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

(1)  Sections 63(c)(1)(B) (relating to the additionalstandard 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 toinflation adjustments), 63(c)(7) (defining the real property tax deduction),63(c)(8) (defining the disaster loss deduction), and 63(f) (relating toadditional amounts for the aged or blind) of the Internal Revenue Code shallnot 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 shallbe operative, except that the standard deduction amounts provided therein shallinstead mean:

(A)  $4,000 in the case of:

(i)  A joint return as provided by section235-93; or

(ii)  A surviving spouse (as defined in section2(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 whois not married and who is not a surviving spouse or head of household; or

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

(2)  [Paragraph effective January 1, 2011.  Forparagraph effective until December 31, 2010, see above.  Repeal and reenactmenton December 31, 2015.  L 2009, c 60, §6(3).] Section 63(c)(2) (relating tothe 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 section235-93; or

(ii)  A surviving spouse (as defined in section2(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 whois not married and who is not a surviving spouse or head of household; or

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

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

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

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

(c)  Section 121 (with respect to exclusion ofgain from sale of principal residence) of the Internal Revenue Code shall beoperative for purposes of this chapter, except that for the election under section121(f), a reference to section 1034 treatment means a reference to section235-2.4(n) in effect for taxable year 1997.

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

(e)  Section 165 (with respect to losses) ofthe Internal Revenue Code shall be operative for purposes of this chapter,except that the amount prescribed by section 165(h)(1) (relating to thelimitation per casualty) of the Internal Revenue Code shall be a $100limitation 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 specialrules for personal casualty gains and losses in federally declared disasters)of the Internal Revenue Code shall not be operative for the purposes of thischapter.  Section 165 as operative for this chapter shall also apply to lossessustained from the sale of stocks or other interests issued through theexercise of the stock options or warrants granted by a qualified hightechnology business as defined in section 235-7.3.

(f)  Section 168 (with respect to theaccelerated cost recovery system) of the Internal Revenue Code shall beoperative for purposes of this chapter, except that sections 168(j) (relatingto property on Indian reservations), 168(k) (relating to the special allowancefor 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 assistanceproperty) of the Internal Revenue Code shall not be operative for purposes ofthis chapter.

(g)  Section 172 (with respect to net operatingloss deductions) of the Internal Revenue Code shall be operative for purposesof this chapter, as further provided in section 235-7(d), except that sections172(b)(1)(J) and 172(j) (both of which relate to qualified disaster losses) ofthe Internal Revenue Code shall not be operative for purposes of this chapter.

(h)  Section 179 (with respect to the electionto expense certain depreciable business assets) of the Internal Revenue Codeshall be operative for purposes of this chapter, except that provisionsrelating to:

(1)  The increase of the maximum deduction to $100,000for taxable years beginning after 2002 and before 2008, and the increase of themaximum deduction to $125,000 for taxable years beginning after 2006 and before2011, in section 179(b)(1);

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

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

(4)  Defining section 179 property to include computersoftware 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 assistanceproperty in section 179(e),

shall not be operative for the purposes of thischapter.

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

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

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

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

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

(n)  In administering the provisions of sections410 to 417 (with respect to special rules relating to pensions, profit sharing,stock bonus plans, etc.), sections 418 to 418E (with respect to special rulesfor multiemployer plans), and sections 419 and 419A (with respect to treatmentof welfare benefit funds) of the Internal Revenue Code, the department oftaxation shall adopt rules under chapter 91 relating to the specificrequirements under such sections and to such other administrative requirementsunder those sections as may be necessary for the efficient administration of sections410 to 419A.

In administering sections 401 to 419A (withrespect to deferred compensation) of the Internal Revenue Code, Public Law93-406, section 1017(i), shall be operative for the purposes of this chapter.

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

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

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

[(q)]  In administering section 457 (withrespect to compensation plans of state and local governments and tax-exemptorganizations) of the Internal Revenue Code, any funds that represent pre-taxemployee deferrals or contributions that are distributed from the deferredcompensation plan and used solely to obtain retirement credits under the state [employees']retirement system shall not be treated as a rollover for purposes of section457(e)(16)(A) of the Internal Revenue Code and such funds shall be subject toincome tax under this chapter.

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

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

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

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

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

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

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

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

[(x)]  Section 530 (with respect to educationindividual retirement accounts) of the Internal Revenue Code shall be operativefor the purposes of this chapter.  For the purpose of determining the maximumamount that a contributor could make to an education individual retirementaccount for state income tax purposes, modified adjusted gross income as usedin section 530 as operative for this chapter means federal modified adjustedgross income as defined in section 530. [L 1985, c 19, pt of §1; am L 1987, c239, §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; amL 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 L2008, 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 afterDecember 31, 2007; provided that the retroactive and prospective effectivedates contained in the congressional acts relating to the Internal Revenue Codeand enacted during 2007 shall be operative for chapter 235.  L 2008, c 93, §7.

  The L 2009, c 60 amendment of subsection (a) applies totaxable years beginning after December 31, 2010 and is repealed and reenactedon December 31, 2015.  L 2009, c 60, §6(2) and (3).  Effect of amendment onunderpayments.  L 2009, c 60, §4.

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

 

Revision Note

 

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