Haw. Code R. § 18-235-5-05 - Alternative apportionment

(a) As authorized by section 235-5(e), HRS, if the director of taxation determines that the method set forth in section 235-5, HRS, and administrative rules thereunder does not fairly determine income derived from or attributable to Hawaii, or does not clearly and accurately reflect the actual amount of income received from all property and sources within the State, the director may permit or require:

(1) Separate accounting;

(2) The exclusion of any one or more of the factors;

(3) The inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this State; or

(4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income.

(b) A taxpayer may petition the director to use an alternative apportionment method pursuant to section 235-5(e), HRS, by written request.

(1) The petition shall include data clearly showing that the application of factors provided in the law, including these rules, does not result in a reasonable attribution of net income to Hawaii due to the peculiar nature of the taxpayer's business and that the taxpayer's proposed method more clearly reflects income attributable to Hawaii.

(2) The petition shall disclose the extent to which the proposed method is being used in other states to which the taxpayer reports.

(c) The following shall be sufficient to constitute the director's imposition of alternative apportionment under this section:

(1) Issuance of an assessment based on an alternative method accompanied by notification that an alternative method was used;

(2) For a claim for refund on an original return, denial of a taxpayer's claim for refund accompanied by notification that an alternative method was used;

(3) For a claim for refund made via an amended original return, denial of a taxpayer's claim for refund without more, provided that the alternative used by the director consists wholly of the method used by the taxpayer in filing its original return.

(4) In all other cases, any notification that an alternative method was used.

Notes

Haw. Code R. § 18-235-5-05

[Eff 4/2/2016] (Auth: HRS §§ 231-3(9), 235-118) (Imp: HRS § 235-5)