News & Announcements

Hawaii Conforms to IRC Except for Increase in UBTI

Posted Tuesday, July 2, 2019 6:27 am

On June 7, Governor Ige signed into law Act 69, which updated the Internal Revenue Code (“IRC”) conformity date to December 31, 2018, for tax years beginning after that date.  This means that Hawaii income tax laws conform to the federal tax code as it existed on December 31, 2018, and changes to federal tax law made after that date are not automatically incorporated into state tax law.  The prior IRC conformity date was February 9, 2018 for tax years beginning after 2017.

No Increase in UBTI

Hawaii, however, decouples from certain federal provisions.  One such provision that Hawaii expressly does not follow is Code Sec. 512(a)(7), which increases unrelated business taxable income (“UBTI”) of tax-exempt organizations.  Under section 512(a)(7), UBTI is increased by any amount for which a deduction is not allowable and which is paid or incurred by the organization for any qualified transportation fringe or any parking facility.

Opportunity Zone Benefits

Hawaii will follow Code Sec. 1400Z-1 to Code Sec. 1400Z-2, which provide incentives for investors to re-invest realized capital gains into Opportunity Funds, which are used to provide investment capital in certain low-income communities (i.e., Opportunity Zones).  Hawaii, however, limits their scope to Opportunity Zones designated by the governor.  Click here to learn more about Hawaii Opportunity Zones.

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