HB269 amends Hawaii’s income tax statutes to increase the capital gains tax burden on certain nonresident and foreign taxpayers. For individual taxpayers, it revises the alternative tax calculation under section 235-51 so that the special capital gains tax caps for nonresident and foreign taxpayers are higher than under current law. For corporate taxpayers, it similarly amends section 235-71.5 to raise the alternative capital gains tax rates applied to nonresident and foreign corporations, while leaving the resident taxpayer rules largely unchanged.
The bill applies to taxable years beginning after December 31, 2025. Its practical effect is to increase the tax owed on net capital gains earned in Hawaii by nonresident and foreign individuals, estates, trusts, corporations, regulated investment companies, and real estate investment trusts, relative to resident taxpayers. The bill would therefore alter the state’s tax code by creating a more favorable capital gains treatment for residents than for nonresidents and foreign taxpayers, and it would likely affect investment income taxation and tax planning for out-of-state and foreign-owned entities with Hawaii-source gains.
Impact
HB269 would amend sections 235-51 and 235-71.5 of the Hawaii Revised Statutes, changing the alternative tax formulas for net capital gains. The bill increases the applicable capital gains tax rates or caps for nonresident and foreign taxpayers and for nonresident and foreign corporations, regulated investment companies, and real estate investment trusts. It does not appear to change the resident taxpayer capital gains treatment in the same way, so the main statutory impact is a targeted tax increase on nonresident and foreign filers beginning with taxable years after December 31, 2025.
Sentiment
The available context suggests the bill is primarily a revenue-raising or tax-redistribution measure, with the stated purpose of increasing capital gains taxes for nonresident and foreign taxpayers. Because there are no committee transcripts or recorded votes provided, there is no direct evidence of debate, amendments, or formal support/opposition in the supplied materials. The bill’s introduction and referral indicate it was still in the committee process at the time of the last action.
Contention
The main point of contention is likely to be the bill’s differential treatment of resident versus nonresident and foreign taxpayers. Supporters may view the measure as a way to ensure out-of-state and foreign investors pay more on Hawaii-source capital gains, while critics may argue it makes Hawaii less attractive to investment or unfairly burdens nonresident and foreign-owned businesses and trusts. The bill also raises potential concerns for corporations, REITs, and investment companies that realize capital gains in Hawaii, since their tax liability would increase under the revised alternative tax formulas.