Haw. Code R. § 18-235-110.7-21 - Identification of property
(a) In general. A
taxpayer must maintain records from which the taxpayer can establish, with
respect to each item of eligible property, the following facts:
(1) The month and the taxable year in which
the property was placed in service;
(2) The basis of the property;
(3) The estimated useful life or recovery
period that was assigned to the property to determine eligibility for the
credit; and
(4) The date the
property is disposed of or otherwise ceases to be eligible property.
The above stated facts will be analyzed to determine both the eligibility for the credit, and the necessity for any recapture of credit.
(b)
Insufficient records. For recapture purposes, if the taxpayer's records are
insufficient to establish the above stated facts, it will generally be assumed
that the most recently acquired eligible property was disposed of
first.
(c) Mass assets. Where the
maintenance of records of details on mass assets is impractical, the taxpayer
may adopt reasonable recordkeeping practices, consonant with good accounting
practices and consistent with the taxpayer's prior recordkeeping practices.
Mass assets means a mass or group of individual items of property (A) not
necessarily homogeneous, (B) each of which is minor in value relative to the
total value of the mass or group, (C) numerous in quantity, (D) usually
accounted for only on a total dollar or quantity basis, and (E) with respect to
which separate identification is impracticable. Examples include portable air
and electric tools, jigs, and hardware.
(d) Taxpayer uses an averaging convention to
compute depreciation for eligible property. A taxpayer's use of an averaging
convention to compute depreciation for eligible property will be recognized to
determine if recapture is required for a particular property.
(1) "Averaging convention", defined. The
averaging convention provides for assumed dates that property is placed in
service, or ceases to be eligible property. For example, it might be assumed
that all additions and retirements made during the first half of a given year
were made on the first day of that year, and that all additions and retirements
during the second half of that year were made on the first day of the following
year.
(2) The taxpayer must
consistently use the assumed dates to compute the recapture of credit for all
eligible property depreciated under the taxpayer's averaging convention. In any
event, however, the director may disregard the taxpayer's use of the averaging
convention dates if the use results in a substantial distortion of eligibility
for the credit.
Notes
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