REQUESTING THE DEPARTMENT OF TAXATION TO CONDUCT A COMPREHENSIVE ANALYSIS OF CORPORATE INCOME REPORTING STRUCTURES, INCLUDING THE TREATMENT OF FOREIGN SUBSIDIARY INCOME, TO INFORM LONG-TERM FISCAL PLANNING.

SCR185

THE SENATE

S.C.R. NO.

185

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

SENATE CONCURRENT

RESOLUTION

Requesting the department of taxation to conduct a
comprehensive analysis of corporate income reporting structures, including the treatment
of foreign subsidiary income, to inform long-term fiscal planning
.

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WHEREAS, the
State relies on corporate income tax revenue to support essential public
services, including public education, healthcare, infrastructure, environmental
protection, and public safety; and

����
WHEREAS, most
state corporate income tax systems, including Hawaii's, begin with federal
taxable income and apply state-level adjustments and apportionment formulas to
determine state tax liability; and

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WHEREAS, states
vary in their approach to corporate income reporting, including separate entity
reporting, water's-edge combined reporting, and worldwide combined reporting,
each of which may have differing implications for revenue stability,
administrative complexity, and economic competitiveness; and

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WHEREAS, corporations
operating across multiple jurisdictions may structure income through affiliated
entities, including foreign subsidiaries, consistent with federal and state
law, and the treatment of such income may affect the size, composition, and
predictability of the state corporate tax base; and

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WHEREAS, careful,
data-driven analysis of corporate income reporting practices can assist the State
in evaluating long-term fiscal sustainability and revenue forecasting accuracy
without predetermining statutory changes; now, therefore,

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BE IT
RESOLVED by the Senate of the Thirty-third Legislature of the State of Hawaii,
Regular Session of 2026, the House of Representatives concurring, that the
Department of Taxation is requested to conduct a comprehensive analysis of
corporate income reporting practices, including the treatment of foreign
subsidiary income; and

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BE IT FURTHER
RESOLVED that the Department of Taxation is requested to include in its
analysis, to the extent practicable and consistent with taxpayer
confidentiality protections:

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(1)
�
An estimate of corporate income tax revenue
attributable to corporations with foreign subsidiary structures;

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(2)
�
An evaluation of potential revenue impacts
under alternative corporate income reporting models, including separate entity
reporting, water's-edge combined reporting, and worldwide combined reporting;

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(3)
�
An assessment of how alternative definitions
of the corporate tax base would interact with Hawaii's current apportionment
methodology;

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(4)
�
Administrative feasibility considerations,
compliance costs, and enforcement implications associated with alternative
reporting structures;

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(5)
�
A comparison of approaches taken by other
states and any publicly available information regarding fiscal or economic
outcomes; and

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(6)
�
Identification of any data limitations,
modeling assumptions, or implementation challenges; and

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BE IT FURTHER
RESOLVED that the Department of Taxation is requested to submit a report of its
findings and analysis to the Legislature no later than twenty days prior to the
convening of the Regular Session of 2027; and

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BE IT FURTHER
RESOLVED that certified copies of this Concurrent Resolution be transmitted to the
Governor, Director of Taxation, Director of Budget and Finance, and Chairperson
of the Council on Revenues.

OFFERED BY:

_____________________________

Report Title:
�

Department
of Taxation; Comprehensive Analysis; Corporate Income Reporting