Saturday, June 06, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, October 23, 2011
Kalapa: Alternative Energy Tax Credits Opened Flood Gates
By Lowell L Kalapa @ 3:12 AM :: 4380 Views :: Energy, Environment


by Lowell L. Kalapa, Tax Foundation of Hawaii

One of the standards of good tax policy is that a tax system is efficient, taking few resources and effort to administer the tax imposed and taking little effort with which to comply with the law. Directions and information should be convenient and understandable to the average taxpayer, encouraging compliance and insuring that both the administrator and the taxpayer clearly understand how the law is applied.

When laws are so vague and poorly written, all sorts of problems can and do occur. Such was the case with what has become known as the Act 221 credits for investments and research in high technology. The drafter of the legislation deliberately inserted terms and actions on the behalf of the taxpayer that literally allowed all sorts of interpretation. With that intent in mind, the author of the legislation directed that the law be liberally interpreted, basically meaning “anything goes” in order to qualify for the credit. As a result, in the initial years following the adoption of the credit, anything and everything seemed to qualify as a claim for the credit.

More recently, a rewrite of the tax credit for alternate energy was intended to broaden the application of what was the old solar hot water heater credit to encourage the development of even more advanced technology for the use of non-fossil fuels to power the state. However, in the rush to encourage all sorts of new technologies, the legislation left the “barn door” wide open to interpretation and application that it appears to have opened the flood gates in allowing all sorts of claims to be filed and awarded.

Then there is the uninformed action to make simple things hard. Nearly 40 years ago the legislature decided that if the differences between the state income tax law and the federal income tax law could be minimized, there would be few differences between the two laws and it would make it much easier for the taxpayer to comply with the state law. Mistakes would also be reduced. The first step lawmakers took was to make sure that as many of the state provisions as possible mirrored the federal provisions when it came to the definition of taxable income. The result was that they adopted a new approach to insuring that the state law conformed to the federal law by listing those sections of the federal law that were not operative for state income tax purposes and which sections of the federal law were operative but differed in the amount of income recognized by that section. Lawmakers also committed to adopting provisions of the federal law regardless of the revenue impact - either plus or minus - in the pursuit of insuring simplicity for not only the taxpayer but also for the tax department.

One of the benefits of maintaining close conformity with the federal law is that state administrators could then rely on federal audits and examinations of federal returns to trigger an alert for state auditors to select the state returns where questionable information had been provided. This allowed state tax auditors to concentrate on the state’s largest source of tax income, the general excise tax. Some may question that if the state strives to maintain a close similarity to the federal definition of income, how come taxpayers cannot claim items such as the same standard deduction as provided by the federal law or tax credits like the earned income tax credit. That is because these provisions do not define taxable income or the dollar amount at the federal is irrelevant to the state tax rates which are substantially lower than federal tax rates.

In recent years both policymakers, as well as administrators, seem to have lost institutional memory when conforming the state income tax with the federal law. As a result, the number of differences between the federal and state laws has grown and where a few years ago Hawaii was able to boast that it had a single page income tax return, that has now grown to four pages and multiple worksheets that don’t even get turned into the tax department.

This past session had probably the most marked digression from conformity to the federal law. As a result of legislative action, some taxpayers will no longer be able to take all of the deductions they will be able to take on their federal tax return and all taxpayers will not be able to deduct their state income or general excise taxes on their income tax return.

Not only will taxpayers have to figure out different deductible amounts for their state return from their federal return, but they will also have to be aware of those changes and make the required recalculations of their taxable income. More work and more paper to be filed. Ease and efficiency are quickly disappearing and make compliance even more difficult.

--- 30 ---


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

808 State Update AM940


ACA Signups Hawaii



Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii



Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii


Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube


Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes


Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii


National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii


OHA Lies

Opt Out Today

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii


Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii