RELATING TO A CHILD TAX CREDIT.

SB1053

THE SENATE

S.B. NO.

1053

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to a child tax credit
.

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 Hawaii's taxation
system has had a disproportionate impact on working families for many years.
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According to a 2018 study by the Institute on
Taxation and Economic Policy, Hawaii has historically placed the second-highest
tax burden on low-income households, with Hawaii's lowest-income households
paying approximately fifteen per cent of their income in state and local
taxes.
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In comparison, Hawaii's highest
earning households pay roughly nine per cent of their income in state and local
taxes.

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The legislature further finds that
investing in the well-being of Hawaii's children is essential to the creation
of a prosperous and sustainable future.
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To address child poverty, the American Rescue Plan Act of 2021 increased
the federal child tax credit from $2,000 to $3,600 for qualifying children
under age six, and $3,000 for other qualifying children under age eighteen,
while allowing the credit to be distributed to qualifying taxpayers on a
monthly basis.

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The legislature additionally finds
that the provisions of the American Rescue Plan that strengthened the child tax
credit expired at the end of 2021, despite lifting millions of families and
their children out of poverty.
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In the
face of federal inaction to maintain a robust child tax credit, states have a
responsibility to enact policies that assist working families with children in
meeting their basic needs.

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The legislature also finds that
according to the National Conference of State Legislatures, fifteen
jurisdictions have enacted a state child tax credit.
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State laws vary regarding refundability and
how child tax credits are calculated.
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The two primary approaches are either establishing a fixed limit or a
percentage of the federal child tax credit.
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The fixed limit for state child tax credits ranges from $25 to $1,750
per child.
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The percentage for state
child tax credits range from five per cent to thirty-three per cent of the
federal child tax credit.

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The purpose of this Act is to
strengthen tax fairness for working families by establishing a refundable state
child tax credit.

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SECTION 2.
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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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Refundable child tax credit.
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(a)
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Each

qualifying individual taxpayer may claim a refundable child tax credit
multiplied by the number of dependents of the taxpayer who are under the age of
eighteen and with respect to whom the taxpayer is entitled to a deduction under
section 235-54(a); provided that spouses filing separate tax returns for a
taxable year for which a joint return could have been filed by them shall claim
only the tax credit to which they would have been entitled had a joint return
been filed.
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The tax credit shall be
calculated in accordance with the table below.

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Adjusted
gross income
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Credit per dependent

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Under
$40,000

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$650

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$40,000
under $47,500
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$585

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$47,500
under $55,000
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$520

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$55,000
under $62,500
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$455

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$62,500
under $70,000
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$390

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$70,000
under $77,500
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$325

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$77,500
under $85,000
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$260

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$85,000
under $92,500
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$195

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$92,500
under $100,000
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$130

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$100,000
under $115,000
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$ 65

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$115,000
and over
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$
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0.

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(b)
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The credit allowed under this section shall
be claimed against the net income tax liability for the taxable year.
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If the tax credit under this section exceeds
the
amount of the income tax payments
due from the taxpayer, the excess of credits over payments due shall be
refunded to the taxpayer; provided that the tax credit properly claimed by a
taxpayer who has no income tax liability shall be paid to the taxpayer
;
provided further that no refunds or payment on account of the tax credit
allowed by this section shall be made for amounts less than $1.

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(c)
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All claims, including amended claims, for a
tax credit under this section shall be filed on or before the end of the
twelfth month following the close of the taxable year for which the credit may
be claimed.
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Failure to comply with the
foregoing provision shall constitute a waiver of the right to claim the credit.

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(d)
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No credit shall be allowed under this section
for any taxable year in the disallowance period.
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For purposes of this subsection, the
disallowance period is:

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(1)
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The period of
ten taxable years after the most recent taxable year for which there was a
final administrative or judicial decision that the taxpayer's claim for credit
under this section was due to fraud; or

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(2)
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The period of
two taxable years after the most recent taxable year for which there was a
final administrative or judicial decision disallowing the taxpayer's claim for
credit for reasons other than fraud.

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(e)
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The director of taxation:

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(1)
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Shall prepare
any forms necessary to claim a tax credit under this section;

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(2)
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May require
proof of the claim for the tax credit;

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(3)
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Shall alert
eligible taxpayers of the tax credit using appropriate and available means;

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(4)
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Shall submit an
annual public report to the governor and legislature containing the:

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(A)
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Number
of credits granted for the prior calendar year;

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(B)
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Total
amount of the credits granted; and

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(C)
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Average
value of the credits granted to taxpayers whose adjusted gross income falls
within various income ranges; and

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(5)
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May adopt rules
pursuant to chapter 91 to effectuate this section.

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(f)
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For purposes of this section,
"qualifying individual taxpayer" means a taxpayer who:

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(1)
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Files a federal
income tax return for the taxable year claiming the child tax credit under
section 24 of the Internal Revenue Code; and

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(2)
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Files a Hawaii
income tax return using the same filing status used on the taxpayer's federal
income tax return for the taxable year and claiming the same dependents claimed
on the federal income tax return for the taxable year.
"

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SECTION
3.
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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:

Refundable
Child Tax Credit

Description:

Establishes
a refundable child tax credit.
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Applies
to taxable years beginning after 12/31/2025.

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