§235-4  Income taxes by the State;residents, nonresidents, corporations, estates, and trusts.  (a) Residents.  The tax imposed by this chapter applies to the entire income of aresident, computed without regard to source in the State.

(b)  Nonresidents.  In the case of anonresident, the tax applies to the income received or derived from propertyowned, personal services performed, trade, or business carried on, and any andevery other source in the State.

In the case of a nonresident spouse filing a jointreturn with a resident spouse, the tax applies to the entire income of thenonresident spouse computed without regard to source in the State.

(c)  Change of status.  Except where a jointreturn is filed, when the status of a taxpayer changes during the taxable yearfrom resident to nonresident, or from nonresident to resident, the tax imposedby this chapter applies to the entire income earned during the period ofresidence in the manner provided in subsection (a) of this section and duringthe period of nonresidence the tax shall apply upon the income received orderived as a nonresident in the manner provided in subsection (b) of thissection; provided that if it cannot be determined whether income was receivedor derived during the period of residence or during the period of nonresidence,there shall be attributed to the State such portion of the income as isdetermined by applying to such income for the whole taxable year the ratiowhich the period of residence in the State bears to the whole taxable year,unless the taxpayer shows to the satisfaction of the department of taxationthat the result is to attribute to the state income, dependent upon residence,received or derived during the period of nonresidence, in which event theamount of income as to which such showing is made shall be excluded.

The apportionment of income provided by thissubsection shall not apply where one spouse is a resident of this State and ajoint return is filed with the nonresident spouse in which event the tax shall becomputed on their aggregate income in the manner provided in section 235-52without regard to source in the State.  Where, however, both spouses changetheir status from resident to nonresident or from nonresident to resident,their income shall be apportioned in the manner provided in this subsection.

(d)  A corporation, foreign or domestic, istaxable upon the income received or derived from property owned, trade orbusiness carried on, and any and every other source in the State.  In additionthereto a domestic corporation is taxable upon its income from property owned,trade or business carried on, and any and every other source outside the State,unless subjected to income tax thereon in any other jurisdiction.  Subjectionto federal tax does not constitute subjection to income tax in anotherjurisdiction.  "Corporation" includes any professional corporationincorporated pursuant to chapter 415A or 416.

  (e)(1)  The income of a resident estate or trust shall becomputed without regard to source in the State.  The income of a nonresidentestate or trust shall be that received or derived from sources in the State.

(2)  A beneficiary of an estate or trust, or persontreated as the owner of any portion of a trust, who is taxable upon incomethereof under the Internal Revenue Code, shall be taxed thereon as hereinprovided, irrespective of the taxability of the estate or trust or whether itis required to make a fiduciary return under this chapter.  If all such incomeconsists of income which would be taxable under this chapter if receiveddirectly by the beneficiary or person, the beneficiary or person shall be taxedupon all of it.  If some of it consists of income which would not be taxable ifreceived directly by the beneficiary or person, then unless the trustinstrument provides otherwise the income of each such beneficiary or personshall be conclusively presumed to have been received or derived out of eachclass of income of the estate or trust, and the beneficiary or person shall betaxed upon such part of it as would be taxable if received directly by thebeneficiary or person.

(3)  Each estate or trust shall include in its returnall of the information necessary to determine the taxability of the income ofthe estate or trust, regardless of source.  Only in the case of a nonresidentestate or trust of which all the beneficiaries are nonresidents and no part ofwhich is treated as owned by a resident shall the return be confined to incomefrom sources in the State.  This paragraph shall not cause income to be taxedto an estate or trust that otherwise would not have been so taxed. [L Sp 1957,c 1, pt of §2; am L Sp 1959 2d, c 1, §16; Supp, §121-3; HRS §235-4; am L 1969,c 226, §5; am L 1974, c 9, §1; am L 1976, c 60, §1; am L 1978, c 95, §1; am L 1983,c 167, §18 and c 206, §1; am L 1985, c 270, §4; gen ch 1985; am L 1988, c 141,§19]

 

Note

 

  Chapter 416 referred to in text is repealed.

 

Attorney General Opinions

 

  Refund of real property tax after termination of a trustbecomes income to the beneficiaries.  Att. Gen. Op. 64-5.

  Taxability of income earned out-of-state by resident.  Att.Gen. Op. 65-5.

 

Case Notes

 

  Income tax not applicable to inheritance under territoriallaws.  14 H. 38.

  Tax on annuity from property held in trust is payable byannuitant and not trustee.  20 H. 589.  Annuities paid from trust taxable asincome.  32 H. 51.  Tax paid by employer for employee is income of employee. 38 H. 188.

  Gifts inter vivos deemed not income.  25 H. 603.

  Tax on income in year payment made for damages caused bylabor strike.  Stock of mainland agents is taxable by Territory.  26 H. 299,aff'd 289 F. 664.

  Only taxes actually paid during the taxable year deductibleas expenses and not reserve for taxes for succeeding years.  27 H. 336.

  Intangibles.  31 H. 264, aff'd 47 F.2d 869.

  Profits realized from sale of stock taxable in year oftransaction.  Tax on profit on stock redeemed by corporation.  32 H. 896, aff'd79 F.2d 761.

  Retrospective tax laws.  33 H. 766.

  Tax on income of corporation is valid.  1 U.S.D.C. Haw 294,aff'd 121 F. 772.

  Ability of State to tax income of nonresidents turns on situsof property generating income.  64 H. 258, 640 P.2d 282.

  Intangible property generating income acquired a businesssitus in Hawaii and could be taxed under subsections (b) and (e)(2).  64 H.258, 640 P.2d 282.