends the capital gains tax rate for individuals, estates, and trusts.  Amends the alternative capital gains tax for corporations.  Effective 7/1/3000.  (HD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO CAPITAL GAINS TAX.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

     (1)  The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

          (A)  The taxable income reduced by the amount of net capital gain, or

          (B)  The amount of taxable income taxed at a rate below [7.25] nine per cent, plus

     (2)  A tax of [7.25] nine per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

     This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

     SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-71.5  Alternative tax for corporations.  Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section.  If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

     (1)  A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

     (2)  The sum of:

          (A)  3.08 per cent of the lesser of:

              (i)  The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

             (ii)  The net capital gain for the taxable year, plus

          (B)  [4] Five per cent of the excess (if any) of:

              (i)  The net capital gain for the taxable year, over

             (ii)  The amount of the net capital gain taken into account under subparagraph (A)."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Capital Gains Tax; Increase

Description:

Increases the capital gains tax rate for individuals, estates, and trusts to nine percent. Increases the alternative capital gains tax for corporations to five percent.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to capital gains tax.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

     "(f)  If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

     (1)  The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

          (A)  The taxable income reduced by the amount of net capital gain, or

          (B)  The amount of taxable income taxed at a rate below [7.25] nine per cent, plus

     (2)  A tax of [7.25] nine per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

     This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

     SECTION 2.  Section 235-71.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-71.5  Alternative tax for corporations.  Section 1201 (with respect to alternative tax for corporations) of the Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be operative for the purposes of this chapter and shall be applied as set forth in this section.  If for any taxable year a corporation, regulated investment company, or real estate investment trust has a net capital gain, then, in lieu of the tax imposed by section 235-71, there is hereby imposed a tax (if such tax is less than the tax imposed under section 235-71) which shall consist of the sum of:

     (1)  A tax computed on the taxable income reduced by the amount of the net capital gain, at the rates and in the manner as if this section had not been enacted, plus

     (2)  The sum of:

          (A)  3.08 per cent of the lesser of:

              (i)  The net capital gain determined by including only the gain or loss which is properly taken into account for the portion of the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

             (ii)  The net capital gain for the taxable year, plus

          (B)  [4] Five per cent of the excess (if any) of:

              (i)  The net capital gain for the taxable year, over

             (ii)  The amount of the net capital gain taken into account under subparagraph (A)."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2025.

Report Title:

Capital Gains Tax; Income Tax; Increase

Description:

Increases the capital gains tax threshold to nine percent. Increases the alternative capital gains tax for corporations to five percent.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 1742

Honolulu, Hawaii

RE:    H.B. No. 476

       H.D. 2

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B. No. 476, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO CAPITAL GAINS TAX,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the capital gains tax.

     More specifically, this measure:

     (1)  Amends the capital gains tax rate for individuals, estates, and trusts from 7.25 per cent to an unspecified percentage; and

     (2)  Amends the alternative capital gains tax rate for corporations from four per cent to an unspecified percentage.

     Your Committee received testimony in support of this measure from Activities and Attractions Association of Hawaii, Inc.; Democratic Party of Hawaii Education Caucus; Hawaii Alliance for Progressive Action; Hawaii Appleseed Center for Law and Economic Justice; Hawaii Children's Action Network Speaks!; Hawaii State AFL-CIO; League of Women Voters of Hawaii; and fifteen individuals.

     Your Committee received testimony in opposition to this measure from The Chamber of Commerce Hawaii, Grassroot Institute of Hawaii, Hawaii Association of REALTORS, Hawaii Patriot Republicans, Maui Chamber of Commerce, and numerous individuals.

     Your Committee received comments on this measure from the Department of Taxation, Hawaii Food Industry Association, and Tax Foundation of Hawaii.

     Your Committee finds that the current tax code allows Hawaii taxpayers to either pay the top marginal rate of their income tax bracket or the capital gains rate of 7.25 per cent, whichever is lesser on capital gains.  As a result of Act 41, Session Laws of Hawaii 2024, the increases to the income tax brackets and decreases to the income tax rates allow taxpayers who earn less than $150,000 to pay at the marginal rate, which will be lower than the current 7.25 per cent capital gains tax rate.  Therefore, any increases to the capital gains tax will not have a meaningful effect on the tax rates for working families, thus allaying any concerns that the measure would negatively impact working families.

     If a Committee on Conference is convened on this measure, your Committee respectfully requests that the Committee on Conference consider amending the capital gains tax rate for individuals, estates, and trusts from 7.25 per cent to eight per cent.

     Your Committee has amended this measure by:

     (1)  Changing the effective date to July 1, 2050, to facilitate further discussion on the measure; and

     (2)  Specifying the taxable years to which the measure applies.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 476, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 476, H.D. 2, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO.  1166

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 476

      H.D. 2

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 476, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CAPITAL GAINS TAX,"

begs leave to report as follows:

     The purpose of this measure is to increase the capital gains tax rate for individuals, estates, and trusts to nine percent and the alternative capital gains tax rate for corporations to five percent.

     Your Committee received testimony in support of this measure from the Hawaiʻi Health & Harm Reduction Center; Hawaii Appleseed Center for Law & Economic Justice; Hawaii State AFL-CIO; and two individuals.  Your Committee received testimony in opposition to this measure from the Hawaiʻi Association of REALTORS; Grassroot Institute of Hawaii; Hawaiian Islands Republican Women; and numerous individuals.  Your Committee received comments on this measure from the Department of Taxation; Hawaiʻi Children's Action Network Speaks!; Democratic Party of Hawaiʻi Education Caucus; and Tax Foundation of Hawaii.

     Your Committee has amended this measure by changing the capital gains tax rate for individuals, estates, and trusts and alternative capital gains tax rate for corporations to unspecified percentages.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 476, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 476, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  498

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 476

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Economic Development & Technology, to which was referred H.B. No. 476 entitled:

"A BILL FOR AN ACT RELATING TO CAPITAL GAINS TAX,"

begs leave to report as follows:

     The purpose of this measure is to increase the capital gains tax rate for individuals, estates, and trusts to nine percent and the alternative capital gains tax rate for corporations to five percent.

     Your Committee received testimony in support of this measure from IATSE Local 665; Hawaii Appleseed Center for Law & Economic Justice; Hawaii State AFL-CIO; Education Caucus of the Democratic Party of Hawaiʻi; and one individual.  Your Committee received testimony in opposition to this measure from the Grassroot Institute of Hawaii; Hawaiʻi Association of REALTORS; and six individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that eighty percent of all long-term capital gains in the State are earned by the wealthiest group of taxpayers, who have incomes greater than $400,000, exacerbating the State's income inequality.  This measure addresses this issue by increasing the capital gains tax rate to nine percent and the alternative capital gains tax for corporations to five percent.

     Your Committee has amended this measure by changing the effective date to July 1, 3000, to encourage further discussion.

     Your Committee notes, as a reference for potential fiscal impact of this measure, estimates made in 2021 of revenue that would be generated by the same capital gains tax rate increases proposed by this measure are as follows:

     (1)  $53,700,000 for fiscal year 2025;

     (2)  $55,500,000 for fiscal year 2026; and

     (3)  $57,000,000 for fiscal year 2027.

     As affirmed by the record of votes of the members of your Committee on Economic Development & Technology that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 476, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 476, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Development & Technology,