H.B. 2239 Summary

• Establishes Dependent Care Flexible Spending Accounts (FSAs) allowing all Hawaii working taxpayers to use pre-tax dollars for eligible dependent care expenses.

• Sets annual contribution limits of $5,000 for joint returns and $2,500 for separate/individual returns, aligned with federal Internal Revenue Code section 129.

• Covers eligible expenses including child care services, summer programs, before and after school programs, and adult day care for dependents under 13 years old or those physically or mentally incapable of self-care.

• Requires FSA trustee to be a federally-insured financial institution and mandates distribution only upon submission of reimbursement forms with paid receipts verifying eligible expenses.

• Unused funds remaining at year-end escheat to the state; participation must continue for the entire tax year unless there is a qualifying status change such as marriage, divorce, or birth of a child.

• Effective July 1, 2020, with application to taxable years beginning after December 31, 2020.