Haw. Code R. § 18-235-122 - S corporations; domestic and foreign

(a) The definitions in section 18-235-4-01 apply to this section.

(b) A resident shareholder of an S corporation is subject to tax on the shareholder's pro rata share of the S corporation's income from whatever source derived.

(c) A nonresident shareholder of an S corporation is subject to tax on the shareholder's pro rata share of the S corporation's Hawaii source income.

(d) Shareholders of an S corporation shall be subject to tax on their pro rata shares of S corporation income whether or not the S corporation is required to file a return.

(e) An S corporation shall determine Hawaii source income by allocation and apportionment under the Uniform Division of Income for Tax Purposes Act, sections 235-21 to 235-39, HRS, if and to the extent that:

(1) The S corporation derives income from business activity both within and without this State,

(2) The S corporation's business activity is taxable in both this State and another jurisdiction, and

(3) The income is not derived from the rendering of purely personal services.

Otherwise, an S corporation shall determine Hawaii source income by allocation and separate accounting pursuant to section 235-5, HRS, and section 18-235-5-02. For an S corporation incorporated in Hawaii, Hawaii source income includes income that is allocated or apportioned to any jurisdiction in which the S corporation is not taxable.

(f) An S corporation return made pursuant to section 235-128, HRS, shall report the gross income, gains, losses, deductions, and credits from whatever source derived, and each shareholder's pro rata share of those items. The S corporation also shall report each shareholder's pro rata share of income, gains, losses, deductions, and credits from sources within the State.

Notes

Haw. Code R. § 18-235-122

[Eff 9/3/94] (Auth: HRS §§ 231-3(9), § 235-118) (Imp: HRS § 235-4(d), 235-122)