Instructions for Form N-40 Schedule A, B, C, D, E, F, G, J, K-1 - Hawaii

This document contains official instructions for Schedule A, Schedule B, Schedule C, Schedule D, Schedule E, Schedule F, Schedule G, Schedule J, and Schedule K-1 for Form N-40. . These documents are released and collected by the Hawaii Department of Taxation. An up-to-date fillable Form N-40 Schedule D is available for download through this link. The latest available Form N-40 Schedule J can be downloaded through this link.

Instruction Details:

  • This 17-page document is available for download in PDF;
  • Actual and applicable for this year;
  • Complete, printable, and free.

Download your copy of the instructions by clicking the link below or browse hundreds of other forms in our library of forms released by the Hawaii Department of Taxation.

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Download Instructions for Form N-40 Schedule A, B, C, D, E, F, G, J, K-1 - Hawaii

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Clear Form
2019
STATE OF HAWAII—DEPARTMENT OF TAXATION
INSTRUCTIONS FOR FORM N-40
(REV. 2019)
AND SCHEDULES A, B, C, D, E, F, G, J, AND K-1
FIDUCIARY INCOME TAX RETURN
(Section references are to the Internal Revenue Code (IRC), as adopted and
incorporated by reference in Chapter 235, Hawaii Revised Statutes (HRS).)
(Publication references are to federal Publications.)
Contents
Page
Act 260, SLH 2019 – This act establishes a nonre-
Trust
fundable income tax credit equal to 30 per cent of
Every trust having for the taxable year any taxable
Special Instructions for Bankrupt Estates .........4
the ship repair industry costs paid or incurred to
income, or having gross income of $400 or more
design and construct the purpose-built floating
Special Instructions for Simple Trusts
subject to taxation under Hawaii Income Tax Law re-
dry dock to be used by the United States Navy in
Without Capital Gains (or Losses) ..............5
gardless of the amount of taxable income.
Pearl Harbor. The aggregate cap is $6,000,000
per year. This act also repeals the capital infra-
The trustee of a charitable remainder trust
Specific Instructions for Resident Estates
structure tax credit. Applies to taxable years be-
shall file a Hawaii Form N-40, showing the revenues
And Trusts ....................................................6
ginning after December 31, 2021.
and expenses of the trust and no tax liability for the
Specific Instructions for Nonresident Estates
trust. Compute the taxable income and enter the
Act 261, SLH 2019 – This act amends the research
And Trusts ....................................................16
amount on line 15 on page 1 as an adjustment to
activity credit that references to the base amount
result in no taxable income on line 22. Schedules K-1
in section 41 of the IRC shall not apply, and cred-
Specific Instructions for Qualified Funeral
are to be attached to the Form N-40.
it for all qualified research expenses may be tak-
Trusts ............................................................16
en without regard to the amount of expenses for
A qualified revocable trust which has made the
ATTENTION:
previous years. Also transfers certification to the
election for Hawaii purposes under section 645(a) to
Department of Business, Economic Develop-
be treated and taxed, for income tax purposes, as
Hawaii has not adopted the increased expensing
ment, and Tourism and the aggregate cap per
part of its related estate during the election period,
deduction under section 179 (Hawaii limit is $25,000)
taxable year is $5,000,000. Applies to taxable
files Form N-40. To make this election, file federal
or the bonus depreciation provisions.
years beginning after December 31, 2019 and
Form 8855 with the Department.
Hawaii has not adopted the domestic activities
this credit is repealed on December 31, 2024.
Nonresident Estate or Trust
production deduction under section 199.
Act 267, SLH 2019 – This act establishes a nonre-
Where To Get Tax Forms
Every nonresident estate or trust having gross in-
fundable income tax credit equal to 30 per cent of
come of $400 or more (some part or all of which
the qualified rehabilitated expenditures that are
Hawaii tax forms, instructions, and schedules may
is from sources within Hawaii) regardless of the
certified by the historic preservation division of
be obtained at any taxation district office or from the
amount of gross income subject to taxation or the
the Department of Land and Natural Resources.
Department of Taxation’s (Department) website at
amount of taxable income, (i) if any of the benefi-
If a deduction is taken under section 179, no tax
tax.hawaii.gov, or you may contact a customer
ciaries is a resident of Hawaii, or (ii) if in the case of
credit shall be allowed for that portion of the qual-
service representative at: 808-587-4242 or 1-800-
a trust, a resident of Hawaii is treated as the sub-
ified expense. This act takes effect on July 1,
222-3229 (Toll-Free).
stantial owner of any portion of the trust, or (iii) if the
2019 and shall be repealed on December 31,
Changes You Should Note
trust is engaging in business (rental of real property
2024.
located in Hawaii).
Act 275, SLH 2019 – This act increases the annual
Act 69, Session Laws of Hawaii (SLH) 2019 —
“Resident trust” means a trust of which the fidu-
aggregate cap for the Motion Picture, Digital
This act amends Hawaii Income Tax Law under
ciary is a resident of the State or the administration
Media, and Film Production Income Tax Cred-
chapter 235, Hawaii Revised Statutes (HRS), to
of which is carried on in the State.
it to $50,000,000. Applies to taxable years begin-
conform to certain provisions of the IRC, as
ning after December 31, 2018.
“Nonresident trust” means one other than resi-
amended as of December 31, 2018. This act also
dent.
For tax years beginning after December 31, 2017,
specifies that section 512(a)(7) shall not apply,
which is related to the computation of unrelated
and before January 1, 2026, Act 27, SLH 2018,
Period To Be Covered By 2019 Return
business taxable income.
limits the amount of losses from the trades or
businesses of noncorporate taxpayers that the
File the 2019 return for calendar year 2019 and fis-
Act 96, SLH 2019 – This act amends the rules for
taxpayer can claim each year. Taxpayers can’t
cal years beginning in 2019 and ending in 2020. If
sourcing the sales factor for net income tax to
deduct losses in excess of a threshold amount in
the return is for a fiscal year or a short tax year (less
impose market-based sourcing for sales of intan-
the current year. The amount of the excess busi-
than 12 months), fill in the tax year space at the top
gibles and services to where it is used in the
ness loss is treated as an NOL carryover to later
of the form.
State. Applies to taxable years beginning after
tax years. Use federal Form 461 to figure the ex-
December 31, 2019.
Note: Form N-40 for 2019 may also be used if: (1)
cess business loss and attach it to your return.
Act 221, SLH 2019 – This act adds a new section to
the trust or estate has a tax year of less than 12
Act 143, SLH 2017 — This act amends the qualifica-
chapter 235. A person that lacks physical pres-
months that begins and ends in 2020 and (2) the
tions a production must meet in order to claim the
ence in the State is presumed to be systemati-
2020 Form N-40 is not available by the time the trust
Motion Picture, Digital Media, and Film Pro-
cally and regularly engaging in business in the
or estate is required to file its return. However, the
duction Income Tax Credit. This act also caps
State and taxable under this chapter if, during the
trust or estate must show its 2020 tax year on the
the amount of tax credit that may be claimed at
current or preceding calendar year:
2019 Form N-40 and incorporate any tax law chang-
$35,000,000 per year, extends the sunset date to
es that are effective for tax years beginning after De-
(1) The person engages in 200 or more business
January 1, 2026, and requires film productions
cember 31, 2019.
transactions with persons within the State; or
claiming the tax credit to obtain a verification re-
When Form N-40 Must Be Filed
(2) The sum of the value of the person’s gross in-
view of qualified production costs by a certified
come attributable to sources in this State equals
public accountant. This act applies to taxable
Returns must be filed on or before the 20th day of
or exceeds $100,000 in sales.
years beginning after December 31, 2018.
the fourth month following the close of the taxable
General Instructions
Applies to taxable years beginning after Decem-
year of the estate or trust. If the due date falls on
ber 31, 2019.
a Saturday, Sunday, or holiday, the due date for the
Who Must File Form N-40
return is extended to the next business day.
Act 232, SLH 2019 – This act requires income tax
Decedent’s Estate
withholding for nonresident taxpayers based on
Note: Under Hawaii Tax Law, certain tax credits
the taxpayers’ distributive share of income attrib-
must be claimed within 12 months from the close of
Every estate having for the taxable year gross in-
utable to the State reflected on the partnership’s,
the tax year.
come of $400 or more subject to taxation under the
estate’s, and trust’s return. The amount withheld
Private delivery services. Hawaii has adopted
Hawaii Income Tax Law.
equals to the highest marginal tax rate applicable
the IRC provision to allow documents and payments
to a nonresident taxpayer multiplied by the
delivered by a designated private delivery service to
amount of the taxpayer’s distributive share of in-
qualify for the “timely mailing treated as timely filing/
come attributable to the State.
Clear Form
2019
STATE OF HAWAII—DEPARTMENT OF TAXATION
INSTRUCTIONS FOR FORM N-40
(REV. 2019)
AND SCHEDULES A, B, C, D, E, F, G, J, AND K-1
FIDUCIARY INCOME TAX RETURN
(Section references are to the Internal Revenue Code (IRC), as adopted and
incorporated by reference in Chapter 235, Hawaii Revised Statutes (HRS).)
(Publication references are to federal Publications.)
Contents
Page
Act 260, SLH 2019 – This act establishes a nonre-
Trust
fundable income tax credit equal to 30 per cent of
Every trust having for the taxable year any taxable
Special Instructions for Bankrupt Estates .........4
the ship repair industry costs paid or incurred to
income, or having gross income of $400 or more
design and construct the purpose-built floating
Special Instructions for Simple Trusts
subject to taxation under Hawaii Income Tax Law re-
dry dock to be used by the United States Navy in
Without Capital Gains (or Losses) ..............5
gardless of the amount of taxable income.
Pearl Harbor. The aggregate cap is $6,000,000
per year. This act also repeals the capital infra-
The trustee of a charitable remainder trust
Specific Instructions for Resident Estates
structure tax credit. Applies to taxable years be-
shall file a Hawaii Form N-40, showing the revenues
And Trusts ....................................................6
ginning after December 31, 2021.
and expenses of the trust and no tax liability for the
Specific Instructions for Nonresident Estates
trust. Compute the taxable income and enter the
Act 261, SLH 2019 – This act amends the research
And Trusts ....................................................16
amount on line 15 on page 1 as an adjustment to
activity credit that references to the base amount
result in no taxable income on line 22. Schedules K-1
in section 41 of the IRC shall not apply, and cred-
Specific Instructions for Qualified Funeral
are to be attached to the Form N-40.
it for all qualified research expenses may be tak-
Trusts ............................................................16
en without regard to the amount of expenses for
A qualified revocable trust which has made the
ATTENTION:
previous years. Also transfers certification to the
election for Hawaii purposes under section 645(a) to
Department of Business, Economic Develop-
be treated and taxed, for income tax purposes, as
Hawaii has not adopted the increased expensing
ment, and Tourism and the aggregate cap per
part of its related estate during the election period,
deduction under section 179 (Hawaii limit is $25,000)
taxable year is $5,000,000. Applies to taxable
files Form N-40. To make this election, file federal
or the bonus depreciation provisions.
years beginning after December 31, 2019 and
Form 8855 with the Department.
Hawaii has not adopted the domestic activities
this credit is repealed on December 31, 2024.
Nonresident Estate or Trust
production deduction under section 199.
Act 267, SLH 2019 – This act establishes a nonre-
Where To Get Tax Forms
Every nonresident estate or trust having gross in-
fundable income tax credit equal to 30 per cent of
come of $400 or more (some part or all of which
the qualified rehabilitated expenditures that are
Hawaii tax forms, instructions, and schedules may
is from sources within Hawaii) regardless of the
certified by the historic preservation division of
be obtained at any taxation district office or from the
amount of gross income subject to taxation or the
the Department of Land and Natural Resources.
Department of Taxation’s (Department) website at
amount of taxable income, (i) if any of the benefi-
If a deduction is taken under section 179, no tax
tax.hawaii.gov, or you may contact a customer
ciaries is a resident of Hawaii, or (ii) if in the case of
credit shall be allowed for that portion of the qual-
service representative at: 808-587-4242 or 1-800-
a trust, a resident of Hawaii is treated as the sub-
ified expense. This act takes effect on July 1,
222-3229 (Toll-Free).
stantial owner of any portion of the trust, or (iii) if the
2019 and shall be repealed on December 31,
Changes You Should Note
trust is engaging in business (rental of real property
2024.
located in Hawaii).
Act 275, SLH 2019 – This act increases the annual
Act 69, Session Laws of Hawaii (SLH) 2019 —
“Resident trust” means a trust of which the fidu-
aggregate cap for the Motion Picture, Digital
This act amends Hawaii Income Tax Law under
ciary is a resident of the State or the administration
Media, and Film Production Income Tax Cred-
chapter 235, Hawaii Revised Statutes (HRS), to
of which is carried on in the State.
it to $50,000,000. Applies to taxable years begin-
conform to certain provisions of the IRC, as
ning after December 31, 2018.
“Nonresident trust” means one other than resi-
amended as of December 31, 2018. This act also
dent.
For tax years beginning after December 31, 2017,
specifies that section 512(a)(7) shall not apply,
which is related to the computation of unrelated
and before January 1, 2026, Act 27, SLH 2018,
Period To Be Covered By 2019 Return
business taxable income.
limits the amount of losses from the trades or
businesses of noncorporate taxpayers that the
File the 2019 return for calendar year 2019 and fis-
Act 96, SLH 2019 – This act amends the rules for
taxpayer can claim each year. Taxpayers can’t
cal years beginning in 2019 and ending in 2020. If
sourcing the sales factor for net income tax to
deduct losses in excess of a threshold amount in
the return is for a fiscal year or a short tax year (less
impose market-based sourcing for sales of intan-
the current year. The amount of the excess busi-
than 12 months), fill in the tax year space at the top
gibles and services to where it is used in the
ness loss is treated as an NOL carryover to later
of the form.
State. Applies to taxable years beginning after
tax years. Use federal Form 461 to figure the ex-
December 31, 2019.
Note: Form N-40 for 2019 may also be used if: (1)
cess business loss and attach it to your return.
Act 221, SLH 2019 – This act adds a new section to
the trust or estate has a tax year of less than 12
Act 143, SLH 2017 — This act amends the qualifica-
chapter 235. A person that lacks physical pres-
months that begins and ends in 2020 and (2) the
tions a production must meet in order to claim the
ence in the State is presumed to be systemati-
2020 Form N-40 is not available by the time the trust
Motion Picture, Digital Media, and Film Pro-
cally and regularly engaging in business in the
or estate is required to file its return. However, the
duction Income Tax Credit. This act also caps
State and taxable under this chapter if, during the
trust or estate must show its 2020 tax year on the
the amount of tax credit that may be claimed at
current or preceding calendar year:
2019 Form N-40 and incorporate any tax law chang-
$35,000,000 per year, extends the sunset date to
es that are effective for tax years beginning after De-
(1) The person engages in 200 or more business
January 1, 2026, and requires film productions
cember 31, 2019.
transactions with persons within the State; or
claiming the tax credit to obtain a verification re-
When Form N-40 Must Be Filed
(2) The sum of the value of the person’s gross in-
view of qualified production costs by a certified
come attributable to sources in this State equals
public accountant. This act applies to taxable
Returns must be filed on or before the 20th day of
or exceeds $100,000 in sales.
years beginning after December 31, 2018.
the fourth month following the close of the taxable
General Instructions
Applies to taxable years beginning after Decem-
year of the estate or trust. If the due date falls on
ber 31, 2019.
a Saturday, Sunday, or holiday, the due date for the
Who Must File Form N-40
return is extended to the next business day.
Act 232, SLH 2019 – This act requires income tax
Decedent’s Estate
withholding for nonresident taxpayers based on
Note: Under Hawaii Tax Law, certain tax credits
the taxpayers’ distributive share of income attrib-
must be claimed within 12 months from the close of
Every estate having for the taxable year gross in-
utable to the State reflected on the partnership’s,
the tax year.
come of $400 or more subject to taxation under the
estate’s, and trust’s return. The amount withheld
Private delivery services. Hawaii has adopted
Hawaii Income Tax Law.
equals to the highest marginal tax rate applicable
the IRC provision to allow documents and payments
to a nonresident taxpayer multiplied by the
delivered by a designated private delivery service to
amount of the taxpayer’s distributive share of in-
qualify for the “timely mailing treated as timely filing/
come attributable to the State.
Page 2
paying rule.” The Department will conform to the In-
When and to Whom the Tax Must Be
(2) 100% of the tax shown on the 2018 return
ternal Revenue Service (IRS) listing of designated
is not prepaid, a penalty for not paying enough
Paid
private delivery service and type of delivery services
estimated tax may be charged.
qualifying under this provision. Timely filing of mail
The tax of a trust or an estate must be paid in full
For more information regarding the underpay-
which does not bear the U.S. Post Office cancel-
when the return is filed.
ment penalty and special rules for farmers and fish-
lation mark or the date recorded or marked by the
ermen, see Form N-210.
The tax may be paid by check or money order
designated delivery service will be determined by
made payable to the Hawaii State Tax Collector. Do
Amended Return
reference to other competent evidence. The private
not send cash.
delivery service can tell you how to get written proof
If a fiduciary’s return is filed and then it becomes
Write your Federal Employer I.D. No. (FEIN) on
of the mailing date.
necessary to make changes to income, deductions,
the check or money order. Your check must be on a
Six-month automatic extension of time to
or credits, file an amended return on Form N-40, us-
U.S. bank and payment in U.S. dollars.
file. Section 18-235-98, Hawaii Administrative Rules
ing the form for the year being amended. Check the
(HAR), allows an automatic six-month extension of
Note: Form N-201V is no longer required when mak-
box on Form N-40, Item F for an amended return
time to file a return without filing an application for
ing a payment with your return.
and fill in the return with all of the correct information.
extension. This extension does not include an ex-
Attach a completed Schedule AMD, Explanation of
If the estate or trust cannot pay the full amount
tension of time to pay. File Form N-201V, Business
Changes on Amended Return, to the amended re-
that is owed, you can ask to enter a payment agree-
Income Tax Payment Voucher, to make a payment
turn. Also, attach all schedules, forms, and attach-
ment after you receive a billing notice for the bal-
(if applicable). File Form N-201V by the regular due
ments required to file a complete return. See the
ance due. Please be aware that penalty and interest
date of the fiduciary income tax return. Federal Form
instructions for Schedule G lines 13 and 14. If the
continue to accrue on the unpaid tax amount even
7004, Application for Automatic Extension of Time To
return is being amended to take a farming net op-
though you have not yet received a billing notice.
File Certain Business Income Tax, Information, and
erating loss (NOL) carryback deduction, also check
Payments will be accepted and applied to the en-
Other Returns, may not be used in lieu of Form N-
the box on Form N-40, Item F, NOL Carryback.
tity’s tax liability; however, to ensure that the entity’s
201V. Form N-201V may be filed and payment made
payments are applied correctly, your check or money
For NOLs arising in tax years ending after De-
electronically through the State’s Internet portal. For
order must have: (1) the entity’s name as shown on
cember 31, 2017, Act 27, SLH 2018, eliminates
more information, go to tax.hawaii.gov/eservices/.
the return clearly printed on the check, (2) the entity’s
NOL carrybacks (except for farming NOLs which are
Where Form N-40 Must Be Filed
FEIN, and (3) the tax year and form number being
permitted a two-year carryback), and allows unused
filed (e.g., 2019 N-40).
NOLs to be carried forward indefinitely. Also, the
If you are enclosing a check or money order with
NOL deduction is limited to 80% of taxable income
If the fiduciary expects a tax liability of $500 or
your tax return, mail your return with payment to:
for NOLs arising in tax years beginning after Decem-
more, a declaration of estimated tax must be filed.
ber 31, 2017.
Hawaii Department of Taxation
Use Form N-201V to send your estimated tax pay-
P.O. Box 1530
ment to the Department.
You may elect to carry the farming NOL forward
Honolulu, HI 96806-1530
instead of first carrying it back to prior years. If you
If you are filing your return after the prescribed
make this election, then you can use your farming
due date, the refund shown may be limited or disal-
If you are not enclosing a payment with your tax
NOL only in the carryforward period. To make this
lowed due to the statute of limitations. In general, a
return, mail your return to:
election, attach a statement to your original return
claim for refund or credit for overpaid income taxes
filed by the due date (including extensions) for the
Hawaii Department of Taxation
must be filed within three years after the return is
farming NOL year. This statement must state that
P.O. Box 3559
filed for the taxable year, within three years of the
you are electing to waive the carryback period un-
Honolulu, HI 96811-3559
due date for filing the return, or within two years from
der section 235-7(d), HRS, and IRC section 172(b)
when the tax is paid, whichever is later. For purposes
Form N-40 can be filed and payment made
(1)(B)(iv).
of determining whether a refund or credit is allowed,
electronically through the State’s internet portal. For
taxes paid on or before the due date of the return
If you filed your original return on time but did
more information, go to tax.hawaii.gov/eservices/.
(e.g. taxes withheld from an employee’s pay, or esti-
not file the statement with it, you can make this elec-
Authentication
mated tax payments) are considered paid on the due
tion on an amended return filed within 6 months of
date of the return, without considering an extension
the original due date of the return, but not including
Returns shall be authenticated by the original signa-
of time to file the return.
any extension. Attach a statement to your amend-
ture of the individual fiduciary, or by the authorized
ed return, and write “Filed pursuant to 26 C.F.R.
Penalties and Interest
officer of the organization receiving or having cus-
301.9100-2” at the top of the statement. Also include
tody or control and management of the income of
the statement noted above that you are waiving the
For failure to file, pay or amend as required by law,
the estate or trust.
carryback period. Once you elect to waive the car-
penalties and interest will be added to the tax under
The Paid Preparer’s Information at the bottom of
ryback period, it cannot be changed later. If you do
section 235-104, HRS.
page 1 of Form N-40 must be signed and completed
not file this statement on time, the carryback period
Late filing of return. The penalty for failure to
by the person or in the name of the firm or corpora-
cannot be waived and you must first carry the farm-
file a return on time is assessed on the tax due at
tion paid to prepare the fiduciary’s return. Individual
ing NOL back before carrying it forward.
a rate of 5% per month, or part of a month, up to a
preparers may furnish their alternative identifying
If you are filing your return after the prescribed
maximum of 25%.
number for income tax return preparers (PTIN) in-
due date, the refund shown may be limited or disal-
stead of their social security number.
Failure to pay tax after filing timely returns.
lowed due to the statute of limitations. In general, a
The penalty for failure to pay the tax after filing a
The preparer required to sign the return MUST
claim for refund or credit for overpaid income taxes
timely return is 20% of the tax unpaid within 60 days
complete the required preparer information and:
must be filed within three years after the return is
of the prescribed due date.
filed for the taxable year, within three years of the
Sign it in the space provided for the preparer’s
Interest. Interest at the rate of 2/3 of 1% per
due date for filing the return, or within two years from
signature.
month or part of a month shall be assessed on
when the tax is paid, whichever is later. For purposes
Give a copy of Form N-40 to the taxpayer, in ad-
unpaid taxes and penalties beginning with the first
of determining whether a refund or credit is allowed,
dition to the copy to be filed with the Department.
calendar day after the date prescribed for payment,
taxes paid on or before the due date of the return
The fiduciary may authorize the Department to
whether or not that first calendar day falls on a Satur-
(e.g. taxes withheld from an employee’s pay, or esti-
discuss its tax return with its paid preparer by check-
day, Sunday or legal holiday.
mated tax payments) are considered paid on the due
ing the “Yes” box above the paid preparer’s identi-
date of the return, without considering an extension
Underpayment of estimated taxes. The De-
fication number. Checking “Yes” will allow the De-
of time to file the return.
partment imposes the penalty for the underpayment
partment to contact the paid preparer to answer any
of estimated tax as provided in section 235-97(f),
Change In Federal Taxable Income
questions that may arise during the processing of
HRS. If applicable, this penalty shall be added to the
your tax return. This designation does not allow your
tax for the taxable year in an amount determined at
In general, a change to your federal return whether
paid preparer to call the Department for information
the rate of 2/3 of 1% per month, or part of a month,
it is made by you, or by the IRS, must be reported to
about the processing of your return or for other is-
upon the amount of the underpayment for the period
the State of Hawaii.
sues relating to your return. This designation does
of the underpayment.
(1) Section 235-101(b), HRS, requires a report to
not replace Form N-848, Power of Attorney.
Generally, if at least:
the Director of Taxation if the amount of federal
taxable income is changed, corrected, adjusted,
(1) 60% of the tax shown on the 2019 tax return; or
or recomputed as stated in (3).
Page 3
(2) This report must be made:
der section 651(a) only in those taxable years of the
On page 1 at the top of Form N-40, write the
trust in which it does not distribute to a beneficiary
name, identification number, and address of the
(a) Within 90 days after a change, correction,
amounts other than amounts of income (determined
grantor(s) or other person(s) in parentheses after
adjustment or recomputation is finally deter-
under the governing instrument and local law) re-
the name of the trust.
mined.
quired to be distributed currently. Section 651(a) is
The income taxable to the grantor or another
(b) Within 90 days after an amended federal
not applicable to estates.
person under sections 671 through 678 and the de-
return is filed.
Any trust which does not qualify for the taxable
ductions and credits applied to the income must be
(c) At the time of filing the next income tax re-
year under section 651(a) is treated as a “complex”
reported on the income tax return that person files.
turn, if earlier than set forth in (a) or (b).
trust under section 661(a). All estates are treated un-
The grantor/trustee for a trust that was created
(3) A report within the time set out in (2) is required
der section 661(a) in the same manner as “complex”
in a tax year beginning on or after January 1, 1981,
if:
trusts.
should not file Form N-40. The grantor/trustee must
(a) The amount of taxable income as returned
furnish his or her social security number to payors
Income in Respect of a Decedent
to the United States is changed, correct-
of income and report all items of income, deduction,
ed or adjusted by an officer of the United
Section 691 provides for the inclusion, when re-
and credit from the trust on his or her Form N-11 or
States other competent authority.
ceived, in gross income of an estate or trust of
Form N-15.
amounts of gross income which, although attribut-
(b) A change in taxable income results from a
The grantor/trustee for a trust described above,
able to the decedent, were not properly includable in
renegotiation of a contract with the United
including grantor trusts created in tax years begin-
his or her return for any period up to the date of his
States or a subcontract thereunder.
ning before 1981, who has previously filed Form
or her death. This includes income from installment
N-40 and who wants to take advantage of the sim-
(c) A recomputation of the income tax imposed
obligations. The same section allows deductions for
plified reporting requirements in the future should
by the United States under the IRC results
business expenses, interest, taxes, etc., to the estate
file a Form N-40 for the current year and write on
from any cause.
or other person receiving the property to which the
it “pursuant to section 1.671-4(b), this is the final
(d) An amended income tax return is made to
deduction pertains.
return for this grantor trust.” A grantor/trustee who
the United States.
These provisions apply for State purposes if the
chooses this option must furnish his or her social se-
(4) The report referred to above shall be in the form
decedent died on or after January 1, 1958. The tax-
curity number to payors of income for the next year
of an amended Hawaii income tax return.
able status of the income attributable to the decedent
and report the trust income on his or her Form N-11
is the same as if the decedent had lived and received
or Form N-15 for the next year and for future years.
(5) The statutory period for the assessment of any
the income. Thus, if the decedent was a resident his
The grantor/trustee must not file Form N-40 for fu-
deficiency or the determination of any refund
or her income would be treated as though it had its
ture years.
attributable to the report shall not expire before
source in Hawaii even if it had its source elsewhere,
the expiration of one year from the date the De-
At-Risk Loss Limitations
since the fact that the decedent was a resident in
partment is notified by the taxpayer or the IRS,
itself makes the income taxable. On the other hand, if
whichever is earlier, of such a report in writing.
Generally, the amount the estate or trust has “at risk”
the decedent’s income had its source outside Hawaii
Before the expiration of this one-year period, the
limits the loss you can deduct for any tax year. Use
and he or she was a nonresident, this income will be
Department and the taxpayer may agree in writ-
federal Form 6198, At-Risk Limitations, to figure
treated as wholly tax exempt.
ing to the extension of this period. The period so
the deductible loss for the year and file it with Form
agreed upon may be further extended by sub-
Estate tax or Generation-Skipping Transfer
N-40. For more information, see federal Form 6198,
sequent agreements in writing made before the
(GST) tax previously paid to Hawaii, under Chapter
Publication 559, and Publication 925, Passive Activ-
expiration of the period previously agreed upon.
236D or Chapter 236E, HRS, which was attributable
ity and At-Risk Rules.
to the inclusion in a decedent’s gross estate of the
Change of Address Checkbox
Passive Activity Loss Limitations
right to receive items of income treated as income
in respect of a decedent and includable in gross in-
If your mailing address has changed, you must notify
Section 469 generally limits deductions and credits
come on the fiduciary return, is allowable as a de-
the Department of the change by completing Form
derived from passive activities to the amount of in-
duction either to the fiduciary or to the beneficiaries,
ITPS-COA, Change of Address Form, or log in to
come derived from all passive activities.
depending on whether or not such income is paid,
your Hawaii Tax Online account at hitax.hawaii.
Generally, an activity is deemed to be passive
credited, or required to be distributed. The fiduciary
gov. Failure to do so may prevent your address from
if it involves the conduct of any trade or business,
is entitled to deduct only the portion of the Chapter
being updated, any refund due to you from being
and the taxpayer does not materially participate in
236D or Chapter 236E, HRS, tax attributable to such
delivered (the U.S. Postal Service is not permitted
the activity. Passive activities do not include work-
income, which was not (during the taxable year in
to forward your State refund check), and delay im-
ing interests in oil and gas properties (as defined in
which received) paid, credited, or required to be dis-
portant notices or correspondence to you regarding
section 469(d)).
tributed to a beneficiary. Any deductions in this con-
your return.
nection to which beneficiaries are entitled should be
An estate or trust is treated as materially partici-
IRS Adjustment Checkbox
shown in a statement attached to the return.
pating in an activity if an executor or fiduciary, in his
or her capacity as such, is involved in operations of
The credit on Schedule E, line 1 for taxes paid
If your are filing an amended return due to an IRS
the activity on a regular, continuous, and substantial
to other jurisdictions is limited to taxes imposed on
adjustment, check the boxes on Form N-40, Item
basis. In the case of a grantor trust, however, mate-
the fiduciary itself as the taxpayer. Do not take any
F, Amended Return and IRS Adjustment. Fill in the
rial participation is determined at the grantor level.
credit on Schedule E, line 1 for taxes imposed on the
return with all the correct information and attach a
Rental activities are considered to be passive activi-
decedent even if paid by the fiduciary.
completed Schedule AMD, Explanation of Changes
ties, whether or not the taxpayer materially partici-
on Amended Return, to the amended return. Also,
Income Taxable to the Grantor or
pates.
attach all schedules, forms, and attachments re-
Substantial Owner
In the case of taxable years of an estate ending
quired to file a complete return. Give a corrected
less than two years after the date of death of the
Schedule K-1 (Form N-40) to each beneficiary. On
Report on Form N-40 the part of the income that is
decedent, up to $25,000 of deductions and credit
Schedule K-1 (Form N-40), check the box Amended
taxable to the trust. Do not report on Form N-40 the
equivalents attributable to all rental real estate ac-
K-1 to indicate it is an amended Schedule K-1.
income that is taxable to the grantor or another per-
tivities in which the decedent actively participated
son. Instead, attach a separate sheet to report the
Simple and Complex Trusts
is allowed. Any unused losses and/or credits are
following:
deemed “suspended” passive activity losses for the
If the terms of the governing instrument of a trust
The income of the trust that is taxable to the
year, and are carried forward indefinitely.
require that all of its income (determined under the
grantor or another person under sections 671
If the estate or trust distributes any interest in
governing instrument and Hawaii law) be distributed
through 678.
a passive activity, the basis of the property imme-
currently and do not provide that any amounts may
The name, identifying number, and address of
diately before the distribution is increased by the
be paid, permanently set aside or used in the taxable
the person(s) to whom the income is taxable.
passive activity losses allocable to the interest; and
year for the charitable purposes specified in section
such losses are not allowable as a deduction. See
Any deductions or credits applied to this income.
642(c), such a trust may qualify as a “simple” trust
section 469(j).
under section 651(a). Such a trust is qualified un-
Page 4
Note: Losses from passive activities are first subject
not be offset by losses from passive activities. See
estates and trusts are required to withhold and pay
to the at-risk rules. When the losses are deductible
federal Form 8582, Passive Activity Loss Limitations,
to the State on behalf of their nonresident benefi-
under the at-risk rules, the passive activity rules then
to compute the amount of allowable passive activity
ciaries an amount equal to the highest marginal tax
apply.
loss.
rate applicable to individuals, currently 11%, multi-
plied by the amount of the beneficiary’s distributive
Portfolio income is not treated as income from a
Withholding of Taxes On the Income
share of income attributable to the State reflected on
passive activity, and passive losses and credits gen-
of Nonresident Beneficiaries
the estate’s and trust’s return for the taxable period.
erally may not be applied to offset it. Portfolio income
Form N-201V is used for reporting and paying this
generally includes interest, dividends, royalties, and
Pursuant to Act 232, SLH 2019, and applicable to
withholding by the estate or trust to the Department.
income from annuities. Portfolio income of an estate
taxable years beginning after December 31, 2018,
or trust must be accounted for separately, and may
OF SPECIAL INTEREST TO BANKRUPTCY TRUSTEES
AND DEBTORS-IN-POSSESSION
Taxation of Bankruptcy Estates of
chapter 7 or 11 of title 11 are, upon written request,
OR PROCESS.” When completed, attach the Form
open to inspection by or disclosure to the trustee.
N-11 or N-15 to the Form N-40.
An Individual
The returns subject to disclosure to the trustee are
Calculate the taxable income based on the in-
those for the year the bankruptcy begins and prior
For federal and State tax purposes, when an indi-
come and deductions of the estate by completing
years. Use Form L-72, Request for Copies of Hawaii
vidual files a petition under chapter 7 or 11 of the
lines 7 through 26 (Form N-11) or lines 7 through
Tax Return (available at any District Tax Office), to
United States Code, a separate taxable entity is cre-
43 (Form N-15).
request copies of the individual debtor’s tax returns.
ated. See section 1398 and 11 U.S.C. section 346.
Note: In a chapter 11 case filed after October 16,
If the bankruptcy case was not voluntary, disclosure
In a chapter 7 bankruptcy case, the trustee must ob-
cannot be made before the bankruptcy court has en-
2005, the allocations used for federal tax purposes
tain a Tax Identification Number (TIN) from the IRS
tered an order for relief, unless the court rules that
must be used to allocate any State tax items, in-
and file the estate tax return. Unless a trustee has
the disclosure is needed for determining whether
cluding any taxes withheld at the source. If any in-
been appointed in a chapter 11 bankruptcy case,
relief should be ordered.
come was allocated, the debtor-in-possession (or
the debtor-in-possession must obtain a TIN for the
the chapter 11 trustee, if one was appointed) must
estate and file any required tax return. Unless sub-
Special Filing Instructions Only for
attach a schedule that shows (a) all the income
stantive consolidation has been ordered in a joint
Bankruptcy Estates
reported on the Form W-2, Form 1099, or other
petition, two separate bankruptcy estates and two
information return, (b) the portion of this income
separate taxable entities are created. A TIN must
Form N-40 is used ONLY as a transmittal for Form
includible in the bankruptcy estate’s gross income,
be obtained for each, and a separate return filed for
N-11, Hawaii Individual Income Tax Return (Resi-
and (c) all the withheld income tax, if any, and the
each estate. The TIN obtained from the IRS for the
dent) or Form N-15, Hawaii Individual Income Tax
portion of withheld tax reasonably allocated to the
bankruptcy estate must be used in filing any required
Return (Nonresident and Part-Year Resident). Under
bankruptcy estate. Attach a copy of the Form W-2,
State estate tax returns. Do not use the individual’s
section 1398(c), the taxable income of the bankrupt-
if any, issued to the individual debtor for the tax year
social security number when filing bankruptcy estate
cy estate generally is figured in the same manner as
if any allocation is required because of Bankruptcy
tax returns.
that of an individual, and includes any income includ-
Code section 1115. In addition, if any deduction or
Caution: The individual debtor and the bankrupt-
ed in property of the estate as defined in Bankruptcy
credit was allocated, attach a schedule showing how
cy estate are separate taxable entities, with their
Code sections 541 and 1115. The bankruptcy estate
such allocation was accomplished. For more details,
own separate tax filing requirements. Generally,
of an individual is allowed one exemption. Complete
including acceptable allocation methods, see Notice
the individual debtor retains his or her tax identity
only the identification area at the top of Form N-40.
2006-83, 2006-40 I.R.B. 596, available at www.irs.
and must file his or her own personal tax returns,
The name of the bankruptcy estate should be en-
gov/irb/2006-40_IRB/ar12.html.
and the trustee or debtor-in-possession, as ap-
tered on Form N-40 in the following format:
plicable, files the required returns of the estate.
Transfer of Tax Attributes From the
“John Q. Public Bankruptcy Estate”
The filing of a tax return for the bankruptcy estate
Individual Debtor to the Bankruptcy
Beneath, enter the name of the trustee in the fol-
does not relieve the individual debtor of his or her
Estate
lowing format:
(or their) individual tax obligations.
“Mary Kalikimaka, Trustee”
Under section 1398(g), the bankruptcy estate suc-
Note: A separate taxable entity is not created if a
ceeds to the following tax attributes of the individual
If the fiduciary’s address is outside the United
partnership or corporation files a petition under any
debtor:
States or its possessions or territories, enter the
chapter of title 11 of the U.S. Code. For additional
information on the line for “City or town, State and
information about bankruptcy estates, please refer to
Net operating loss carryovers;
Postal/ZIP Code” in the following order: city, province
Publication 908, Bankruptcy Tax Guide.
Charitable contributions carryovers;
or state, postal code, and the name of the country.
Who Must File
Recovery of tax benefit items;
Do not abbreviate the country name. Be sure to in-
clude the TIN of the estate.
Credit carryovers;
Every trustee (or debtor-in-possession) for an indi-
The “Date Entity Created” is the date on which
vidual’s bankruptcy estate under chapter 7 or 11 of
Capital loss carryovers;
the petition was filed, or the date of conversion to a
title 11 of the United States Code, must file a return
Basis, holding period, and character of assets;
chapter 7 or 11 case. Be sure to note the period cov-
if the bankruptcy estate has gross income for the tax
Method of accounting; and
ered by the return, since a bankruptcy estate is al-
year beginning in 2019 of $3,344 or more.
lowed to have a fiscal year. If a fiscal year is selected,
Other tax attributes that may be prescribed by
When To File
the period can be no longer than 12 months and the
the Department.
tax return due date is on or before the 20th day of the
File Form N-40 on or before the 20th day of the
Income, Deductions, and Credits
fourth month following the close of the fiscal year. If
fourth month following the close of the tax year. Sec-
a fiscal year is chosen, it must be the same for the
tion 18-235-98, HAR, allows an automatic six-month
Under section 1398(c), the taxable income of the
federal return.
extension of time to file without filing an application
bankruptcy estate generally is figured in the same
Then, prepare a Form N-11 or N-15 (as appropri-
for extension. This extension does not include an ex-
manner as that of an individual. The gross income of
ate) to report the income and deductions to which
tension of time to pay. File Form N-201V, Business
the bankruptcy estate includes any income included
the estate is entitled. Enter only the name of the
Income Tax Payment Voucher, to make a payment
in property of the estate as defined in U.S. Code, title
bankruptcy estate in the “Name” section of the Form
(if applicable). File Form N-201V by the regular due
11, sections 541 and 1115.
N-11 or N-15 as follows:
date of Form N-40. Form N-201V can be filed and
Caution: Earnings from services performed by
payment made electronically through the State’s In-
First Name: “John Q. Public”
an individual debtor in a chapter 11 case after
ternet portal. For more information, go to tax.hawaii.
the commencement of the chapter 11 case are
Last Name: “Bankruptcy Estate”
gov/eservices/.
property of the bankruptcy estate under section
Also, enter the estate’s TIN in place of the so-
1115 of the Bankruptcy Code (11 U.S.C. section
Disclosure of Return Information
cial security number. Do not otherwise complete the
1115). In addition, income from property ac-
identification portion of the Form N-11 or N-15. In the
Under section 235-116, HRS, tax returns of indi-
quired after the beginning of the case is taxable
top margin of each page of the Form N-11 or N-15,
vidual debtors who have filed for bankruptcy under
to the estate.
write “Attachment to Form N-40. DO NOT DETACH
Page 5
To determine whether any amount paid or in-
from the discharge of indebtedness. However, any
possession must file a written request for the deter-
curred by the bankruptcy estate is allowable as a de-
amount excluded from gross income must be ap-
mination with the Department. The request must be
duction or credit, or is treated as wages for employ-
plied to reduce certain tax attributes in a certain or-
accompanied by the original return which must be
ment tax purposes, treat the amount as if it was paid
der.
executed under penalties of perjury plus a duplicate.
or incurred by the individual debtor in the same trade
The request must include a statement indicating
Use federal Form 982, Reduction of Tax Attri-
or business or other activity the individual debtor en-
that it is a request for prompt determination of tax
butes Due to Discharge of Indebtedness, to show
gaged in before the bankruptcy proceedings began.
liability and: (a) the return type, and all the tax pe-
the reduction of tax attributes. However, for Hawaii
riods for which prompt determination is sought; (b)
purposes the following reductions are not operative
Administrative expenses.—The bankruptcy es-
the debtor’s name; (c) the debtor’s SSN, TIN, or EIN;
and are not allowed as exclusions:
tate is allowed a deduction for any administrative
(d) the type of bankruptcy estate; (e) the bankruptcy
expense allowed under section 503 of title 11 of the
General business credit;
case number; and (f) the court where the bankruptcy
U.S. Code, and any fee or charge assessed under
Minimum tax credit; and
is pending. Send the request to the address noted
chapter 123 of title 28 of the U.S. Code, to the extent
below. Mark the envelope with “Request for Prompt
Foreign tax credit carryovers.
not disallowed under an IRC provision.
Determination.” The Department will notify the trust-
Tax Rate Schedule
ee or debtor-in-possession within 60 days from re-
Administrative expense loss.—When figuring a
ceipt of the request if the return filed by the trustee or
NOL, nonbusiness deductions (including adminis-
Once the amount of taxable income of the estate is
debtor-in-possession has been selected for exami-
trative expenses) are limited under section 172(d)
determined (line 26 of Form N-11 or line 43 of Form
nation or has been accepted as filed. If the return is
(4) to the bankruptcy estate’s nonbusiness income.
N-15), also enter this amount on line 22 of Form
selected for examination, it will be examined as soon
The excess nonbusiness deductions are an admin-
N-40. Calculate the amount of tax for the bankruptcy
as possible. The Department will notify the trustee or
istrative expense loss that may be carried back to
estate using the tax table or the tax rate schedule for
debtor-in-possession of any tax due within 180 days
each of the three preceding tax years and forward
a married individual filing a separate return. Be sure
from receipt for the request or within any additional
to each of the seven succeeding tax years of the
to complete the capital gain worksheet to determine
time permitted by the bankruptcy court.
bankruptcy estate. The amount of an administrative
the tax if the estate has any such gains, as this may
expense loss that may be carried to any tax year is
Where to File
potentially lower the tax liability.
determined after the NOL deductions allowed for
Enter this computed tax on Form N-11, line 27 or
that year.
All bankruptcy estate tax returns (including requests
Form N-15, line 44. Determine the amount of tax due
for prompt determination) must be mailed to:
Caution: An administrative expense loss is al-
after any credits that the bankruptcy estate is entitled
lowed only to the bankruptcy estate and cannot
to claim. Be sure to attach all applicable forms re-
Hawaii State Tax Collector
be carried to any tax year of the individual debtor.
quired to claim the credit, as well as any required
Bankruptcy Unit
schedules. Claim all credits to which the bankruptcy
P . O. Box 259
Carryback of NOLs.— For NOLs arising in taxable
estate is entitled to on Form N-11 or N-15 as applica-
Honolulu, HI 96809-0259
years ending after December 31, 2017, Act 27, SLH
ble. Do not claim these credits by filling out the credit
2018, eliminates NOL carrybacks (except for farm-
Do not mail bankruptcy estate tax returns to any
sections of the Form N-40. Also, remember that non-
ing NOLs which are permitted a two-year carryback),
other address.
refundable credits may not decrease the amount of
and allows unused NOLs to be carried forward in-
Dismissal of Bankruptcy Case
tax owed below zero.
definitely. Also, the NOL deduction is limited to 80%
of taxable income for taxable years beginning after
Once the amount of credits that the bankruptcy
If the bankruptcy court later dismisses an individual’s
December 31, 2017.
estate is entitled to has been determined, enter the
chapter 7 or 11 case, the bankruptcy estate is no lon-
amount from line 36 of Form N-11 or line 53 of Form
You may elect to carry the farming NOL forward
ger treated as a separate taxable entity. It is as if no
N-15 on Form N-40, Schedule G, lines 1, 3, and 5.
instead of first carrying it back to prior years. If you
bankruptcy estate was ever created for tax purposes.
make this election, then you can use your farming
Enter on Form N-11 or N-15 any tax withheld,
In this situation, the debtor must file amended tax re-
NOL only in the carryforward period. To make this
estimated tax payments, or amounts paid with ex-
turns on Form N-11 or N-15 to replace all full or short
election, attach a statement to your original return
tension. If any withheld tax reported on a Form W-2
year individual returns and bankruptcy estate returns
filed by the due date (including extensions) for the
has been allocated between the bankruptcy estate
filed as result of the bankruptcy case. Any income,
farming NOL year. This statement must state that
and the individual debtor, be sure to attach the al-
deductions, and credits previously reported by the
you are electing to waive the carryback period un-
location schedule. Any tax payments reported on
bankruptcy estate on its tax return must be reported
der section 235-7(d), HRS, and IRC section 172(b)
Form N-288A should be included in the amount of
on the debtor’s amended returns. Attach a statement
(1)(B)(iv).
estimated tax paid. Be sure to attach the form to the
to the amended returns explaining why the debtor is
return. Determine the amount of total payments (line
filing an amended return, and be sure to check the
Exemption.—A bankruptcy estate is allowed a per-
41 of Form N-11 or line 58 of Form N-15) and also
“Amended” box on the applicable form.
sonal exemption of $1,144.
enter this amount on Form N-40, Schedule G, line 7.
Caution: An individual may not deduct adminis-
Complete lines 8 through 15 of Schedule G. Be sure
Standard deduction.—A bankruptcy estate that
trative expenses incurred by the bankruptcy es-
to sign and date the Form N-40.
does not itemize deductions is allowed a standard
tate if a bankruptcy case is dismissed as these
deduction of $2,200.
are considered to be personal nondeductible
Prompt Determination of Tax Liability
expenses. The taxpayer may deduct only those
Discharge of indebtedness.—In a title 11 case,
To request a prompt determination of the tax liability
expenses allowable had a bankruptcy not been
gross income does not include amounts that nor-
of the bankruptcy estate, the trustee or debtor-in-
filed.
mally would be included in gross income resulting
HOW TO FILL IN FORM N-40
The specific instructions that follow this section
by checking the “Yes” box above the paid preparer’s
cessing of your return or for other issues relating to
explain how all trusts and estates should fill in the
signature. Checking “Yes” will allow the Department
your return. This designation does not take the place
form.
to contact the paid preparer to answer any questions
of a power of attorney for other return related mat-
that may arise during the processing of the return.
ters. Form N-848 must still be used to grant a power
Trusts and estates, may authorize the Depart-
This designation does not allow your paid preparer
of attorney.
ment to discuss its tax return with its paid preparer
to call the Department for information about the pro-
SIMPLE TRUSTS WITHOUT CAPITAL GAINS (OR LOSSES) MAY USE THE FOLLOWING-
DESCRIBED SHORT-FORM METHOD OF COMPLETING THEIR RETURNS
(a) Reporting Income and deductions. Fill in
than the amount of income required to be distributed
If the amount shown on line 18 exceeds the
page 1, lines 1 through 19 in accordance with spe-
currently, enter on line 19 the amount shown on line
amount of income required to be distributed currently
cific instructions.
18 and enter zero on line 22. Schedule G (Form
less nontaxable income, enter on line 19 the amount
N-40) need not be completed.
of income required to be distributed currently and
(b) Determine taxable income and tax of fidu-
complete the remainder of page 1.
ciary. If the amount shown on line 18 is not more
Page of 17