[§235-125.5]  Transition rule.  (a)  Acorporation for which an S election was in effect for federal purposes but notfor Hawaii purposes for the taxable period immediately preceding the taxableperiod beginning after December 31, 1989, may elect before December 31, 1992,not to have section 235-125(a) apply to carryforwards from taxable periodspreceding the taxable period beginning after December 31, 1989, for which aHawaii S election was not in effect.  An election pursuant to this sectionshall be applicable to all such carryforward items.

(b)  A net operating loss carryforward subjectto an election under this section shall be allowed as a deduction in computingS corporation taxable income after all other items of income and deductionshave been taken into account in accordance with this part and shall not reduceS corporation taxable income below zero.

(c)  A carryforward, other than a net operatingloss carryforward, subject to an election under this section shall be takeninto account by the corporation in computing taxable income as though an Selection were not in effect for the year.  In computing taxable income underthis subsection, the allowance of a deduction for a net operating losscarryforward shall be determined in accordance with subsection (b).

(d)  No carryforwards subject to the electionunder this section may be carried forward to a C corporation year within themeaning of Internal Revenue Code section 1371(b).

(e)  An election pursuant to this section shallbe made on a timely filed (including extension) S corporation income tax returnfor the first taxable period beginning after December 31, 1989, or an amendedreturn filed before December 31, 1992.  A copy of the election shall beattached to the S corporation tax return for each year to which thecarryforward is carried. [L 1991, c 24, §1]