HB 520: RELATING TO TAXATION.

A BILL FOR AN ACT

RELATING TO TAXATION.

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

     SECTION 1.  The legislature finds that a movement to exclude tips from income taxation is increasing at the federal level.  The legislature believes that a similar exclusion at the state level would help local small businesses attract qualified employees.

     Accordingly, the purpose of this Act is to exclude from state income taxes the gross income, adjusted gross income, and taxable income derived from tips received by employees.

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-     Tips; tax exclusion.  (a)  There shall be excluded from gross income, adjusted gross income, and taxable income tips received during the taxable year that are included on the tipped employee's statements furnished to the employer for purposes of title 26 United States Code section 3102.

     (b)  The director of taxation:

     (1)  Shall prepare forms as may be necessary for the purposes of this section;

     (2)  May require evidence from any taxpayer; and

     (3)  Adopt rules pursuant to chapter 91 necessary for the purposes of this section.

     (c)  For the purposes of this section:

     "Tips" means gratuities or voluntary monetary contributions received by an employee from a guest, patron, or customer and that the employee reports to the employer for purposes of title 26 United States Code section 3102.

     "Tipped employee" means an employee working in an occupation in which the employee receives more than $30 a month in gratuities."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025.

Report Title:

Small Business Caucus; Income Tax; Tips; Tipped Employees

Description:

Excludes from state income taxes the gross income, adjusted gross income, and taxable income derived from tips received by employees.

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