This is an update to the Tax Insights that was issued on May 30, 2023. On June 1, 2023, S.B. 1437, S.D. 1, H.D. 2, C.D. 1, was enacted into law as Act 50, Session Laws of Hawaii 2023. Act 50 is a SALT cap workaround measure that would allow partnerships and S-corporations to elect to pay Hawaii income tax at the entity level. By electing to pay Hawaii income tax on Hawaii PTE income at the entity level, partners and S-corporation shareholders would be able to avoid the SALT cap.
Department of Taxation Guidance
On July 21, 2023, the Department of Taxation (DOTAX) issued its initial guidance in Tax Information Release (TIR) 2023-01, however, as explained below, this guidance is likely to change before the law goes into effect. According to the current guidance, for the 2023 tax year:
- Estimated payments will not be required;
- PTE tax (PTET) payments will be accepted beginning on December 15, 2023; and
- PTET election must be made electronically no later than April 20, 2024.
On July 25, 2023, Accuity participated in an online forum hosted by DOTAX where tax practitioners were given an opportunity to provide feedback on the guidance contained in the TIR. As the forum was concluding, DOTAX announced that it would accept written comments until August 15, 2023. Thus, we anticipate that DOTAX will be updating its guidance sometime after the deadline to submit written comments has passed.
TIR 2023-01 is attached to the pdf version of this Tax Insights (click the DOWNLOAD PDF button below) for your convenience.
What should you do now?
You do not need to take any action at this time, but we encourage you to start thinking about whether your partnership or S-corporation should make the Hawaii PTET election. We will continue to update you as more information becomes available.
If you have questions regarding how this measure may affect you, please don’t hesitate to contact us.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice. This communication may not be applicable to your specific circumstances and may require consideration of non-tax and other tax factors if any action is to be contemplated. Please contact your tax professional prior to taking any action based on this information. Accuity LLP assumes no obligation to the reader of any changes in tax laws or other factors that could affect the information contained herein.