§235-2.4  Operation of certain Internal
Revenue Code provisions; sections 63 to 530.  (a)  Section 63 (with respect
to taxable income defined) of the Internal Revenue Code shall be operative for
the purposes of this chapter, subject to the following:



(1)  Sections 63(c)(1)(B) (relating to the additional
standard deduction), 63(c)(1)(C) (relating to the real property tax deduction),
63(c)(1)(D) (relating to the disaster loss deduction), 63(c)(4) (relating to
inflation adjustments), 63(c)(7) (defining the real property tax deduction),
63(c)(8) (defining the disaster loss deduction), and 63(f) (relating to
additional amounts for the aged or blind) of the Internal Revenue Code shall
not be operative for purposes of this chapter;



(2)  [Paragraph effective until December 31, 2010. 
For paragraph effective January 1, 2011, see below.] Section 63(c)(2)
(relating to the basic standard deduction) of the Internal Revenue Code shall
be operative, except that the standard deduction amounts provided therein shall
instead mean:



(A)  $4,000 in the case of:



(i)  A joint return as provided by section
235-93; or



(ii)  A surviving spouse (as defined in section
2(a) of the Internal Revenue Code);



(B)  $2,920 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);



(C)  $2,000 in the case of an individual who
is not married and who is not a surviving spouse or head of household; or



(D)  $2,000 in the case of a married individual
filing a separate return;



(2)  [Paragraph effective January 1, 2011.  For
paragraph effective until December 31, 2010, see above.  Repeal and reenactment
on December 31, 2015.  L 2009, c 60, §6(3).] Section 63(c)(2) (relating to
the basic standard deduction) of the Internal Revenue Code shall be operative,
except that the standard deduction amounts provided therein shall instead mean:



(A)  $4,400 in the case of:



(i)  A joint return as provided by section
235-93; or



(ii)  A surviving spouse (as defined in section
2(a) of the Internal Revenue Code);



(B)  $3,212 in the case of a head of household
(as defined in section 2(b) of the Internal Revenue Code);



(C)  $2,200 in the case of an individual who
is not married and who is not a surviving spouse or head of household; or



(D)  $2,200 in the case of a married individual
filing a separate return;



(3)  Section 63(c)(5) (limiting the basic standard
deduction in the case of certain dependents) of the Internal Revenue Code shall
be operative, except that the limitation shall be the greater of $500 or such
individual's earned income; and



(4)  The standard deduction amount for nonresidents
shall be calculated pursuant to section 235-5.



(b)  Section 72 (with respect to annuities;
certain proceeds of endowment and life insurance contracts) of the Internal
Revenue Code shall be operative for purposes of this chapter and be interpreted
with due regard to section 235-7(a), except that the ten per cent additional
tax on early distributions from retirement plans in section 72(t) shall not be
operative for purposes of this chapter.



(c)  Section 121 (with respect to exclusion of
gain from sale of principal residence) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that for the election under section
121(f), a reference to section 1034 treatment means a reference to section
235-2.4(n) in effect for taxable year 1997.



(d)  Section 163 (with respect to interest) of
the Internal Revenue Code shall be operative for the purposes of this chapter,
except that provisions in section 163(d)(4)(B) (defining net investment income
to exclude dividends) shall not be operative for the purposes of this chapter.



(e)  Section 165 (with respect to losses) of
the Internal Revenue Code shall be operative for purposes of this chapter,
except that the amount prescribed by section 165(h)(1) (relating to the
limitation per casualty) of the Internal Revenue Code shall be a $100
limitation per casualty, and section 165(d) (with respect to wagering losses)
[and] sections 165(h)(3)(A) and 165(h)(3)(B) (both of which relate to special
rules for personal casualty gains and losses in federally declared disasters)
of the Internal Revenue Code shall not be operative for the purposes of this
chapter.  Section 165 as operative for this chapter shall also apply to losses
sustained from the sale of stocks or other interests issued through the
exercise of the stock options or warrants granted by a qualified high
technology business as defined in section 235-7.3.



(f)  Section 168 (with respect to the
accelerated cost recovery system) of the Internal Revenue Code shall be
operative for purposes of this chapter, except that sections 168(j) (relating
to property on Indian reservations), 168(k) (relating to the special allowance
for certain property acquired during the period specified therein), 168(m)
(relating to the special allowance for certain reuse and recycling property),
and 168(n) (relating to the special allowance for qualified disaster assistance
property) of the Internal Revenue Code shall not be operative for purposes of
this chapter.



(g)  Section 172 (with respect to net operating
loss deductions) of the Internal Revenue Code shall be operative for purposes
of this chapter, as further provided in section 235-7(d), except that sections
172(b)(1)(J) and 172(j) (both of which relate to qualified disaster losses) of
the Internal Revenue Code shall not be operative for purposes of this chapter.



(h)  Section 179 (with respect to the election
to expense certain depreciable business assets) of the Internal Revenue Code
shall be operative for purposes of this chapter, except that provisions
relating to:



(1)  The increase of the maximum deduction to $100,000
for taxable years beginning after 2002 and before 2008, and the increase of the
maximum deduction to $125,000 for taxable years beginning after 2006 and before
2011, in section 179(b)(1);



(2)  The increase of the qualifying investment amount
to $400,000 for taxable years beginning after 2002 and before 2008, and the
increase of the qualifying investment amount to $500,000 for taxable years
beginning after 2006 and before 2011, in section 179(b)(2);



(3)  The increase of the maximum deduction to $250,000
and the increase of the qualifying investment amount to $800,000 for taxable
years beginning in 2008, in section 179(b)(7);



(4)  Defining section 179 property to include computer
software in section 179(d)(1);



(5)  Inflation adjustments in section 179(b)(5);



(6)  Irrevocable election in section 179(c)(2); and



(7)  Special rules for qualified disaster assistance
property in section 179(e),



shall not be operative for the purposes of this
chapter.



(i)  Section 198A (with respect to the
expensing of qualified disaster assistances expenses) of the Internal Revenue
Code shall not be operative for purposes of this chapter.



(j)  Section 219 (with respect to retirement
savings) of the Internal Revenue Code shall be operative for the purpose of
this chapter.  For the purpose of computing the limitation on the deduction for
active participants in certain pension plans for state income tax purposes, adjusted
gross income as used in section 219 as operative for this chapter means federal
adjusted gross income.



(k)  Section 220 (with respect to medical
savings accounts) of the Internal Revenue Code shall be operative for the
purpose of this chapter, but only with respect to medical services accounts
that have been approved by the Secretary of the Treasury of the United States.



(l)  Section 265 (with respect to expenses and
interest relating to tax-exempt income) of the Internal Revenue Code shall be
operative for purposes of this chapter; except that it shall not apply to
expenses for royalties and other income derived from any patents, copyrights,
and trade secrets by an individual or a qualified high technology business as
defined in section 235-7.3.  Such expenses shall be deductible.



(m)  Section 408A (with respect to Roth
Individual Retirement Accounts) of the Internal Revenue Code shall be operative
for the purposes of this chapter.  For the purposes of determining the
aggregate amount of contributions to a Roth Individual Retirement Account or
qualified rollover contribution to a Roth Individual Retirement Account from an
individual retirement plan other than a Roth Individual Retirement Account,
adjusted gross income as used in section 408A as operative for this chapter
means federal adjusted gross income.



(n)  In administering the provisions of sections
410 to 417 (with respect to special rules relating to pensions, profit sharing,
stock bonus plans, etc.), sections 418 to 418E (with respect to special rules
for multiemployer plans), and sections 419 and 419A (with respect to treatment
of welfare benefit funds) of the Internal Revenue Code, the department of
taxation shall adopt rules under chapter 91 relating to the specific
requirements under such sections and to such other administrative requirements
under those sections as may be necessary for the efficient administration of sections
410 to 419A.



In administering sections 401 to 419A (with
respect to deferred compensation) of the Internal Revenue Code, Public Law
93-406, section 1017(i), shall be operative for the purposes of this chapter.



In administering section 402 (with respect to
the taxability of beneficiary of employees' trust) of the Internal Revenue
Code, the tax imposed on lump sum distributions by section 402(e) of the
Internal Revenue Code shall be operative for the purposes of this chapter and
the tax imposed therein is hereby imposed by this chapter at the rate
determined under this chapter.



[(o)]  In administering section 403 (with
respect to taxation of employee annuities) of the Internal Revenue Code, any
funds that represent pre-tax employee deferrals or contributions that are
distributed from the annuity and used solely to obtain retirement credits under
the state [employees'] retirement system shall not be treated as a rollover for
purposes of section 403(b)(8)(A) of the Internal Revenue Code, and such funds
shall be subject to income tax under this chapter.



[(p)]  Section 451 (which provides general
rules for taxable year of inclusion) of the Internal Revenue Code shall be
operative, except that the provisions of sections 451(i)(3) and 451(i)(6), as
they relate to a qualified electric utility, shall not be operative for
purposes of this chapter.



[(q)]  In administering section 457 (with
respect to compensation plans of state and local governments and tax-exempt
organizations) of the Internal Revenue Code, any funds that represent pre-tax
employee deferrals or contributions that are distributed from the deferred
compensation plan and used solely to obtain retirement credits under the state [employees']
retirement system shall not be treated as a rollover for purposes of section
457(e)(16)(A) of the Internal Revenue Code and such funds shall be subject to
income tax under this chapter.



[(r)]  Section 468B (with respect to special
rules for designated settlement funds) of the Internal Revenue Code shall be
operative for the purposes of this chapter and the tax imposed therein is
hereby imposed by this chapter at a rate equal to the maximum rate in effect
for the taxable year imposed on estates and trusts under section 235-51.



[(s)]  Section 469 (with respect to passive
activities and credits limited) of the Internal Revenue Code shall be operative
for the purposes of this chapter.  For the purpose of computing the offset for
rental real estate activities for state income tax purposes, adjusted gross
income as used in section 469 as operative for this chapter means federal
adjusted gross income.



[(t)]  Sections 512 to 514 (with respect to
taxation of business income of certain exempt organizations) of the Internal
Revenue Code shall be operative for the purposes of this chapter as provided in
this subsection.



"Unrelated business taxable income"
means the same as in the Internal Revenue Code, except that in the computation
thereof sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall
apply, and in the determination of the net operating loss deduction there shall
not be taken into account any amount of income or deduction that is excluded in
computing the unrelated business taxable income.  Unrelated business taxable
income shall not include any income from a prepaid legal service plan.



For a person described in section 401 or 501 of
the Internal Revenue Code, as modified by section 235-2.3, the tax imposed by
section 235-51 or 235-71 shall be imposed upon the person's unrelated business
taxable income.



[(u)]  Section 521 (with respect to
cooperatives) and subchapter T (sections 1381 to 1388, with respect to
cooperatives and their patrons) of the Internal Revenue Code shall be operative
for the purposes of this chapter as to any cooperative fully meeting the
requirements of section 421-23, except that Internal Revenue Code section 521
cooperatives need not be organized in Hawaii.



[(v)]  Sections 527 (with respect to political
organizations) and 528 (with respect to certain homeowners associations) of the
Internal Revenue Code shall be operative for the purposes of this chapter and
the taxes imposed in each section are hereby imposed by this chapter at the
rates determined under section 235-71.



[(w)]  Section 529 (with respect to qualified
tuition programs) shall be operative for the purposes of this chapter, except
that section 529(c)(6) shall not be operative.



[(x)]  Section 530 (with respect to education
individual retirement accounts) of the Internal Revenue Code shall be operative
for the purposes of this chapter.  For the purpose of determining the maximum
amount that a contributor could make to an education individual retirement
account for state income tax purposes, modified adjusted gross income as used
in section 530 as operative for this chapter means federal modified adjusted
gross income as defined in section 530. [L 1985, c 19, pt of §1; am L 1987, c
239, §1(6); am L 1989, c 13, §2 and c 321, §2; am L 1990, c 16, §2; am L 1991,
c 207, §1; am L 1996, c 187, §2; am L 1997, c 297, §3; am L 1998, c 113, §2; am
L 1999, c 198, §2, c 253, §2, and c 270, §2; am L 2000, c 148, pt of §2, c 174,
§3, and c 297, pt of §5; am L 2001, c 221, §5; am L 2002, c 223, §3; am L 2003,
c 172, §3; am L 2004, c 89, §4; am L 2005, c 60, §3; am L 2006, c 110, §2; am L
2008, c 93, §2; am L 2009, c 60, §1;c 133, §3, c 165, §2; and c 181, §1]



 



Note



 



  The 2008 amendment applies to taxable years beginning after
December 31, 2007; provided that the retroactive and prospective effective
dates contained in the congressional acts relating to the Internal Revenue Code
and enacted during 2007 shall be operative for chapter 235.  L 2008, c 93, §7.



  The L 2009, c 60 amendment of subsection (a) applies to
taxable years beginning after December 31, 2010 and is repealed and reenacted
on December 31, 2015.  L 2009, c 60, §6(2) and (3).  Effect of amendment on
underpayments.  L 2009, c 60, §4.



  The L 2009, c 165 and c 181 amendments apply to taxable years
beginning after December 31, 2008.  L 2009, c 165, §4 and c 181, §3.



 



Revision Note



 



  Subsections (o) to (x) redesignated pursuant to §23G-15.