RELATING TO TAX HAVEN ABUSE.

Taxes

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: ICHIYAMA
Last action: 2025-12-08
Official status: Carried over to 2026 Regular Session.
Effective date: Not listed

Plain English Breakdown

The bill summary does not provide specific details on how much additional revenue will be generated.

Stopping Tax Haven Abuse

This bill requires corporations to include the income from their foreign subsidiaries when calculating state taxes, using a formula that determines how much tax they owe.

What This Bill Does

Requires companies to report all money earned by their foreign branches in Hawaii.
Uses a special formula to decide what part of this money is taxed by Hawaii.

Who It Names or Affects

Corporations with foreign subsidiaries or branches.
The State of Hawaii's Department of Taxation.

Terms To Know

Tax Haven: A country or region where taxes are very low, used by companies to avoid paying higher taxes in other places.
Combined Reporting: A method of tax reporting that includes all income from a company and its foreign branches when calculating state taxes.

Limits and Unknowns

The bill only affects corporations with foreign subsidiaries.
It does not specify how much extra money the state will collect from this change.
This law starts on January 1, 2026.

Bill History

2025-12-08 D
Carried over to 2026 Regular Session.
2025-01-21 H
Referred to ECD, FIN, referral sheet 1
2025-01-16 H
Introduced and Pass First Reading.
2025-01-14 H
Prefiled.

Official Summary Text

RELATING TO TAX HAVEN ABUSE.
Taxation; Corporations; Combined Reporting
Requires corporations to include the income of all foreign subsidiaries to the State. Applies the State's apportionment formula to determine the share of reported profits subject to the appropriate tax. Effective 1/1/2026.

Current Bill Text

Read the full stored bill text

HB116

HOUSE OF REPRESENTATIVES

H.B. NO.

116

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to tax haven abuse
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
�
The
legislature finds that corporations use complicated schemes to shift domestic
earnings to subsidiaries incorporated in offshore tax havens or countries with
minimal or no taxes, to reduce their state and federal income tax liability by
billions of dollars in certain cases.
�
A
January 2019 report by the Institute on Taxation and Economic Policy and the
United States Public Interest Research Group estimated that the State is losing
$38,000,000 annually by not updating tax laws to mandate worldwide combined
reporting of corporate income.
�
Worldwide
combined reporting is considered the gold standard for closing tax loopholes,
and the report found it would raise nearly three times more revenue than other
options to address revenue currently lost to tax avoidance.

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The purpose of this Act is to change how
corporate tax is determined in the State to a more fair and effective form of
calculating corporate tax liability by:

����
(1)
�
Requiring
corporations to include the income of all foreign subsidiaries to the State, as
already required by the Internal Revenue Service; and

����
(2)
�
Applying
the State's apportionment formula to determine the share of reported profits subject
to the appropriate tax.

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SECTION 2.
�

Chapter 235, Hawaii Revised Statutes, is amended by adding a new section
to be appropriately designated and to read as follows:

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"
�235-
�
Corporation income reporting for all
foreign subsidiaries.
�
(a)
�
Every
corporation subject to the tax imposed under this chapter shall report all
income from foreign subsidiaries by filing a copy of federal Internal Revenue
form 5471 with the department of taxation at the same time as the forms must be
filed with the Internal Revenue Service.

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(b)
�
All income from a
corporation's subsidiaries shall be apportioned as business income pursuant to
section 235-29.
"

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SECTION 3.
�

New statutory material is underscored.

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SECTION 4.
�

This Act shall take effect on January 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

Taxation;
Corporations; Combined Reporting

Description:

Requires
corporations to include the income of all foreign subsidiaries to the
State.
�
Applies the State's apportionment
formula to determine the share of reported profits subject to the appropriate
tax.
�
Effective 1/1/2026.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.