HI HB1362

Establishes an elective pass-through entity tax allowing partnerships and S corporations to pay Hawaii income tax at the entity level rather than at the individual member level.

Tax imposed on electing entities equals the sum of all members' distributive shares and guaranteed payments of Hawaii taxable income multiplied by the highest individual tax rate under section 235-51, excluding income of corporate members.

Members of electing pass-through entities receive a credit equal to their share of entity-level taxes paid; nonresident members with only pass-through entity income are not required to file Hawaii income tax returns.

Residents and part-year residents receive credits for similar taxes paid to other states or the District of Columbia on pass-through entity income; net losses may be carried forward in subsequent years.

Elections are made annually on forms prescribed by the director of taxation and are irrevocable for each tax year; effective June 30, 3000.