HB1147 amends Hawaii’s earned income tax credit statute. The bill keeps the state refundable earned income tax credit at 40 percent of the federal earned income tax credit, but clarifies that part-year residents and nonresidents must prorate the Hawaii credit by the ratio of Hawaii adjusted gross income to federal adjusted gross income. It also updates the definition of a “qualifying individual taxpayer” to require filing both a federal and Hawaii return using the same filing status and the same dependents claimed on the federal return.
The bill also changes the treatment of carryforwards for certain nonrefundable credits under the same section. It limits the use of carried-forward credits by providing that no credit carried forward under the subsection may be used for taxable years beginning after December 31, 2024, and separately bars credits claimed for tax year 2022 and carried forward from being used after December 31, 2025. The bill applies to taxable years beginning after December 31, 2024, and is intended to remain in effect despite a later statutory reenactment date referenced in existing law.
Impact
HB1147 would amend section 235-55.75 of the Hawaii Revised Statutes, affecting the state earned income tax credit and related credit carryforward rules. For taxpayers, the bill would make explicit that nonresidents and part-year residents must apportion the refundable EITC based on Hawaii-source income, and it would tighten eligibility and filing requirements for claiming the credit. It would also end the ability to use certain carried-forward nonrefundable credits after the specified dates, reducing future tax benefit availability for affected taxpayers.
Sentiment
The available bill materials suggest a generally technical and administrative purpose rather than a controversial policy shift. The committee record provided does not include testimony, votes, or debate, but the bill description indicates the measure is meant to clarify existing law and correct the treatment of nonresident claims and carryforwards. Overall, the bill appears aimed at refining tax administration and limiting unintended credit use rather than expanding the credit broadly.
Contention
The main points of potential contention are the reduction in tax benefits for some taxpayers and the stricter rules for nonresidents and part-year residents. Taxpayers who previously claimed the refundable credit without the clarified proration, or who relied on extended carryforward treatment for nonrefundable credits, would be most affected. Any opposition would likely come from taxpayers, tax preparers, or advocates concerned about reduced refunds or the narrowing of credit availability, while supporters would likely emphasize conformity, clarity, and preventing overclaiming.