Elective Pass-Through Entity Tax

"Member"

Tax Imposed

The tax is imposed on the sum of all member's distributive shares and guaranteed payments of Hawaii taxable income as calculated under the pass-through entity tax law, multiplied by 11%. The distributive shares and guaranteed payments of members who are corporations are not included in the sum will not be subject to this tax. If the income calculated reflects a net loss for the electing pass-through entity, the net loss may be carried forward to subsequent tax years for as long as the electing pass-through entity elects to be subject to the tax until exhausted.

Nonresident Individuals

A nonresident individual who is a member of an electing pass-through entity is not required to file an income tax return for a tax year if the member's only source of Hawaii income is from electing pass-through entities and the electing pass-through entities file and pay the tax due under this law.

Report to Members

Each electing pass-through entity must report to each of its members, for each tax year, the member's pro rata shares of the tax imposed.

Member Credits

Each member of an electing pass-through entity whose distributive share or guaranteed payment of Hawaii taxable income is subject to the elective pass-through entity tax will be entitled to a credit equal to the member's share of the tax paid. If the amount of the credit exceeds the member's tax liability, the excess amount is not refundable to the member. Any member claiming a credit will not entity who is a member at the time the election is filed, or any officer, manager, or member of the entity who is authorized to make the election and who attests to having such authorization under penalty of perjury. Once the election is made, it will be irrevocable for that taxable year and will be binding on all partners, shareholders, and members of the electing pass-through entity.

Each member that is subject to the Hawaii elective pass-through entity tax as a Hawaii resident or part-year resident will be entitled to a credit for the direct member's or indirect member's pro rata share of taxes paid to another state or to the District of Columbia, on income of any partnership or S corporation of which the person is a member, provided that the taxes paid to another state or to the District of Columbia result from a tax that the Director of Taxation determines is substantially similar to the Hawaii elective pass-through entity tax imposed. Any credit will be calculated in a form and manner prescribed by the Director, provided the calculation is consistent with the provisions of this law. If the amount of the credit authorized exceeds the member's tax liability for the tax imposed, the excess amount will not be refundable and will not carry forward.