RELATING TO TAXATION.

Labor Small Business Taxes

Active

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

Sponsor: WARD, GARCIA, MURAOKA, REYES ODA, SHIMIZU
Last action: 2025-12-08
Official status: Carried over to 2026 Regular Session.
Effective date: Not listed

Plain English Breakdown

The official source material does not mention any specific impact on small businesses attracting qualified workers.

Tax Exclusion for Tips

This bill excludes tips received by employees from state income taxes.

What This Bill Does

Excludes from state income taxes the gross income, adjusted gross income, and taxable income derived from tips received by employees.
Requires the director of taxation to create necessary forms for this change.
Allows the director to request evidence from taxpayers if needed.
Enables the director to make rules under chapter 91 to support this section.

Who It Names or Affects

Employees who receive tips as part of their income.

Terms To Know

Tips: Gratuities or voluntary monetary contributions received by an employee from a guest, patron, or customer and reported to the employer for tax purposes.
Tipped Employee: An employee working in an occupation where they receive more than $30 per month in gratuities.

Limits and Unknowns

The bill applies only to taxable years starting after December 31, 2025.
It does not specify how the change will affect existing tax laws or regulations.

Bill History

2025-12-08 D
Carried over to 2026 Regular Session.
2025-01-21 H
Referred to LAB, FIN, referral sheet 2
2025-01-21 H
Introduced and Pass First Reading.
2025-01-17 H
Pending introduction.

Official Summary Text

RELATING TO TAXATION.
Small Business Caucus; Income Tax; Tips; Tipped Employees
Excludes from state income taxes the gross income, adjusted gross income, and taxable income derived from tips received by employees.

Current Bill Text

Read the full stored bill text

HB520

HOUSE OF REPRESENTATIVES

H.B. NO.

520

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO TAXATION
.

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

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SECTION
1.
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The legislature finds that a movement
to exclude tips from income taxation is increasing at the federal level.
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The legislature believes that a similar
exclusion at the state level would help local small businesses attract
qualified employees.

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Accordingly,
the purpose of this Act is to exclude from state income taxes the gross income,
adjusted gross income, and taxable income derived from tips received by
employees.

����
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-
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Tips;
tax exclusion.
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(a)
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There shall be excluded from gross income,
adjusted gross income, and taxable income tips received during the taxable year
that are included on the tipped employee's statements furnished to the employer
for purposes of title 26 United States Code section 3102.

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(b)
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The director of taxation:

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(1)
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Shall prepare forms as may be necessary for
the purposes of this section;

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(2)
�
May require evidence from any taxpayer; and

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(3)
�
Adopt rules pursuant to chapter 91
necessary for the purposes of this section.

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(c)
�
For the purposes of this section:

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"Tips"
means gratuities or voluntary monetary contributions received by an employee
from a guest, patron, or customer and that the employee reports to the employer
for purposes of title 26 United States Code section 3102.

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"Tipped
employee" means an employee working in an occupation in which the employee
receives more than $30 a month in gratuities."

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SECTION
3.
�
New statutory material is
underscored.

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SECTION 4.
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This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Small
Business Caucus; Income Tax; Tips; Tipped Employees

Description:

Excludes
from state income taxes the gross income, adjusted gross income, and taxable
income derived from tips received by employees.

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