SB1466 amends Hawaii’s earned income tax credit (EITC) statute. The bill keeps the credit refundable and generally equal to 40 percent of the federal EITC, but clarifies that a qualifying taxpayer may be a resident or nonresident individual who files both a federal return claiming the federal EITC and a Hawaii return using the same filing status and dependents. For part-year residents and nonresidents, the bill expressly requires the Hawaii credit to be prorated by the ratio of Hawaii adjusted gross income to federal adjusted gross income.
The bill also revises the carryforward rules for certain nonrefundable credits under the EITC section. It ends the ability to use carried-forward credits after specified cutoff dates, including a limitation that no credit carried forward under the subsection may be used for taxable years beginning after December 31, 2024, and that credits claimed for tax years beginning after December 31, 2021, and carried forward may not be used after December 31, 2025. The act applies to taxable years beginning after December 31, 2024, and preserves the amended language beyond the 2027 reenactment date referenced in prior law.
Impact
The bill would amend section 235-55.75, Hawaii Revised Statutes, governing the state earned income tax credit. Its practical effect is to codify a prorating formula for nonresidents and part-year residents, tighten eligibility and filing requirements tied to the federal EITC claim, and limit the use of certain carried-forward nonrefundable credits. These changes affect individual income taxpayers, especially nonresidents and part-year residents, and reduce the availability of long-term carryforward benefits under the credit program.
Sentiment
The available voting history suggests broad support and little controversy: the Senate Ways and Means Committee passed the bill unanimously, 13-0, and there are no recorded committee transcript objections in the provided materials. The bill appears to have been treated as a technical clarification and cleanup measure rather than a major policy overhaul.
Contention
The main policy issues are administrative and fiscal rather than ideological. The bill narrows how nonresidents and part-year residents calculate the credit by requiring a Hawaii-to-federal income ratio, and it eliminates or sunsets extended carryforward treatment for nonrefundable credits. Any potential contention would likely come from taxpayers or advocates concerned about reduced credit value or stricter eligibility rules, while supporters would view the changes as clarifying the statute and aligning the credit with Hawaii-source income.